Atlanta’s $250 Million Empowerment Zone Mess: Big Promises Produce Few Results

Dr. Steve Morse

Introduction and Background

The purpose of this report is to evaluate the progress of the Atlanta Empowerment Zone program and its results after two and one-half years of operation. Congress authorized federal funding of Empowerment Zones on August 10, 1993. On December 21, 1994, Atlanta’s Empowerment Zone application and strategic plan titled “Creating an Urban Village” was chosen by the U.S. Department of Housing and Urban Development (HUD) as one of six cities to be awarded Empowerment Zone (EZ) designation and $250 million ($100 million in federal cash grants and $150 million in job tax incentives) to revitalize Atlanta’s poorest neighborhoods.

The information collected for this report was derived from performance reviews by a variety of groups including: the U.S. General Accounting Office, the Atlanta Empowerment Zone Corporation, the Rockefeller Institute of Government, HUD, Price Waterhouse Consulting, and the Georgia Department of Community Affairs. A complete list of sources is included at the end of the report.

What is an Empowerment Zone?

The EZ program was created by HUD as a way to “empower” inner-city residents of the poorest neighborhoods to become self-sufficient and improve the quality life of the inner-city poor. Billed as an “economic development” program, the EZ program is actually a mix of two program agendas. First, the program includes concepts from former HUD Director and congressman Jack Kemp’s 1980s “Enterprise Zone” program and its effort to solve inner-city poverty by providing investment and job tax credits to lure businesses to relocate to poor neighborhoods and hire residents. Second, the program includes the Clinton Administration’s desire to provide for “human development” programs in rebuilding inner-cities in America by emphasizing the need for health clinics, adequate housing, drug treatment, child care, job and literacy training. Congress authorized this new program mix that was “designed to empower people and communities across the nation in developing and implementing a strategic plan to create job opportunities and sustainable community development.”1

A major theme of the program is job creation in inner-cities. As stated in Atlanta’s application, “The first priority in revitalizing distressed communities is to create economic opportunities – jobs and work – for all residents. The creation of jobs, both within the community and throughout the region, provides the foundation on which residents will become economically self-sufficient and communities can revitalize themselves.”2

How Atlanta Won EZ Designation – The Strategic Plan

Atlanta’s EZ is a 9.3 square mile area that includes 30 inner-city poor neighborhoods. Atlanta’s application was selected based on a strategic plan to increase economic opportunity for its residents and create inner-city businesses and jobs. Atlanta’s strategic plan is centered on creating an “urban village” where employment, self-sufficiency, and investment outcomes include:

  • All 30 neighborhoods will become a network of cottage-based businesses plus several business operations,
  • Four “Urban Village Centers” (Sweet Auburn, Summerhill, Lakewood, and M.L. King/Atlanta University Complex) will become critical mass centers of commercial and light industry, having residents as owners and employees of a significant number of businesses,
  • Three other Urban Village Centers will be major tourist, convention and higher learning centers that will be strong support for neighborhood and commercial businesses enterprises,
  • An Environmental and Ecological Industrial Park will be home of the “Solarizing Atlanta Initiative” and the home of major industries in recycling, remanufacturing, and advanced technologies or research and development,
  • The EZ will be sustained by a host of job training and support capabilities such as the One Stop Capital Shop and the Atlanta University Center,
  • The Atlanta EZ Small Business Investment Center will be banks and credit unions making a strong environment for business retention and development.3, 4

In order to create the “urban village” with the above characteristics, Atlanta’s strategic plan is organized in five major program areas:

  1. Economic Development – expanding employment and economic investment opportunities by increasing jobs, training for jobs, transportation to jobs; attracting businesses to the EZ; and increasing sources of funds for businesses;
  2. Provide Adequate Housing for All – increasing access to credit, improving the affordability and availability of housing, increasing home ownership, and meeting the needs of the homeless;
  3. Creating Safe and Livable Communities – increasing public safety; improving streets, sidewalks, lighting, and parks; and promoting ecologically sustainable communities;
  4. Lifting Youth and Families Out of Poverty – confronting and reducing drug and substance abuse, reducing high school dropouts, creating food cooperatives and community gardens to feed the hungry, and providing human development programs;
  5. Providing Governance – creating the Atlanta Empowerment Zone Corporation to implement the strategic plan.3, 4

 

Evaluation of Atlanta EZ Programs

How is Atlanta’s EZ doing in accomplishing the promised goals and programs to “Create an Urban Village” and revitalize poor neighborhoods? This study reports the progress of the Atlanta EZ initiative at three levels:

  1. the managerial and administrative level, (see Table1),
  2. comparison of actual vs. promised program goals (see Tables 2, 3 and Fig. 1), and
  3. the program status level with regard to start dates and progress of successful programs (see Tables 4 & 5).

