Human Capital Investment for Central City Revitalization 9781134827541, 9780815332121

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HUMAN CAPITAL INVESTMENT FOR CENTRAL CITY REVITALIZATION

Other Titles in the Contemporary Urban Affairs Series edited by Richard Bingham Local Economic Development Policy: The United States and Canada Laura A. Reese Beyond Edge Cities

Richard D. Bingham, William M. Bowen, Yosra A. Amara, Lynn W. Bachelor, Jane Dockery, Jack Dustin, Deborah Kimble, Thomas Maraffa, David L. McKee, Kent P. Schwirian, Gail Gordon Sommers, Howard A. Stafford Neighborhoods, Family, and Political Behavior in Urban America

Yvette M. Alex-Assensoh Governing Metropolitan Areas: Response to Growth and Change

The Art of Revitalization: Improving Conditions in Distressed Inner-City Neighborhoods

Sean Zielenbach Reviving America's Forgotten Neighborhoods: An Investigation of Inner City Revitalization Efforts

Elise M. Bright Downtowns: Revitalizing the Centers of Small Urban Communities Michael A. Burayidi Wages, Race, Skills, and Space: Lessonsfrom Employers in Detroit's Auto Industry

Susan Turner Meiklejohn Minority Politics at the Millennium

David K. Hamilton

Richard A. Keiser and Katherine Underwood

The Collaborative City: Opportunities and Struggles for Blacks and Latinos in U.S. Cities

Human Capital Investment for Central City Revitalization

John Betancur and Douglas Gills

Fritz W. Wagner, Timothy E. Joder, Anthony J. Mumphrey Jr.

HUMAN CAPITAL INVESTMENT FOR CENTRAL CITY REVITALIZATION

FRITZ W. WAGNER TIMOTHY

E. JODER

ANTHONY J. MUMPHREY JR.

Routledge New York and London

Published in 2003 by Routledge 29 West 35th Street New York, New York 10001 www.routledge-ny.com Published in Great Britain by Routledge 11 New Fetter Lane London EC4P 4EE www.routledge.co.uk Copyright © 2003 by Routledge Routledge is an imprint of the Taylor & Francis Group. Printed in the United States of America on acid-free paper. All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers.

10 9 8 7 6 5 4 3 Library of Congress Cataloging-in-Publication Data Human capital investment for central city revitalization / edited by Fritz W. Wagner, Timothy E. Joder, and Anthony J. Mumphrey Jr. p. cm.-(Contemporary urban affairs) A companion work to managing capital resources for central city revitalization. Includes bibliographical references and index. ISBN 0-8153-3212-2 I. Human capital. 2. Urban poor. 3. Urban renewal. I. Wagner, Fritz W. II. loder, Timothy E. III. Mumphrey, Anthony l. IV. Garland reference library of social science. Contemporary urban affairs. HD4904.7.H858442003 307.3'42--dc21

2002037045

Contents

List of Contributors

VII

Acknowledgments

Xl

Foreword CHAPTER

XIll

1

HUMAN CAPITAL INVESTMENT

1

ROBERT W. BECKER AND ROBERT A. COLLINS

CHAPTER 2 THE DETROIT EMPOWERMENT ZONE'S EFFECT ON ECONOMIC OPPORTUNITY: EMPLOYERS' RESPONSES TO THE ZONE'S PROGRAMS AND INCENTIVES

12

MARGARET DEWAR

CHAPTER

3

BUILDING COMMUNITIES, BUILDING COALITIONS: INITIATIVES FOR URBAN EDUCATION KATHRYN DoHERTY, CHERYL JONES, AND CLARENCE STONE

CHAPTER

42

4

TENANT ORGANIZING IN PUBLIC HOUSING: A CASE STUDY OF KANSAS CITY, MISSOURI, AND NEW ORLEANS, LOUISIANA ROBERT

o. WASHINGTON AND ROBERT K. WHELAN

v

78

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Contents

CHAPTERS

THE IMPACT OF COMMUNITY-REINVESTMENT AGREEMENTS ON MORTGAGE LENDING TO MINORITY AND LOW-INCOME HOUSEHOLDS AND NEIGHBORHOODS 100

ALEX SCHWARTZ

CHAPTER

6

CONCLUSION: HUMAN CAPITAL INVESTMENT AND CENTRAL CITY REVITALIZATION FRITZ WAGNER, TIMOTHY JODER, ANTHONY

J.

MUMPHREY JR.,

AND LOUIS CRUST

134

Index

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List of Contributors

Editors Fritz W. Wagner, the Dean Emeritus of the College of Urban and Public Affairs at the University of New Orleans is also Senior Lecturer at the University of Washington, Bothell and Seattle. He holds his B.S. from Michigan State University and his M.S. and Ph.D. (planning) from the University of Washington. His areas of interest include small-town and neighborhood planning, environmental planning, land use and zoning, policy evaluation, and planning issues in developing countries. Timothy E. Joder, Associate Dean of Business Affairs and Executive Director of Sponsored Research at the College of Urban and Public Affairs at the University of New Orleans, serves as Deputy Director of the National Center for the Revitalization of Central Cities. Prior to joining the University of New Orleans in 1981, he served as Chief Planner, Louisiana State Planning Office, Office of the Governor; as a community development planner with the City of Baton Rouge and Parish of East Baton Rouge; and as a coordinator of the Boca Raton, Florida, Community Development Block Grant program. He holds a B.A. in urban affairs/geography from the University of Pittsburgh and a master's of public administration from the University of New Orleans. Anthony J. Mumphrey Jr., Professor of Urban and Regional Planning and research director of the National Center for the Revitalization of Central Cities (retired) at the University of New Orleans. B.S., M.S. (civil engineering), Tulane University; M.A., Ph.D. (regional science), University of Pennsylvania. Mumphrey, who served as an Executive Assistant for Planning and Development to the Mayor of New Orleans (1978 to 1984), started a professional consulting firm that specializes in engineering, architecture, and planning services. His research interests include creative public-finance techniques, solid-waste management, the impacts of annexation and defensive

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List o/Contributors

incorporation, city-suburban development relationships, and the decisionmaking process in the public sector.

Authors Robert W. Becker is Executive Director of New Orleans City Park. He is also an adjunct professor at the College of Urban and Public Affairs, University of New Orleans, where he has taught since 1981. He served as vice president of planning and operations for the Audubon Institute in New Orleans from 1988 to 2001 and as executive director of the New Orleans City Planning Commission from 1982 to 1988. He has been associated with planning and development activities in the city of New Orleans since 1971. Mr. Becker received his bachelor's degree from the State University of New York at Buffalo and his master's degree from the University of Iowa. He is a member of the American Institute of Certified Planners and the American Planning Association. Robert A. Collins is Chair of the Department of Urban Studies and Public Policy at Dillard University. He also holds the Conrad Hilton Endowed Assistant Professorship in Urban Studies and serves as Program Manager of the Dillard University Community Development Corporation. Dr. Collins is a former U.S. Senate staff member, specializing in federal urban policy issues. He holds a Ph.D. in Urban Studies from the University of New Orleans. His current research interests include community development corporations and urban politics. Louis Crust is a Ph.D. candidate at the College of Urban and Public Affairs at the University of New Orleans and is also a research fellow at the National Center for the Revitalization of Central Cities. With a background in cartography, computer programming, and urban anthropology, he has worked for the Maritime Resource Management Service of the Council of Maritime Premiers and for the government of Nova Scotia, Canada. His research interests include social theory, political economy, public policy, and social change. Margaret Dewar is a professor of urban planning and chair of the Urban and Regional Planning Program at the A. Alfred Taubman College of Architecture and Urban Planning at the University of Michigan. She holds a Ph.D. from the Massachusetts Institute of Technology and teaches state, local, and community economic development planning; planning for declining industries; industrial policy; processes for regional restructuring; and community development. Current research and service projects include the Detroit Eastside Housing Initiative; the Political Economy of Brownfield Redevelopment; the Detroit Empowerment Zone; the Michigan Neighborhood AmeriCorps Program; and the Detroit Community Outreach Partnership Center Program. Her articles have been published in numerous journals such as Economic

List of Contributors

IX

Development Quarterly, Journal of Planning Education and Research, Regional Studies, Journal of Policy History, Rural Development Perspectives, Journal of Planning Literature, and Policy Studies Review. Kathryn Doherty is research director at Editorial Projects in Education, the nonprofit organization that publishes Education Week, an independent, national newspaper covering K-12 education. Previously, she was a social science analyst in the U.S. Department of Education's Planning and Evaluation Service. She has a Ph.D. in government and politics from the University of Maryland. Cheryl Jones is a Ph.D. student at the University of Maryland. Her research area includes urban education and black politics. She is a contributor to Changing Urban Education. Alex Schwartz is Associate Professor at the Graduate School of Management and Urban Policy at the New School University and Senior Research Associate at the New School's Community Development Research Center. He holds a Ph.D. in urban planning and policy development from Rutgers University. His research interests include housing and community development, service industries, and urban economic development. His most recent research projects include national studies of the management of housing owned by community development corporations and other nonprofit organizations and of the economic linkages between central cities and suburbs. His articles have appeared in the Journal of the American Planning Association, Urban Affairs Quarterly, Urban Geography, and other journals. Clarence Stone is professor of Government and Politics at the University of Maryland, College Park. His research interests include the areas of urban education and related human investment policies, the restructuring of local governance, and the politics of social reform. Currently he is directing a multicity study titled "Civic Capacity and Urban Education," a 3-year project funded by the National Science Foundation. His most recent book is Regime Politics: Governing Atlanta 1946-1988. Robert O. Washington was President of Social Policy Research Group, a New Orleans-based public policy organization which specializes in research, social planning, and human services delivery systems. He was also Professor of Urban Policy Analysis in the College of Urban and Public Affairs at the University of New Orleans. He served from 1988 to 1993 as Vice Chancellor for Graduate Research and Dean of the Graduate School at the University of New Orleans; from 1982 to 1986 he was Dean of the School of Social Work at the University of Illinois Urbana-Champaign; from 1976 to 1982 he was Dean of the College of Social Work at Ohio State University. Bob Washington was a co-editor of the Journal of Planning Education and Research. He authored eight books and numerous articles. Dr. Robert Washington passed away in 2000. Robert K. Whelan is Professor and served as Interim Dean at the College of Urban and Public Affairs at the University of New Orleans. He is

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List o/Contributors

coauthor of Urban Policy and Politics in a Bureaucratic Age (1986) and has authored or coauthored many articles and papers including "Urban Regime and Racial Politics in New Orleans" (Journal 0/ Urban Affairs, 1994). His research interests center on urban economic development and local government administration in the United States and Canada.

Acknow ledgments

This book and its companion volume, Managing Capital Resources for Central City Revitalization, are the products of a three-year endeavor by the National Center for the Revitalization of Central Cities. A consortium of several academic institutions, the National Center analyzes critical problems facing America's central cities, evaluates strategies to address those problems, and recommends policy alternatives. The idea for the National Center was born in 1991 as part of an urban development seminar series. Louisiana's former senior Senator J. Bennett Johnston turned this academic discussion into a tool for research and policy making and sponsored the National Center in Congress, which appropriated $500,000 to the project. Because of its initial success (1992-1994), the National Center received additional funding (1995-1998) in the amount of $1.0 million to pursue an ambitious agenda. If not for Senator J. Bennett Johnston and strong support from New Orleans' Mayor Marc Morial, the National Center could not have continued its work. This book, Human, Capitallnvestment for Central City Revitalization, is one product of their commitment to urban policy research and to the nation's investment in central cities. We also recognize our National Center colleagues at the University of Michigan (Margaret Dewar), University of Maryland (Kathryn Doherty, Cheryl Jones, and Clarence Stone), New School University (Alex Schwartz), and the University of New Orleans (Robert Washington and Robert Whelan). Their research and analyses for the National Center have made significant contributions to the urban planning/urban development literature. We also appreciate the work of many other people who were instrumental in this effort. Arthur Nelson helped draft the book proposal that we submitted to Garland Publishing. Professor Richard Bingham, series editor of Garland's urban affairs collection, selected this manuscript for publication and recognized

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Acknowledgments

the important contribution our research could make to the urban affairs/urban studies discipline. David McBride, urban affairs editor at Routledge, guided us through the publication process following his firm's acquisition of Garland Publishing. Robert Becker and Robert Collins reviewed drafts of each chapter and wrote the introductory chapter. Lauren Schrantz formatted each of the research studies into a working paper and then consolidated them into a single manuscript. We are indebted to Louis Crust for his invaluable service as an author and as a coordinator of this project. Our sincere thanks to all. June 30, 2002 University of New Orleans New Orleans, Louisiana

Fritz W. Wagner Timothy E. Joder Anthony J. Mumphrey Jr.

