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The U.S. Empowerment Zone Program
The Evolution of a National Urban Program and the Failure of Local Implementation in Detroit, MichiganRobin Boyle and Peter Eisinger
College of Urban, Labor and Metropolitan Affairs
Wayne State University,
Detroit, Mi
EURA Conference
Copenhagen
May 17, 2001Note : The Detroit section of this paper draws upon material collected by the authors in connection with two U.S. Department of Housing and Urban Development (HUD) funded assessments/evaluations of the federal Empowerment Zones/Enterprise Communities program. Teams from Wayne State University served as field associates for the "Assessment of the EZ/EC Initiative" (led by the Rockefeller Institute) and the "Evaluation of Empowerment Zones and Enterprise Communities" (led by Abt Associates/Urban Institute). The results of those studies have by and large not been published nor is it our intention to do so here. Instead, this paper is an attempt to break out of the strictures of the two HUD projects and just "tell the story" of the Detroit Empowerment Zone – what it has done well, what it has done poorly and what can be learned from the experience.
The establishment of the federal Empowerment Zone program in 1993 and its expansion late in 2000 are bookends for eight years’ worth of modest urban policy initiatives promoted by the Clinton administration. Title XIII of the Omnibus Budget Reconciliation Act of 1993 provided for the creation of nine zones, six in urban areas to be designated by the Secretary of the Department of Housing and Urban Development (HUD) and three in rural areas to be designated by the Secretary of Agriculture i.
These zones were designed to target a variety of economic and community development incentives and benefits in geographic areas characterized by unusually high poverty, unemployment, and general distress. Congress expanded the program early in 1999 by authorizing the designation of 20 additional Empowerment Zones, of which 15 were to be allocated to urban areas. A third round of designations, which occurred in December 2000, added another 7 urban zones and 2 additional rural zones.Empowerment Zones represent a version–albeit a distinctive one–of a place-based initiative long familiar both in the United States and Europe for encouraging economic development in distressed districts of big cities. American states had been administering their own enterprise zones for more than a decade when the federal program first passed, and they initially drew for their inspiration from British proposals for such zones. Yet evidence supporting the efficacy of the state enterprise zones has always been decidedly mixed, offering little encouragement for those who advocated the implementation of a similar federal program. Nor has there yet been a definitive assessment that shows that the first round of federal Empowerment Zones are accomplishing their development objectives. It is against this ambiguous backdrop that the steady expansion of the federal program has occurred. An effort to take stock is therefore overdue. We set out to contribute to that undertaking by examining in some detail the experience of the Empowerment Zone in the city of Detroit.
The U.S. Empowerment Zone Program: An Introduction
The idea of a low- or no-tax, loosely regulated zone to encourage business formation and investment comes from Britain, though the lower house of the Illinois legislature actually passed an enterprise zone bill in 1979, a year before the English Parliament established a working British zone program. The idea was vigorously promoted in the United States by Stuart Butler, a British policy researcher and advocate affiliated with a conservative American think tank, the Heritage Foundation. Congressman Jack Kemp, a conservative Republican member of the House of Representatives from upstate New York, introduced an enterprise zone bill in the U.S. Congress in 1980, the first of many unsuccessful attempts to put a federal program into practice.
Federal enterprise zone bills were introduced in every Congress during the Reagan and Bush administrations (1980-1992). All offered subsidies to qualifying businesses in form of various sorts of investment and wage tax credits, and many provided for the elimination or deferral of capital gains taxes. Although the principal advocates for these zones were Republicans (President Reagan himself endorsed the idea, and his administration submitted its own version of the program to Congress in 1982 and 1983), the idea of enterprise zones attracted some Democratic co-sponsors. Urban and minority interests, usually associated with the Democratic party, such as the NAACP, the U.S. Conference of Mayors, the Congressional Black Caucus, and the National League of Cities, also voiced strong support for this modest initiative during the 12 years of Republican control of the White House.
In 1987 Congress did successfully include a provision in the Housing and Community Development Act that permitted the Secretary of Housing and Urban Development to designate 100 federal enterprise zones, but the legislation provided no tax incentives or any other kind of support. Jack Kemp (by this time the Secretary of HUD) declined to implement this strictly honorific provision. In the wake of severe riots in Los Angeles in 1992 Congress included legislation for a federal enterprise program in a budget bill, but President Bush vetoed the bill on the grounds that it contained provisions that would raise taxes.
During the period when enterprise zone bills were failing in Congress, the states were embracing the program enthusiastically. Florida and Connecticut passed the first programs in 1980 and 1981, respectively, and by 1993, when the federal Empowerment Zone program finally passed as part of the first Clinton budget, 41 states had programs up and running. The single common feature among the state enterprise zones is that they are geographically targeted economic development initiatives. Otherwise, the form these programs take varies widely: the number of zones a state allows, their size, the criteria for selection, and the array of incentives offered all differ from state to state. The state of Michigan, for example, has only one enterprise zone, while some states, such as Louisiana, established hundreds, apparently leaving few parts of the state unzoned. Some states offer new job tax credits; others offer an investment tax credit. Several states permit local property tax abatement on facilities in the zones, while others exempt businesses from the corporate income tax. In deference to organized labor and environmental interests and in order to avoid running afoul of federal laws on these matters, few states offer an easing of regulatory rules regarding occupational safety and health or pollution control that the original British proposals had envisioned.