(1) Managerial and Administrative Level Evaluation

Federal rules require all EZ funds be passed through the Georgia Department of Community Affairs (DCA). In September 1996 and April 1997, the DCA performed a site visit and program review of the Atlanta EZ pursuant to the state’s liability and responsibilities required by the federal government. During both site visits, DCA found many “Areas of Concern” concerning the use of funds. Table 1 shows a partial list of questionable administrative spending “Areas of Concern” found by the DCA site visit as reported to the City of Atlanta.5, 7, 20, 21

 

Table 1. Selected Administrative Spending “Areas of Concern” by

Department of Community Affairs Site Visits of

Atlanta EZ, September 10, 1996 and April 15, 1997

Source: (5), (7), (20), (21)

Area of

Concern

Amount

($)

Comments by

DCA

Lunch meeting at Ritz-Carlton-Buckhead, Nov. 1996 (Atlanta EZ Executive Director Paul White) $122 for lunch including $85 in alcoholic beverages DCA reminds Atlanta EZ that regular staff meetings and meetings for employees not on travel status do not justify purchase of meals for staff. DCA says public funds may not be used for “entertainment” and alcoholic beverage purchases under any circumstances. DCA orders repayment.
Back retirement and fringe benefits pay was illegal for Atlanta EZ employees formerly hired as EZ consultants. City of Atlanta refuses to abide by the Georgia Constitution, terms of federal fund grants and OMB rules. Back fringe = $9,376,Back retirement = $4,164

Total back pay = $13,540

DCA says retirement and benefits pay prior to date of employment (as consultants) violates: 1) the gratuities clause of the Georgia Constitution, 2) terms and conditions of the EZ award, and 3) Office of Management and Budget (OMB) Circular A-87. (In response, City of Atlanta EZ officials claimed the Georgia Constitution did not apply to them as they wrote, “However, the Georgia Constitution is not outlined in the terms and conditions of the grant agreement as an applicable document.”20) DCA reminds the city that as a municipality chartered by the State of Georgia, the City of Atlanta must abide by the Georgia Constitution. DCA demands repayment of illegal back employee benefits. City of Atlanta refuses to issue repayment since Nov. 25, 1996.
Cellular phone use(Exec. Dir. Paul White) $2,461 for four months of cellular phone use Costs appear excessive, some calls appear personal in nature, DCA reminds cell phones be used only for business and conservatively.
Callaway Gardens workshop for EZ Advisory Board (CEAB), 10 hotel rooms reserved and paid were never used $1,141 for 10 unused hotel rooms Persons registered as staying in rooms were not on workshop sign-in sheet. CEAB member tells DCA 10 names were used to reserve block of rooms but were never canceled. DCA demands documentation that persons attended workshop to support expenditure. Atlanta EZ agrees to provide documentation. DCA waiting on proper documentation since Oct. 30, 1996.
Catering expenses for 3 Atlanta EZ staff and program meetings $320 catering fees DCA reminds the City and Atlanta EZ that meals for all Atlanta EZ employees not on travel status, regardless if for business purposes, are not allowable costs for reimbursement unless they are part of a training session lasting more than four hours of the day.
Callaway Gardens workshop: 12 non-EZ related persons attended workshop, relationship or participation in EZ program not documented $1,940 total room charges for non-EZ related individuals Of the 12 persons in question, 7 persons stayed one night (four have the same last name), and 5 stayed two nights. Documentation indicating the relationship of these individuals to the EZ program or workshop must be supplied to support expenditure. Atlanta EZ agrees to provide documentation. DCA waiting on proper EZ documentation since Oct. 30, 1996.
EZ program projected to spend 10-year administrative budget in first 3 years of operation $4 million administrative budget for salaries, operations The Atlanta City Council resolution authorizing the Mayor’s acceptance of federal EZ money states that over 10-year period, $4 million will be spent on administration and $96 million for programs. DCA warns that $4 million total administrative spending will likely be depleted by the end of 1997, leaving no funds.
Poor cash management, inaccurate funding requests from EZ to DCA Various amounts, funding timeliness appears last minute and in crisis mode DCA states they spend an inordinate amount of time deciphering and correcting fund drawdown requests from EZ. DCA will no longer process inaccurate and last minute funding requests from Atlanta EZ. DCA offers help to train EZ on fund drawdown process.

 

(2) Comparison of Actual Goals vs. Promised Goals

Program benchmark goals were identified for the programs and strategies cited in the Atlanta EZ strategic plan, “Creating an Urban Village.” Table 2 shows the percent of actual funds vs. promised funds expended in major program areas. Only 6.7 percent of promised “economic development” programs funds have been spent, 4.1 percent of promised funds for “housing” have been spent, 0.8 percent of promised funds for “creating safe and livable communities” have been spent, zero percent of promised funds for “lifting youth and families out of poverty” have been spent, and 73 percent of all promised funds to be used for “Atlanta EZ administration and community board governance” have been spent. Of the total $100 million promised to be spent on the EZ initiative, only 5.9 percent of available funds has been spent to date (as of 8/1/97), and nearly one-half (49.2 percent) of this total spending has been on EZ administrative costs.

