Who Is Worthiest Among the Impoverished? : Taxpayer Funds to Move L.A. Jobs Out of California
It would appear to be an example of the system working the way it should: Nashville, Tenn., using federal grant money intended to develop inner-city areas, has enticed a manufacturer to relocate into an impoverished area, creating as many as 150 new jobs.
The problem: The manufacturer will be moving out of an impoverished area of Los Angeles--a neighborhood south of Boyle Heights near the border of East Los Angeles--where it is already providing local residents with jobs paying as much as $12 an hour. By some measures, the Los Angeles neighborhood is worse off than the one in Nashville.
The manufacturer, Somma Mattress Co., plans to take only a handful of people to Tennessee. About 20 employees will remain in Los Angeles as part of a secondary office operation, and the rest--about 70--will be laid off.
“I don’t think it’s fair,” said one Los Angeles employee facing layoff, who asked not to be named. “I’m sure there’s people there who need a job . . . but there’s going to be people unemployed here who need a job too.”
Surprisingly, there appears to be no legal obstacle to keep Somma from pulling up stakes in one inner-city area and--with $150,000 of federal money--moving to another.
A spokesman for the U.S. Housing and Urban Development Department, the original source of the federal grant, declined to comment directly on whether such a move was an appropriate use of the funds, called an Urban Development Action Grant.
But he noted: “Cities have used block grant funds to attract other businesses to their locale . . . (and) companies move for a lot of different reasons.”
In Nashville, Metro Councilman Julius Sloss, who was instrumental in arranging the financial incentives for Somma, defended the city’s use of federal money. “We’re still using the money the way it was meant to be used,” he said.
And Angel Echevarria, Somma’s president, said he was simply moving to improve the operation of his business, not to escape a bad L.A. neighborhood for a better one in Nashville.
“There is as much poverty here as there is over there,” he said, adding, “I have to consider what’s best for the welfare of myself and the company.”
In Los Angeles, City Councilman Richard Alatorre, in whose district Somma’s plant lies, viewed the move with equanimity.
Use of the federal money “from my understanding is allowed, and obviously if the federal government allows it to be used in this manner, there’s nothing that I can say or anyone else can say about whether it’s a proper use of money,” he said.
Robert Levine, a senior economist at the RAND Corp. and a former official in the Johnson Administration’s Office of Economic Opportunity, said using federal money this way “seems inappropriate” but added that it is not unprecedented. For example, Levine noted, federal grants were used in the 1960s to create jobs in Appalachia, but little thought was given to where those jobs might have moved from.
According to Echevarria, talks between Somma and Nashville began nearly a year and a half ago when the company approached the city about moving.
The firm, which makes mattresses and other bedding materials, wanted to reduce shipping costs (70% of its customers are east of the Mississippi River) and get away from what it considered California’s expensive workers compensation system, Echevarria said.
The firm’s pink-and-white Los Angeles plant sits in a decrepit neighborhood of frame houses, factories and warehouses just north of railroad tracks and the Santa Ana Freeway.
The area is more than 98% Hispanic, with nearly 26% of the households below the poverty line and unemployment around 8%, according to 1990 census data, the most recent numbers available.
And crime is a problem: An index published by a marketing and research firm in Ithaca, N.Y., known as Claritas Inc., shows the area had five times as many personal and property crimes as the nation on average in 1994.
“In the daytime, it’s a very nice quiet neighborhood,” Echevarria says. “But at night, it turns into East Beirut.” He says employees are frightened enough by ever-present gangs and drive-bys that they are reluctant to work after dark.
By comparison, the east Nashville neighborhood where the plant is moving is 57.3% white and 40.3% black, with 26.4% of the households below the poverty line and an unemployment rate of 5.9%, the 1990 census data showed.
The Claritas index showed that the area had crime only 5% worse than the national average in 1994.
Since 1990, the Nashville economy has reportedly improved enough that the city is suffering spot labor shortages in some industries. Citywide, Nashville’s unemployment rate was 2% in December.
“We’re still in a poverty pocket,” Echevarria says. “But when you talk about a poverty pocket in Tennessee, it can’t be compared with one in East L.A. There’s no drive-by shootings, no assaults . . . no graffiti.”
Indeed, some parts of east Nashville near the proposed mattress plant are undergoing gentrification as a new generation of homeowners moves in.
To entice Somma to town, the Nashville metropolitan government, at Sloss’ urging, put up $50,000 of its own money and $150,000 of money from the Urban Development Action Grant to pay moving expenses.
The UDAG money was in a city-administered pool of funds originally used to help Stouffer Hotels build a hotel near Nashville’s convention center in the 1980s.
The money is now being paid back by the hotel company and is available for other economic development uses at the city’s discretion. (The Reagan Administration ended the UDAG program in 1988 for budgetary and other reasons.)
Somma will begin operations in Nashville in the next few weeks.
“We didn’t entice them with the (federal grant),” said Don Jones, legal director of Nashville’s Metro Council. “They were looking for a place to relocate . . . and one of the benefits we could put together was use of the (grant).”
Correspondent Bill Carey in Nashville contributed to this report.