The 1993 federal Empowerment Zone program includes several elements contained in previous unsuccessful congressional proposals, such as wage credits and access to tax-exempt facility bonds for qualifying businesses. But the Clinton program clearly shifted the focus of the zone program from economic development to a much broader set of community revitalization objectives, building on what may have been an off-hand suggestion that had accompanied the first Reagan bill to Congress a decade earlier. The Reagan administration had recommended as part of the program "experimentation with providing… services by nongovernmental entities," such as neighborhood organizations (Mossberger, 2000, p. 66). This feature finds full-blown expression in the decision to make the centerpiece of the Clinton zones a grant to each urban winner of $100 million over a ten-year period in the form of Title XX Social Services block grant monies. These funds are to be used to contract with qualified neighborhood and local organizations primarily for job training, community policing partnerships, childcare initiatives, youth recreation and training, and homeowner assistance, among other services. That the federal zones focus so heavily on social service provision makes them quite different from the purely economic development enterprise zones adopted by the states or the program envisioned by Congress in the 1980s.
Understanding the Context of the Empowerment Zone Program
The Empowerment Zone program is the product of a process of policy learning in which assessments of past experiences are fed into and influence the latest policy iteration. What is of particular interest is that this policy learning occurs in the United States both within and across levels of government in the federal arrangement. Empowerment Zones are hardly novel: they clearly owe their form and rationale to state and federal programs that came before. We can see this process of policy learning occurring in two different contexts: one is the experience with the federal Model Cities program of the 1960s and the other is the experience with state enterprise programs.
Model Cities. Originally designed to demonstrate how the concentration of resources in a coordinated way in a few distressed neighborhoods could transform those places, this Great Society place-based program raised expectations that were quickly disappointed. Model Cities was the name given to program established by the Demonstration Cities and Metropolitan Development Act of 1966. The act provided federal support for a community-based planning process, whose aim was to use existing federal, state, and local resources to revitalize poor neighborhoods. The aims were ambitious, particularly for a program that provided very little program money. The purposes of the program, according to the legislative preamble, were "to provide assistance to enable cities to implement new proposals to rebuild and revitalize large slums; to expand housing, job, and income opportunities; to reduce dependence on welfare payments; to improve educational facilities; to combat disease and ill health; to reduce the incidence of crime and delinquency; to enhance recreational and cultural opportunities; and generally to improve living in such areas."
Model Cities foundered for many reasons, but two are relevant to our understanding of the Empowerment Zones. One is that although Model Cities called for extensive citizen participation in developing a model neighborhood plan, the process was clearly controlled from the outset by city governments and professional urban planners, engendering a sense that the ultimate plan was a top-down creation. The Empowerment Zone program, in contrast, developed a genuinely bottom-up planning approach: according to HUD, "Successful and sustained revitalization starts with the residents." Every stakeholder in the city was to be involved in the strategic planning process that constituted the basis for competing for Empowerment Zone status. If the implementation was at times unwieldy, it was nothing if not inclusive at the grass roots.
A second problem with Model Cities was that the program was spread too thinly. The original idea in 1966 was to implement the program in a handful of demonstration sites to show what a coordinated approach with existing resources could accomplish, but political pressures forced the enlargement of the program, even as the appropriations remained the same. A quarter century later Congressional proponents of the federal Empowerment Zone program were determined to limit its implementation to a few cities. As an official from the Department of Treasury testified before the Senate in hearings on the Empowerment Zone bill, "Model Cities... was expanded to cover about 120 cities, and we ended up wasting a lot of federal resources. I do not think anybody wants to make that mistake again" (U.S. Senate, 1993, p. 17) ii. The result in the Empowerment Zone legislation was to limit the number of designees to permit a real concentration of resources in a few places.
If the Empowerment Zone program was informed by the failures of Model Cities, it was also inspired by at least one positive aspect. Model Cities was designed by policy architects who understood that the revitalization of distressed communities required a holistic approach, that the problems of these places and the people who lived in them could not be addressed by piecemeal solutions or by a single-minded economic development strategy. Thus, the purpose of the Empowerment Zone program is "to empower American communities and their residents to create jobs and opportunity [and] take effective action to solve difficult and pressing economic, human, community and physical development challenges..." (Federal Register, 1994, p. 2700). As an Indiana state official observed as he testified before the House in support of the Empowerment Zone bill, "It certainly represents a holistic approach to redeveloping some of the most distressed parts of our communities....I want to emphasize the holistic.... You just can’t have a business development or community development proposal" (U.S. House, 1993, p. 48).
Attacking urban distress across a broad front reflects an understanding of the interconnectedness of problems faced by high poverty urban areas, but a holistic approach is also the source of some confusion and tension. Michael Wolf, a long-time student of enterprise zones, observed in congressional testimony that the Empowerment Zone bill reflected a dual nature, economic development, pure and simple, on the one hand, and community revitalization in all its ramifications on the other (U.S. House, 1993, p. 34). Stakeholders tend to emphasize the approach that best accords with their interests rather than struggle to fashion a truly coordinated program. Thus, business interests have tended to focus on the economic development aspects of the program, while community-based organizations promote social service and housing initiatives as keys to revitalization. Business interests tend to measure their progress by reference to "hard" indicators, while CBSs typically employ softer measures of goal achievement, a difference that leads inevitably to tensions in the zones.
Model Cities was deemed a failure because communities could not comfortably embrace the notion that social aims and physical and economic rehabilitation had to go hand in hand. The challenge for Empowerment Zones is to transcend these tensions and to fashion a genuinely coordinated approach.
State enterprise zones. American federalism is built on the notion that the states function as "laboratories of democracy." That is, they engage selectively in policy innovation and experimentation in such a way that the other states and Washington itself may watch what happens before committing their own states or the entire nation to a similar course of action. The early state enterprise zones certainly functioned as policy experiments while the rest of the states and Washington watched. It is true that in some respects, Washington was a reluctant bystander, since various elements in Congress and the White House were simultaneously seeking to pass a federal program even before the outlines of the state experience had become clear. In the end, however, this enforced seat on the sidelines may have paid off: the federal Empowerment Zone bill that finally passed in 1993 clearly benefitted from the state experience with enterprise zones iii. At least insofar as the design of the Empowerment Zone program was concerned, the laboratories of democracy worked virtually exactly as they were supposed to.