 

Table 2. Atlanta EZ Funds Actually Spent by Major Program

Areas as Reported by Official DCA Expenditure Records,

as of 8/1/97, ($, %)

Source: (3), (8), (9), (10), (12), (14), (15), (22)

Atlanta EZ Major Goals and Program Thrusts

(Column #1)

EZ funds promised in Atlanta EZ strategic plan to HUD ($)

(as of 6/30/94)

(Column #2)

EZ funds allocated by Atlanta EZ benchmark process ($)

(as of 8/1/97)

(Column #3)

EZ funds

Approved by Atlanta EZ board ($)

(as of 8/1/97)

(Column #4)

Actual funds requested by Atlanta EZ from DCA ($)

(as of 8/1/97)

(Column #5)

Percent of promised funds in strategic plan actually spent

(as of 8/1/97)

(Col. #5/Col #2 X 100)

Economic Development: expanding employment and investment opportunity

$32.5

million

$17.5

million

$3.616

million

$2.172

million

6.7%

Providing Adequate Housing for All

$19

million

$13.2

million

$13.068

million

$780,248

4.1%

Creating Safe and Livable Communities

$8

million

$4.2

million

$3.642

million

$59,956

0.8%

Lifting Youth and Families Out of Poverty

$36.5

million

$8.1

million

$50,000

$ ZERO

ZERO %

Atlanta EZ Administration and Community EZ Board Governance

$4

million

$4

million

$4

million

$2.917

million

73%

TOTAL

$100

million

$47

million

$24.376

million

$5.929

million

5.9%

 

Table 3 compares promised program goals vs. actual program goals achieved for those programs listed in Atlanta’s winning application to HUD. Actual goals achieved were obtained from Atlanta EZ program reviews and fact sheets, in addition to fund drawdown requests from DCA. Of the 34 program goals, 28 programs were found to have achieved zero percent of promised goals, 2 programs achieved 20-66 percent of targeted goals, and 4 programs have achieved 100 percent of their goals. Figure 1 identifies which EZ programs (by letter) are on target with respect to achieving stated goals.

 

Table 3. Atlanta EZ Strategic Plan Promised Target Goals Compared with Actual Goals Achieved, Dec. 21, 1994 to Aug. 1, 1997

Source: (3), (6), (7), (8), (9), (10), (11), (12), (13), (14), (15), (22)

 

Atlanta EZ Program

Atlanta EZ Program Description

Target

Goal

Promised

Actual

Goal

Achieved

Percent of Goal Achieved

A

Create skilled and high quality jobs for EZ residents 500 jobs yr. 1,600 jobs yr. 2

Total jobs = 1,100

zero jobs zero %

B

Create new community-based businesses 20 businesses zero businesses zero %

C

Create new jobs from business tax incentives 200 new jobs zero jobs zero %

D

Create new jobs to develop vacant prop. 200 new jobs zero jobs zero %

E

Develop vacant buildings and parcels NA 3 buildings 20 %

F

Create new jobs from manufacturing housing with alternative energy sources 40 new jobs zero jobs zero %

G

Create new jobs from single female employment strategy 50 new jobs zero jobs zero %

H

Create new jobs – house code improvments 10 new jobs zero jobs zero %

I

Establish community-based financial institutions 4 fin. Institutions zero estab. zero %

J

EZ residents on financial inst. Boards 7 EZ residents zero residents zero %

K

Create SBIC 1 SBIC zero created zero %

L

Recruit new bank branches to EZ 3 branches zero begun zero %

M

Create One Stop Capital Shop 1 shop 1 shop created 100 %

N

Estab. youth comm. dev. corps. 9 youth corps zero estab. zero %

O

Est. community development corp. 5 corps. zero estab. zero %

P

Est. youth employment program 1 program zero estab. zero %

Q

Est. federation of comm. dev. corp. 1 federation zero estab. zero %

R

Create credit education program 1 program zero created zero %

S

Expand existing revolving loan funds $3.3 million $2.3 million 66 %

T

Train EZ residents for jobs 500 residents zero trained zero %

U

Est. transportation service EZ residents 1 established zero estab. zero %

V

Provide training scholar. EZ residents 200 scholarships zero provided zero %

W

Contract public safety survey 1 survey 1 survey 100 %

X

Create mobile police stations (cars) and hire new sworn police officers 18 new officers and 18 new cars zero cars, zero sworn officers zero %

Y

Est. police sensitivity training program 2 programs zero estab. zero %

Z

Est. conflict resolution centers 4 centers zero estab. zero %

AA

Repair bridges, upgrade and rep. lights, sidewalk, storm drains 2 bridges, 2,513lights, 200 drains zero repaired or upgraded zero %

BB

Provide homes with low-flush toilets, low-flow shower gauges 303 homes 303 provided 100 %

CC

Provide hazardous waste training for businesses 36 trained 36 trained 100 %

DD

Assess hazardous industrial sites in EZ 14 sites zero assessed zero %

EE

Est. electronic job linkages – computers 18 linkages zero estab. zero %

FF

Provide burglar bars for EZ homes 166 homes zero provided zero %

GG

Provide smoke detectors to EZ homes 312 detectors zero provided zero %

HH

Expand drug testing program 1 program zero programs zero %
Summary:28 programs (82% of programs) have achieved zero % of promised goals

2 programs (6% of programs) have achieved from 20% – 66% of goals

4 programs ( 12% of programs) have achieved 100% of goals

 

Figure 1. What EZ programs are on target to achieve projected benchmark goals?