Foreword

This book, and its companion volume Managing Capital Resources for City Revitalization, is a product of the research agenda of the National Center for the Revitalization of Central Cities, a consortium of several academic institutions dedicated to analyzing the critical problems facing America's central cities. The premise behind Fritz Wagner, Timothy Joder, and Anthony Mumphrey's Human Capital Investment for Central City Revitalization is that the major weakness of urban-revitalization policies and programs is their failure to develop human capital. By human capital they mean the sum total of a person's knowledge and skills, or geographically, as the stock of knowledge (educational attainment) and training skills (occupational distribution) that exists in particular area. Area, of course, is what they are referring to in central city revitalization. A series of case studies presents four methods that provide a potential for improving the living conditions of central city residents: Empowerment Zones, school-linked services, tenant-based management, and community-reinvestment agreements. Margaret Dewar evaluates the Federal Empowerment Zone program in Detroit in terms of the program's success in improving the well-being of Zone residents. Kathryn Doherty, Cheryl Jones, and Clarence Stone discuss the strategies used in Baltimore and New Orleans in improving scholastic achievement by building healthy communities and coalitions. Robert Washington and Robert Whelan examine efforts by public-housing residents in Kansas City and New Orleans to rebuild their communities. And Alex Schwartz analyzes bank lending to minority households in low-income neighborhoods. These chapters focus on ways in which central city residents can improve their own situations, living conditions, and the central city itself. Investment in human capital is posited as a way to provide real improvement in the lives of the poor and in the communities in which they live. Richard D. Bingham Cleveland, Ohio November, 2002 xiii

1

Human Capital Investment ROBERT W. BECKER AND ROBERT A. COLLINS

Many strategies that have been designed to revitalize the central city focus on the physical redevelopment of decaying infrastructure. Still other strategies involve the use of subsidies and tax breaks to attract business. In contrast to these prescriptions (physical redevelopment and financial incentives), lies the idea of human capital investment. Wagner, Joder, and Mumphrey in Urban Revitalization: Policies and Programs report that one weakness of urban-revitalization policies and programs, in general, is that they fail to develop human capital:

1

It is clear that physical redevelopment alone will not bring prosperity to central cities. Much greater attention must be paid to investing in human capital as an effective strategy for long-term economic improvement. The federal government must ensure that its programs, in whole or in part, encourage training and educational efforts designed to increase the skills ofthe workers so they are ready for the economic opportunities of the twenty-first century (1995: 209).

Our colleagues at the National Center for the Revitalization of Central Cities undertook a three-year project, beginning in 1995, to analyze and evaluate locally-based revitalization strategies among several American cities. In this book, Human Capital Investment for Central City Revitalization, they analyze four methods that offer central city residents the ability to improve their standard of living. These include initiatives for urban education such as school-linked services, tenant-based management, community reinvestment agreements, and empowerment zones. In this introductory chapter, we define the term human-capital investment (HCI), provide a cursory review of the literature, and layout the organizational structure of the book. I

2

Human Capital Investment

Human Capital What is human capital? It is the sum total of a person's knowledge and skills. Human capital may also be described as the stock of knowledge (educational attainment) and training skills (occupational distribution) that exists in a particular geographic area. Lucas (1988) and Rauch (1992) contend that the geographic concentration of human capital raises productivity in metropolitan areas. Higher levels of productivity imply increased economic growth and development as well as a better standard of living for metropolitan residents. In other words, it is investment in people-through schooling, on-the-jobtraining, health care, child care, housing, recreation, transportation, access to information-that delivers measurable benefits to individuals in terms of increases in personal income and to society in terms of economic growth and development (Lucas 1988; Becker 1975; Hansen 1963). Thus, programs and policies directed at human capital investment playa key role in central city revitalization. Human capital investment is a people-based strategy while physical redevelopment projects and financial incentives are place-based. While one might assume that one of the two approaches may be more effective, Fainstein and Markusen (1993) counter that the people-based versus placebased debate is a false dichotomy. They believe that only an integrated approach involving ~oth people-based and place-based programs will succeed in the long term. This lack of an integrated approach has been the cause of many program failures: Independent social and economic policies [have] had a perverse result: they failed to halt capital outmigration, deepened urban poverty in the inner city, and cut into resources that state and local governments had ... to reverse [urban decline]. This time around, an effective urban policy must blend social and economic policy if inner cities are to be revitalized and their residents provided a life of adequate employment and hope (Fainstein and Markusen 1993: 1463). Michael Stegman (1993), a former Assistant Secretary of the U.S. Department of Housing and Urban Development (HUD), also supports a holistic approach that blends economic investment (a place-based policy) with education and training (a people-based policy). He suggests that economic and human capital investment strategies would strengthen and expand community-based development organizations which have partnered with public agencies and with private businesses to create housing and economic development projects. Education and training strategies emphasize asset accumulation, community self-help, home ownership (including resident

Robert W. Becker and Robert A. Collins

3

management), and the creation of economic opportunities that are largely independent of social service agencies, government institutions, the mainstream economy, and corporations. David Rusk (1993), based on his analysis of several central cities, concludes that uncoordinated urban revitalization programs are ineffective in the long term. His data indicate that cities with piecemeal programs tend to show decline across most economic indicators. Cities with comprehensive urban-revitalization plans, on the other hand, tend to show growth across most economic indicators. A comprehensive plan would combine physical redevelopment, financial investments and business incentives with education, training, community organizing, and other forms of human capital investment. The Study of Human Capital The study of human capital has long been the province of the economics discipline. Sweetland (1996) explains that the economist's interest in human capital investment (HCI) stems from the fact that a significant fraction of national economic growth could not be explained by conventional economic models. To address that problem, researchers from various economic subfields-labor economics, public finance, welfare economics, growth theory, and development economics--designed a theory of human capital as well as econometric models to measure it. Five Nobel laureates from economics (Theodore Shultz, Gary Becker, Milton Friedman, Simon Kuznets, and Robert Solow) are credited with conceiving human capital theory. Based on their construct, empirical analyses of the subject have proceeded in three directions: production function, human capital formation, and measures of the returns to schooling. The last has also received attention from other disciplines including sociology, psychology, political science, planning, human-resource development, and business administration. Despite the broad academic interest in this aspect of human capital investment, most essays tend to focus on the quantitative: i.e., costbenefit analysis (Raymond and Sesonowitz 1975; Hansen 1963; Koster 1990; Bluestone 1990). Few studies have considered human capital investment in the context of urban revitalization or have investigated the program- and policy-oriented impacts of a human capital investment strategy. In the following pages, we give an overview of (I) the work on returns to schooling, (2) the impacts of economic restructuring, (3) the state of urban poverty, and (4) federal programs. Returns to Schooling

Becker (1993: 17) asserts that "Education and training are the most important investments in human capital." His analysis indicates a positive correlation

4

Human Capital Investment

between years of education and income. The more years of education or training a person has-that is, educational attainment-the higher that person's annual income tends to be. Educational attainment represents ability, motivation, and socioeconomic status (Raymond and Sesonowitz 1975). Most studies which measure returns to schooling apply a cost-benefit model. Costs are defined as the amount of money lost by going to school, school related expenses, and other resource costs. Benefits are defined as the average income of an individual per age and years of schooling. Hansen (1963) found-based on his study of the educational attainment of white males in 1949-that the rate of return (increase in income) on investment (cost of schooling per year) has consistently increased. The annual income of a white male with only an elementary education was nearly nine percent greater than the white male who did not complete his elementary education. And a college graduate earned nearly 16 percent more than a man without an elementary education. The importance of an education-as it relates to economic well-beinghas been inculcated into the American psyche since the 1950s. Bluestone (1990: 304) stated, "An individual's education helps to determine that individual's relative but not absolute position in the labor market (wage) queue." Koster (1990) discovered that, in the 1980s, the income gap among high school graduates, college graduates, and professionals was wider than it had been at any time in American history. Peterson and Vroman (1992) found that college-educated workers and those with post graduate studies along with some job experience enjoyed rising incomes (in real terms) while workers with a high school education or less suffered a drop in earnings. Berman, Bound, and Griliches (1994) examined changes in the demand for skilled labor in the manufacturing industry. As investment in research and development and in computer technology has increased, blue-collar jobs (particularly unskilled labor) have declined: the share of blue-collar occupations fell from 71.4 percent in 1973 to 62.8 percent in 1987. Operators-who are usually unskilled-comprised 62.3 percent of all blue-collar occupations in 1973; fourteen years later, operators comprised 57.6 percent of all blue-collar occupations. Berman and his colleagues (1994) also found that the number of white-collar jobs in the manufacturing industry had grown 8 percentage points between 1973 and 1987, from a 29 percent share to 37 percent.

Impact of Restructuring The decline in blue-collar jobs and the concomitant relative fall in the wages of moderate- and low-income families is usually explained in terms of global and national economic restructuring (Harrison and Bluestone 1988). A February 1989 issue of the Pittsburgh Post-Gazette, for example, dramatizes the impact of restructuring: lim Bates earned $37,000 per year at USX Corporation

Robert W Becker and Robert A. Collins

5

until 1985 when he was laid off. Since then, he has worked as a medicalwaste handler at West Penn Hospital where he earns $13,500 per year. By transferring from a manufacturing industry to a service industry, his income declined a staggering 63.0 percent. Earnings in the service industry seem tied to education. The starting salary for an entry-level personal service worker, in 1995 for example, was $8,382 per year. The mean annual salary for a sales or clerical worker was $20,472 ($10.66/hr); for technical workers, the mean annual salary was $26,784 ($13.95/hr); and for managerial and professional workers it was $34,104 per year ($ 17.76/hr) (Census Report 1995). Unless an individual held a white-collar job or was a skilled tradesman in the manufacturing industry, or was a technical or professional worker in the service industry, that person was unlikely to benefit from the country's burgeoning economic expansion of the 1990s. Thus, it would appear that a large segment of the popUlation has been left behind. While some of these people are no better off now than they were before the economic expansion, a great many are worse off. Studies by Nord and Sheets (1992), Sassen (1989), and Wilson (1987) indicate an ever-widening gap between the haves and the have-nots. The have-nots tend to cluster in the urban core. These have-nots include the working but poor, recent immigrants, and the underclass. Nord and Sheets (1992) surveyed labor market hardship rates among 100 large metropolitan areas. Labor market hardship is the inability of workers to exceed poverty level earnings through their jobs. The authors measured labor market hardship by industry category by earnings. They found that 20 percent of manufacturing industry employment, 50 percent of advanced corporate services (ACS) employment, and 65 percent of consumer service industry employment were low-wage. Their analysis also revealed that 66 percent of all female employment in all types of service industries (social service, consumer service, distributive service, and ACS) was low wage. The data further show that African-Americans and Hispanics comprised a significant share of the low wage service industry labor market. Another group that did not benefit from the thriving economy was the underclass. Wilson (1987) has defined the underc1ass as a group of individuals who lack training and skills; experience long-term unemployment or are not members of the labor force; contain members who engage in street crime and other forms of aberrant behavior; and whose families experience long term spells of poverty and/or welfare dependency. The fact that individuals who are working but poor or who are members of the underclass did not capitalize on the economic upturn is not due to the lack of opportunity but is due to the lack of preparation. Central city residentsmany of whom make-up society's have-nots-remain unprepared because of poverty and its associated stigma.