Michael Wolf claims that the Empowerment Zone program "distills much of the past State and local EZ experience while avoiding much of the worst " (U.S. House, 1993, p. 3).
Among elements that the Clinton program adopted from the states was a competition for zone designation rather than designation by entitlement; the establishment of a limited program and a monitoring requirement; and anti-pirating language, which forbids zones from inducing industrial relocation from one part of a city to the zone. In short, the Empowerment Zone program is very much the product of the American federal system, an arrangement of shared, often mutually reinforcing responsibility among levels of government in which the states and nation inform and instructs one another in the process of policy development.
The Detroit Empowerment Zone -- A Tale of Two Cities
As will become clear in this review, Detroit’s Empowerment Zone achieved a national reputation as being one of the most successful of the original 6/8 urban zones and a model for the subsequent rounds. Throughout the mid-1990s, both President Clinton and Vice-President Gore came to Detroit to praise the Mayor and laud his success with the Zone. In particular, they claimed success in terms of leveraging private-sector investment and incorporating the city’s leading private companies in the process. Not only were the (then) "Big Three" automobile companies directly associated with the Zone but the local financial institutions (collectively entitled the EZFIC) played a key role in identifying, pledging, then delivering significant amounts of private sector investment. Depending on the press release, EZFIC has identified private investments in the Zone is excess of $6 Billion.
These numbers include large expenditures previously committed by the private sector, including the automakers. Most notable was the (then) Chrysler's new engine plant on the east side of Detroit and GM's promise to support parts suppliers located within the Zone. Moreover, the EZFIC was also in a position to identify projects already in the development pipeline (such as the clearance of the derelict Clark Street Cadillac assembly plant) and anticipate additional investment across the Zone, a reaction to pent-up demand found in other parts of the city. This level of investment (and the attendant media coverage) created the perception that the Detroit Empowerment Zone is working, despite the omnipresent shroud of governmental control.
Yet the evidence collected to date on progress in the Detroit Empowerment Zone reveals a very different picture of Zone "success". In contrast to successful leverage of private resources, progress with many of the itemized programs and projects slated to receive federal dollars (Title XX funding) has been limited, at best. By May 2000 (five years and six months after Zone designation), the Detroit EZ had about $72 million of the $100 million in Title XX funds under contract. (Detroit News, July, 31. 2000.) While still low for such a late date, the $72 million under contract in July 2000 does reflect progress from the October 1999 Combined Quarterly Query when the Zone had only $61,913,456 under contract and from the January 1998 Baseline Conditions Report when an even smaller amount was under contract and only $4.5 million of the Title XX funds had actually been disbursed. While information remains incomplete, the lack of progress with so many programs has served to establish a perception within the Zone of "business as usual" (quote from EZDC Board member), with the layers of stultifying bureaucracy destroying the hopes and aspirations of many zone residents and businesses.
The tale of two realities in the Detroit Empowerment Zone is further influenced by the geographic shape of the Zone and the scale of neighborhood decline. Many of the 80 programs in the Strategic Plan – especially the smaller family and welfare-focused initiatives – are scattered across the 18 square miles of the Zone with little chance of forming critical mass. Hence many of the Title XX funded programs are not recognized by community, nor by the media. What's more, many of the smaller projects, especially the complex, multi-agency, family and welfare-focused programs, require administrative and technical support that is simply not available.
This review paper seeks to examine how this situation developed and the implications this has for the neighborhoods and businesses in the Zone, the impact of the Zone on the Mayor and on other political processes in the city and, finally, the impact of the Detroit story on the overall assessment of the federal Empowerment Zone program.
Title XX – The Unsuccessful Zone
On the whole, the Detroit Empowerment Zone’s direct action and agent-operated programs have been spectacularly unsuccessful. After a multi-part January 2000 series on the Detroit Zone, the Free Press editorialized that, "Poor city leadership holds back empowerment zone…" They continued. "It’s easier to create an empowerment zone than make it work, as Detroit has learned five years after winning a barrel of federal tax breaks and cash to redevelop the city." The Free Press went on to grade the Detroit Zone, "Overall, the empowerment zone experiment rates no more than a C. It has been nice for those who got the breaks. It’s free of scandal; although record keeping is so sloppy that it’s hard to be sure. But it is also free of vision or vigor, and it has made zero difference to most Detroiters…" (Detroit Free Press, January 18, 2000).
In terms of Title XX implementation, the single greatest problem is that the City of Detroit did not use the EZ as an opportunity to create a new means of doing business. While the Zone did prompt more activities intended to benefit the public to be contracted to private providers, it tried to do so by shoving a large volume of contracts through the existing purchasing/contracting system which was much more oriented toward the prevention of fraud than the timely implementation of contracted programs. If anything, the way in which the City of Detroit attempted to "do business" with regard to the EZ was worse than its typical practices. Mayor, Council and Departments saw EZ programs twice (at both GMBA and at contract stages) in comparison to once for typical city contracts (see Fig. 1 GMBAS/Contracting flow-chart below). Even before going to the City, however, both GMBAs and contracts went through Committee, Board and Staff review at the EZDC itself. It was literally a wonder that anything ever got done!
Figure One: Detroit’s GMBAS and Contracting Process
EZDC GMBAS PROCESS TO AN APPROVED CONTRACT
| 1. Implementing agencies work on GMBAS as per strategic plan |
2. Completed GMBAS forwarded to EZDC Committees for review (GMBAS not approved go back to implementing agency)
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3. EZDC committees forward reviewed & approved GMBAS to EZDC Board |
| 4.
EZDC Board Approves/Disapproves GMBAS
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5. Forward to EZDC staff | ||
| 6.
