Plans for Jobs, Housing Are at Odds

Echoing the debate over welfare reform, Los Angeles Mayor Richard Riordan is battling some City Council members to preserve a key element of his second-term agenda: job creation.

At issue is whether the disadvantaged are best helped by creating jobs through economic development programs or through the direct provision of basic needs, like shelter.

“Economic development provides really, truly long-term benefits that can be expanded with time,” said Deborah La Franchi, assistant deputy mayor. “If you create jobs, people will have the ability to afford life’s necessities.”

But some council members are wary that the mayor’s job creation initiatives would be carried out at the expense of affordable housing.

“Housing ranks up there as being more critical,” said City Councilwoman Rita Walters. “It’s the difference between a paper cut on your hand and a severe injury that puts you in the hospital.”

For the budget year beginning July 1, Riordan has proposed setting aside $10.7 million for economic development--business loans, business improvement districts and a new venture capital program. Last year, $8.7 million was budgeted for economic development--about double the city’s usual allotment.

A key vote on this budget is expected in a joint committee meeting Thursday. Four of the six members already have said they want less money to go to the mayor’s new economic development initiatives.

Similar concerns have been raised about a Riordan proposal to expand his targeted neighborhood initiative, an $11-million program started last year. The mayor has proposed adding Van Nuys to the program, which would receive an additional $1 million under his plan.

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Related to economic development because it draws from the same pool of funds, the targeted neighborhood initiative seeks to improve so-called borderline areas, and relies on residents to set priorities for spending.

But some council members say they are concerned that commercial interests have benefited from this process at the expense of housing.

“The mayor talks about empowering neighborhoods, but to me, a neighborhood is more than just a commercial corridor,” said City Councilman Mike Hernandez.

The money for both economic development and the targeted neighborhoods program would come from federal Community Development Block Grants, historically a source of funds for housing and social services.

The amounts involved are relatively small. But the tussle reflects a deeper philosophical debate throughout the country, as cities reconsider decades-old social programs to combat urban blight.

City officials describe the traditional approach to these issues as “need-based” as opposed to what they call an “investment-based” strategy. One approach addresses basic needs such as housing; the other seeks to generate investment--usually by helping businesses.

Across the country, major cities have been gradually increasing funding dedicated to businesses, often at the expense of housing programs, according to the U.S. Department of Housing and Urban Development.

On average, cities now devote nearly 10% of block grant funds to economic development, HUD says. Los Angeles in recent years has spent about 3% of that money on economic development. The mayor pushed through a measure last year increasing the total to 7.4%, but the city still lags behind the average. The shift reflects a sense that urban problems have become too vast and overwhelming for government to cure on its own. As with welfare reform, new economic development programs rely on the private sector to pick up where government leaves off.

“We will never really be able to meet all of the residents’ needs through direct public expenditures,” said City Councilman Mark Ridley-Thomas, who supports the mayor’s proposal.

Investment advocates such as Ridley-Thomas say the city is losing ground by paying too little attention to job creation.

Housing and social programs temporarily help individuals, similarly minded officials say, but not neighborhoods, which continue to decline from lack of investment.

There is little opposition at City Hall to spending some money on economic development. But the questions are how much and at whose expense.

“I think that the mayor’s initiatives on economic development are important . . . but I’m not sure that they should be supported with block grant money, at least to the extent that’s been proposed,” said City Councilwoman Jackie Goldberg.

On one level, housing advocates do not have a difficult case to make. Los Angeles has mile after mile of aging homes and apartments on the verge of becoming slums.

In many parts of the city, families routinely double up in small apartments or use makeshift, illegal dwellings.

“We are all competing for the same source of funds,” said Garry Pinney, acting chief of the city housing department. “The council . . . has a lousy job.”

Housing expenditures by the city have declined overall in recent years, in part because of waning revenues at the Community Redevelopment Agency, said Pinney.

But Pinney is especially concerned that the portion of Community Development Block Grant funds allotted to housing is ebbing, falling from $38.5 million in 1994-95 to $27.5 million this year.

Block grant money represents roughly a quarter of the city housing department’s budget, Pinney said. It is used for a variety of programs, ranging from home-ownership assistance to repair, acquisitions and construction of new housing.

Private developers sometimes partner with the nonprofit organizations supported by these funds, but the goal is always to improve the city’s affordable housing stock, not create jobs or boost industry.

Although HUD has increased other types of funding to the city, Pinney said the block grant money is key because it comes with less red tape and can be used in ways other funding can’t.

It can be used to fix smaller-scale blight, such as patching a leaky roof, he said. And because it’s better for forging partnerships with private developers, the money goes further.

But officials from the mayor’s office argue that the city will be left behind if it does not continue to show a commitment to boosting businesses--not just individuals.

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The economic development money this year has been used for a variety of programs, including the city’s year-old investment fund.

The fund played a key role in keeping Capitol Records in Hollywood, in part by helping to pay for construction of a parking garage, said Steve Andrews of the Community Redevelopment Agency. Money from the fund also enticed a movie-theater chain to expand into a depressed commercial district of San Pedro.

Money has gone to small businesses for loans and training, and to jump-start a city “brownfields” program. Brownfields are industrial properties that have fallen into disuse, often due to pollution. Public money may be used to help lure developers to transform an old factory site, for example, for use by a high-tech company or as a shopping mall.

Riordan hopes to add another economic development program to this list: equity, or venture capital, for business. Though risky, such public investments can have big payoffs. Recently, in one such case, a deal forged by the L.A. Community Development Bank helped Copeland Beverage Group save 100 jobs at a dairy south of downtown.

But the proposal has drawn opposition, and some council members have asked for clarification on exactly who would benefit.

“I don’t know how prudent it is to use public funds . . . in this fashion,” said City Councilman Rudy Svorinich.

But although Riordan has agreed as a compromise to cut, though not eliminate, the equity capital proposal, he is striving to keep next year’s spending levels for economic development at least equal to this year’s.

“When we bring a company in, not only does blighted property disappear, sales and income tax comes in, DWP gets a new customer,” said La Franchi, the assistant deputy mayor. “As small as our program is, it’s certainly better than nothing.”