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Urban Poverty

According to the 1990 U.S. census, 14.8 percent (33.6 million) of all individual Americans had incomes that placed them below the official poverty line. Of those, 42.6 percent (14.3 million) lived in central cities: about one in five central city residents was poor (O'Sullivan 1993). A recent study by the U.S. Department of Housing and Urban Development (1999) indicated that, despite the economic gains experienced in the United States since 1993, one out of every three central cities had poverty rates of 20 percent or higher: for example, 34 percent of the population in New Orleans lived in poverty; 43 percent in Miami; 33 percent in Detroit; 30 percent in St. Louis; 24 percent in Philadelphia; and 20 percent in the District of Columbia (U.S. HUD 1999). Older central cities also suffer from long-run population outmigration and relatively higher unemployment. As middle- and upper-income households leave the central city, the city's tax base contracts. Because the local government has fewer fiscal resources, it cannot meet all the demands of the remaining central city residents (many of whom are poor and elderly) and of central city businesses. To recover lost revenue, the local government increases taxes on landlords and other business owners but neglects needed infrastructure improvements. This leads to business closings and relocations and to financial disinvestment. These actions-i.e., heavy taxation and loss of business-further erode the central city tax base (Swanstrom 1996). Central city decline, however, marks not only the loss of economic assets but also the loss of human and social capital. Any historical survey of census data will reveal that some pockets of poverty have persisted for generations. In the case of the central city, pockets of extreme poverty are referred to as ghettos. Today's ghetto neighborhoods are populated almost exclusively by the most disadvantaged segments of the black urban community. These residents live outside the American occupational and social system; they reinforce and perpetuate a conduct of behavior that opposes the norms held by mainstream society. Because of this disconnect between ghetto life and society, many who live in the ghetto but seek jobs outside the area are seen as being unemployable (Wilson 1987; Jargowsky 1997). This pattern affects the hopes and dreams of those individuals who live in the ghetto, and leads them to develop harmful behavior and addictions. How then to break the cycle of poverty? Jargowsky (1997: 200) contends that investments in education and training must be the first priority: without progress in educating inner-city children, it is certain that many of them will fare poorly in the increasingly technological marketplace-in effect, creating the next generation of ghetto and barrio residents. More generally, programs and policies that combat addictions, that encourage school completion and responsible parenting, that educate people about the labor market, and that build self esteem need to be

Robert W Becker and Robert A. Collins

7

instituted. Such initiatives would reduce the influence of destructive patterns developed through cultural conditioning earlier in life (Wilson 1987). Swanstrom and Wright, however, caution that: Investing in individual human capital is a necessary but not sufficient condition for stopping the polarization of wages and providing the basis for a middle-class opportunity society. To accomplish these goals, we need to place skilled workers within dense networks of social capital, producing dynamic clusters of regional prosperity (1996: 38). In other words, central city neighborhoods that are segregated by income need to transition toward mixed-income housing. The very presence of rniddle- and working-class families in neighborhoods previously confined to the lowincome population provides social stability and also reinforces patterns of behavior accepted by the general public (Wilson 1987). Limited education, a changing economic landscape, and poverty all hinder central city revitalization. These problems, we contend, may be surmounted through investment in human capital. Federal Initiatives

The federal government has launched a number of initiatives in this direction: empowerment zones, welfare-to-work, earned-income tax credit, community policing, HOPE VI, community learning centers, and the community-development financial institutions fund among others. However, there is evidence that few of these federal directives have been effective in either their implementation or execution. Neither federal welfare-to-work programs nor on-the-job training programs, for instance, have achieved their intended goals. Upgrading the education levels and job skills of persons receiving public assistance is clearly an important element of the human capital investment approach to urban revitalization. To address that challenge, the federal government placed the Job Opportunities and Basic Skills (JOBS) training program at the core of its 1988 welfare legislation, the Family Support Act. The Family Support Act represents a nationwide attempt on the part of the federal government to redress the chronic human capital deficiencies among welfare recipients. JOBS contributes to this effort by providing matching federal funds for states to create initiatives designed to prepare welfare recipients for the labor market and economic self-sufficiency. Unlike previous federal employment programs for welfare recipients, JOBS targets the most disadvantaged recipients of the Aid to Families With Dependent Children (AFDC) program. Government officials, however, have imposed policies that cut off benefits to recipients as soon as they find work, even if that job does not pay a

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Human Capital Investment

living wage. This sudden loss of benefits, Imbroscio and colleagues (1995) claim, is a major roadblock to economic self-sufficiency. Under current policy, recipients who find jobs are eligible for transition assistance in health and child care but not in housing or food assistance. In addition, eligible recipients may receive transition assistance for no more than two years. At present, these federal efforts (JOBS and temporary assistance) are simply punitive. In our view, corrective measures are threefold. First, temporary assistance should include housing and food assistance. Second, the time limit needs to be extended. Lastly, any assistance package must incorporate an education and training program. Blakely and Small (1997) maintain that most inner-city job training programs are misguided because they produce contradictory results: as job trainees successfully find work they tend to leave the inner-city, taking their money with them. This circumstance further deteriorates an already weak central city tax base. Thus, the answer is not to simply spend billions of federal and state dollars on inner-city schools and jobs programs. Rather, education and training should be considered as just part of a comprehensive strategy to rebuild inner-city communities and develop social capital. Reichert (1997: 191) suggests that the resources of government agencies, private businesses,local residents, and community-based organizations should be used to "raise the expectations of the people, forge bonds of community and trust, improve social justice and equity, and establish a sense of accountability and ownership within the community." It is our view that locally-based efforts supported through public-private partnerships may prove better. Our National Center colleagues explore four locally-based methods that, at least in the cases they studied, attempt to build community through human capital investment.

Organization of Book The objective of the chapters in this book is to demonstrate how and under which circumstances certain types of investment in human capital could generate favorable returns to society. Each chapter follows the same general outline: (a) literature review, (b) case study or empirical analysis, and (c) policy implications and recommendations. Margaret Dewar offers a site-specific evaluation of the federal Empowerment Zone program in chapter 2. Specifically, she examines the effectiveness of Detroit's Empowerment Zone to improve the economic well-being of zone residents. Overall, Professor Dewar finds that this federal initiative in this city promises more than it returns. Despite that conclusion, the author does highlight some positive aspects of the Empowerment Zone program. In chapter 3, "Building Coalitions, Building Communities: Initiatives for Urban Education," the authors show that scholastic achievement in the central

Robert W Becker and Robert A. Collins

9

city depends on building healthy communities and coalitions. Doherty, lones, and Stone outline the comprehensive and collaborative strategies which Baltimore and New Orleans have embraced. They relate the obstacles to raising the capacities of disadvantaged children. Next, the authors discuss the dynamics of public school systems: the problems in building the capacity of parents to interact with the system, and the problems within an educational bureaucracy resistant to change. They also offer recommendations for enhancing urban education given an environment of dwindling public resources. Washington and Whelan authored the chapter "Organizing Communities: The Case of Public Housing Developments." This research examines the efforts by public-housing residents in Kansas City and New Orleans to rebuild their communities. Through these case studies, Washington and Whelan claim that society at-large wrongly assumes that the poor and publichousing residents are passive wards of the state. This erroneous assumption has been perpetuated by a political regime that thwarts the empowerment of the poor and inhibits the effective delivery of services to them. In chapter 5, Alex Schwartz analyzes bank lending to minority households and in low-income neighborhoods. He begins this study by chronicling the evolution of the Community Reinvestment Act and the Home Mortgage Disclosure Act. Next, he describes the collection and organization of the largest database on bank lending agreements. Results from his statistical analysis of that database address the following questions: (I) Do the Community Reinvestment Act (CRA) and Home Mortgage Disclosure Act (HMDA) increase the chances for disadvantaged residents to own their homes, businesses, and other property? (2) Do community groups significantly enhance the quality of community-reinvestment agreements by being involved in their negotiation? It is clear that human capital investment must occur on many levels and involve a multitude of partners if significant advantage is to be taken of the nation's most important resource, its people. In the concluding chapter, Wagner, loder, Mumphrey, and Crust summarize the key findings of previous chapters. The authors thank the editors and M r. Louis Crust for their comments on earlier drafts of this chapter. Also a special acknowledgment to D,: Krishna Akundi for his input.

References Becker, G. (1975) Human Capital: A Theoretical and Empirical Analysis, New York: National Bureau of Economic Research. ___ (1993) Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (Third ed.). Chicago, IL: University of Chicago Press.

10

Human Capital Investment

Bennan, E., J. Bound, and Z. Griliches. (1994) "Changes in the demand for skilled labor within U.S. manufacturing: evidence from the Annual Survey of Manufactures." Quarterly Journal of Economics 109(2): 367-97. Blakely, E. and L. Small (1997) "Michael Porter: new gilder of ghettos," in T. Boston and C. Ross (ed) The Inner City: Urban Poverty and Economic Development in the Next Century. New Brunswick, NJ :Transaction Publishers, pp. 161-83. Bluestone, B. (1990) "The impact of schooling and industrial restructuring on recent trends in wage inequality in the United States," American Economic Review 80 (2): 303-07. Fainstein, S. and A. Markusen (1993) "The urban policy challenge: integrating across social and economic development policy," North Carolina Law Review 71(5): 1463-86. Hansen, W. (1963) "Total and private rates of return to investment in schooling," Journal of Political Economy 71: 128-40. Harrison, B. and B. Bluestone (1988) The Great U Turn: Corporate Restructuring and the Polarizing ofAmerica, New York: Basic Books Inc. Imbroscio, D., M. Orr, T. Ross, and C. Stone (1995) "Baltimore and the human investment challenge," in F. Wagner, T. Joder, and A. Mumphrey (eds) Urban Revitalization: Policies and Programs, Thousand Oaks, CA: Sage Publications, pp.38-68. Jargowsky, P. (1997) Poverty and Place: Ghettos, Barrios, and the American City, New York, NY: Russel Sage Foundation. Koster, M. (1990) "Schooling, work experience, and wage trends," American Economic Review 80(2): 308-12. Lucas, R. (1988) "On the mechanics of economic development," Journal of Monetary Economics 22(1): 3-39. Nord, S. and R. Sheets (1992) "Service industries and the working poor in major metropolitan areas," in E. Mills and J. McDonald (eds) Sources of Metropolitan Growth, New Brunswick: Rutgers, Center for Urban Policy Research. Peterson, G. and W. Vroman (1992) "Introduction: urban labor markets and economic opportunity," in G. Peterson and W. Vroman (eds) Urban Labor Markets and Job Opportunity, pp. 1-29, Washington, DC: The Urban Institute Press; Lanham, MD: Distributed by University Press of America. Rauch, J. (1993) "Productivity gains from geographic concentration of human capital: evidence from the cities," Journal of Urban Economics 34: 380-400.

Robert W. Becker and Robert A. Collins

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Raymond, R. and M. Sesnowitz (1975) "The returns to investment in higher education: some new evidence," Journal of Human Resources 10: 139-54. Reichert, U. (1997) "Revitalizing the inner city: a holistic approach," in T. Boston and C. Ross (eds) The Inner City: Urban Poverty and Economic Development in the Next Century, New Brunswick, NJ: Transaction Publishers, pp. 185-92. Rusk, D. (1993) Cities Without Suburbs, Washington, DC: Woodrow Wilson Center Press. Sassen, S. (1988) "The socio-spatial organization of the New York economy," in R. Beauregard (ed) Economic Restructuring and Political Response, Newbury Park: Sage Publications, pp. 69-114. Stegman, M. (1993) "National urban policy revisited," North Carolina Law Review 71(5): 1737-77. Swanstrom, T. and W. Wright (1996) "Rising U.S. income equality: a social capital approach," discussion paper, Rockefeller Institute of Government, State University of New York at Albany, Albany, NY. Sweetland, S. (1996) "Human capital theory: foundations of a field of inquiry," Review of Educational Research 66(3): 341-59. U.S. Department of Housing and Urban Development (1999) Now Is the Time: Places Left Behind in the New Economy, Washington, DC. Wagner, F., T. Joder, and A. Mumphrey (eds), (1995) Urban Revitalization: Policies and Programs, Thousand Oaks, CA: Sage Publications. Wilson, W. (1987) The Truly Disadvantaged: The Inner City, the Underclass, and Public Policy, Chicago: University of Chicago Press.

2

The Detroit Empowerment Zone's Effect on Economic Opportunity: Employers' Responses to the Zone's Programs and Incentives 1 MARGARET DEWAR

President Lyndon Johnson and his domestic policy staff introduced the Model Cities program in 1965. Model Cities was the first comprehensive federal commitment to the physical and social rehabilitation of central cities. In less than ten years, however, Model Cities was terminated. While it held great promise, the program delivered only modest gains to central city revitalization. Thirty years later, another Democratic president and his staff have put forward a comprehensive effort to revitalize the central city: Empowerment Zones. The key question to answer now and not a decade or two later is whether this new effort to develop unique, community-based comprehensive approaches can be made more successful than the nation's previous comprehensive effort, the Model Cities program of the 1960s. Furthermore, can the Empowerment Zone program be made more successful than isolated programs such as assistance to small business and targeted jobs tax credits? Following the termination of the Model Cities program, evaluative studies revealed the programmatic and administrative problems that plagued its existence. Thus, frequent performance monitoring and quality control of the Empowerment Zone (EZ) program is needed for both administration and policy making. The implementers of current Empowerment Zones need information that will allow them to institute mid-course corrections to make success more likely. As the fifteen new Empowerment Zones begin implementation, policy makers in Washington and EZ leaders in those fifteen cities need input on the strengths and weaknesses of the programs in order to assure better results. Context Empowerment Zones and Enterprise Communities are the major Clinton administration initiatives to revitalize especially depressed areas of central cities. The administration designated six urban Empowerment Zones (EZs) in December 1994. Each will receive $100 million in federal program funds over ten years (from 1995 through 2004) to implement efforts 12

13

Margaret Dewar Table 2.1. Cities with Empowerment Zones 1994 Atlanta Baltimore Chicago Detroit New York Philadelphia/Camden

Designated in 1998 Cleveland Los Angeles

1999 Boston Cumberland Co., NJ Cincinnati Columbia/Simter EI Paso Gary/East Chicago Knoxville Miami Minneapolis New Haven Norfolk/portsmouth Santa Ana SI. Louis/East SI. Louis Huntington.Ironton

Sources: U.S. Department of Housing and Urban Development 1998a; U.S. Department of Housing and Urban Development 1999a.

specified in a strategic plan. Sixty-six cities were designated as Enterprise Communities; these cities are eligible for $3 million in federal program funds. The administration's commitment to Empowerment Zones, however, remains strong. In early 1998, designated areas in two additional cities were upgraded from Enterprise Communities to Empowerment Zones. In January 1999, the administration named fifteen new urban Empowerment Zones (U.S. Department of Housing and Urban Development 1998a, 1999a). Cities with Empowerment Zones are listed in Table 2.1. Any evaluation of this program demands answers to at least these three underlying questions: 1.