EZDC staff sends recommendation for approval to Planning &
Development Department (P&DD) (GMBAS sent back for further review
if necessary)
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7. Must have resolution for City Council/P&DD |
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8. P&DD forwards contract to Implementing Agency for signatures & requests for clearances
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9. P&DD sends contract to City County Building for signatures
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10. Council approves contract |
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Letter to proceed to Implementing Agency (IA) & approved contract |
Note: The flow chart above had to be re-entered for reproduction. It is, however, an EZDC document stating about how the process should be conducted. All content and sequencing is quoted directly.
Although there are some exceptions, the 50+ programs planned as Title XX-funded initiatives have been slow to launch, slow to produce results, and are likely to never to produce benefits to the community at planned levels. It is also increasingly clear that several programs (to which an extraordinary portion of the Title XX funding was allocated) will most probably not be launched at all in planned form.
Planned EZ programs never launched for a variety of reasons. In the case of the Detroit Public Schools, multiple changes in leadership between Zone planning and implementation meant that some planned initiatives were no longer compatible with organizational plans. In other cases, organizations never really possessed the capacity needed to launch the planned initiative(s) for which they received Title XX funding. One organization, in protest of receiving no Title XX funds to help implement its assigned program, actually chose to "secede" from the Zone. The net effect of these and other factors is that many funded and unfunded programs have effectively gone dormant or otherwise vanished – in a few cases these were exceptionally important programs upon which other planned programs were to rely for clients or other key inputs.
A case in point: The Self-Sufficiency Centers
The ‘holistic" Detroit EZ plan aimed at broad revitalization of Zone and its families. This approach was predicated on using "Self-Sufficiency Centers" as a "front door" to EZ resources providing referral and case management. The model for these centers was to be the "Partnership for Economic Independence" (PEI) that had been developed by the Warren/Connor Development Coalition and pilot-tested successfully with 200 families and foundation funding from the Joyce, Annie E. Casey, Hudson-Webber foundations. PEI was based on the firm belief that a deficit in work and job skills was only one of many factors keeping the long term unemployed out of the labor force. Warren/Connor’s PEI was aimed at addressing the full-range of challenges (skills, health, childcare, transportation, substance abuse) that were keeping many Zone families out of the economic mainstream.
Detroit EZ planners took HUD’s preference for contiguity as gospel and produced the only truly contiguous Zone among the first round EZ. Geographically the Detroit EZ strongly resembles a three-bladed airplane propeller. A small central "hub" links thin "blades" that shoot off to the north, southwest and southeast. This odd geography was the result of three groups of very effective community leaders who succeeded in getting their distinct and different areas into the Zone plan a map of which appears on the following page.
Figure Two: The Detroit Empowerment Zone
A Zone border was then drawn to link these three hard points (the tips of the propeller blades) while still meeting program population, land area and economic requirements. The resulting Zone (the shaded portion of the map above) had few natural affinities/overlap in institutions. As a result, three sub-zones became the concept around which a number of programs were to be implemented. Following this logic, Detroit’s original Empowerment Zone strategic plan/application called for three "Community Self-Sufficiency Centers" to be established – one in each of the three sub-zones.
Only one sub-zone center has actually launched – the east site at Warren/Connor Development Coalition. That the east site was successfully launched is not surprising given that the self-sufficiency centers were to be replications at scale of concepts W/CDC has already successfully piloted through its Partnership for Economic Independence. The reasons why only one Center actually opened go to the heart of the implementation difficulties that have plagued the Zone.
Starting immediately after Detroit received Zone designation, Warren/Connor aggressively implemented the initiative. Their approach was based on sound local precedents. In Detroit, the norm for grant funded programs has long been to begin implementing programs once an affirmative funding decision is made and, in the words of one informant, "catch-up the paperwork later." In the case of the Detroit Empowerment Zone, the process of "catching up the paperwork" proved to be exceptionally complex and time-consuming owing in part to poor management of the political relationships. In addition, the Empowerment Zone Development Corporation lacked the power to contract. As a result, the time required to get proper contracts – from City Government – proved to be exceptionally long. While this would not normally have been a major problem, the Detroit City Council – that had felt slighted by the Zone planning process – insisted upon "letter of the law" interpretations" of applicable law and regulations so that no costs incurred prior to the issuance of formal notices to proceed were ultimately reimbursed.
A number of Zone implementing agencies experienced losses as a result of non-reimbursement. One organization – Warren/Connor – was brought to the brink of bankruptcy. The net effect of non-reimbursement was tremendous fiscal distress on the agency. Dramatic staff and other cuts across the whole organization were made in order to absorb unfunded EZ – related expenses. While Warren/Connor survived, its very public difficulties have deterred other organizations from coming forward to come forward to assume responsibility for the originally planned west and east-side centers.
Zone residents have proven to be so socially isolated that they cannot reliably be induced to appropriately and successfully engage with individual programs intended to benefit them. In many ways, this is what has made the inability of the Detroit EZ to launch all three Community Self-Sufficiency Centers not only regrettable but tragic. The Centers were to provide ongoing assistance to EZ residents – on an accountable basis – to locate, successfully engage with and benefit from the full-range of assistance many EZ families need in order to enter (and remain in) the economic mainstream. In the absence of the referring and case management component, the programs intended to benefit families (including job training programs) have remained a woefully under-utilized non-system.
The "Successful" Zone
Perceptually speaking, private investments flows are the outstanding success story of the Detroit EZ. In its 2000 Annual Report, the Detroit EZDC estimates investment in the Zone at $6.6 billion. Detroit’s business community has made a tremendous investment in the Zone through two principal routes: 1) Financing of projects in the Zone by Detroit’s major financial institutions, and, 2) Direct investment by companies in their own facilities.
