HOWARD FINE
Staff Reporter
L.A.’s repeated attempts at revitalizing its blighted inner-city areas have hardly been a rousing success.
Rebuild LA took in $500 million during its five-year life, but had limited success. The Community Redevelopment Agency has had a spotty record; it now faces an annual deficit of $8 million and is about to be taken over by the City Council. The Community Development Bank has been plagued by bad loans since its inception in 1995.
Now comes Mayor Richard Riordan’s latest plan Genesis L.A.
The program, announced two weeks ago, has the ambitious goal of attracting $250 million in private investment to create 5,000 new jobs at 15 blighted sites across the city.
Can it succeed where the others have come up short?
The Riordan administration is confident it will, because it relies on private-sector dollars and not massive government programs. “Genesis L.A. is about the bottom line sound, strategic investment,” Riordan said in unveiling the program.
But similar efforts in other cities, where local government specified the exact areas that private dollars would flow into, have yielded mixed results.
Philadelphia instituted a program that gives state tax credits to businesses that contribute at least $50,000 a year to a local community development corporation, which targets specific neighborhoods for revitalization.
“This allows businesses to pair with specific neighborhoods,” said Kevin Feeley, a spokesman for Philadelphia Mayor Ed Rendell.
So far, however, only 14 companies have signed on to the plan.
Houston had a similar program in which banks received incentives to make loans in specially designated inner-city neighborhoods, according to former Mayor Bob Lanier, who now runs Houston-based Landar Corp., a real estate development company.
“We inherited the program from the previous administration,” Lanier said. “Unfortunately, the banks never found enough good loans to have the program make any impact. The idea of banks adhering to some government idea of where the money should go didn’t work for us. We felt that it should be left up to the marketplace.”
Lanier said the government’s focus changed to sprucing up old inner-city neighborhoods with new infrastructure investment. “We found that if you make these old, run-down areas more attractive places for people to live, the commercial development would follow on its own accord,” he said.
In fact, it is this very idea of having the city direct where banks should send their funds that apparently tripped up Riordan’s initial plan of corporate sponsorships for redevelopment sites. Riordan designated 15 sites including Taylor Yard in the East L.A. area, Santa Barbara Plaza and the Goodyear Tract Industrial Park in South L.A., and the North Hollywood Studio Project for redevelopment under Genesis L.A.
But three major banks that, along with the L.A. Department of Water and Power, have committed up to $40 million to the program, balked.
Wells Fargo & Co., BankAmerica Corp., and Washington Mutual Inc. said they only agreed to commit money to a privately run investment fund, not to specific sites, and Riordan’s office was forced to issue a clarification to that effect.
The banks are insisting on a fund with a private-sector manager who would be empowered to make decisions on where the monies would be allocated.
“This is an investment, and we expect to receive a market return,” said Bank of America spokesman Cary Walker. “We invest in the fund and the fund posts returns.”
Walker also said that BofA is looking to Genesis L.A. as a vehicle through which to fulfill its federal Community Reinvestment Act requirements. Spokespeople for the other two banks also confirmed that they, too, plan to use Genesis L.A. as a means of complying with the CRA.
Washington Mutual spokesman Adrian Rodriguez said that, if successful, Genesis could have the additional benefit of generating new businesses and employees who would then open up accounts with the bank.
“That is certainly one of the reasons why the banks were interested,” he said.
As of last week, Riordan’s economic development staff was still in negotiations with the three banks over just how Genesis L.A. would operate.
Riordan spokesman Dan Margolis said the administration would have no further comments on Genesis L.A. until the negotiations are complete.
Glenn Yago, director of capital studies for the Milken Institute in Santa Monica, said it’s important that the private money be combined with public funds to achieve maximum impact.
“In the past, you had massive federal government programs pumping billions of dollars into the inner cities, either through housing programs or community development block grants,” he said. “Now, the amount of public funds available for these things is dwarfed by private money. The key is to leverage the public money with the private money.”
That is the tack taken by Philadelphia, which in 1994 set up an Economic Stimulus Fund that brought in about $5.6 billion over five years and is on track to bring in nearly $1 billion more this year. Nearly two-thirds of the money was from the public sector, with the remaining third coming from the private sector.
“We used every public dollar we could find and then leveraged private-sector investment into the fund,” said Feeley.
Feeley said the city retained or attracted 58,000 jobs from 1994 to 1998, although he said he did not know just how many of those jobs could be directly attributed to loans and infrastructure investments made by the fund.
So far, Riordan’s staff has not determined if public funds will be matched with the private dollars under the Genesis L.A. program. But at least as important as the money itself, say redevelopment and urban planning experts, is the structure of the program.
“This really depends on how the program is set up,” said real estate and economic development consultant Larry Kosmont. “If it is set up as more of a private-sector model, then they have a shot at making quick, focused decisions. But if it’s left up to a bureaucracy to determine where the money goes, then it might not succeed.”
