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Oops, he did it again

Franklin left to untangle mess Campbell administration made of federal program and the $50 million it can still spend



Last Jan. 23 was a happy day for city officials. On that day, Washington officially named Atlanta a federal "renewal community," giving blighted parts of the city access to $17 billion in tax breaks.

A press conference was held, pictures were taken, backs were slapped.

Except, and this might have been important to mention, the designation came at a price. In the eyes of the federal government, you're either a renewal community or you're an Empowerment Zone; you can't be both. Atlanta, which has gained access to $100 million in grants and $150 million in tax breaks over the years because it was named an Empowerment Zone in 1994, has jeopardized a hefty chunk of its EZ money thanks to its new title as a renewal community.

It's a bungle that further stalls the city's troubled Empowerment Zone initiative, a program with about $50 million still to distribute.

It now appears clear that the person who filled out Atlanta's renewal community application either knew they would potentially jeopardize the Empowerment Zone initiative and didn't care or was simply incompetent. Because the application to become a "renewal community" states explicitly: If you are designated a renewal community, then you lose your Empowerment Zone designation.

Some cities, such as Chicago, Philadelphia and Detroit, got around the language by simply putting in an application for an area of the city not covered by the Empowerment Zone. For instance, let's say the east side of Chicago is in the Empowerment Zone. Chicago would then submit its application for west side neighborhoods. Voila. Problem solved.

In Atlanta's case, though, the renewal community area completely overlaps -- and then some -- the Empowerment Zone. If HUD's own application is to be believed, then that means sayonara, Empowerment Zone.

That leaves Mayor Shirley Franklin to ponder why her predecessor, Bill Campbell, allowed such an application to go forward, when it so clearly risked the Empowerment Zone program.

"I have no idea," Franklin says.

The mayor is waiting to see if the feds -- who recently asked for 45 more days to think on it -- will permit Atlanta to operate both programs. Otherwise, she may be faced with choosing between one or the other.

While Franklin tries to figure what will happen to the famously floundering federal entitlement program, she may want to take a look at a U.S. Department of Housing and Urban Development report that details the successes (and failures) of the six original Empowerment Zones, a list that includes Atlanta. The report, which was issued to utter silence last November, gives ammo to longtime critics of the Empowerment Zone program. But it also shows what worked.

For example, Atlanta's Empowerment Zone, which saw 63 percent job growth from 1995-2000 as compared to the previous five years, far outpaced those of six other cities. That means that 7,000 people found new jobs. The next closest increase in job growth occurred in Baltimore, but it totaled only 29 percent. Moreover, people employed in Empowerment Zone businesses increased by 150 percent, or nearly 3,000 people, between 1997 and 2000.

The problem with the numbers, as the report itself points out, is that there's no clear link between job growth and the Empowerment Zone program, and much of the growth occurred during some of the most economically prosperous times the city has seen in 50 years.

In Atlanta, "the primary lending programs have been slow to get off the ground," says Michael Rich, the Emory professor who authored Atlanta's section of the study. "The project to market the tax incentives has never really gone forward. The kinds of things you would think would be affecting [the employment numbers] aren't operable in the zone or just beginning to get under way. It suggests that maybe in Atlanta's case they just picked appropriate census tracts where business was likely to grow anyway, regardless of whether or not you did anything."

In fact, in Atlanta, only a small percentage of the 300 businesses surveyed were aware of the tax and regulatory relief the zone offered. When asked about the most important help they received through Atlanta's Empowerment Zone, 68 percent replied, "Nothing/no help/Unaware of programs." The survey also asked business owners whether they were aware of three specific and significant tax benefits, and in each case, Atlanta is either at or near the bottom when compared to all six original Empowerment Zone cities. Only 42 percent of respondents said they knew about a special wage tax credit -- worse than only New York City -- and just 7 percent of the businesses were actually using the incentive.

Furthermore, as Rich points out, so many of the human services programs that the Empowerment Zone's citizen-devised strategic plan called for were shelved in favor of gaudy economic development deals.

The Emory professor highlights a few projects: There was $36 million earmarked for programs in lifting youth and families out of poverty, $6 million for expanded childcare, $2 million for establishing four multi-purpose service centers, and $14.5 million to expand pre-kindergarten education.

"Most of this stuff never happened," Rich continues. "But these were the types of investments that were meant to raise the skills so that folks would be better able to enter the workforce and stay in the workforce. There was supposed to be a workforce development program. You're looking at about $10 million for job training programs. Only a few thousand dollars have been invested in programs there. Pre-K? I don't think there's been a penny spent on that to my knowledge, in Empowerment Zone money."

In many cases, the city lacked the personnel with the expertise to establish and run human services programs -- especially after its administration was gutted by Campbell -- and HUD didn't step in to offer help even though it had pledged unprecedented technical assistance.

"In Atlanta's case, there were many instances along the way where technical assistance and support may have been warranted, but my sense is that Atlanta never asked for help, and the regional HUD office, even though it had money available to hire consultants to come in and assist, was reluctant to come in on its own initiative," Rich concludes.

With the study, HUD has a roadmap to help it figure out what should be done to make the final two years of the initial 10-year Empowerment Zone plan more successful than the previous eight. Rich, however, isn't overly optimistic that will happen, given the reception the report has received.

"Here you have the first opportunity to examine the impact of combining tax incentives and regulatory relief with program spending, which consumed the national level debate for over a decade," Rich argues. "The studies might as well have been dropped in the middle of the desert somewhere as far as the reactions to those reports."

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