Financing: By any standard, Detroit’s EZFIC (Empowerment Zone Financial Institutions Consortium) is one of the national Empowerment Zone program’s most successful initiatives. Through the EZFIC, several Detroit banks committed to new lending of $1.2 billion over the planned 10-year life of the imitative. The institutions in question reached their ten-year goal in slightly more than four years and are continuing lending at a rate that suggests they may ultimately double the ten-year goal. Prior to the EZ initiative, however, most of the key institutions in the EZFIC had already negotiated multi-year lending commitments with the Detroit Fair Banking Coalition as part of CRA compliance. Most EZFIC member institutions had also begun cooperating in the general area of community development in a predecessor of the FIC that was up and running prior to the EZ. In addition, the public position taken by even some of the bankers most closely associated with the Zone is that by-and-large standard lending practices have prevailed. (The creation, as a Title XX-funded initiative, of a Shorebank affiliate to meet the specific credit needs of smaller borrowers is an obvious exception).
Comerica Bank – an EZFIC institution – puts total citywide investment since 1994 at $17 billion in completed, in process or planned projects. Within this city-wide total, Detroit’s most recent Annual Report to HUD on the EZ claims $6.6 billion in new investment in the Zone. Of that, two companies have invested almost half. DaimlerChrysler and General Motors have together invested $2.83 billion in their facilities in the Zone.
If you go to most of the project locations listed in the various reports construction is indeed at some stage of development – a growing number of these projects are even complete. In terms of investment flows, the Detroit Empowerment Zone appears to be a major success. We say this, however, with significant reservation because we fail to see nearly as much evidence that the Detroit EZ "owns" these successes in quite the same way as it owns the failures of the direct action programs discussed in the previous sections. The available "data," such as it is, is almost useless as an evaluative tool of the Zone. With the exception of newspaper stories, there has been little or no "rigor" in the assembly of most of these listings. In fact, there is no incentive for rigor. Data gathering and reporting is actually being done by people who need the Zone to be, or at least to appear, successful. At the simplest level, the data is not "audited."
– Claimed status of projects not verified.– Stated investment not checked.
– Job creation claims not monitored.
– Project timings never really checked to eliminate from the claimed results those projects actually planned/committed prior to Zone designation.
At a more subtle level, the real relatedness of projects to the Zone has never been established. There is no case-by-case information establishing causation or even an identifiable marginal influence. As a field assessment team, we continue to struggle with the question of the leveraging and substitution effects of the Detroit Empowerment Zone because we continue to struggle with the more fundamental question of the marginal effect of the Zone initiative itself.
Put in the simplest, most unvarnished form – we fail to see how many of the good things that clearly are happening in both the Zone and the balance of Detroit might have been caused by what little the individual Zone programs that are in operation, and the Detroit EZDC itself, have actually been doing. We have seen no convincing evidence to suggest that the various developments would not have taken place "but for" the Detroit Empowerment Zone. In fact, a substantial portion of the claimed investment flow clearly has its origins in events and collaborations begun prior to Zone designation.
Two "Big Three" sites account for $2.83 billion – nearly half – of all claimed investment. In those cases, the national economy and low gas prices that had supported the purchase of high-end SUVs and luxury passenger cars probably had much more influence on corporate decisions to make these investments in the expansion of pre-existing plants than any EZ incentive or action.
DaimlerChrysler’s Jefferson North plant (the only US plant that assembles Jeep Grand Cherokees) and the new Mack Avenue Engine plant (that make engines for Jeep Cherokees) received $2.5 billion of new investment since Zone designation. It was demand for the vehicle, however, not the EZ that drove the expansion decision. When all is said and done, adjacent to the pre-existing Jefferson North plant was the only economical location at which to expand Cherokee production. This is true to an even greater degree of the $337 million that GM invested within its pre-existing Poletown plant, also located within the Zone.
Major investors have also publicly attributed little influence to the Zone’s tax incentives and have consistently failed to attribute any role in their decision making to direct actions taken by the Detroit EZDC staff or Title XX funded initiatives. When contacted by the Detroit Free Press, DaimlerChrysler’s director of state relations Fred Hoffman (DC’s point person in negotiations for economic development incentives) flatly stated that "We didn’t make the investment just because of the empowerment zone. We believe in Detroit. We believe in the workforce and the historic Jefferson plant is on the site of our original plant." Gerry Holmes, a spokesman for General Motors, says the company invested $337 million into its "Poletown" plant located on the Detroit/Hamtramck border because it "made business sense." Dave Bing, chairman of the Bing Group, said he had planned to build his EZ facility before the Zone designation; "I was going to do it anyway." (Hoffman, Holmes and Bing statements all drawn from the Detroit Free Press, July 31, 2000 issue).
Development Programming and Infrastructure: Title XX dollars were not used to fund pre-development work or enhance infrastructure needed by these projects. To the degree this was done, it was done with traditional public funding sources. EZ staff did not (and does not) undertake economic development work. Basically EZ staff service the board and its committees and functions as low-level contract administrators with actual contracts being struck between implementers and City of Detroit (rather than EZDC). All major local economic development programs, however, were "written in" to the Zone, forging links between Zone and the major economic development agencies operating in the city and the metropolitan area: the Detroit Economic Growth Corporation, the Detroit Regional Chamber of Commerce and more. However, Title XX was not used to fund the public or quasi-public agencies working to secure these projects. At this stage there is no evidence that these linkages with economic development agencies resulted in anything better or different in Zone (or anywhere else) as a result of EZ designation.
The projects creating the $6.6 billion in new investment were "staffed" through city government by people at public, private and quasi-public entities conducting "business as usual". Their efforts were perceptually linked to the Zone via the Detroit EZ plan "leverage machine." The inclusion of these programs in the plan created a "hook" – similar to the EZFIC hook – with which to link almost any positive development result obtained in the Zone to the EZ reporting going to HUD.