Does "empowerment"-the effort to augment people's skills and autonomy through involvement in planning and decision-makinglead to a reduction in poverty and an improvement in neighborhood conditions? 2. Does job creation have any connection to poverty alleviation? 3. Can neighborhood development efforts serve as an anti-poverty program? The federal aim of Empowerment Zones and Enterprise Communities is to "empower American communities and their residents to create jobs and opportunity, take effective action to solve difficult and pressing economic, human, community and physical development challenges of today, and build for tomorrow" (Federal Register 1994). A major goal repeated often is

14

The Detroit Empowerment Zone's Effect on Economic Opportunity

"creating economic opportunity" (U.S. Department of Housing and Urban Development 1995; Clinton 1994). As stated in HUD's application guide: "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 .... Opportunities for entrepreneurial initiatives, small business expansion, and training for jobs that offer upward mobility" (U.S. Department of Housing and Urban Development 1994: 8). Although the EZ program has been compared to the comprehensive approach taken by Model Cities to revitalize urban areas, the Department of Housing and Urban Development describes an Empowerment Zone as having a more narrow purpose: "to create jobs and business opportunities in the most economically distressed areas of inner cities" (U.S. Department of Housing and Urban Development I999b). This federal goal is to be achieved through an array of tax incentives for businesses to locate and expand in municipalities' empowerment zones and hire more EZ residents. Two of those incentives are described below: the Empowerment Zone Employment Credit and the Property Depreciation Deduction. The Empowerment Zone Employment Credit allows an employer to claim a tax credit of 20 percent on the first $15,000 of a qualified employee's earnings. A qualified employee is one who performed "substantially" all his work in the Zone in the employer's trade or business and had his or her main home in the Zone. A qualified EZ business could also deduct up to $37,500 of the cost of depreciable property. This deduction is applicable in lieu of the maximum standard deduction and cost recovery deductions. Thus, a business located in a city's EZ could claim up to $20,000 more in property depreciation deductions than those located elsewhere. In addition to tax credits and tax deductions, qualified EZ businesses could receive up to $3,000,000 in state and municipally issued tax-exempt bonds. To qualify for the property depreciation deduction or bond financing, a business had to meet the following criteria (U.S. Department of Treasury 1993, 1999; Empowerment Zones 1993; Taxpayer Relief 1997):2

l.

At least 35 percent of the business establishment's employees had to live in the Zone. 2. At least 80 percent of the establishment's total gross income had to come from activity in the Zone. 3. "Substantially" all use of tangible property had to be in the Zone. 4. "Substantially" all services had to be performed in the Zone.

Detroit Empowerment Zone Each city has wide discretion in designing the strategic plan for its Empowerment Zone as well as in specifying the area within the city to be

Margaret Dewar

15

included in the Empowerment Zone. Detroit's Empowerment Zone covers more than eighteen square miles-stretching from the city's far Eastside through the central area between downtown and Hamtramck, and through the southwest section of the city, nearly to the city's boundary (see Map I in the Appendix). Ten percent of the city's population is located inside the Empowerment Zone, about 101,000 persons. Indicators of economic hardship show that the EZ is a section of the city with extremely high poverty and unemployment rates and extremely low incomes. According to 1990 Census figures, 47 percent of EZ residents lived in poverty, compared to 32 percent of city residents. Also, 65 percent of children in the EZ lived in poverty, compared to 51 percent of the city's children. Twenty-nine percent of EZ residents were unemployed in 1990, compared with 20 percent of city residents. The median household income of EZ residents was slightly over half that of the city's median household income, and approximately one-fifth of the regional median household income. The age distribution of EZ residents was similar to that of the city as a whole, with a slightly higher percentage of elderly and a slightly lower percentage of child residents in the EZ. Sixty percent of Zone residents, according to the 1990 census, were African American, 21 percent were white, II percent were Hispanic (including all races), and 8 percent were from other racial/ethnic groups. For the city of Detroit as a whole, 73 percent of the population were African American, 21 percent white, 3 percent Hispanic, and 3 percent were from other racial/ethnic groups (Detroit 1994, "Introduction"). Detroit's strategic plan includes eighty programs that create economic opportunity, restore and upgrade neighborhoods, and sustain competent, healthy, safe families (Detroit 1994). Twenty-eight EZ programs, in particular, aid Detroit businesses in creating economic opportunity (see Table 2.2). Research Question

This research addresses the question: Do Empowerment Zones, at least in Detroit, affect economic opportunity? Specifically, we identify and explain the changes in employer behavior caused by the incentives and programs offered in the Zone.

What Do We Know about the Effects? Does this set of incentives and programs create economic opportunity for people who live in an Empowerment Zone? Creating economic opportunity as used here means generating more employment in the Empowerment Zone and connecting more Empowerment Zone residents to jobs than would have occurred without the federal program.

16

The Detroit Empowerment Zone's Effect on Economic Opportunity

Table 2.2. Detroit Empowerment Zone Programs to Create Economic Opportunity Program Description Benefit One Stop Capital Shop

Tank Automotive Research Development and Engineering Center Business Modernization Outreach Program

Central source of info. on financing, accounting/legal issues in business Bank holding company to offer residential and business loans Partnership of II Detroit area lending institutions Builds capacity of local organizations to strengthen neighborhoods Incubator for new businesses Helps existing businesses improve technology Trains employees, youth, business owners in use of technology Survey/data bank of Detroit businesses

Science and Technology Park

High tech business incubator

Metropolitan Center for High Technology Incubator Program Booker T. Washington Business Association

Technology-based business incubator

Community Development Bank Empowennent Zone Financial Institutions Consortium Neighborhood Commercial Development Management Corporation Midwest Manufacturing Technology Center

Model Urban Industrial Areas

Incubator for minority service-oriented businesses Urban industrial clusters

Property and Land Use Data Bank

Inventory of Cityowned properties

JOBnet

Clearinghouse to match employers with EZ employees

Infonnation/education

Financing Increased capital available to Detroit businesses Improve physical! economic business environment at local level Education, increased production/expansion capacity Education, increase pool of skilled workers Identify needs of Detroit businesses in modernizing Infonnation, proximity to other high tech businesses, good infrastructure Education, space, proximity to other high tech businesses Education, space, clerical support Improve physical, economic environment in which to conduct business Speed up land sales/facilitate expansions Access to employees and tax credits

Contil/ued

17

Margaret Dewar

Table 2.2. (Continued) Description

Benefit

World Trade Expansion Initiatives

Increase opportunities for international trade

International Transportation Hub

Increase opportunities for international trade Generally strengthen area Cultural amenities, musuems, etc. Partnership to create marketing materials for Detroit Job training programs for disabled Job training, services for disabled Also assists small businesses in complying with ADA requirements programs Marketing and events programming for Mexicantown area

Improve infrastructure, Facilitate access to international customers Improve infrastructure

Program

Cultural Industries Empowerment Zone Business Attraction Consortium Michigan Rehabilitation Services Great Lakes Center for Independent Living

Mexicantown Welcome and Retail Center

Industry Specific Training Manufacturing:

Focus: HOPE - Fast Track Machinst Training Focus: HOPE Partnership for Economic Independence Focus: HOPE IM2000

Increased customer base through Detroit image Increases the pool of skilled employees Education, Increases the pool of skilled employees

Improvement of area around Ambassador Bridge, tourist attraction; increase customer base Increase the pool of skilled employees in the manufacturing fields

Training in manufacturing technology Entry level manufacturing training Training/jobs in mill operations

Health Care: JTPA New Beginnings PEl

Increase tourism, customer base

Increase the pool of skilled employees in the health care fields Training for prospective nurses, physicians, lab techs, etc. Continued

18

The Detroit Empowerment Zone's Effect 011 Economic Opportunity

Table 2.2. (Continued) Program Construction:

Description

YouthBuild Detroit (PEl) YouthBuild Detroit (City) "Green Industries":

Offers training in the construction trades

Youth Fair ChanceLandscape Training Program Entrepreneurs Training

Offers training in landscape - incubates landscape companies Offers entrepreneurial training

Multicultural and Multigenerational Training

Job training programs

Benefit Increase the pool of skilled employees in construction fields Increases the pool of skilled employees in landscaping and the supply of landscape service providers

Increases the pool of skilled employees, suppliers Increases the pool of skilled employees

Source: J umpstarting 1994.

At the present time, no direct evidence on the success or failure of the Empowerment ZonelEnterprise Communities program is available. A Department of Housing and Urban Development (HUD) evaluation of the program, however, is underway. In the meantime, anecdotal reports and fragmentary data appear favorable. For instance, in mid-1998 HUD Secretary Andrew Cuomo claimed 20,000 new jobs were created in all program cities and $4 billion in new private investment was generated. Since no detailed analysis exists, one could attribute the job and investment growth to the EZ rather than to other influences (U.S. Department of Housing and Urban Development 1999a, 1997). The General Accounting Office conducted a national survey of 2400 EZ businesses. The survey examined a business establishment's use of tax credits. Results from that study indicate that 42 percent of large urban businesses (having fifty or more employees) and 6 percent of small urban businesses (having less than fifty employees) had used the employment credit. The majority who used the credit reported that it was "somewhat important" in their decision to hire EZ residents. About 9 percent of large urban businesses used the increased expensing deduction; about 4 percent of small businesses did so. Very few businesses used the tax-exempt bonds or the other credits available to businesses in distressed communities (U.S. General Accounting Office 1999). Although the study reported the use of incentives, it did not demonstrate whether the incentives caused new economic opportunity for EZ

Margaret Dewar

19

residents-thus, businesses may have been doing what they would have done without the subsidies. Studies of urban labor markets and evaluations of older subsidy and incentive programs may offer some insight as to what effect the EZ program might have on economic opportunity. In general, these studies suggest that such a program designed to create economic opportunity for the urban poor will not be effective. This is because even if more jobs exist, EZ residents will not get them. Central city residents lack the skills needed for most new jobs in the economy (Holzer 1996). A large percentage of adults in poverty have not held jobs for more than a short time; they are not "job ready" and do not possess the habits which may enable them to get and keep jobs (Pavetti 1996). The jobs that match their skills best-those in consumer services and retailexist far from their residences in areas of higher income (Holzer 1991). Moreover, urban residents face racial discrimination (Turner, Fix, and Struyk 1991). Thus, Empowerment Zone programs are insignificant interventions that cannot overcome current labor market conditions. Program evaluations of tax incentives and tax credits-measures also included in the EZs-indicate that tax policies are rarely effective in generating economic activity that would not have existed anyway or in leading to employment of people in low-income neighborhoods. Tax incentives aimed at changing investment and location decisions are ineffective except in influencing choices between nearly identical and proximate locations (Dewar 1990). Further, the targeted jobs tax credit is "perhaps the most outstanding example of an entitlement program with extremely low participation rates despite a very generous subsidy offer" (Bishop and Kang 1991). Many aspects of the EZ legislation do not make sense conceptually. For instance, if the goal is to encourage employment of EZ residents, subsidies to businesses should not be restricted to jobs in the Empowerment Zone. Workers rarely have jobs in their neighborhoods and working near home is not necessarily beneficial (Immergluck 1996; Gottlieb 1997; Bums and Gober 1998). Employers need not hire unemployed Zone residents to qualify for credits, so some employment credits may be paid to businesses for bidding residents away from other businesses (Lehman 1994). Incentives for economic development may improve the welfare of some people but may also make others worse off (Ladd 1994). In contrast to these arguments, scholars who have examined neighborhood job networks in central cities contend that Empowerment Zones can create economic opportunity. Programs that build job skills, improve access to job networks, and counter discrimination have shown some signs of success (Immergluck and Hilton 1996). Community-based programs that involve networks of employers and programs for job-training and support of workers have shown results (Weiss and Harrison 1996). Locallabor markets do exist because word-of-mouth referrals are important in hiring (Theodore

20

The Detroit Empowerment Zone's Effect on Economic Opportunity

and Carlson 1996; Hansen and Pratt 1992). Therefore, local labor markets could be exploited; to improve the economic opportunities for EZ residents. However, these promising directions do not need to involve the subsidies to employers that the Empowerment Zone provides. Optimistic early numbers and cautionary research findings have not yet answered the question of whether and why Empowerment Zones create economic opportunity. Six years after the Empowerment Zone program was initiated, conclusions-based on direct evidence from the first six program cities-should be possible.

