Can Santa Ana Make Urban-Aid History?

By SCOTT MARTELLE

Aug. 23, 1999 12 AM PT

TIMES STAFF WRITER

You’d think $100 million in free federal money would solve a host of problems for any economically battered area.

Santa Ana officials certainly hope so as they set out to revitalize three of the city’s most beleaguered neighborhoods, now a federally designated urban empowerment zone and one of 15 created nationwide this year.

Over the next decade, the city’s officials plan to combine the federal funds with $2.5 billion in local private and public programs to shore up and expand youth sports leagues, health care and incentives for business development.

The three targeted areas include two neighborhoods along 1st Street between Flower and Fairview Streets, and a larger area east of downtown comprising mostly low-income residential neighborhoods and light industries west of the Costa Mesa Freeway, roughly between 1st Street and Warner Avenue.

The neighborhoods were selected because of pervasive high unemployment and poverty, low education and job skills, and lack of access to health care, child care and such support programs as English-language classes.

But if the experiences of other empowerment zones are any indication, getting the money is no guarantee of success. In city after city, the programs have been dogged by mismanagement, misinformation, infighting and ineffectiveness that have cast shadows over even touted victories.

And just as Santa Ana gets its zone program underway, public policy experts are debating whether such initiatives can ever spark the tidal changes necessary to meet one of the nation’s most stubborn challenges: resurrecting urban cores in an era of suburban sprawl.

“One hundred million dollars sounds like a lot of money, but in the scheme of what money flows in and out of neighborhoods, it’s not that much . . . when we’re talking billions of dollars a year of disinvestment over 50 years,” said Daniel Immergluck, vice president of the Woodstock Institute, a nonprofit research and policy analysis organization that studied job creation in Chicago’s empowerment zone.

Patterned after urban revitalization programs in England in the 1960s and enacted in the U.S. after the 1992 Los Angeles riots, empowerment zones are supposed to revive downtrodden neighborhoods using tax incentives, grants and low-interest loans to entice business investment. Although the program calls for $10 million a year over 10 years in each zone, Congress approved only $3 million this year for each of the current group of cities. The Clinton administration is expected to ask for the remaining $97 million later this year.

The programs have had some successes, but most have stumbled at the gate.

Earlier this year, FBI agents in Philadelphia opened an investigation into the empowerment zone there after reports that a local agency approved $2 million in loans for projects that involved two board members. And an audit last year by the U.S. Office of the Inspector General found a pattern of problems in Atlanta, Chicago, Philadelphia and Detroit--the only empowerment zones audited.

The root difficulty: lack of oversight both by local officials and by the U.S. Department of Housing and Urban Development, the agency entrusted to administer and monitor the money.

Of particular concern was HUD’s apparent reluctance to correct problems within those four programs dating back to 1997 and its inability to discover that cities were sometimes overstating their accomplishments, said Catherine Kuhl-Inclan, assistant inspector general for audits.

In one instance, Atlanta zone officials reported to HUD a program in which a public housing resident was raising $150,000 from her low-income neighbors to trigger a matching zone grant to open a day-care center. Yet Atlanta housing officials said in April that the program doesn’t exist.

HUD officials deny that they have lost oversight for the empowerment zones but acknowledge that they need to more closely examine reports from local zone officials.

“We learned a lot from that first round,” said Dennis Kane, HUD coordinator for the empowerment zones. “We’ve started a new performance-based measurement system and we’re getting the new reports in now. It’s much more accurate. And we’re not going to just take the cities’ word for it. We’re going to have verification by our field offices.”

The problems already have produced repercussions in some cities. In Atlanta, the mayor fired 18 of the initial 22 staff members two years ago and replaced the executive director, reinventing the program at a time when it should have been hitting its stride.

Problems in some places arose before the zones were even created. In Atlanta and New York City, political disputes over who would run the programs delayed their debuts. Camden, N.J., whose zone was designated jointly with Philadelphia’s, was so far behind that a HUD report in 1996 raised doubts about whether it would ever get off the ground. Officials there, though, have since hired an executive director and the program is underway, Kane said.

HUD officials also have been critical of other aspects of the programs’ progress, including Los Angeles’ supplemental empowerment zone, designated after the initial round announced in 1994 did not include the city.

HUD officials lauded the creation of the $640-million Los Angeles Community Development Bank, designed to loan money to local businesses--usually minority-owned--that have trouble getting commercial bank loans.

But HUD officials also criticized Los Angeles for not implementing broader programs in the enterprise zone. And in March, HUD announced an audit after the city reported that the bank was falling short on creating jobs, and that as much as 60% of its portfolio consisted of shaky loans.

Last week, the bank’s largest borrower--the Copeland Beverage Group dairy--announced it was closing, reneging on as much as $18 million in loans, about one-fourth of the bank’s current portfolio.

Aldo Estrella Schindler, Santa Ana’s empowerment zone manager, said local officials plan to use others’ failures as a template for what to avoid.

“We can’t be making the same mistakes as other people,” he said.

Still, some problems have already cropped up. For instance, Santa Ana’s application lists one community group with an annual budget of $26,000 as providing $1 million per year in services, a level of involvement it couldn’t possibly attain. Elsewhere, the city’s application contains conflicting estimates of proposed expenditures for individual program categories, such as job training.