We also find little evidence that significant numbers of EZ residents have been employed by projects claimed as results of EZ investment. Instead, interviewees identified little change in the enormous skill deficits and the economically and socially isolated communities across the Zone. On a related note, training programs – even those with minimal entry-requirements – have not been able to meet enrollment targets. No "automatic" linkages of projects to the EZ should be assumed either. Neither project funding nor staffing nor tax credit use of most developments in Zone creates the kind of clear and unequivocal linkage to the Zone program that would make us comfortable attributing causation to the EZ program.
A Shifting Definition of the Zone’s Purpose
Until recently, most stakeholders subscribed to the "Tale of Two Zones." As a result, they have tended to be simultaneously proud of the "good" Zone and outraged at the lack of progress of the "bad" Zone. Recently, however, there seems to be a movement toward the view that "perhaps the Title XX programs aren’t that important after all." After literally years of outrage – including from within the EZDC Board itself – at the slow pace of Title XX contracting and disbursement, a January 2000 expose of the lack of progress in implementing Title XX programs published in the Detroit Free Press elicited almost no public response. (In a later section of this report, we discuss the somewhat different reaction of Detroit’s Mayor and the EZDC Board to these same articles.)
At one level, we think that Detroiters as a group could simply no longer sustain the anger that results from a continued focus on the Title XX contracting process and programs that remains halting at best. After truly disastrous levels of disinvestment through the 1970s and 1980s exacerbating already significant racial tensions, Detroit has been on a development "winning streak" through the 1990s and 2000. Zone figures make a reasonably plausible claim that as much as $6.6 billion may have been invested in (or at least committed to) projects in the Zone. Citywide figures from a major local bank estimate total new investment in and commitments to all Detroit projects at $17 billion. Substantial downtown revitalization is underway.
Detroiters not only want success they have a deep emotional need for success resulting from all the years of disinvestment. As a result, we believe that that there is a growing tendency among stakeholders who did not previously view economic development – as measured by investment flows – as the key Zone objective to now take the position that investment flows are the appropriate primary indicator of EZ success. Moreover, the conflicting/competing strategies reflect the multi-dimensional nature of the EZ Strategic Planning process where many (and powerful) voices struggled to be heard. Today many of those voices are quieter and some are silent. Further, it appears that many of those who saw the Zone as something greater than the investment flows are more likely to be quiet or silent than those for whom the investment flows are more compelling.
How Did We Get Here?
When the opportunity to seek Empowerment Zone designation emerged, Dennis Archer had been elected (but not yet inaugurated) as Detroit’s Mayor. In its dying days, the outgoing Young Administration evidenced no interest in seeking a Zone. As a result, the earliest genuinely serious work on a Zone plan came from Wayne County (the county including Detroit) community and economic development staffers. The senior Wayne County staffer associated with the project – Gloria Robinson – was effectively a member of Archer’s government in waiting. Before long, Robinson was Archer’s director designate for Detroit’s Department of Planning and Development. At that time, the Zone planning process moved into a more conventional relationship with Detroit city government and securing a Zone became a top priority for the early days of the new Archer Administration.
The planning process employed was an open, freewheeling almost anarchic series of task force, committee and coordinating council meetings largely staffed by loaned personnel from businesses, universities and other institutions. The"Coordinating Council", supposedly charged with managing the process, with a mix of business, community and university representatives provided general guidance on the front end the process and served as the final reviewer of the resulting plan.
Too much specificity masked too little consensus: After 20 years of disinvestment and rising racial tension, Detroit had just elected a pro-business Mayor who enjoyed significant biracial as well as city and suburban support. Pent-up demand for new housing and commercial space in the city had already begun producing new projects. Some of the few major (heavily-incentivized) projects from the previous city administration were finally beginning to show signs of producing spin-off/follow-on development. The core of a new entertainment district, centered on Detroit’s Fox Theater, had already been established.
In this environment, some key CBO leaders, academics, and others (including a few eccentric public officials, community activists and salesmen pushing particularistic and eccentric development schemes) came together in a planning process largely guided by an Archer "shadow" administration. The planning process came to be seen as opportunity to get things for organizations that "worked the process" effectively. Various parties brought needs, agendas and initiatives to planning process. Some people literally pulled up a chair and just stayed until they got what they wanted. In the words of one observer, "everyone came to the table with their Christmas list. And the longer they stayed, the more they got." Hence much of the "planning process" was devoted to clustering and combining and winnowing hundreds of projects and programs – some realistic, some truly bizarre!
Looking at the result, a cynic might comment that the only thing linking many parts of the Zone's "strategic plan" together was a staple. This is not to say that Detroit EZ Strategic Plan, "Jump Starting the Motor City," does not have a section that purports to describe Detroit’s strategic vision for change. It does (Detroit EZ Strategic Plan, IV, p 13 – 23). That section, however, actually describes how six task forces created the policy goals that – at the time of plan assembly – "can now be clustered into three broad goal areas that correspond to the plan."
The resulting section is a less-than-successful attempt to retroactively impose a unifying strategy and structure on how three groups of programs totaling 80 separate initiatives, created by six groups of people were to accomplish the three very broad goals of:
– Creating Economic Opportunity– Sustaining Healthy, Competent and Safe Families
– Restoring and Upgrading Neighborhoods.
The Detroit EZ plan was created in a then-unprecedented "era of good feeling" for Detroit that Zone planners were justifiably disinclined to put at risk by insisting upon a Zone plan with a single unifying vision. It is important to also remember that many key players in Zone planning were based in small organizations for which $50,000 Neighborhood Opportunities Fund Grants (reprogrammed CBDG funds) were a big deal. Given the extremely limited historical access to significant public sector resources on the part of many Zone planners, it is likely that many truly believed a successful Zone initiative with "something for everybody" was possible with the $100 million of Title XX funds that would be available to Detroit if it received a Zone designation. What they have discovered, however, is that $100 million doesn’t buy what it used to!
