Sunday, February 10, 2002

Federal grant use questioned

Cincinnati's empowerment zone criticized

By Derrick DePledge
Enquirer Washington Bureau

        WASHINGTON — The Bush administration's decision to strip federal money for some empowerment zones from next year's budget was based in part on questionable results in cities like Cincinnati, federal officials said.

        The U.S. Department of Housing and Urban Development has expressed concern about progress in some empowerment zones and whether federal cash investments were producing new jobs or economic growth.

        HUD officials also pointed to $246 million in unspent money in urban empowerment zones at the end of this past fiscal year as a factor in the administration's recommendation. Nancy Segerdahl, a HUD spokeswoman, said the president's budget favored “programs that demonstrate results.”

        “It's clear that many of these empowerment zones are not spending their existing grant funds, so this budget request will shift the focus toward providing tax incentives as a more effective vehicle to promote economic development and job growth in these communities,” she said.

        In Cincinnati, city officials and neighborhood activists have acknowledged administrative and other problems with the empowerment zone but argue that the initiative is improving. Many involved with the project knew the initial promise of $10 million per year for 10 years from the government was not guaranteed but hoped for more federal money than has been provided.

        The Cincinnati Empowerment Corp., which oversees the empowerment zone, has received $18.9 million since 1999 and expects another $3 million this year. The non-profit corporation has committed about $13 million to community projects with 43.8 percent of it devoted to economic and work force development.

        At the start, officials estimated that the empowerment zone in nine low-income city neighborhoods would create or retain more than 10,000 jobs. Three years later, that still appears ambitious.

        Many people who live in the city's empowerment zone neighborhoods have no high school diploma or transportation. An empowerment loan fund has been created to help businesses provide services, and other money has gone to help train and hire residents for jobs. Arts, recreation and health education programs also have received money.

        “The first two years were pretty rocky. Everyone knows that,” said Harold Cleveland, who took over as chief executive officer at the nonprofit corporation last year. “But we are poised for our best year. I think we've built some credibility in the city.”

        The president's proposed budget would eliminate federal grants for empowerment zones in 15 urban and five rural areas. An array of tax breaks and wage credits still would be available to help keep or lure businesses into empowerment zone neighborhoods.

        Many Republicans have long preferred tax breaks over federal grant money for empowerment zones and designed a national renewal community program — including a site in Hamilton — around the theory that tax incentives spur economic growth.

        Rep. Steve Chabot, R-Ohio, who has opposed the $100 million-over-10-year promise, said lawmakers should evaluate empowerment zones in relation to other potential budget cuts and spending for the war on terrorism.

        But he also believes that tax incentives are more effective for empowerment zones.

        “In my view, you're going to create more jobs and improve these distressed communities more by actually encouraging businesses to locate there,” Mr. Chabot said.

        Two Democrats who represent empowerment zones — Sen. Paul Wellstone, D-Minn., and Rep. Loretta Sanchez, D-Calif. — already have said they would try to restore the money when Congress debates the budget.

        Ms. Sanchez said the empowerment zones targeted were chosen in 1999 — in the second round of the program — because the communities had not prospered as the economy soared in the 1990s.

        “The people who live in these zones weren't making it in prosperous times. They were the ones being left behind,” she said. Withholding federal grants at a time when the nation is in recession could cause even greater hardship.

        “They'll fall even further behind,” she said.

        Some Republicans also are concerned. Rep. Frank LoBiondo, R-N.J., said money for an empowerment zone in Cumberland County, N.J., should not be jeopardized because of poor performance in other communities.

        “They've not done what they're supposed to do, and it's hurt all of us,” Mr. LoBiondo told the Daily Journal in Vineland, N.J., adding that he would take that argument to the Bush administration.


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