See Table 2 for programs identified by letter and percent of goal achieved.

Source: (3), (6), (7), (8), (9), (10), (11), (12), (13), (14), (15)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3) Program Status Level, Start Dates and Schedule

Table 4 shows the status of the 40 Atlanta EZ programs with regard to funds allocated in the strategic plan, scheduled start dates, and current status. Current status designates whether the program start date is on time, and if the program is behind, on- or ahead of schedule as identified in the strategic plan.

 

Table 4. Status of Promised Atlanta EZ Programs,

December 21, 1994 to August 1, 1997

Source: (3), (6), (8), (9), (10), (11), (12), (13), (14), (15), (22)

Atlanta EZProgram Description EZ FundsPromised ($) [Scheduled Start Date] EZ Program Statusý = not begun, no/few plans, inactive, no $ spent

¤ = late beginning, behind schedule, only planning

ongoing, no $ spent

þ = ongoing, $ spent; (A)=started ahead schedule,

(O)= started on-time, (L)=started late

Develop brochures to market EZ tax incentive program $200,000[Aug. 1995] ¤
Develop vacant buildings and parcels via Comm. Dev. Corp. $10 million[Aug. 1995] ý
Stimulate mfg. of housing using alt. energy sources $200,000[Aug. 1995] ¤
Develop employment strategies for single female heads of household $400,000[Aug. 1995] ¤
Make grants for code and façade improvements $400,000[Sept. 1995] ý
Create SBIC’s to provide small businesses with equity $4 million[Aug. 1995] ý
Establish 3 credit unions $200,000[Aug. 1995] ý
Establish branch banks $50,000[Aug. 1995] ý
Nominate Comm. Dev. Corp. for tax credits $10,000[Aug. 1995] ý
Estab. One Stop Capital Shop $1.016 million[May 1995] þ (L)
Estab. 9 Youth Comm. Dev. Corp’s, 5 Comm. Dev. Corp, & 1 Youth Empl. Program $400,000[Aug. 1995] ý
Create youth empl. programs $400,000[Aug. 1995] ý
Create mentorship program for youth in EZ $256,000[Aug. 1995] ý
Utilize and expand existing revolving loan programs, form bond pools $1.2 million[Aug. 1995] ¤
Relax lending criteria, make loans “user friendly”, create credit education programs $150,000[Aug. 1995] ý
Estab. Rev. Business Loan program and linkage comm. $3.3 million[Aug. 1995] ¤
Leverage EZ resources, match loans/grants $200,000[Aug. 1995] ¤
Expand ATT, offer scholar. & training at job fairs, banks $500,000[Aug. 1995] ¤
Train 400-500 residents for jobs, access day care, teach transp. skills $900,000[Aug. 1995] ý
Fulton Cotton and Bag Mill, convert 11 buildings into loft $1 million (loan)[March 1996] þ (L)
Relocation of Creative Fine Arts, Inc. to EZ $500,000 (loan)[May 1996] þ (L)
Sweet Auburn Curb MarketBooth funds loan $450,000 (loan)[Aug. 1996] þ (L)
Corp. Courier, Inc., relocation midtown to EZ $400,000 (loan)[Sept. 1996] ¤
Miss Piggy’s RestaurantBusiness start-up loan $50,000 (loan)[Sept. 1996] þ (L)
Renewal Atlanta, Inc., – (recycling) start-up loan $85,000 (loan)[March 1996] ¤
Georgia Manufacturing Innovation Center (job train.) $500,000[March 1996] ¤
Install 303 low-flush toilet and shower gauges in homes $135,000[Sept. 1995] þ (O)
Create mobile police stations (cars) & hire 18 new officers $3.248 million[Aug. 1995] ¤
Conduct public safety survey of police services in the EZ $13,300[Aug. 1995] þ (L)
Asbestos/lead paint and radon training to 36 bus. in EZ $125, 100[July 1995] þ (L)
Install burglar bars in 166 EZ resident homes $150,000[Dec. 1995] ¤
Install smoke detectors for EZ residents $50,000[Sept. 1995] ¤
Community Empowerment Advisory Board budget $276,000[Aug. 1995] þ (O)
Mortgage Assist. Payment for first time home buyers $7.2 million[Aug. 1995] ¤
Self-Sufficiency Center for home ownership opportunity $4 million[Dec. 1996] þ (L)
Repair housing code violations for senior citizens $2.5 million[Sept. 1996] ¤
Dev. comprehensive master plans for EZ neighborhoods $1.3 million[Dec. 1996] ý
Electronic computer searches GA jobs (Ga. Dept. Labor) $100,100[Dec. 1996] ¤
Rolls-Royce (Roswell Mtr.Cars) dealership relocation to EZ Tax incentives for EZ res. hired [June 1997] þ (O)
Summary: (40 total programs)13 programs (32% of all programs) have not begun and inactive = ý

16 programs (40% of programs) began late, are behind schedule, only plans = ¤

11 programs (28% of all programs) started on-time, & on/ahead of schedule = þ

 

Table 5 shows success stories, accomplishments and the status of Atlanta EZ Board approved programs. Funds expended are from official fund drawdown request records of DCA. Dates of approval for funding by the Atlanta EZ Board and DCA are also noted.

