City Lessons : Local Governments and Nonprofits Create Wealth Where It’s Needed

Several of the nation’s most innovative mayors, who were visiting Santa Monica Tuesday to discuss urban revitalization at a Milken Institute conference, could have picked up lessons on the economy of cities on Monday if they traveled around the center of Los Angeles with Mayor Richard Riordan and City Council member Mike Hernandez.

The politicians were leading a tour of Hernandez’ first council district, where a combination of city government, nonprofit organizations and private companies are working to create wealth--to use a term seldom associated with distressed central cities.

Wealth creation is what is going on in the inner core of many cities in Southern California and across the nation, where local government and businesses realize that restoring the vitality of a retail sector in the center of town is as economically productive as putting up a new mall on the outskirts.

But reviving cities is complex work. One of the chief lessons of Central L.A., duplicated in other Southern California communities--La Habra, Fullerton, San Bernardino to name a few--is that nonprofit organizations play a critical role.

Esperanza Community Housing Corp., for example, stepped in Monday to buy a slum building for under $200,000 with funds from Los Angeles’ Department of Housing and from private banks and foundations.

Esperanza, founded eight years ago by Sister Diane Donoghue--a Catholic nun at a local parish--and backed by banks, churches, several schools of USC and hosts of private foundations, will now supervise remodeling to turn the structure into a 12-apartment residence complete with social services for families living there.

Elsewhere in the first district, New Economics for Women has built two apartment buildings, Casa Loma and Centro de Ninos, with 285 units of rental housing for single parents and children, complete with child-care and computer training so parents can try for better jobs.

NEW, started 12 years ago, is funded by federal and local governments and by foundations, banks and corporations such as Chevron, which gets a tax credit for backing affordable housing. It is assisted by UCLA’s Urban Planning School.

All told, nonprofit NEW has caused $44 million to flow into a distressed area, and its computer training has lifted residents’ earning power, says Beatriz Olvera Stotzer, the organization’s founder and president.

To be sure, such efforts seem like small voices in the wind against the low literacy and skill levels that handicap many of Southern California’s poor as they face welfare reform and the need to get jobs. Yet the renewed attention of political, financial and cultural heavyweights in central cities is not misplaced.

The economic payoff is in the effects of reclaimed streets--and the expelling of gangs and drug dealing that goes along with reclamation--on local people and the surrounding areas. Ultimately, property values will rise and residents will feel that no matter their poor jobs, their children will have opportunities for a better life.

In this important process, nonprofits can act as catalysts more easily than city government, which is hemmed in by the letter of laws and politics and media criticism.

In the Pico-Union area, for example, St. Sophia’s Greek Orthodox Cathedral is working with the city and private business to revitalize a shopping district on Pico Boulevard. Now there is a market of stalls rented out to merchants who have set up a jewelry store, a beauty parlor and clothing outlets.

“None of them have business licenses, they pay no taxes,” Hernandez explains. “The local people complain of cars taking parking spaces and of litter.”

But the solution is to keep the market open. “The city could close them down, but that would deprive the area of retail services and not earn any revenue,” he says.

So Hernandez, who heads Economic Development for all of Los Angeles, is working with St. Sophia’s and other churches and with the Los Angeles Neighborhood Initiative--a nonprofit group--to build a parking structure and to foster other improvements.

The stalls on Pico will be properly licensed and taxed. But they will get more business thanks to the area’s improvements which, it is hoped, will create a lively district that local groups are calling the “Byzantine-Latino” corridor.

But poor neighborhoods often get caught in the blind ironies of laws written to help them. For example, so-called Quimby funds, paid by developers for recreational facilities close to their projects, seldom reach older neighborhoods. Yet population densities and needs for recreational facilities are greater in the inner cities.

City and state funds for street repair go disproportionately to areas where there is less traffic than in older neighborhoods.

And there is institutional prejudice. When the Metro station was built on Alvarado Street near 7th Street, the area’s population was described in an official study as “undesirable.” To be sure, there is crime and police patrols have been beefed up to suppress it. But the people are not undesirable.

Rather, they are potentially a great source of economic activity in an area that was once a prime commercial location. Hernandez is trying to raise funds to have a retail center and parking garage built at the Alvarado metro station.

An entrepreneurial one-time bail bondsman who has been in office five years, Hernandez has been trying out remedies for urban decay that could set examples for other communities.

A Business Improvement District in the Lincoln Heights neighborhood, for example, will be funded directly by $118,000 of the taxes raised from local merchants. “We’ll get to make decisions on how our tax money can help the area with security and beautification,” says Steve Kasten, a local Realtor and head of Lincoln Heights Chamber of Commerce.

But will the city’s coffers go short $118,000? No, says Hernandez, the city will take in more. “Lincoln Heights businesses now pay $400,000 a year into the city’s general fund, but there are unlicensed businesses in the area. With greater fee and tax collections, I predict the city will be taking in $900,000,” says Hernandez.

He knows, and so should we, that there’s wealth potential and a high return on investment in our central cities.