Research Design This study examines only one aspect of creating economic opportunity: the effects of EZ incentives and programs on employers' behavior. Clearly, determining effects is not enough to conclude that the EZ created economic opportunity. A holistic study requires (1) a household panel survey to track the employment experiences of Zone residents and comparable other individuals, and (2) a specific analysis of each program offered within the EZ. In this study, however, the author addresses a narrow question: Do EZs affect an employer's decisions and thus create economic opportunity? Three sites within the Detroit Empowerment Zone were selected to learn how those areas were changing and how the employers in those three areas were responding to the Empowerment Zone. 3 "Place" is an important unit of analysis because Empowerment Zones aim to create economic opportunity not through overall incentives or programs but through efforts that target specific, distressed places. Study sites were selected based on the following three criteria: 1. The selected sites needed to be recognized as distinct business districts (i.e., as either industrial or retail areas) within the city that could experience change. 2. The business districts needed to cross Zone boundaries. In other words some section of the district had to lie inside the Empowerment Zone and the remainder had to lie outside the Zone. This allowed us to compare and contrast similar areas and thus tell if EZ incentives were responsible for causing change. 3. A business association, community development corporation, or other organization had to be active in the area, working to strengthen that area and promoting the use of EZ programs. Researchers first catalogued and assessed the physical condition and extent of activity in all industrial and retail areas within Detroit's Empowerment Zone. 4 Next, we asked leaders of community-based organizations and business

21

Margaret Dewar

Table 2.3. Total Number of Employees and Percent Interviewed by Site and Industry Site and Industry Islandview Construction Manufacturing Wholesale Retail Services Total Vernor-Junction Manufacturing Retail Finance Services Total Vernor·Springwells Construction Manufacturing Transportation Retail Finance Services Total

Number of Employees

Percent Interviewed

5 24 10 2 4 45

100.00 66.70 50.00 50.00 100.00 68.90

2 38 2 13 55

100.00 68.40 50.00 53.80 65.40

2 2 I 42 2 35 84

100.00 100.00 100.00 71.40 100.00 54.30 65.50

associations to review and advise us on our identification and selection of business districts, employer questionnaire, and count of district establishments. The three sites selected for study were the Islandview industrial district, the Vernor-Junction City retail district and the Vemor-Springwells retail district. All employers-private, public, and non-profit-in each of the study districts were targeted for interview. There was a total of 184 employers. However, some employers refused to participate and others could not be found. Therefore, only 66 percent of all employers completed interviews. Because the total population is small to begin with and an even smaller number completed interviews, the study's results may give a biased representation of employer behavior. Table 2.3 shows that the percentage of employers interviewed by industry varies widely, from 50 to 100 percent. Over an eight month period, March to October 1998, 122 face-to-face interviews were conducted with either the owner or manager of a business establishment. Interviews focused on three points: business operation, workers and type of positions held, and employment policies.

Findings This study reports findings from three case study sites. One is an industrial area, Islandview, on the east side of the city (see Map 1). More than one thousand

22

The Detroit Empowerment Zone's Effect on Economic Opportunity

people work in the area at approximately forty-five businesses as well as at nonprofit and governmental organizations. In 1998 slightly more than half of the employers were manufacturers; nearly one-quarter were wholesalers; slightly more than one-tenth were in construction; 9 percent were in services; and 4 percent were in retail. Ten percent were nonprofit organizations, schools, or public offices. Nearly 70 percent of the employers in the industrial district were interviewed for this study, and nearly 60 percent of those interviewed were located in the Empowerment Zone section of the district. Neighborhoods immediately surrounding the district have suffered substantial residential abandonment; the poverty rate was about 40 percent in 1989 and probably remains high (U.S. Bureau of the Census 1993). Several active community-based organizations are committed to strengthening the neighborhood and building new housing. One of these worked to establish and staff the Islandview Village Industrial Association and to designate the area of the industrial district within the EZ as a Model Urban Industrial Area. Another Eastside nonprofit that is committed to strengthening industry in its area has developed a plan for the Islandview district to be an "in-place industrial park." The other two study sites are similar retail districts in Southwest Detroit. The Vernor/Junction site to the east is inside the Zone, and the Vernor/Springwells site to the west is outside the Zone (see Map I). About eighty-four establishments operate in Vernor/Springwells and about fifty-five in Vernor/Junction (see Table 2.3). Close to six hundred people work in Vernor/Springwells, and somewhat over four hundred work in Vernor/Junction. In 1998 in Vernor/Spring wells, half the establishments were in retail and 40 percent were in services. Construction, manufacturing, transportation, and finance accounted for a total of 8 percent of the employers. Between 15 and 20 percent of the employers were nonprofits or government offices (nonprofits fell into industrial categories of services and transportation). In Vernor/Junction nearly 70 percent of the establishments were in retail and nearly one fourth were services. Manufacturing and finance also constituted small numbers in this district. Only one employer, a parochial school, was a nonprofit organization. About two-thirds of the employers were interviewed in each retail district. The residential neighborhoods around the districts had low rates of housing abandonment and housed a low-income population. In 1989 the poverty rate in the area around Vernor/Junction was about 45 percent; in the area around Vernor/Springwells it was slightly over 30 percent (U.S. Bureau of the Census 1993). A very active business association was working to strengthen the retail areas which were already the healthiest retail districts in low-income areas of the city.

Results in the Industrial District In Islandview, only one employer of eighteen in the Empowerment Zone portion of the district had used the employment credit in the first three years of

Margaret Dewar

23

the EZ; none had used the increased deduction of the cost of depreciable property or the bond financing. The same employer who used the employment credit had considered using the increased expensing deduction, the work opportunity tax credit (offering credits for certain types of people), and the One-Stop Capital Shop (one of the EZ programs). An additional three employers had considered using the employment credit but had not done so. When asked about location and investment decisions two of the eighteen employers in the Zone mentioned that the EZ affected their location decisions. None mentioned the Zone as a factor in investment and expansion decisions. Why had employers not used the benefits the EZ offered? Nearly 40 percent of the employers said the incentives had no value to them. Slightly more than half stated that getting information and filling out forms were too timeconsuming. Other reasons were also apparent. Only two employers clearly met the criteria for a "qualified business" (see discussion of eligibility above) and were eligible to use the larger deduction of the cost of depreciable property and to receive bond financing. About two-thirds of the employers in the EZ had made investments that would have enabled them to benefit from the increased deduction for depreciable property if they had qualified. Two employers in the Zone were nonprofit organizations or governmental organizations and therefore would not use tax incentives. All for-profit employers in the Zone were eligible for the employment credit, but only about one-third of the employers in the Zone stated that they employed any Zone residents. Some employers could have found the workopportunity tax credit, which encouraged employment of certain types of workers who were often hard to employ, more attractive than the Empowerment Zone employment credit because the work-opportunity credit was not lost if a worker moved out of the Zone (U.S. Department of the Treasury 1999). However, none of the Is1andview employers in the Zone had used the work-opportunity tax credit although two had considered doing so. Table 2.4 compares the behavior of employers inside and outside the Zone within the Islandview district. If the EZ had a strong effect on employer behavior, the indicators should be higher for employers in the Zone than for those outside it, with the exception that the percentage of employers decreasing employment should be lower in the Zone. Instead, the numbers show a mix of stronger performance outside the Zone and stronger performance inside the Zone. Although two new employers had located in the Zone and none had located in the area outside the Zone, the employers outside the Zone were more likely than those in the Zone to have made new investments, acquired land or buildings, and increased employment. However, employers in the EZ expanded employment at a considerably faster rate than those outside the EZ.

24

The Detroit Empowerment Zone's Effect on Economic Opportullity

Table 2.4. Employers' Activities, 1995-98 In Zone Study Site and Activity

Number of Employers

Number of Employers

Percent of Employers

2 10 2 7 3

11.1 55.6 11.1 38.9 16.7

0 9 4 7 2

0.0 69.2 30.8 53.8 15.4

10

27.8 55.6 16.7 44.4 16.7

23 36 7 28 6

41.1 64.3 12.5 50.0 10.7

Number of Jobs

Percent of 1995 Jobs

Number of Jobs

Percent of 1995 Jobs

+67

27.9

39

7.3

121

35.0

Islandview Located in the area Made new investments Acquired land/bldgs. Increased employment Decreased employment Vernor areas Located in the area Made new investments Acquired land/bldgs. Increased employment Decreased employment

Islandview Change in employment Vernor areas Change in employment

Outside Zone

Percent of Employers

20 6 16 6

+47.5

15

Source: Interviews with employers.

Results in the Retail District In Vernor/Junction one employer used the increased deduction for the cost of depreciable property and the One-Stop Capital Shop. The same employer considered using the employment credit. An additional six employers considered using EZ benefits but had not done so. Six considered the employment credit; two considered the increased deduction for depreciable property and the use of bonds. Four employers considered using the work-opportunity tax credit. Several considered using Detroit EZ programs. Why had employers not used the EZ benefits? Eighty-five percent of the employers said they did not know about the benefits and the programs. Indeed, 40 percent of the owners and managers interviewed had arrived in the area after the EZ began, and nearly 30 percent of the businesses had opened in Vernor/Junction after the EZ began. Unless regular EZ publicity educated new owners and managers about the benefits of the Zone. they would not necessarily know about them. Nine percent of the employers said they believed they were not eligible. but all businesses except those employing family members or selling alcohol for consumption off the premises were eligible for the employment credit (U.S. Department of the Treasury 1999). Based on other information that the employers provided. about half were probably eligible for

Margaret Dewar

25

the increased deduction of depreciable property and for the use of bonds. Of these, about two-thirds of the employers had made the kinds of investments that could allow them to benefit from the increased deduction. About 11 percent said they did not need the programs and benefits. Six percent believed that the programs and benefits were only for large businesses, although they are not. One employer cited problems in dealing with the city and the EZ. Lack of knowledge about the benefits and incorrect assumptions about eligibility go a considerable way towards explaining the lack of use of the benefits and programs. Other issues were also important, however. For one, at least some of the businesses operated with very low profits or were losing money and had no income from which to take deductions to reduce taxes. For another, small businesses may be reluctant to take advantage of tax breaks that could invite the Internal Revenue Service to investigate their books or that could call the attention of immigration authorities. One of the establishments in Vernor/Junction was a nonprofit organization that could not use the tax credits. The programs and benefits were not necessarily appropriate for the needs of the type of businesses in the area. The interest rate on bond financing reflects the riskiness of the business that backs the issue. Bonds for small, independent retail stores such as many in Vernor/Junction would be high-risk unless the city backed the bonds. The work-opportunity tax credit could be more attractive to employers than the EZ employment credit, although no employers said they had used the work-opportunity tax credit. In Vernor/Springwells, outside the Empowerment Zone, nearly one-quarter of the employers said the EZ had affected their organization or business. However, they cited effects that were not due to the EZ: greater economic growth in a period of regional economic prosperity, for instance, and the city's repair of roads. Some pointed to increased efforts against crime and to the demolition of abandoned buildings. Two had used the One-Stop Capital Shop. Table 2.4 compares Vernor/Junction and Vernor/Springwells employer behavior in activities that the EZ seeks to encourage. Employers outside the EZ were more likely than those in the EZ to locate in the area, make new investments, and increase employment. Employers in the EZ were slightly more likely to acquire land and buildings; they were also more likely to decrease employment. Employment increased 35 percent in Vernor/Springwells, outside the Zone, and only 15 percent in Vernor/Junction, inside the Zone. No manager or owner in either Vernor/Junction or VernorlSpringwells cited the Empowerment Zone as a reason for their choice of location or decision to expand or to hire certain employees.

Connections between Employers and Residents Although the EZ incentives sought to encourage decisions to locate in the Zone, make new investments, expand, and employ Zone residents, the key

26

The Detroit Empowerment Zone's Effect 011 Economic Opportunity

connection between Zone employers and residents was through jobs. If businesses located and expanded in the area but did not hire Zone residents, the creation of economic opportunity for Zone residents would be indirect and uncertain. Despite their not using EZ credits, were employers creating economic opportunity for Zone residents or for other low-income residents of nearby neighborhoods through jobs? In the Islandview industrial district, the answer is usually no. In the Vernor/Junction and Vernor/Springwells retail districts the answer is yes. Maps 2, 3, and 4 (in the Appendix) show the distribution of workers' residences by zip code for the three districts. About one-quarter of Islandview workers live on the east side of Detroit, but very few live in the area near the industrial district. In contrast, more than half the employees in the Vernor districts live in the same zip code as the retail areas. Employers in Islandview reported that between 15 and 20 percent of employees lived within two miles of their businesses and 9 percent lived in the EZ. In Vernor Junction and Vernor/Springwells, 56 percent of employees lived within two miles of the businesses, and employers in Vernor/Junction estimated that 60 percent of their employees lived in the EZ. Another indication of the connection to the local area is the racial and ethnic mix of employees compared to that of the residential neighborhoods surrounding the districts. The Vernor areas' employment reflected the surrounding neighborhoods' racial and ethnic mix more than did the Islandview district. In Islandview, located near neighborhoods where more than 90 percent of the residents were African American (U.S. Bureau of the Census 1993), about 43 percent of employees were African American, with the majority of these employed in two businesses. One-quarter of the employers reported that they had no African-American workers. The residents of the areas around Vernor/Junction were almost 45 percent Latino and slightly over 9 percent African American. In the area around Vernor/Spring wells, nearly 30 percent of the population were Latino, and only 2 percent were African American (U.S. Bureau of the Census 1993). A neighborhood with a large number of immigrants from the Middle East was located near Vernor/Springwells, just over the city border in Dearborn. In Vernor/Junction and Vernor/Spring wells, 36 percent of the employees were Latino, 31 percent were white and not Latino, 19 percent were African American, and 7 percent were Arab. To learn more about the connections between employers and local workers, the employers were asked about the entry-level position filled most often in the business or organization. An entry-level job was defined as one that could be filled by someone with very little work experience or specific training. The entry-level jobs were of interest because many residents in low-income neighborhoods, such as those in the EZ, might be able to fill such positions.

