City to Review Bank’s Investments
The Los Angeles City Council asked city officials Tuesday to review the L.A. Community Development Bank’s investments in high-tech start-ups, after The Times reported that the $35-million program has yielded few benefits for the low-income communities the federally funded bank was created to serve.
The City Council measure instructs bank officials and the city’s Community Development Department--which oversees the bankto report back in two weeks with details of the contract with Zone Ventures, the Southern California arm of Silicon Valley venture capital firm Draper Fisher Jurvetson.
It also asks the city attorney to review Zone Ventures’ compliance with the contract, which calls for the high-tech companies that receive federal money to be located in blighted neighborhoods and hire half their staff from the low-income Empowerment Zone.
The Times reported Oct. 21 that the 13 high-tech start-ups that have received federal funds are located in downtown office towers outside the area the bank is chartered to serve.
By last spring, only six of the 570 jobs created by the companies had gone to Empowerment Zone residents.
So far, the bank has allotted $23 million of its $35-million commitment to Zone Ventures.
The council measure, introduced by Councilman Mark Ridley-Thomas, asks the city attorney to determine if the remaining $12 million can be withheld.
“This is very problematic,” said Ridley-Thomas, whose South Los Angeles district is in the Empowerment Zone but received none of the investment capital. “The way it could be corrected is to cause them to come into compliance. If they can’t, the balance of the investment that they expect should be withheld.”
Bank and Zone Ventures officials did not return calls for comment late Tuesday.
But bank officials previously have defended the investments as appropriate, saying they were meant to revitalize downtown and augment a broader investment strategy that was derailed. Zone Ventures officials have said they believe they are meeting the bank’s goals.
The bank, formed in the wake of the 1992 riots, had hoped to strike pay dirt in the high-tech market in the boom days of public stock offerings, then use its cash infusion to better perform its core duties serving poor neighborhoods, interviews and documents revealed.
But the tech bubble burst and investments in the companies probably will yield much more modest payoffs later than expected, bank officials have said.
