Loan Pool Targets Pacoima Job Losses

Los Angeles City Councilman Richard Alarcon and officials of the federal Small Business Assn. and the North American Development Bank this morning will announce the start of a guaranteed loan program in Pacoima created by the U.S. and Mexican governments to assuage the negative effects of NAFTA.

The Community Adjustment and Investment Program is designed to recover some of the thousands of jobs Washington says were lost in the 47 U.S. communities hardest hit by the North American Free Trade Agreement between the United States, Mexico and Canada.

Pacoima lost much of its manufacturing base when the nation’s third-largest faucet company, Price Pfister, laid off more than 500 workers there and shifted many of its operations to Mexicali, Mexico.

“Hopefully, this will mean that workers who have been laid off will be able to be retrained and businesses that didn’t qualify for loans before will be able to qualify for loans,” said Alarcon, who represents Pacoima.

Alarcon said he hoped the CAIP program would speed Pacoima’s economic recovery--which, he added, is already underway--by spurring new investment in the area.

Bruce Hodgeman, chief of finance for the Small Business Assn.’s Los Angeles district office, said he expects about 40 business owners to attend the event this morning at Tavern on the Green restaurant in Pacoima, and about six owners to actually apply for loan guarantees in the first month.

But borrowers will have to move quickly to apply for the guarantees before the federally imposed deadline of March 31.

The decision to include Pacoima in the program was based on unemployment data provided by the U.S. Bureau of Labor Statistics and the U.S. Department of Labor’s NAFTA-Transitional Adjustment Assistance Program.

Under the $22.5-million CAIP program, small businesses in Pacoima are qualified for SBA guarantees on bank loans of up to $750,000 if they pledge to hire at least one new employee for every $35,000 they borrow.

In rural areas, the U.S. Department of Labor will administer the guaranteed loans.

The NADBank--a $3-billion financial institution created through NAFTA and jointly run by the United States and Mexico to help ease implementation of the pact--can also offer loan guarantees directly, in addition to the SBA mechanism, officials said.

Although recipient communities were announced in August, NADBank Director Hugh Loftus said only $15 million in loans had been guaranteed and only 800 new jobs created as of December due to lack of personnel to process the applications.

Two loans for a total of $1.8 million were financed by the Department of Agriculture in California, Loftus said, both in Watsonville in the northern part of the state.

Program administrators hope to underwrite $1 billion in loans designed to expand small businesses and to create 30,000 jobs around the country.

In addition to jobs lost at Price Pfister, John Rooney, president of the Valley Economic Development Center, said Pacoima lost about 200 additional jobs when apparel manufacturers moved their operations out of the community and the country.

NAFTA hit the entire region particularly hard because of the area’s proximity to Mexico and the timing of the 1994 Northridge earthquake and U.S. defense downsizing, Rooney said.

But in recent months Pacoima has been targeted by several important state and federal programs intended to revitalize businesses there, including its designation as a federal empowerment zone, which carries certain tax breaks for companies in the zone. Commercial building vacancy rates are at only 3% as companies move to the community to take advantage of state tax credits on loans in the area and the federal benefits.

“Right now, companies there are hungry for capital and [CAIP] will provide that capital,” Rooney said.