 

Table 5. Atlanta EZ Program Accomplishments to Date, Funding Approved by the Atlanta EZ Board and Georgia DCA

for Period Dec. 1994 to Aug. 1997

Source: (8), (9), (10), (12), (22)

EZ Major Program Area

ED=Econ Dev.SC=Safe Comm.POV=PovertyHO=Housing

EZ Program Description

Atlanta EZ Board Approved Budget ($)

[Approval Date]

DCA Approved Funding [Approval Date]

Actual EZ Funds Expended (requested by Atl EZ)

ProgramStatus

ED

One Stop Capital Shop $1.016 million [10/96] $1.016 million [11/04/96] $172,216 Approved and Open

ED

Loan to Creative Fine Arts, Inc. $500,000[8/12/96] $500,000[10/31/96] $500,000 Loan Approved

ED

Loan to Sweet Auburn Curb Mkt $450,000[8/12/96] $450,000[10/31/96] $450,000 Loan Approved

ED

Loan to Miss Piggy’s Rest. $50,000[9/09/96] $50,000[10/31/96] $50,000 Loan Approved

ED

Loan to Fulton Bag Mill $1 million[3/11/96] $1 million[10/31/96] $1 million Loan Approved

ED

Loan to Corporate Courier, Inc. $400,000[9/09/96] $400,000[10/31/96] $ zero Pending Approval

SC

Conduct police survey $13,300[2/12/96] $13,300[11/01/96] $11,856 Completed

SC

New sworn police officers $3.248 million[3/28/96] $2.372 million [2/06/97] $ zero Not Completed

SC

Training for lead/asbestos removal $125,100[3/11/96] $57,600[11/06/96] $48,100 Completed

SC

Electronic linkage $100,101[3/11/96] $2,000[11/06/96] $ zero Approved and Awaiting Comp. of Needs Assessment

SC

Burglar barsfor EZ residents $150,000[3/11/96] $150,000[11/01/96] $ zero Approved and Awaiting Clearance from City Attorney

SC

Smoke detectors for EZ Residents $50,000[3/11/96] $50,000[11/01/96] $ zero Approved and Awaiting Clearance from City Attorney

POV

Needs assess-ment for Dev. Ctr $50,000[3/11/96] $50,000[7/02/97] No Requested Action Approved

HO

Dev. Neighbor-hood Master Plans $1.3 million[5/12/97] $400,000[6/26/97] No Requested Action Increase to $1.3 Million Awaiting Mayor’s Signature

HO

Community Dev. Operating Grant $1.3 million[5/12/97] No Requested Action No Requested Action Elig. Forms Being Prepared; Awaiting Mayor’s Signature

HO

Mortgage Assist. Program $7.2 million[8/14/95] $7.2 million[10/31/96] $ zero Cond. Approval Pending Sum Draw Agreement
HO Sr. Citizen Housing Rehab. $2.5 million[9/09/96] $2.5 million[11/04/96] $ zero Conditional approval pending rect. of lump sum draw agreement
HO Owner Occupied Housing Rehab. $2 million[8/14/95] $2 million[11/04/96] $ zero Conditional approval pending rect. of lump sum draw agreement
HO Home Ownership Center $4 million[8/14/95] $1.068 million[12/31/96] $508,719 Approved

 

Additional Observations and Evaluations About the Atlanta EZ

 

Conflicts Among Atlanta EZ Participants

Reports on the growing tension among participants of the Atlanta EZ have been noted in Washington, D.C., as a report by the Rockefeller Institute of Government to HUD stated, “…other issues such as the selection of the (EZ) executive director, the adoption of benchmarks, and the approval of specific EZ-funded projects have all led to significant conflict between the (EZ) citizen board members and the mayor. This in turn has slowed down the implementation of Atlanta’s strategic plan.”6

Poor Relations Between Atlanta EZ and DCA

There is a poor working relationship between DCA and the Atlanta EZ. Federal rules require DCA to process, approve, and to be responsible for the expenditure of Atlanta EZ funds, and perform site visits of programs to ensure proper procedures in using funds. However, as noted in DCA site visit reports of the Atlanta EZ, inadequate procedures, poor management, unallowable expenditures, and inaccurate fund requests have taken an inordinate amount of DCA time in what should be a normal systematic process.5, 7 Although the DCA offered to help train EZ officials with proper procedures, Atlanta EZ officials blamed DCA oversight of procedures as a reason why EZ projects have fell short of their goals. Atlanta EZ officials reported the conflict and poor relationship with DCA, writing in a performance review to HUD, “A time-consuming conflict with the State of Georgia over the release of funds initially delayed progress, but the Zone has committed $47 million in federal Enterprise Zone funds.”12 In another performance review to HUD, Atlanta EZ officials wrote about the strained relationship with the State of Georgia, “However, the challenge is to get the state to the level as a serious development partner not a ‘watchdog group’.”10

Clearly, DCA is in a difficult position. DCA is responsible for EZ fund expenditures following Georgia state law; while on the other hand, the Atlanta EZ refuses to comply with many directives from DCA. Thus, Atlanta EZ officials appear to feel that because they are using federal EZ funds (that are required to be disbursed according to Georgia law), the laws of the State of Georgia and requirements by DCA for fund expenditures do not apply to them.