Sowing the seeds of its own destruction: Although not recognized at the time, the freewheeling process employed in the creation of the plan denied a number of genuine stakeholders special status in the process/influence over the plan. For instance, career city employees (as distinct from Archer appointees) had comparatively little influence over the plan. While the members of the City Council were welcome – like everyone else in town – to come join the process, Council members were accorded no special status in the development of the plan. They were never consulted privately about the specifics of the plan nor given the opportunity to quietly insert their pet projects into the proposed Zone program. The organized group of African American ministers was also denied special status in the process – no seat was set-aside specifically for them on the Coordinating Council. One minister, however, got himself elected to the Coordinating Council as a general community representative as a result of which his clerical colleagues almost immediately repudiated him.
As a result of being denied special status in the planning process, the constituencies listed above – as well as some others – claimed that they have been excluded from the process and so had been wronged. In consequence of feeling denied their proper status on the front end of the Zone planning process, City Council, some well-placed city employees and others players "went underground" with their opposition. These actors then re-emerged later – after Zone designation – to successfully reclaim at implementation stage the influence over the Zone they felt they had been denied at the planning stage.
Council and the bureaucrats reinserted themselves into the Zone in three key ways that proved to be devastating to attempts to secure rapid implementation of the Detroit EZ plan after designation as well as financially punitive for implementing agencies that "took a flyer" and began implementing their assigned programs promptly.
In the face of these developments, a new city Administration with an almost desperate need to be liked did the only thing it felt could do – it folded and let Council and the bureaucracy have their way. As a result of this modus operandi, the implementation of the EZ programs and many other change initiatives have been slowed and complicated by an inability to either persuade or command the city government apparatus to implement the Administration’s directions on a reliable and timely basis.
A horrific "Catch-22" problem emerged through which an individual, namable, comparatively low-level city employee brought EZ implementation to a grinding halt through the personal control they had obtained over the contracting process. This was like the scene in Joseph Heller’s great comic novel where a Private claimed to have blocked the D-Day invasion until General Eisenhower committed more armor! In the novel, Private Wintergreen blocked the D-Day invasion by not mimeographing the orders. In the Detroit EZ, a contracting official simply didn’t write implementation contracts for some programs until he was good and ready to do so. No program got a contract in less than 18 months and some programs – that are purportedly still intended for implementation – only got contracts in summer 2000. (Five and a half years after Zone designation). As Zone implementation dragged into weeks, months and eventually years, the Archer Administration distanced itself from the Zone and left the program twisting slowly in the wind until early 2000.
In addition to City Government’s seeming inability to "lead, follow or get out of the way" with regard to EZ implementation, the Zone’s own governing body has not always been a positive force. In the early going, The EZDC Board effectively blinded itself through well intentioned (but disastrous) policies about who could (and could not) serve. A disruptive degree of Board turnover was inadvertently engineered into the Detroit Empowerment Zone from the very beginning. Prior to Zone designation, Detroit’s quest of an EZ was guided by an Empowerment Zone Coordinating Council EZCC made up of key community, business and institutional leaders.
Many members of the EZCC came from agencies that were "written into" the EZ Strategic Plan as key implementing agencies. The EZCC itself, however, decided that implementing agencies would not have seats on the permanent Empowerment Zone Development Corporation (EZDC) Board. As a result, most key community representatives and some of the leading designers of the Zone plan – the genuinely passionate advocates of community change through empowerment – fell out of Zone governance. Later, empty seats, turnover and habitual absences of some members diminished the credibility of the EZDC Board. At no point in the EZDC’s existence have all 49 seats been filled. In the past two years, the rate of deterioration in board composition has accelerated to the degree that only 35 Board seats were filled at the time of the 1999 Annual Report and only 25 seats were filled at the time of the 2000 Annual Report with no new members having joined the Board.
City government, however, must also share some of the blame for the Board’s difficulties. One knowledgeable interviewee charged that the primary reason that the board is shrinking seemingly without replacement is that "downtown" – specifically the Mayor’s Office – has been "going slow on reviewing and interviewing candidates for Board seats." The individual went on to note that before one particular member of the Board left their seat in January 2000 a replacement had already been identified and named – subject to the Mayor’s approval. As of the first week of August, 2000 however, that individual still had not been interviewed or approved.
Staff was also a problem. Confusing, contradictory, inaccurate and ultimately self-destructively inaccurate reporting from EZ staff and its director to the Mayor, Council, Community, and HUD have not helped build confidence in the Detroit EZ’s direct action programs. The (since departed) EZ Executive Director further undermined Council and public confidence in the Zone when she answered at a public hearing that she simply did not know how many jobs were being created in the Zone.
Without compelling leadership and with implementation seemingly hopelessly bogged-down, the EZ was seen by many as yet another example of bureaucratic incompetence. A completely over-matched Executive Director and staff were left in place for years by the EZDC despite demonstrable lack of results on those aspects of the program that were to be administered or facilitated by staff. Most all stakeholders seemed to think there was little to gained by fighting the battles necessary to – possibly – get the EZ moving. And by 1999 no one really expected it to do much. The EZ had little relevance to Zone residents let alone other Detroiters. Both newspapers in the city repeatedly ran articles and editorials highly critical of the pace of EZ implementation. No one seemed to care. There were no visible consequences.
A New Beginning?
We do not know why, however, a series of January 2000 Detroit Free Press articles so rattled the Archer Administration that the Mayor ceased distancing himself from the Zone and, instead, made a grab for control. Two interviewees described the results of the January 2000 Free Press stories in ways that suggest they were – for the Mayor and the EZDC Board – a watershed event in redefining the partnership of City Government and Community. Both interviewees described the Mayor as showing up at the January EZDC Board meeting "with media in tow" as a result of the Free Press articles and editorial.