Margaret Dewar

27

In the Islandview industrial district nearly three-quarters of the employers said they had at least one entry-level position. In the previous year nearly 60 percent of the employers had hired people for entry-level positions; 18 employers had hired 192 workers in entry-level positions during the previous year. Although the average starting wage for the most commonly filled positions was not high, between $7 and $8, half of these employers paid entry-level workers more than $8 per hour. The positions were nearly always permanent and full-time, and offered benefits. One-third of the employers who hired entry-level workers said that workers were more likely to leave the positions through promotion than through quitting or being fired. In other words, quite a few jobs in the district could have fit Islandview's less-skilled workers, and these would often have been good jobs with pay above the minimum wage, benefits, and promotion possibilities. In the Vernor retail districts, 63 percent of the employers said they had at least one entry-level position. Others had positions that fit the definition of entry level, but the positions were open only to family members. In the previous year these employers had hired 189 workers for entry-level positions. The average starting wage for the most commonly filled entry-level positions was about $5.90, lower than in Islandview. This was because more jobs paid the minimum wage and because many positions were in restaurants where workers earned tips to compensate for a lower minimum wage. Nearly 83 percent of the most commonly filled entry-level jobs were permanent, but only 36 percent were full time. Only one-third of the positions offered fringe benefits; of these, 85 percent included medical coverage among the benefits. Employers stated that in nearly one-quarter of the jobs, workers were promoted more often than they quit or were fired. On every measure, the averages in the Vernor areas described jobs that were not as good as the ones in the Islandview district. Why did so few residents of nearby neighborhoods hold these jobs in Islandview and so many hold them in the Vernor areas? Methods of hiring, the requirements and screening for the jobs, and the employers' views of workers from the nearby neighborhoods help explain the nature of the connection between residents and employers.

Hiring Entry-Level Workers Table 2.5 summarizes the ways in which employers recruited entry-level workers. In all of the districts, employers relied most heavily on word of mouth to find workers. They depended most on their workers' knowing friends and family who could fill the positions. Because workers did not live in the Islandview area and were predominately white, neighborhood workers were not part of the word-of-mouth network that could alert them to job openings. In the Vernor areas, the many workers from nearby neighborhoods could recruit others to the job openings. In addition, customers, who came

28

The Detroit Empowerment Zone's Effect on Economic Opportuility

Table 2.5. Methods Employers Used to Recruit Entry-Level Employees Vernor Areas n = 58 Islandview n = 22 Methods Number of Percent of Number of Percent of Employers Employers Employers Employers of Recruiting Word of mouth Employees' friends, family Customers' friends, family Owners' friends, family Walk-in applications Temp agency Public employment agency Internal posting Company human resources dept. Newspaper ads Similar companies Internet ads Contact local organizations: churches, schools, etc. Radio ads Union procedures

21 15 2 6 9 7

95.5 71.4 9.5 28.6 40.9 31.8

52 27 15 16 34 I

89.7 51.9 28.8 30.8 58.6 1.7

4 3

18.2 13.6

1 2

1.7 3.4

I 3 1 1

4.5 13.6 4.5 4.5

4 7 0 0

6.9 12.1 0.0 0.0

9.1

9 I 0

15.5 1.7 0.0

0 0 2

Source: Interviews with employers.

largely from the neighborhood, were also a source of job referrals. Owners and managers had ties to the neighborhood and their connections also reinforced the neighborhood labor market. Vernor area employers were more active in all types of recruitment of workers that made connections with local residents. A substantially larger percentage of Vernor employers than Islandview ones recruited workers through walk-in applications and help-wanted signs in their windows. Walkin applications in neighborhood-oriented retail areas like the Vernor districts further reinforce a neighborhood labor market. Vernor businesses' recruitment of workers through local churches, schools, and other organizations helped them hire local workers. Other recruitment methods had no necessary connection with neighborhood workers. Postings in the company, use of company human-resource departments, contacts with similar companies, and union-determined hiring could exclude people not already well-connected with these types of businesses. Temporary help agencies had no particular association with the neighborhood residents. The use of newspaper ads, a public employment agency, and radio ads publicized job openings widely and could allow residents of the Islandview neighborhood to learn about openings. However, less than 15 percent of the employers in either district used newspaper advertising.

29

Margaret Dewar

The word-of-mouth system of worker referrals for job openings is a major explanation for the strong connections between local workers and local jobs in the Vernor districts and the weak connections in the Islandview area. This also reinforced racial and ethnic separation in the workplace. In the Vernor districts. about two-thirds of the employees worked with an owner or manager of the same ethnic or racial group. In Islandview. African American managers and owners supervised a workforce that was more than three-fifths African American. White managers and owners oversaw a workforce that was two-fifths African American. Finding ways for some EZ residents to find jobs at businesses in industrial districts is critical to begin the formation of a word-of-mouth job network in EZ neighborhoods and among different ethnic and racial groups.

Qualifications/or Entry-Level Jobs Tables 2.6 and 2.7 show the requirements that applicants needed to meet for entry-level positions in Islandview and the Vernor districts. Employers in Islandview were more likely to require literacy. numeracy. and work experience of any type as well as in similar businesses and positions. The Islandview jobs Table 2.6. Required and Desired Qualifications in Entry-Level Hires in Islandview Organizations Required Qualifications

Desired

Number of Percent of Number of Percent of Employers Employers Employers Employers

Literacy Numeracy High school diploma Specific work experience Training General work experience Ability to follow instructions Physical strength Manual dexterity Other physical characteristics Sobriety Work ethic Good attendance. punctuality Communication skills Honesty Common sense Responsible Total employers Source: Interviews with employers.

11 7 I 5 2 2

4 2

50.0 31.8 4.5 22.7 9.1

9.1 13.6

22.7 36.4

1 2 22

27.3 13.6

9.1

5

I

3

18.2

3 8 8 4

6

36.4 18.2

4.5 4.5 9.1

3 2 3

22

13.6 9.1

13.6

30

The Detroit Empowerment Zone's Effect on Economic Opportunity

Table 2.7. Required and Desired Qualifications in Entry-Level Hires in Vernor Organizations Required Qualifications Literacy Numeracy High school diploma English proficiency Spanish proficiency Specific work experience Training General work experience Computer familiarity Physical strength Ability to follow instructions Work ethic Good attendance, punctuality Communication skills Honesty Positive attitude Appropriate appearance and cleanliness Polite Pleasant personality Intelligent, willing to learn Flexibility Total employers

Desired

Number of Percent of Number of Percent of Employers Employers Employers Employers 10 7 15 8 13 9 I 4 4 0

17.2 12.1 25.9 13.8 22.4 15.5 1.7 6.9 6.9 0.0

2 9 6 10 6 7

3.4 15.5 10.3 17.2 10.3 12.1

9 3 8 2 2 58

15.5 5.2 13.8 3.4 3.4

3 3 7 9

5.2 5.2 12.1 15.5

3 1

5.2 1.7

4

6.9

1 6 2

1.7 10.3 3.4

2 3 6 2

3.4 5.2 10.3 3.4

58

Source: Interviews with employers.

were more likely to require physical strength or manual dexterity. Islandview employers emphasized good work habits more than Vernor employers did. A higher percent of the Islandview employers said a work ethic, good attendance and punctuality, and communication skills were required. Vernor employers placed more emphasis on characteristics that affected the way workers interacted with customers-politeness, appropriate appearance and cleanliness, and a pleasant personality. Overall, the requirements were greater for a job in the Islandview district than in the Vernor areas and could have helped to exclude workers from the nearby neighborhoods. Tables 2.6 and 2.7 also show the characteristics that employers hoped to find in applicants, although employers did not require these. Employers in all districts looked for workers with job experience in similar kinds of work. Both groups of employers sought employees with good work attitudes. Tables 2.8 and 2.9 show the screening techniques that employers used in deciding whether to hire an applicant. About the same proportions of

31

Margaret Dewar

Table 2.8. Screening of Prospective Entry-Level Employees by Islandview Employers Screening Technique

Drug testing Physical exam References checked Driver's license required Criminal record checked No screening Number of employers

Number of Employers 10 9 9 3

2

6 21

Percent of Employers

47.6 42.9 42.9 14.3 9.5 28.6

Source: Interviews with employers.

Islandview and Vernor employers did screening. Islandview employers were more likely to use more than one type of screening device than were Vernor employers. Employers' Views about Neighborhood Workers

Employers were asked to rate the employment qualifications of the local workforce, consisting of the workers who lived within two miles of the establishment. Using a scale of I to 5 with I the least qualified and 5 the most qualified, Islandview employers gave local workers an average rating of 2.4. Only two employers rated workers 4 or 5. In the Vernor areas, employers gave workers an average rating of 3.4, with 31 employers rating workers 4 or 5. Tables 2.10 and 2.11 show the characteristics that employers said prevented hiring of neighborhood workers for positions in their organizations. Most Islandview employers reported difficulties with hiring workers from the neighborhood. Vernor area employers, who were much more likely to employ

Table 2.9. Screening of Prospective Entry-Level Employees by Vernor Employers Screening Technique

Drug testing Physical exam References checked Driver's license required Criminal record checked Company test Immigration status checked No screening Number of employers Source: Interviews with employers.

Number of Employers 10 2 24 3

12 2

I 15 58

Percent of Employers

17.2 3.4 41.4 5.2 20.7 3.4 1.7 25.9

32

The Detroit Empowerment Zone's Effect on Economic Opportunity

Table 2.10. Factors Interfering with Islandview Area Employers' Hiring Nearby Residents Number of Percent of Factor Employers Employers Poor work habits 7 29.2 Lack of skills, education, work experience Risk of thefts Drug/substance abuse Unwillingness to work Transportation/child care problems No car or no phone Family problems No license Nothing interferes Number of employers responding

II 1

45.8

2

8.3 20.8 16.7

5

4 1 1

1 3

24

4.2

4.2 4.2 4.2

12.5

Source: Interviews with employers.

residents of nearby neighborhoods, were also much more likely to say that nothing interfered with hiring. Applicants' lack of skills, education, and work experience were cited most often as problems in hiring neighborhood workers. Unwillingness to work, problems with attendance, and inappropriate behavior and appearance were cited as other reasons for not hiring residents of nearby neighborhoods.

Implications for Empowerment Zone Programs The findings from this study suggest that the Empowerment Zone incentives are ill-designed to achieve their goal of creating economic opportunity. They rarely affect employers' behavior. Even if they did affect investments, expansions, and location decisions, they would not necessarily have an impact on Zone residents' economic opportunity because the employers do not necessarily hire Zone residents. In the districts with better jobs (paying more, providing benefits, offering promotion possibilities) in manufacturing, construction, and wholesale, the connection between Zone residents and employers is weak. The connection is strong in districts with retail and consumer service jobs (offering lower pay, infrequent benefits, part-time work, and fewer promotion opportunities). The potential exists for strong connections between residents with little education and work experience and jobs in both industrial and retail districts; employers in both types of districts fill substantial numbers of entry-level jobs in a year. However, the major way of recruiting new workers for job openings is through word of mouth, especially among current workers. Other scholars have shown that workers' word-of-mouth job networks reinforce strong spatial relationships between neighborhoods and employers (Hanson and Pratt 1992).

33

Margaret Dewar

Table 2.11. Factors Interfering with Vernor Area Employers' Hiring Nearby Residents Factor No high school diploma English difficulty Spanish difficulty Lack of specific work experience Lack of training Lack of general work experience Inability to follow instructions Lack of work ethic Poor attendance, punctuality Dishonesty Inappropriate appearance and lack of cleanliness Impolite Difficult personality Undependable Lack of flexibility Nothing interferes Number of employers responding

Number of Employers

Percent of Employers

3 3 2

4.3 4.3 2.9

10 1

14.3 1.4 1.4

1

9

1.4 12.9

2 3

2.9 4.3

2

2.9 1.4 2.9 5.7 1.4 41.4

1

2

4 1

29 70

Source: Interviews with employers.