An editorial in the Atlanta Journal praised DCA’s efforts in attempting to make the EZ program comply with federal and state law, “Thank goodness for the state’s oversight of the Atlanta Empowerment Zone. Without it, a lot of money – $250 million in federal grants and tax credits for Atlanta, one of six cities to win Empowerment Zone status – would be floating around without much accountability.”16

Big Administrative Spending and No Private Sector Funds Generated

The Atlanta EZ is far outspending the administrative budgets of the other five EZ cities and employs three times as many people as Chicago’s EZ. In addition, other EZ cities have raised a significant amount in private sector funds to augment EZ administration expenses. The Atlanta EZ has 24 employees, has raised no private money for administrative, and has spent nearly all of its 10-year administrative budget of $4 million in its first two and one-half years of existence. In comparison, Baltimore’s EZ has spent only 42 percent of their administrative funds, raised an additional $460,000 in private funds for administrative costs, and has only 15 employees in its EZ office. Chicago’s EZ operates as part of city government, has only spent $246,000 in administration funds, and employs only 8 people.19

Responding to the issue of raising private sector funds like the other EZs, Atlanta EZ Executive Director Paul White said, “My approach is not to go ask people for money until we show what we can do on our own.”17 Nearly three-quarters of a billion dollars of private funds were committed by Atlanta businesses according to agreement letters from the private sector in the Atlanta EZ application. However, no private sector funds to help offset administrative costs have been generated by the Atlanta EZ.

Urgent for Economic Development and Job Creation

Atlanta officials appear so urgent to show evidence of job creation and economic development that any new business or relocation in the EZ is immediately claimed as a success story by Atlanta’s EZ program regardless of whether the Atlanta EZ officials were a factor in the business location decision. For example, recently a Rolls-Royce dealership (Roswell Motor Cars) relocated 21 miles from Roswell to the Atlanta EZ. Atlanta EZ officials praised the move as big dose of economic development that will create jobs for EZ citizens. The relocation of a luxury car dealership is not likely to be a big dose of economic development and job creation for the residents of Atlanta’s poorest neighborhoods. Most employees of the luxury car dealer will relocate their jobs downtown, creating very little if any new jobs for EZ residents. However, the relocation will occupy and develop current empty warehouse space in the EZ.

This is a classic case of the Atlanta EZ confusing “causation” and “association”. Claiming credit for any new businesses started in the EZ is certainly a geographic association with the EZ, but new businesses started that are caused by EZ efforts should be accurately accounted for. In short, association is no reason to claim causation.

No Comprehensive EZ Program Agenda

The federal EZ initiative was designed as a comprehensive approach to revitalizing inner-city neighborhoods, encompassing both economic development and human/social development goals. Unlike other EZ cities’ comprehensive efforts that include job creation and economic development, Atlanta’s EZ efforts have been noted in a report by the Rockefeller Institute as being concentrated on two major social areas: 1) neighborhood revitalization, and 2) human development, in isolation of economic development and job creation efforts. As noted by the Rockefeller Institute report to HUD comparing EZ efforts by other cities, “Atlanta being something of an exception with its emphasis on Neighborhood Revitalization and Human Capital Development, all the Empowerment Zone cities stressed the comprehensive approach, either in an integrated or coordinated fashion…”6

To date, EZ efforts have produce little tangible results in economic development and job creation, while their efforts have produced tangible results in social and neighborhood development. As far as the Atlanta EZ economic development effort goes, the revolving loan fund has only approved 5 projects (and the completion of two of these projects is questionable), and has not trained the 500 residents as pledged in the strategic plan. In addition, funding has been approved for non-economic development efforts such as programs that provided burglar bars, smoke detectors, and community policing for EZ residents (although there have been no EZ spending requests from DCA for these efforts). However, the initial EZ program from Congress called for a more holistic effort that included economic development and job creation programs working in connection with social and human development programs, like efforts of other EZ cities, instead of isolating any economic development efforts as the Atlanta EZ programs has been operated.

The Long-Term Results Argument

Performance reviews by many sources indicate the Atlanta EZ program has produced few results. Atlanta officials sometimes respond to the lack of short-term results by stating that the program is not intended to show results in the first years of operation and results are generated and can only be measured in the long-term. However, this same long-term argument was used for the $30 million spent on the failed federal “Model Cities” program in Atlanta between 1967 to 1973 which promised to produce 6,000 new housing units, but only completed 42. Other long-term federal revitalization programs spending millions of dollars and having little success in Atlanta have included: Urban Renewal, Community Action, and Community Development Block Grants (CDBG). The “results in the long-term” argument for these programs has yet to prove worthy as evidenced by Atlanta neighborhoods – now in the long-term from previous programs – that are still in distress. Thus, if previous federal programs were successful in the long-term, we wouldn’t have the need for the current EZ program.