Both interviewees agreed that the Mayor proposed disregarding the EZDC Board’s normal officer succession plan to place Deputy Mayor Nettie Seabrooks into the EZDC Chair. Both interviewees agree that the Mayor argued that a Seabrooks appointment would produce greater cooperation with the Zone on the part of city department heads. Both interviewees reported interpreting the Mayor’s action as a power grab and themselves as resenting his implication that the slow pace of EZ implementation had its origins in the EZDC and its board rather than the City of Detroit and its contracting process.
Where the two interviewees diverged sharply is in the next steps they took. One – citing the Mayor’s action as a "last straw" – elected to leave the Board. The other, however, chose to remain on the Board and reported that the Mayor’s action seemed to motivate the remaining EZDC Board members to take more ownership in the program. To their view, one result of the greater ownership the remaining members of the Board have taken is the recent progress that appears to have been made toward finally giving the community access to the $10 million Innovation Fund and the serious discussion that has started of reallocating funds aware from moribund EZ initiatives and toward more viable current or new ones. The long-time EZ Executive Director has also finally departed the scene to be replaced on an interim basis by an experienced, high profile government/community relations professional.
Note: As this paper was in the final stages of preparation, Detroit Mayor Dennis Archer announced that he would not seek a third term. As a result, Archer is now a "Lame Duck" Mayor serving out a term ending in January 2002. How this will effect the EZ remains to be seen.
The Coming Years
The general view of many people engaged with the Zone – with which we largely agree – is that Detroit’s EZ program per se will not and should not be sustained past its planned ten year life. The most effective individual EZ programs, however, will unquestionably live on. That will happen because the most successful Detroit EZ programs have tended to be those that utilize the "leverage" offered by existing programs and organizations. At one level, the reliance on "leverage" meant that little genuinely new was created with Title XX for the EZ. At another level, however, that means many of the programs of the Detroit Zone will continue to be delivered long after the tax credits have expired and Title XX funds either expended or forfeited without having to make special provision for their institutionalization.In terms of private investment, for over 20 years private investors shied away from Detroit out of fear for its long term viability. In that regard, the Zone designation – along with many other positive things happening in the same general time period – may have been seen as some manner of seal of approval that reduced fearfulness. Since investment often flows in a manner that might most cynically be summed-up as "them that gots, gets more," it is very likely that the new private investment that flows into the Zone during the 10-year designation will prompt additional investment later. Even if no major new projects are begun from ground zero after the expiration of the EZ designation, future on-site expansion and upgrading of Zone projects built during the period of designation should continue for many years to come.
Lessons from the Detroit EZ
We believe that Detroit’s poorly-understood, multi-strategy, overly specific and complex EZ plan was – and remains – essentially impossible to completely implement given the basic realities of Detroit politics, governmental processes and the natural tendency of everything to change over time. Our view is that:
– The primary benefits of the EZ initiative to Detroit have been as a focusing event and sign of hope and validation. In late 1994 and early 1995, Detroit badly needed "a win" and receiving Zone designation had been identified by the Archer Administration as an almost "make it, or break it" priority. Unfortunately, getting the post-designation Zone program through the city apparatus and giving assistance to program implementation was not accorded a comparably high priority. It was said by some in the city that winning the Zone designation was all that really mattered – actually spending the federal dollars would simply cause problems. A prophetic comment!– Actions taken to secure Zone designation may actually helped undermine the prospects for rapid and successful Zone implementation. By writing in everything but the kitchen sink, Detroit’s Zone planners were able to show Washington the enormous amounts of "leverage" that a Detroit EZ could produce on the investment of Title XX funds. But it also created an overwhelming administrative challenge well beyond the capacity of the EZDC and the limited resources accorded to the task by City officials.
– Attaining greater consensus on goals, however, would have produced a simpler, more genuinely strategic, plan that would have been easier to communicate and understand. This would, of course, also have greatly increased the community’s capacity to both oversee and benefit from the Zone initiative.
– With a higher degree of consensus on goals, we believe that the resulting plan could also have been less specific and more flexible. Streamlining the Plan would have come at some cost – the exclusion of projects and program that individuals felt so deeply about.
– With a clearer and simpler plan focused on fewer but bigger initiatives, we believe that Detroit’s cumbersome approvals and contracting process might have been less disruptive to Title XX implementation.
– In addition, more timely implementation of a smaller and more connected group of Title XX programs would have put the whole community onto a more positive trajectory about the Zone’s direct action programs that might have produced new and additional benefits.
In addition to the Detroit-specific lessons outlined above, it would appear that the entire EZ initiative could have benefited greatly from more thought at the beginning of the process about how the jobs/investment impact of all the Zones should be assessed. Clear, consistent, commonsensical guidance (accessible to a lay audience) to all communities about what would "count" and what would not "count" for evaluative purposes would have been incredibly valuable. To our view, such guidance should have been based in a "but for" standard (this job would not exist, this investment would not have been made, this EZ resident would not be employed but for the availability of EZ benefits/services). Such a standard would obviously have produced smaller numbers but generally more reliable data with which to measure the real economic impact of the individual Zones as well as the whole federal EZ/EC program.
ENDNOTES
Note: Full references to follow
The law required at least one of the urban zones to be located in a city of less than half a million people. It also provided for the designation of 95 so-called Enterprise Communities (a third of them awarded to rural communities), which made them eligible to receive a set of benefits of lesser value than those awarded the big city winners. Public attention has focused, however, on the urban component of the program.
ii
In fact, the initial expansion of Model Cities encompassed 150 cities and towns, not 120.iii
Mossberger (2000, Chapter 3) makes clear that far from sitting quietly watching the states, the federal government actively lobbied the states to pass their own enterprise zone programs. One official in the Reagan administration’s Department of Housing and Urban Development is said to have logged 300,000 miles in the air in a campaign to urge the states to pass enterprise zone legislation. HUD functioned as a source of information for the states on such programs all through the 1980s.
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Workshop 5 |