Detroit Engineers Formula to Realize the Empowerment Zone’s Potential

It was in the basement, amid the hanging wires, stacks of drywall and rolls of uncut new carpet, that the spirit moved Judith Jackson. “Say hallelujah, you all,” she suddenly called out to the group touring the nearly completed conversion of an abandoned public library into a children’s education and health center.

Miraculous, indeed, seemed the transformation inside the 83-year-old library on a weathered strip of Woodward Avenue as workers busily built spaces for day-care facilities, a literacy center and Jackson’s Head Start program. In a city that is showing signs of life after losing population and jobs for decades, the sparkling Family Place was a tangible sign of renewal.

It also stands as a milestone for President Clinton’s empowerment zone program, which is providing $6 million to subsidize the center’s operation over the next decade.

Friday marks the two-year anniversary of Clinton’s designation of six cities as empowerment zones; each received a $350-million package of federal grants and tax breaks meant to encourage business investment and social reconstruction in depressed neighborhoods. (Passed over in the final selection, Los Angeles received a $400-million-plus consolation-prize subsidy for a community investment bank.)

Through Detroit’s zone, signs of progress are evident in new factories, new jobs and new programs like the Family Place. But Detroit also testifies to the scale of the challenge facing cities trying to revive their most wounded neighborhoods--and the fragility of the forces that come together to produce progress.

From Jesse Jackson to Jack Kemp, Clinton is regularly accused of slighting the cities. But in fact, through his first term he pursued a coordinated strategy centered on increasing the flow of private investment into urban areas--an effort for which the empowerment zones are the most visible symbol.

After two years, the zones are showing uneven progress. Close observers acknowledge that Chicago and New York have made relatively few gains, largely because of conflicts between their mayors and the targeted communities. Atlanta and Philadelphia seem to occupy a middle ground. At the top of the list are Baltimore and, especially, Detroit.

More than any of the others, Detroit can point to economic gains in its empowerment zone--a sprawling 18-mile grid of depressed communities just south of the Ford Freeway. Local businesses have invested at least $1.8 billion in its zone, far more than in any other city. The city claims credit for 1,750 new jobs.

But forces larger than Clinton’s zone program may explain much of that.

As city planning director Gloria W. Robinson freely acknowledges, the spigot to the capital flow opened because the region’s major banks and the Big Three auto makers decided to reinvest in the city. Led by General Motors, the auto makers are ponying up direct investments and, even more important, increasing their purchases from minority-owned parts suppliers who locate in the zone.

“If the Big Three didn’t step up and support this thing, it wasn’t going to happen,” says Vinnie Johnson, the former Detroit Pistons star whose Piston Packaging assembles struts for the auto manufacturers from a new factory inside the zone that provides 109 jobs.

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Most local observers believe the auto makers’ decision to step up their local purchases--and the parallel commitment by local bankers to lend $1 billion over 10 years into the zone--was driven less by the specific tax inducements in the program than by a broader desire to support the city’s revitalization under Dennis Archer, the dynamic centrist black mayor who succeeded the polarizing Coleman Young in 1993.

As Archer points out, the banks and auto companies had committed to make their investments even if the administration had rejected the city’s application for an empowerment zone. Detroit’s drafting of the zone plan provided the occasion for a reconciliation but not the motivation.

In other cities lacking such a dedicated source of investment, the process has moved more slowly. Although the other five cities can point to promising investments in the pipeline, a recent survey by the Detroit News found the rest making more modest gains in employment, from 407 new jobs in New York’s zone to just 87 in Chicago’s.

Andrew Cuomo, the insistent Housing and Urban Development assistant secretary who oversees the empowerment zone program, brushes those numbers aside. The cities were asked to draft 10-year plans; it’s too early to meaningfully measure their progress, he says. More important, he argues, is evidence that the zones are spreading a “positive belief” in the communities and reversing the cycle of decline.

Cuomo has a point. Yet even empowerment zone fans like Robinson believe the tax break in the Clinton plan (built around a tax credit for hiring workers from within the zone) isn’t enough to operate as a “driving force” in spurring investment. So Michigan’s ambitious Republican Gov. John Engler is advancing a competing idea.

Later this month, Engler will designate 11 depressed communities as “renaissance zones”--a domestic equivalent of the Grand Caymans, without the beach. Firms operating in the zones will be exempt from all business, utility and property taxes; individuals living or moving into them will pay no property or income taxes. Without fear of overstatement, Doug Rothwell, the chief executive of the Michigan Jobs Commission, says: “Nothing like this has ever been tried to this degree anywhere in the country.”

Engler’s approach is bold, but critics see two large flaws. Unlike Clinton’s plan, Engler’s renaissance zones (which some congressional Republicans want to spread nationally) don’t require businesses to hire local residents to receive the tax benefits. And the plan’s very sweep paradoxically narrows its potential use: By definition, Archer notes, most cities can’t afford to completely write off taxes in anything but small, isolated areas.

The broader philosophical question is whether even the most enticing tax cuts would be enough to revive blighted neighborhoods like the blasted blocks of east Detroit, where vacant and burned-out lots now outnumber standing homes on some streets. Engler’s plan offers no new social service money with the tax cuts. In classic “third-way” fashion, Clinton’s model marries business tax cuts to $100-million social service grants for each empowerment city.

The Clinton camp argues that this represents a more holistic approach to healing troubled neighborhoods. Cities are using their grants to beef up police patrols, offer job training and day care, increase access to health care--all initiatives that could make the neighborhoods, and the people in them, better able to take advantage of economic opportunities.

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As conservatives suspect, some of this money seems to be drizzling off into tangential pursuits or subsidizing programs the cities should be funding themselves. But even many of the most hardheaded entrepreneurs struggling to turn a profit inside Detroit’s empowerment zone say that investing in human capital makes more sense that betting on tax cuts alone.

“Otherwise you’re approaching a problem with four sides from only one side,” argues Carmen Munoz, president of Munoz Machine Products Inc., an auto supplier opening a facility in Detroit’s zone.

Aside from Kemp conservatives, most urban affairs experts agree with Munoz and Clinton. But it’s not really known for sure which of these approaches will prove superior--or whether either will be nearly as transformative as their sponsors hope in reviving neighborhoods also suffering from crime, fatherlessness and the erosion of blue-collar opportunities.

In two years, Clinton’s empowerment zone initiative has demonstrated enough success to deserve further life. But if Republicans are genuinely interested--itself a genuine if--the field is still open for them to engage Clinton in a competition on how to rebuild the inner cities.

One answer would be for Congress to authorize more empowerment zones, as Clinton has proposed, but to “turbocharge” some of them with additional tax incentives, as Sens. Spencer Abraham (R-Mich.) and Joseph I. Lieberman (D-Conn.) have suggested. If any place would benefit from letting a thousand flowers bloom, it is the cracked asphalt of streets like Woodward Avenue.

The Washington Outlook column appears here every other Monday.