The creation of new connections with workers in neighborhoods where current workers do not live is unusual. Indeed, if a neighborhood resident finds a good job in one of the district's businesses, the worker may use his or her improved earnings to move out of the neighborhood. Further, other ways of recruiting workers in the industrial district do not give advantages to nearby residents, while other recruitment techniques in the retail district do. Key to enabling EZ residents to benefit from jobs in the Empowerment Zones is to create new connections for neighborhood residents with jobs in industrial districts. A community-based organization that works with employers could also serve as a word-of-mouth referral service to screen and recommend neighborhood residents for job openings in order to begin to establish a word-of-mouth network that would benefit local workers. Lack of education, little work experience, and inappropriate behavior on the job also interfere with the hiring of workers from nearby neighborhoods, even in entry-level positions in a period of low unemployment. The importance of institutions' work in aiding workers to overcome these shortcomings is clear. In addition, services that support workers on the job until they

34

The Detroit Empowerment Zone's Effect on Economic Opportunity

become acculturated to jobs are important. Some Detroit Empowerment Zone programs aimed to provide training and support on the job for Zone residents. The implicit assumptions underlying the EZ's incentives and many of its programs is that neighborhood workers hold nearby jobs and that incentives to employers, not necessarily large incentives, can encourage and reinforce these ties. Because these connections do not necessarily exist, a stronger focus of EZ efforts needs to be on ways to link neighborhood residents and nearby employers.

Islandview Site

Map 1. Location of Study Sites within the Detroit Empowennent Zone.

Prepared by Ihe City 0' DelrOlt Planntng Department

Map 1. Location of Study Sites within the Detroit Empowerment Zone

Vernor Sites

Sites

EZ Boundary

City Boundary

b:

Margare Dewar Appendix

36

The Detroit Empowerment Zone's Effect on Economic Opportunity

Oakland.

Macomb

*6.9% of Employees in Zip Code 48205

Wayne.

Detroit N

*Out of 506 Employees Total

20

o

20 Miles

Map 2. Distribution of Islandview Workers' Residences by Zip Code.

37

Margaret Dewar

Macomb

OaklarJQ

Detroit

Vernor/Junction Site

Wayne

* 54.7% of Employees in Zip Code 48209

10

0

10

20 Miles

*Out of 232 Employees Total

Map 3. Distribution of Vernor/Junction Workers' Residences by Zip Code.

38

The Detroit Empowerment Zone's Effect on Economic Opportunity

--Oakland

Detroit N

• Out at 215 EmC10YHS Total

20

o

20 Miles

Map 4. Distribution of Vemor/Springwells Workers' Residences by Zip Code.

Margaret Dewar

39

NOTES I. The research reported here received funding from the National Center for the Revitalization of Central Cities, University of New Orleans; the Bonner Foundation (through the Center for Community Service and Learning, University of Michigan); the Undergraduate Research Opportunities Program, the Provost's Career Development Fund, and the Coca Cola Foundation Faculty Recognition Award, at the University of Michigan. Kathy Wendler of the Southwest Detroit Business Association, Laurie Garvey and Jeff Burdick of Islandview Village Development Corporation, and Linda Stingl of the Eastside Industrial Council provided essential help and advice. Heidi Lubin, Del Sanders, Deborah VanHoewyk, Emily Gosack, Amy Bullock, John Boyd, Arlova Jackson, Catalina Velasco, Alejandra Montes, Gandy Madrigal, Anne Dibble, Manuel Magana Lisa Solomon, Amy Rogers, Brian Robinson, Mellie Torres, and Kelly Janiga, and the students of my Economic Development Methods course interviewed employers, provided research assistance, and offered ideas. 2. These restrictions were loosened with the tax year beginning after August 1997. 3. This study initially aimed to use data from the Michigan Employment Security Agency workers' compensation system from 1990, 1994, and 1997 to do shift-share analysis to distinguish employment changes consistent with the business cycle, the mix of industries, and other local effects-including the EZ. These data are not linked to specific places of employment often enough to make this analysis possible. 4. This process was facilitated by the Community Reinvestment Strategy reports (Detroit 1997). The Community Reinvestment Strategy was a communitybased effort to plan for the future of ten large areas of the city.

REFERENCES Bishop, K. and S. Kang (1991) "Applying for entitlements: employers and the Targeted Jobs Tax Credit," Journal of Policy Analysis and Management 10. Bums, E. K. and P. Gober (1998) "Job linkages in inner-city Phoenix," Urban Geography 19( 1): 12-23. Clinton, W. 1. (1994) "Address before a Joint Session of the Congress on the State of the Union, Jan. 25," Public Papers of the Presidents of the United States: William J. Clinton. 1994. Book I, Washington, DC: Government Printing Office. Detroit Department of Planning and Development (1994) "Jumpstarting the Motor City." ___ (1997) Community Reinvestment Strategy: Final Report 1-5, Dec.

40

The Detroit Empowerment Zone's Effect on Economic Opportunity

Dewar, M. (1990) "Tax incentives and public loans and subsidies: what difference do they make in nonmetropolitan economic development?" in R. Bingham, E. Hill, and S. White (eds) Financing Economic Development, Newbury Park, CA: Sage. Empowerment Zones, Enterprise Communities, and Rural Development Investment Areas (1993) Budget Reconciliation Act, P.L. 103-66, Aug. 10.

Federal Register (1994) 59 (11): 2700, Washington, DC, Jan. 18. Gottlieb, P. (1997) "Neighborhood development in the metropolitan economy: a policy review," Journal of Urban Aflairs 19(2): 163-82. Hanson, S. and G. Pratt (1992) "Dynamic dependencies: a geographic investigation of local labor markets," Economic Geography 68(4). _ _ (1995) Gender, Work, and Space, New York: Routledge. Holzer, H. (1991) "The spatial mismatch hypothesis: what has the evidence shown?" Urban Studies 28. ___ (1996) What Do Employers Want? New York: Russell Sage. Immergluck, D. (1996) "Neighborhood economic development and local working: the effect of nearby jobs on where residents work," unpublished paper, University of Illinois at Chicago, Sept. Immergluck, D. and T. Hilton (1996) Breaking Down Barriers: Prospects and Policies for Linking Jobs and Residents in the Chicago Empowerment Zone, Chicago: Woodstock Institute. Ladd, H. (1994) "Spatially targeted economic development strategies: do they work?" Cityscape: A Journal of Policy Development and Research 1(I). Lehman, J. (1994) "Updating urban policy," in S. Danziger, G. Sandefur, and D. Weinberg (eds) Confronting Poverty: Prescriptions for Change, Cambridge: Harvard University Press. National Empowerment Zone Action Research Project (1996) "Creating economic opportunity in the Empowerment Zones," EZ Exchange I (2), Spring. Pavetti, D. (1996) "Welfare reform and the labor market," paper presented at seminar on poverty and public policy, University of Michigan, Nov.

Taxpayer Relief Act of 1997 (1997) P.L. 105-34.

Margaret Dewar

41

Theodore, N. and V. Carlson (1996) "Employment networks and the creation oflocal labor markets," paper prepared for the Annual Meeting of the American Association of Geographers, April. Turner, M., M. Fix, and R. Struyk (1991) Opportunities Denied, Opportunities Diminished: Discrimination in Hiring, Washington, DC: Urban Institute. U.S. Bureau of the Census (1993) Census of Population, Washington, DC: GPO. http://venus.census.gov/cdrom/lookup/ U.S. Department of Housing and Urban Development (1994) Building Communities Together: Empowerment Zones and Entelprise Communities Application Guide, The President's Community Enterprise Board, Washington, DC. ___ (1995) Empowerment: A New Covenant with America's Communities; President Clinton's National Urban Policy Report, Washington, DC: Office of Policy Development and Research, July. ___ (1997) "HUD issues Empowerment ZonelEnterprise Community reviews," press release, Mar. 7, www.hud.gov/pressrel/pr97-24. ___ (1998a) "Vice President Gore announces Cleveland and Los Angeles designations as Empowerment Zones," Office of Community Planning and Development, EZIEC Flash, Feb. 4, www.hud.gov/cpd/ezec/flash/020498.html ___ (I 998b) "Cuomo tells conference that Empowerment Zones succeed in spark-

ing $4 billion in investment and creation of about 20,000 jobs," press release, July 15,1998. www.hud.gov:80/pressrel/pr98-291. ___ (1999a) "Vice President Gore announces 20 Empowerment Zones," press release, Jan. 13,1999. www.hud.gov:80/pressrel/pr99--03. ___ (l999b) "What are empowerment zones and enterprise communities?" www.hud.gov:80/break/whatezec. U.S. Department of the Treasury (1993) "Tax incentives for Empowerment Zones and Enterprise Communities," Internal Revenue Service, Dec. ___ (1999) "Tax incentives for Empowerment Zones and other distressed communities," Internal Revenue Service, Pub. 954, Feb. U.S. General Accounting Office (1999) "Businesses' use of Empowerment Zone tax incentives," Report to Congress, GAOIRCED-99-253, Sept.

3

Building Communities, Building Coalitions: Initiatives for Urban Education KATHRYN DOHERTY, CHERYL JONES, AND CLARENCE STONE

Much is known about efforts at physically restructuring cities and the role of business and other actors in that process (Lauria et al. 1995). However, much less is known about investment in human capital. As Norton E. Long once observed, It seems scarcely credible that, after all the funds that have been spent on planning, cities should still lack an inventory of its human resources. Such, however, is the case. The city knows far more about the conditions of its physical structures than it does about the capabilities ... of its people (Long 1972: 162).

Even less is known about the conditions for effective collaboration among urban stakeholders in their efforts to build human capital. What we do know is that the conditions of life for children and families in the inner city are discouraging. Inner-city families face the overwhelming challenge of concentrated poverty and its correlates-drugs, gangs, and violence. Racial segregation and the isolation of the poor only exacerbate these problems. A report on the plight of urban schools reveals that child poverty rose in nearly every city in the United States between 1970 and 1990 and that black children are far more likely than most other children to live in concentrated poverty. For these children, the chances that they will attend lowperforming schools and fail to achieve at levels on par with their peers are very high, as are the chances that they will grow up to be unhealthy and become victims of crime (Education Week 1998). Data indicate that the school systems of the largest U.S. cities serve a student population that represents 40 percent of the country's low income pupils and almost 75 percent of the nation's minority students (Council of Great City Schools 1996). How should such problems be addressed? This chapter begins with the assumption that any effort aimed at bettering the life chances of children and youth in the city must be collaborative and 42

Kathryn Doherty, Cheryl Jones, and Clarence Stone

43

linked to education. Schools bear the primary task of educating children to meet the challenges of work and citizenship, but schools in disadvantaged communities also face all of the problems found among the nation's youth: family disruption, teen pregnancy, high mobility, and dropouts. This study recognizes that schools may have little choice but to playa central part in dealing with social problems. Indeed, schools may play a positive role in overcoming some of the difficult challenges in disadvantaged communities. Schools, after all, are natural loci of activity and possess a large store of physical and material assets (Kretzmann 1992). As social institutions, schools have sustained contact with children and their families. Schools contain numerous able and concerned people-some educators have achieved remarkable feats in making schools in low-income neighborhoods centers of community vitality and academic achievement (Covello 1958; Tyack and Hansot 1982). Most important, schools offer children the capacity to overcome social disadvantage and poverty through academic achievement. But what does it take? In order to place schools at the center of a strategy for improving the lives of children and youth, we must face the reality that while schools are central to the opportunity structure for students, the capacity of these institutions to perform depends greatly on what happens outside of them. Academic performance depends, in part, on what Cohen (1995) calls "social supports." These social supports do not exist in isolation from a school's relationship to its neighborhood, just as academic performance does not occur in isolation from community context. Thus, the relationship between school and community is one of mutual dependence. Communities can help improve their schools, and in tum, schools can help improve the health of their communities. The key process is building human capital. To be successful, this process of building human capital in deteriorated inner cities requires a mobilization of resources beyond the classroom. Community organizations such as churches, businesses, and civic groups, as well as citizens, public institutions, social service agencies, and city leaders, all have a stake in improving the lives of disadvantaged children and youth. Because the problems of poverty and disadvantage are interrelated and because schools and community are interdependent, many now advocate a move toward comprehensive and collaborative strategies for human capital development. At the heart of the effort is a call to create an "infrastructure of support" for disadvantaged families and children (Rich 1988, 1993). This strategy recognizes the need for a thorough and coherent approach to compensating for disadvantage-from early childhood programs and youthdevelopment and after-school activities for various ages to mentoring and internships for older students; from counseling and health care services to adult education, job training, and expanded opportunities-which involves cooperative efforts across numerous sectors of the larger community.