Sustainable Job Creation in EZ Office

It appears from the results measuring how many new jobs have been created by Atlanta EZ efforts, the only sustained jobs that can be found are the 24 salaried positions held by Atlanta EZ program administrators and employees.

 

Recommendations for Saving the Atlanta EZ Program

Recommendation #1

Atlanta EZ officials should initiate and develop a strong working partnership with Atlanta’s private sector for a professional economic development effort. Current EZ efforts reflect little or no thrust to include resources from the Atlanta business community. These new efforts should include:

  1. Restructuring the Atlanta Empowerment Zone Corporation Board to include more members from the private sector. Of 17 Mayoral appointments to the Board, only two members come from the Atlanta business sector – the remaining 15 members come from Atlanta EZ neighborhoods, government and human service organizations. With nearly three-quarters of a billion dollars of potential investment pledged by the private sector in Atlanta’s EZ application, business partnerships with the Atlanta EZ are essential for future investments,
  2. Streamlining the revolving loan review process and increase the fund to accommodate larger business prospects considering competitive locations,
  3. Initiating a more focused effort on economic development, property development and targeted employee job training, and
  4. Improving communications about the Atlanta EZ program and resources available to the private sector, economic developers and the public at-large so that EZ resources will be used to their fullest potential.

Recommendation #2

Establish accountability for success or failure. Because the EZ program uses federal dollars that pass through a state agency, and decisions are made by local officials, accountability for the EZ effort is not clear. Accountability should be achieved by:

  1. Establishing quantitative, measurable results. Programs should have outcomes and outputs defined and measured on a periodic basis.
  2. Designating one person to be responsible for the direction and ultimately the success or failure of the Atlanta EZ program. Currently, the Atlanta Mayor is chairman of the Atlanta EZ Board and the Atlanta EZ has an executive director.
  3. Reviewing current leadership with regard to 1) the direction of the program, and 2) administrative and programmatic accountability and professionalism. Holding the City of Atlanta and Atlanta EZ officials accountable for poor decisions regarding improper direction and use of EZ funds.

Recommendation #3

Atlanta EZ officials must learn to work with – not against – DCA. This can be accomplished by:

  1. Cooperation and realization by Atlanta EZ officials that DCA is not a “watchdog” agency over the EZ. When Atlanta EZ officials request fund drawdowns from DCA, it is DCA’s state and federally-mandated responsibility to follow proper procedures for such requests. Also, DCA is required and authorized to initiate EZ site visits to document proper procedures as they do other programs in the state. Although DCA has generously offered to help train Atlanta EZ officials on program operating procedures, Atlanta EZ officials have refused any help from DCA to improve the efficiency and proper use of EZ funds. One issue must be made clear to Atlanta EZ officials: DCA is an ally and a resource to be used for success, rather than a group to be outwitted or second guessed.
  2. A directive by the Governor of Georgia that in order to continue, the Atlanta EZ must follow state and federal laws required for the disbursement of funds by DCA. At present, it appears that the Atlanta EZ is not accountable to any federal, state, or local group in the use of federal funds. As a condition of the program, federal law requires that funds flowing through DCA and are disbursed under the same laws and procedures as State of Georgia funds. However, it is unclear if DCA can force compliance by the Atlanta EZ to follow state law and proper procedures. In this case, the Governor should intercede to make certain the Atlanta EZ is in compliance with state laws. Should the Atlanta EZ continue to refuse to follow laws and procedures in the allocation and spending of funds, the Governor should order DCA to freeze all allocation of funds to the Atlanta EZ.

Conclusions

Numerous performance reviews of the Atlanta Empowerment Zone’s progress clearly show that this federal program is not producing the intended results. In particular, these reviews indicate that the program is being poorly managed, has little focus and direction, has fallen short of the goals promised in the strategic plan and is accountable to no federal or state governmental authority. Congress allocated the EZ funds to create a comprehensive effort that included human development, neighborhood development, economic development and job creation. Instead, Atlanta’s EZ program is focusing fragmented efforts on social and neighborhood programs in isolation of resources from the private sector to be used in economic development, property development and job training and creation efforts.

When HUD announced that Atlanta was chosen as an EZ city and was to receive $250 million in federal cash and tax credits, many in Atlanta saw the EZ program as Atlanta’s last best hope of revitalizing its poorest inner-city areas. Upon hearing of Atlanta’s EZ award in 1994, Dr. Edward Irons, economics professor and Dean of the School of Business Administration at Clark Atlanta University said, “Ultimately, however, the success or failure of the Empowerment Zone will depend on whether it creates economic development. Jobs and economic growth are the keys to solving the social ills that plague our city. Provide the jobs and people can take care of their needs by themselves.”18

If Dr. Irons’ measure of success is correct, and unless there are substantive changes, Atlanta’s Empowerment Zone effort is headed in the direction of failure and will join the long list of failed federal programs designed to revitalize poor, inner-city neighborhoods.

