David Lizarraga runs a non-profit organization with annual revenues of $120 million. He began his career as an activist in the Chicano movement of the 1960s and worked with labor organizer Esteban Torres to try to incorporate East Los Angeles as a Latino city. When that failed, the pair turned their attention to economic development. In 1970, Torres started the East Los Angeles Community Union. Two years later, Lizarraga assumed leadership of the organization when Torres decided to run for Congress. By leveraging federal grant money, TELACU turned a decaying former Goodrich Tire plant into a 55-acre industrial park. Ever since, TELACU has functioned as a self-sufficient redevelopment and social service institution.
Today, “TELACU focuses its more than $500 million in assets on empowering small- to medium-size businesses as well as improving the lives of individuals and families in the communities it serves,” according to the organization. The organization has generated its share of controversy. It has a history of launching the careers of politicians who later steered contracts its way. Lizarraga currently serves as chairman of the U.S. Hispanic Chamber of Commerce in Washington, D.C. A lifetime Democrat, he joined other Latino leaders last week in endorsing Republican Arnold Schwarzenegger for governor. The interview took place in Lizarraga’s office at TELACU Center in East Los Angeles.
Question: How did you first get involved in community development of the East side?
Answer:
During the mid-1960s, I started a community center in East Los Angeles called Casa Maravilla: It was in the projects, one of the toughest projects. At that time the movimiento was really engaged. We had 22 members of our staff working with 11 different gangs. And we rehabilitated those projects, which were really dilapidated Quonset huts from World War II.
Q: What was the agenda?
A:
At that time I was leading marches because I was more of a militant than an activist. I was angry at the system and how it treated our community. We felt pretty impotent. Politically we had very little presence in the system. The educational system was faltering for us and the police weren’t our friends at that time; our young people were not being treated in a manner conducive to changing lives. So I was angry. I led marches to City Hall and the Board of Supervisors, protesting the concerns we had.
Q: Was TELACU on the map yet?
A:
Right after the Watts Riots, two gentlemen from the United Auto Workers came to Los Angeles. One was Esteban Torres. The question for him was, “Does the concept of labor organizing fit with community organizing?” He formed the East Los Angeles Community Union while I was leading marches and organizing gang kids.
Q: So how did you go from militant to businessman?
A:
Esteban reached out to me. It was difficult because he came from another time, another place in my opinion. But one day he asked me: “What are you doing?” I said, “I’m leading marches, we’re getting press, people are listening, and we’re busting down doors.” He said, “Have you tried turning the knob and walking in?” Then he asked: “Do you have anything that works?” We were protesting all the stuff that didn’t work, but he said, “I know what you’re against. What are you for?” Esteban was an international labor organizer, and he talked about third-world economies. I saw the parallels between third-world economies in Latin America and our third-world economy here. I committed to steer TELACU in a direction that would address economic empowerment.
Q: Why did you choose real estate development for your strategy?
A:
Because East Los Angeles was the hole in the doughnut. There was “dough” all around us economically sound communities where our people worked. We would leave this community to work and spend our dollars, but they didn’t circulate here. We were an economically disinvested community.
Q: What about the jobs that brought people here?
A:
Chrysler, Bethlehem Steel, General Motors, Ford, Uniroyal and Goodrich all closed down. That, together with the movement, didn’t do a lot to improve the economy in our community.
Q: Didn’t the federal government fund TELACU
?
A:
The TELACU model is basically a business model, but it evolved at the time. As the War on Poverty was downsizing, Sen. (Edward) Kennedy and Sen. (Jacob) Javitz thought about creating self-sufficient organizations. That was the Community Development Corp. movement, and we became a CDC. Over a period of years, we received about $7 million from federal grants that we leveraged. The federal government wanted us to build an economic base, but if it were that easy to do business in the barrio, people would be investing all the time. There were obstacles; mainly the barrio economy.
Q: You leveraged the government money with outside investments?
A:
We did the analyses and pro formas, everything to attract debt and investors. That brought into the organization a discipline that allowed us to leverage those government dollars and really have an impact. We built TELACU Industrial Park on 55 acres.
Q: But one industrial park didn’t turn East L.A: around?
A:
The industrial park gave us the economic base, but it’s also a symbol that we were ready to reinvest, to risk to rebuild our community. We needed to show that East Los Angeles was worthy of reinvestment. I had done my share as an activist to scare business away. Now, how were we going to bring business back?
Q: Was the park a success from the start?
A:
By taking on debts and partners, we developed it on a parcel basis. We did a good job of finding that opportunity in the barrio. Also, we were blessed with location, location, location. We haven’t had a vacancy in all these years. We’ve had new tenants, but as soon as one leaves another one wants to be here.
Q: How many tenants?
A:
About 30, a real mix. We have small incubator space, all the way up to a division of Time Warner. It’s a mix of manufacturing and distribution.
Q: Critics would say that with $120 million in revenues, TELACU isn’t a non-profit, it’s a corporation.
A:
That $120 million is the revenue stream of TELACU. The non-profit organization owns TELACU Industries, our for-profit holding company. We have 13 businesses. Aside from the industrial park, we have real estate development industrial and housing. Then financial services we own Community Commerce Bank and financial services programs in the community. Then there’s a construction company and a construction management company a number of firms in that business. But we operate in a way to see how we can affect the community through a double bottom line. This has to run like a business, look like a business, be financed like a business. But where we invest, and what we invest in, makes the difference for us.
Q: But where does the money go?
A:
You hear $120 million, yes, but out of that we have to pay taxes, invest in our business, and eventually there’s a net profit. So 80 percent goes back into the business and 20 percent goes to social programs. The social bottom line is where you do it, how you do it and whom you do it for. These businesses employ 800 to 1,000 people. The greatest social good you do for an individual is the creation of a job. There’s a lot of ways to make a dollar, but we concentrate on things that make a difference, like helping someone buy their first home or building housing for seniors. We decided to stop marching to make a difference by creating something that would provide access to credit. It’s been a great business for us.
Q: What are your social programs?
A:
We have programs for at-risk youth. We have close to 3,000 units of senior housing. The flagship is our education and scholarship program. We currently have 600 students fully funded and we graduate 150 of them every year. They’re in 82 colleges in university, from 22 high schools. Also, we help 2,500 high school and middle school students with counseling and programs.
Q: Explain why TELACU plays an active role in politics.
A:
Generally, we’re here to participate in the system. Obviously, reinvestment in a community isn’t just economic and social, it’s also about political impact. It’s been a long time since we had just one Latino in Congress, Ed Roybal. We now have 29 Latinos and Latinas in the state Legislature and seven members in Congress from the greater Los Angeles areA: So that’s part of our political growth.
Q: You’re a Democrat, but you’re backing Schwarzenegger for governor?
A:
He’s come to the middle.
Q: Don’t a lot of your projects involve public money?
A:
Government funding represents maybe 1 percent of our revenue. We were helped significantly in our early years, but we currently receive very little government funding, and we have to compete for it just like everybody else. We use it for our senior housing projects.
Q. TELACU has cultivated politicians who later got public contracts for the organization. Has this hurt TELACU’s reputation?
A
. Sometimes they did give contracts to TELACU and sometimes they didn’t. It really depended on what they thought was best for their constituency. People tend to overestimate the cohesiveness of politics on the East Side and underestimate the free thinking of elected officials. They talk to their constituents and voters, and the people elect them. But we do engage in the political process to impact policy.