And one local resident came forward recently with a complaint that he never wrote a letter of support included, purportedly over his signature, in Santa Ana’s application.

Those problems reflect the kinds of inattention to detail that disturb federal auditors.

Kane, the HUD coordinator, downplayed the inconsistencies, calling them relatively minor, and said new HUD reporting controls should preclude the problems from developing in the programs themselves.

The Santa Ana program also is designed to be fundamentally different from those in other cities, where the focus has been largely on job creation.

Santa Ana’s program is aimed at rebuilding its neighborhoods, marked by relatively high unemployment, poor employment skills and low education. About one-third of the residents live below the federal poverty line, and many have limited access to health care. Nearly half the households have no English speakers over age 14.

“You have to have stable neighborhoods to have a good work force and a good economic base,” said Patty Nunn, Santa Ana’s manager of economic development. “You have to have education.”

Santa Ana also differs from other zones in terms of need, size and local support. At 4 square miles, it is one of the smallest zones established since the program began. And the amount of local investment--$2.5 billion--exceeds that in most other zones.

While living conditions aren’t as dire as in the urban hearts of Detroit or Atlanta, for instance, the need seems obvious.

Griselda Carrillo, 26, lives with husband Rafael Gomez and their three children in an apartment on Santa Ana’s Minnie Street, in the heart of Santa Ana’s empowerment zone. The neighborhood is one of the city’s poorest.

“You know what I would do? I would want to change the entire community here,” Carrillo said. “Change everything. Have the whole neighborhood look like it was and be like it was 25 years ago.”

As it is, low-rent apartments stand on small yards of packed earth, backed by parking lots. Train tracks run behind Carrillo’s building, dangerously close to children with no access to a playground. Carrillo and other mothers also fear armed gangs of youths.

“Principally,” said resident Alfonso Guerrero, 37, “we need to ensure that our children are safe, so they can go to and from school free without any problems and feel safe here in our neighborhood.” He added that many neighborhood children also need extra help at school. “There’s no place they can go.”

On paper, Santa Ana’s empowerment zone addresses many of those problems, drawing together and expanding existing city-run programs that mix adult education, youth tutoring, after-school sports and a reading-readiness program for preschoolers to reduce dropout rates and improve family stability.

Going from plan to action, though, is the critical hurdle, and the point at which programs elsewhere have stumbled.

“We really have to take a careful look at who’s asking for the money and what benefit it will bring back to the city,” said Nunn, Santa Ana’s economic development manager, adding that one lesson Santa Ana learned is to proceed at a manageable pace. Another lesson: Keep public expectations low.

Some experts argue that there’s a fine line between identifying problem neighborhoods for rejuvenation and inadvertently isolating impoverished areas, said David J. Wright, director of urban and metropolitan studies at the Rockefeller Institute of Government in Albany, N.Y.

“In large part, what the communities most need are strong connections with what’s going on on the outside,” said Wright, who helped write a critical analysis of the zones’ implementation plans. “They need to be tied into the engine in the regional economy.”

The first $3 million already has been allocated in Santa Ana, more than half of it to such programs as Hands Together: A Center for Children, a day-care center that received $250,000; Delhi Park and Community Center, which received nearly $1 million to match state funding for a $4.2-million renovation, including a new community center; and $386,000 for after-school youth programs.

The city also allocated $250,000 to finance a loan program for small businesses through the Southland Economic Development Corp. and $100,000 to staff the Santa Ana W/O/R/K Center, to help place zone residents in jobs and monitor businesses hiring them to qualify for tax-exempt development bonds.

Of the 22 people named to the zone’s board of directors by the City Council last month, none are elected officials. That should help ensure the widest possible representation in programs, said Schindler, Santa Ana’s empowerment zone manager.

“A common critique is we’re not hitting the right people in the city,” Schindler said. “We realize that we can’t knock on 49,000 doors. We’re counting on people in these organizations who have better contact with the communities than we do.”

At the end of a recent school day, 50 or so fifth- and sixth-grade girls from Madison and Kennedy elementary schools met for soccer games in a four-team league under the city-sponsored Sports in the Streets program. The program, initially funded for three years, would extend to 10 years with the help of zone funding.

“Our target population is kids at higher risk, who don’t have a dad there coaching the Little League team and going to games and tossing a ball around since they were 2,” said Jenny Rios, a manager for the city’s Recreation and Community Services Agency.

“These kids don’t have any ability and for the most part are shunned by traditional programs,” Rios said. “This helps their socialization as they get older, gets them involved in a team and the sense that they belong to something positive.”

Times staff writer David Reyes contributed to this report.

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Seeking Empowerment

The granting of federal empowerment zone status earlier this year to the city of Santa Ana could mean $100 million in federal grants over the next decade to rebuild some of the city’s most battered neighborhoods. The plans also call for spurring industrial and business investment in adjacent development sites.

Santa Ana

Size: 4 square miles

Pop.: 49,432

Unemployment: 5.6%

Poverty rate: 31%

Median family income: $16,827

Private/public sector investment: $2.5 billion

Anticipated jobs created or retained: 1,000

Detroit

Size: 18 square miles

Pop.: 101,000

Unemployment: 29%