Strong Economy, Not Government, Made a Difference

Mixed Messages 10 Years After The Riots

Staff Reporter

Even as the fires were still smoldering, politicians wasted no time in promising a whole raft of government initiatives to rebuild and improve the long-neglected inner-city economy.

Many of the damaged properties were rebuilt and the area has seen improvement. But nearly everyone agrees that most government programs helped only at the margins the rebounding economy played a much larger role.

"Collectively, these programs fell far short of the high expectations that people held for them," said Linda Griego, the former president and chief executive of RLA (formerly Rebuild L.A.) and now a local restaurant owner.

Rebuild L.A. was the main organization set up by politicians to help the riot-torn areas.

Then-mayor Tom Bradley and Gov. Pete Wilson called on former L.A. Olympics czar Peter Ueberroth to head it up. It's task: to call upon the private sector to pony up hundreds of millions of dollars to rebuild the riot-torn areas.

President George Bush jetted in with promises of hundreds of millions of dollars more in federal aid, in loans, grants and tax incentives. And L.A. was to be the perfect vehicle for a new federal program: the empowerment zone.

But unrealistically high expectations were generated for Rebuild L.A. and the federal programs. South Los Angeles had been in gradual but inexorable decline for 40 years. No programs, no matter how well intentioned, could possibly turn that around in a couple years.

Recession adds to woes

Plus, L.A. was in the grip of the worst recession it had seen in 60 years, severely limiting the resources it could bring to the table.

Before it disbanded in 1997, Rebuild L.A. managed to secure $312 million in corporate commitments to revitalize the inner city, and another $70 million in job training and other community programs. IBM, Ralphs Grocery Co., Bank of America, the Gas Co. and other corporations donated tens of millions of dollars.

"RLA put a third of a billion dollars in capital into South L.A. that wasn't there before. Of course that made a difference," said John Bryant, president and chief executive of Operation Hope.

But another $100 million in promised new capital never did materialize. When RLA disbanded after its five-year mandate ended in 1997, it turned over the job of economic revitalization to the Community Development Technology Center, an organization affiliated with local community colleges.

The CDTC soon had a different mandate: to boost specific industries by forming trade groups, like the Food Industry Business Roundtable and the Southern California Biomedical Council. It kept only part of RLA's mission by pursuing retail projects for South L.A.

Help from Washington

Meanwhile, during the first two years after the riots, federal aid dollars poured into South L.A., primarily in the form of loans. All told, through 1994, $823 million in federal dollars went to riot-impacted areas, mostly in the form of Small Business Administration and Federal Home Loan Bank Board loans.

Doubtless the federal money would have continued to flow toward riot recovery, but the 1994 Northridge Earthquake, a disaster of far greater scale, soon consumed everyone's attention and dollars.

City officials received another jolt later that year: L.A. was denied a federal empowerment zone, a program that was crafted specifically with Los Angeles in mind. Federal officials said the city's application was vague compared to work produced by rival cities.

Instead, the city was granted funds to set up a Community Development Bank, which would function as a lender of last resort for businesses unable to get capital elsewhere.

But the bank was plagued with problems from the beginning. By its very nature, it was required to make risky loans: businesses had to be rejected for loans by at least two conventional banks to qualify for a CDB loan. So it was hardly surprising that several loans came back to haunt bank and city officials, including a $24 million loan to a dairy that went under.

L.A. finally got its empowerment zone designation in 1998, but by then, the revved-up economy was doing what all these federal programs had failed to do: ignite developer interest in the inner city. Tax credits and other incentives did help some businesses, but they were hardly the dealmakers that were intended.

Another city institution was making its mark on South L.A.: the Community Redevelopment Agency. The CRA put its dollars and powers of land assembly to use on several projects, both housing and retail. But CRA projects often ran into political trouble: witness the protracted struggle over the Santa Barbara Plaza near Crenshaw Avenue and Martin Luther King Boulevard. Ten years after the riots, a redevelopment plan for that area is not finalized.

Mayor James Hahn has backed efforts to set up an affordable housing trust fund. That housing focus continues in South L.A., since city officials recognized that luring more retail projects to the area would be a tough task.

How Government Fared:

The knee-jerk reaction to the riots led to several initiatives that basically went nowhere.

Rebuild L.A.: Non-profit group formed to rebuild riot-torn areas of city; chaired by Peter Ueberroth. Garnered $312 million in money and other aid from corporations; more than $100 million promised but never delivered. Disbanded in 1997

Community Development Technology Center: Successor group to Rebuild L.A., focused mostly on boosting industry sectors and bringing retail to inner city. Lot of studies on industries in South L.A., some actions. Has brought retail, but not high-wage "knowledge industry" jobs.

Los Angeles Community Redevelopment Agency: Charged with redeveloping blighted areas. Brought new housing and some retail projects to South L.A.; slow process often caught up in politics.

Community Development Bank: Make loans to inner city businesses turned down by conventional lenders. Largely a failure. By very nature makes high-risk loans; couple of large flops. As standards tightened, fewer loans made.

State Enterprise Zones: Provide tax credits/incentives for businesses to move in/expand into blighted areas. Successful at the margins; encouraged some businesses to move into or expand in South L.A.

Empowerment Zone: Federal tax credits/incentives for businesses to move in/expand into blighted areas. After missing out on first round in 1994, L.A.'s 1998 empowerment zone designation was too little, too late to be of much help in rebuilding South L.A.

Targeted Neighborhood Initiatives: City program to clean up run-down neighborhoods. Some neighborhoods cleaned up, but in process forced crime and other urban ills to migrate to surrounding neighborhoods.

Source: Business Journal research

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