 

Sources

  1. United States Federal Register, Vol. 59, No. 11, (24-CFR, Part 597 – Designation of Empowerment Zones and Enterprise Communities), U.S. Department of Housing and Urban Development, January 18, 1994.
  2. Building Communities: Together, Empowerment Zones and Enterprise Communities Application Guide; U.S. Department of Housing and Urban Development, and U.S. Department of Agriculture, January 1994.
  3. Creating an Urban Village, “Atlanta Empowerment Zone Benchmark Narrative and Strategic Plan;” Atlanta Georgia’s Application for Federal Empowerment Zone Designation; Atlanta Empowerment Zone Corporation, June 1994.
  4. Community Development: Status of Urban Empowerment Zones; U.S. General Accounting Office; Publication GAO/RCED-97-21, December 1996.
  5. DCA Site Visit Report of Atlanta Empowerment Zone Corporation: April 15, 1997; Georgia Department of Community Affairs; submitted by Chantal Matthews (DCA) to Atlanta Mayor Bill Campbell, April 15, 1997.
  6. Building a Community Plan for Strategic Change: Findings from the First Round Assessment of the Empowerment Zone Initiative; The Nelson A. Rockefeller Institute of Government, State University of New York, Albany, NY; March 1997.
  7. DCA Site Visit Report of Atlanta Empowerment Zone Corporation: September 10, 1996. Georgia Department of Community Affairs; submitted by Chantal Matthews (DCA) to Atlanta Mayor Bill Campbell, September 10, 1996.
  8. Atlanta Empowerment Zone, Executive Summary: January 1 – December 31, 1996; The Atlanta Empowerment Zone Corporation, Paul White, Executive Director – Atlanta Empowerment Zone Corporation, January 3, 1997.
  9. Fact Sheet: Atlanta Empowerment Zone; Atlanta Empowerment Zone Corporation, June 30, 1997.
  10. Performance Review: Atlanta Empowerment Zone, January 1, 1995 to April 30, 1996; Submitted to the Director of the Office of Economic Development, U.S. Department of Housing and Urban Development, Washington, D.C.; Paul White, Executive Director – Atlanta Empowerment Zone Corporation, July 22, 1996.
  11. Activities for Strategic Change: An overview of public and private investment activities in the six urban Empowerment Zones; Price Waterhouse, LLP, March 1997.
  12. Atlanta Empowerment Zone Performance Report 1995 – 1996, [On-line]. U.S. Department of Housing and Urban Development. Available: “www.hud.gov/cpd/ezec/atgaperf.html#top”, 1997.
  13. “Rolls-Royce Motor Cars Rolls It’s Way to Downtown Atlanta,” Ron Vinson, City Beat Online, Vol. II, No. 5, [On-line]. City of Atlanta, Available: “www.atlanta.org/citybeatjunjul97/page5.html”, June-July 1997.
  14. Atlanta Georgia Empowerment Zone Strategic Plan; [On-line]. U.S. Department of Housing and Urban Development, Available: “www.ezec.gov/ezec/GA/atlanta.html”, 1996.
  15. A One Hundred Day Status Report: Atlanta Empowerment Zone Corporation January 8, 1999 to April 18, 1996. Paul White, Executive Director – Atlanta Empowerment Zone Corporation, April 1996.
  16. “Empowerment zone needs proper focus,” Editorial Board, Atlanta Journal, Editorial, July 2, 1997.
  17. “Empowerment Zones: Looking for private sector funds,” Alfred Charles, Atlanta Journal Constitution, June 1, 1997.
  18. “The key to rebuilding Atlanta: Getting Empowerment Zone money is only the beginning of what may be the city’s last best hope of mending itself,” Viewpoint Editorial by Edward Irons, Atlanta Journal Constitution, December 29, 1994.
  19. “Atlanta zone far outspending its rivals,” Alfred Charles, Atlanta Journal Constitution, July 3, 1997.
  20. Letter of response to DCA’s specific areas of concern by City of Atlanta; submitted October 30, 1996 to Chantal Matthews (DCA), from Jeanette Provost, Deputy Director, Department of Housing and Community Development, City of Atlanta.
  21. Letter of response to the Atlanta EZ Corporation; submitted November 25, 1996 to Jeanette Provost, Deputy Director, Department of Housing and Community Development, City of Atlanta, from Chantal Matthews (DCA).
  22. Atlanta Empowerment Zone Project Expenditure Sheet and Drawdown Update; Georgia Department of Community Affairs, July 23, 1997.

 


Dr. Steve Morse is an economist and associate professor in the College of Applied Professional Sciences at the University of South Carolina and a member of the Foundation’s Academic Advisory Board. The Georgia Public Policy Foundation is a nonpartisan, member-supported research and education organization based in Atlanta, Georgia that promotes free markets, limited government and individual responsibility. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

© Georgia Public Policy Foundation (August 6, 1997) Permission is hereby given to reprint this article, with appropriate credit given.

 

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