44

Building Communities. Building Coalitions

While stakeholders working in tandem to serve the needs of the disadvantaged and improving the life chances of children may be imperative, this does not happen spontaneously. Knowing that student learning and community improvement require partnership, coordination, coalition-building among community organizations, and participation by parents and families, we are led to ask: How does it or how can it happen? To what extent are collaborative and comprehensive strategies in place? We are also aware that, across a wide urban landscape, there is a multitude of groups concerned with meeting the needs of and expanding the opportunities for economically disadvantaged children and families. But, to what extent have these groups aligned their efforts through coalition-building, i.e., bringing together the efforts of business and non-profit groups with governmental agencies and community groups? How durable are such efforts? How are coalitions and collaborations created and sustained? What challenges do they face?

Comprehensive and Collaborative Strategies A number of school-based strategies are believed to be central to raising the capacity of disadvantaged families and their neighborhoods. The most promising of these involve a concerted effort to widen the scope of relations among community actors: parental involvement. school-linked services, use of schools as community centers, and links to outside opportunities. These initiatives require an increased level of partnership, cooperation, and mutual respect among professional educators, administrators, parents, and businesses-partnerships that go beyond the normal pattems of interaction among those groups. Parent Involvement Involving parents in education is central to building an infrastructure of support for children. In disadvantaged communities the link between parents and schools is often strained, if not fractured (Lightfoot 1970; Fine 1991). However, while parental engagement is often lacking in disadvantaged communities, schools do have the power to increase parent involvement (Epstein 1986; McAfee 1987; Williams and Chavkin 1989; Dauber and Epstein 1993). Disadvantaged and minority families, in particular, stand to benefit from good parent involvement programs. First, although it may not completely close the gap between racial groups, parent involvement appears to correlate positively with academic achievement for all types of students (Clark 1983; Henderson 1988; Scott-Jones 1987). Second, participation in parent involvement programs helps to dispel the myth that minority parents are not concerned about their children's education (Chavkin 1989; Delgado-Gaitan 1990; Finders and Lewis 1994). Lastly, parent involvement may decrease the level of cultural disconnect between home and school that is often experienced by poor or minority students and their families (Lareau 1987; Ogbu 1988).

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It appears that there is no single model that is most effective in regard to parental involvement (Henderson 1988). However. successful programs tend to have similar characteristics: they are well-planned. comprehensive. and longlasting. Parents are welcomed into the school and made to feel comfortable. Most importantly. parents are respected and considered equal partners in educating their children (Comer 1988; Delgado-Gaitan 1991; Moles 1993; Seeley 1989; Swap 1993). In addition to gaining the skills to reinforce what children learn in school. parents may be involved in governance and/or decision-making in schools. Programs that move families and schools closer together tend to produce better and more sustainable results (Swap 1993; Henderson and Berla 1994). Many such programs have had "spill-over" effects in the community. These programs have served as a first step in raising the capacity of citizens to take on community issues beyond school improvement. School-Linked Services The use of school-linked services for improving the lives of disadvantaged children and their families also requires collaborative efforts among schools, families, and social service agencies. Research increasingly highlights the need for early and comprehensive services among disadvantaged youth. These services-health, nutrition, psychological, and academic support-may be provided through after-school and summer-school programs. Most current intervention programs, however, are crisis-oriented and reactive rather than preventive (American Psychological Association 1994). Moreover, the current delivery of family support services is ad hoc. In order to properly address the needs of disadvantaged families, the services normally provided by independent professional agencies must be linked and coordinated. Schools are natural foci for family support services because, in order to facilitate educational attainment by students, they need to feed children; provide psychological services, health care, and substance and sexual abuse counseling; cooperate with police and probation officers; and deal with drugs, teen pregnancy, suicide, and violence (Dryfoos 1994). Schools as Community Centers In contrast to their educational goals, using schools as community centers opens up prominent buildings in local communities to house a broad range of social services, recreational activities, adult education, and opportunities for the entire family. This places the school at the center of local community life and defines education beyond the activities that take place in the classroom. Just as in the case of school-linked services, the purpose of using schools as community centers has been to improve social supports for the disadvantaged. Using schools as community centers provides citizens with a place where they can become more politically aware and have a forum for expressing their views and sharing their ideas.

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Links to Opportunity

In order for children, parents, and communities to benefit from educational achievement, schools must also be connected to opportunities for success in the "outside" world. It is difficult to overcome the legacy of disadvantage if schools are not linked to other opportunities in the larger community: job placement and higher education. Providing these opportunities, along with mentoring and guidance, is another important aspect of building an infrastructure of support. In 1983, the report A Nation at Risk (U.S. Department of Education) decried the quality of the nation's educational system and warned of its potentially devastating impact on America's economic future. Business and other community members increased their involvement in educational reform; their efforts helped spark a wave of reform initiatives across the country (Finn and Rebarber 1992). While many initiatives involved businesses and other organizations working with individual schools or with a small group of schools, in some cities the focus was on broader city-wide efforts. Several city-wide agreements or compacts between business and school systems promised work for school achievement (National Alliance of Business 1989; Waddock 1993). The efforts reviewed above offer possibilities for schools and various other sectors of the community to playa central role in creating an infrastructure of support for disadvantaged children and youth. By increasing opportunities for participation in the life of the school, school initiatives can also enhance neighborhood ties and foster community development. Improved parent-school relations can give neighborhood residents greater comfort and confidence in dealing with professionals in general. Comprehensive and school-linked services can provide some of the general supports that might give individuals the security and independence needed to participate in the larger life of the community. While we know a good deal about the kinds of programs that have the potential to help create an infrastructure of support for the disadvantaged, we know less about the conditions needed to move from talk to action. What are the obstacles to actually launching those efforts that demand collaboration, coordination, and comprehensive strategies? A Tale of Two Cities

This study looks at efforts to build an infrastructure of support for disadvantaged children and youth in two cities: Baltimore and New Orleans. While both cities have gained national attention as centers for tourism and culture, both have limited political and economic resources. Baltimore and New Orleans are experiencing population decline, high rates of poverty, and low rates of student achievement. Each city has a majority African American population and an

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overwhelmingly black city school system. These cities are surrounded by largely white suburban communities that tend not to make common political cause with them. See Table 3.1 in the Appendix for profiles of these cities. Baltimore is the largest city in Maryland with a population exceeding 730,000 (U.S. Census 1990). The city is 59 percent African American and 39 percent white while the larger metropolitan area has more than 2.3 million residents of whom 71 percent are white and 26 percent are African-American. As is frequently the case in central cities, poverty is an acute problem. In 1990, almost 18 percent of the families in Baltimore lived below the poverty level, and the rate was 33 percent for all children under the age of eighteen. Eighty-seven percent of the children living in extremely poor neighborhoods in the state of Maryland live in Baltimore (Education Week 1998). The Baltimore City Public Schools system has over 100,000 students enrolled: 84 percent are African American and 14 percent are white (Maryland State Department of Education 1996a). The system has the highest dropout rate in the state and only 39 percent of the students entering the ninth grade actually graduate. Baltimore city's scores on Maryland's testing program are worse than any of the other school districts in the state (Maryland State Department of Education I 996b ). A 1986 foundation report (Szanton 1986: 10) says of Baltimore schools: The system is now widely condemned as ineffective, undisciplined, and dangerous. The fact remains that, on leaving the school system, very few Baltimore students have been pressed to the limit of their intellectual potential, many are unprepared for any but menial employment and some are unready for jobs of any kind. The city of New Orleans had a 1990 population just over 490,000. Sixtytwo percent of the citizens are black and 35 percent are white. The metropolitan area, in contrast, is 62 percent white and 35 percent black (U.S. Census 1990). Within the city of New Orleans, almost 32 percent of residents live in poverty, 38 percent of families with children live in poverty, and 41 percent of the city's children live in extreme poverty (U.S. Census 1990; Education Week 1998). Data also reveal that students in the city's public school system are almost 90 percent African American (Council of Great City Schools 1993). The combined public/private 1990 graduation rate in New Orleans was 56 percent (Greater New Orleans Foundation 1996). Our study found, in both Baltimore and New Orleans, a broad commitment by a multitude of groups to improving education and the life chances of disadvantaged children and their families. This commitment included various coalitions and collaborative efforts. The Greater Baltimore Committee (GBC), a nonprofit association of over 950 Baltimore businesses, provides a good example of the kind of

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involvement in school-to-work transitions, mentoring, and providing of opportunities that helps build an infrastructure of support for disadvantaged youth. In 1985, with strong prodding from an Industrial Areas Foundationaffiliated community organization, Baltimoreans United in Leadership Development (BUILD), the GBC became part of a collaborative project called the Baltimore Commonwealth. Participants in this project agreed to contribute to a "CollegeBound" scholarship program for needy students, provide vocational training and employment preparation, and give students who maintained high attendance and suitable grade averages special access to jobs (Orr 1992). Baltimore also has an Empowerment Zone. In addition, the city offers programs such as the School, Family, and Community Partnership; the Child First Authority; Project RAISE; Success for All; Ready at Five; Baltimore Reads; New Schools Initiative; and the Barclay-Calvert partnership between a public and a private Baltimore school. Moreover, Baltimore is home to many groups that have focused on education and the needs of disadvantaged youth: the Maryland Business Roundtable, Advocates for Children and Youth, the Fund for Educational Excellence, the Center for Research on the Education of Students Placed at Risk (CRESPAR) at Johns Hopkins University, the Abell Foundation, as well as the Greater Baltimore Commonwealth (GBC) and BUILD, to name a few. New Orleans, much like Baltimore, has a coalition of organizations directed at improving education and the life chances of disadvantaged children and their families. In 1991, community stakeholders-including public and private school officials, parents, business leaders, and representatives from the police department, health units, and job training agencies-came together to lay the groundwork for collaboration between public and private agencies. The principles developed at that 1991 summit allowed public and private agencies to create a comprehensive strategy for linking education and social services for the city's youth (Garvin and Young 1993). One program born from that effort was Toyota Families in Leaming-a comprehensive, family approach to literacy and educational achievement, in which the University of New Orleans is a partner. Other programs and policies that have contributed to the city's comprehensive strategy include the following: its designation by the U.S. Department of Housing and Urban Development as an Enterprise Community; a $7 million dollar award by the Annie E. Casey Foundation to implement a jobs initiative; the adoption of the Comer School Development Plan and the Accelerated schools program, among other comprehensive strategies by many local schools. In addition to these, a new program under development, Communities in Schools, attempts to facilitate partnerships and coordination by providing school-based services to disadvantaged youth. While the main player in creating and furthering urban education efforts in the city of New Orleans appears to be the city government itself, there is a host of organizations dedicated to improving the lives of the city's children

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and youth. These include Partners in Education-a collaboration between the city school system, business, and a metropolitan-wide civic organization; the Metropolitan Area Committee-a broad based citizen advocacy organization; and Metrovision-a regional economic development organization. In addition to those three organizations, there are groups such as the Greater New Orleans Foundation, Agenda for Children, All Congregations Together (ACT), the Jeremiah Group, and the City-Wide Tenant's Council.

Challenges to Collaborative and Comprehensive Initiatives While stakeholders in Baltimore and New Orleans overwhelmingly described an atmosphere of mutual coexistence among groups, agencies, and organizations dedicated to improving the lives of the disadvantaged, communication among these groups is minimal and the collaboration that does take place is mostly informal. While collaboration and comprehensive attention to needs makes intuitive sense, it hasn't often, at least in the case of the two communities studied here, been translated into practice. Why is this the case when so many stakeholders seem to have the same basic mission? A lack of concern or interest is not the problem. There is no shortage of people who are concerned about the welfare of children-we have already documented the vast number of initiatives and efforts ongoing in these cities. While there are many programs, few of these are collaborative and most fall short of comprehensiveness-i.e., they do not give the necessary attention to the multiple needs of disadvantaged children. Programs which work well tend to be small-scale and succeed despite the school systems in which they operate. Thus, while there is no apparent shortage of initiative in Baltimore and New Orleans, there is a shortage of comprehensive and collaborative programs that can be sustained over time. Our research points to several issues that help explain the fragmentation and disjointed efforts among programs. These issues range from general concerns about the merits of collaboration and the effect of program expansion to turf protection, politics, and school dynamics. Ambivalence about Collaboration

Collaborative and comprehensive strategies for dealing with the needs of inner city children and youth are strongly endorsed, at least in theory. The comment of a New Orleans stakeholder in the education system is typical: People are understanding clearly now that we're serving the same people. The school is serving the same people going to the health center, or the Office of Family Support.... The question is, how can we come together to make sure these needs are met in a comprehensive approach?\

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Despite such realizations, our research found a certain ambivalence about collaboration in practice. A number of urban stakeholders argue that uncoordinated efforts are preferable to collaboration. Just as many contend that all the scattered activity doesn't add up to much and thus support collaborative arrangements. Still other organizations remain uncertain about the need for collaboration and its effectiveness. As one leader in New Orleans explained, "Organizations are still learning, and the extent to which collaboration helps isn't always clear." Ambivalence is fostered among stakeholders because collaboration can take a great deal of time and requires sustained effort. In both Baltimore and New Orleans more than a few respondents mentioned the endless number of meetings that seem to lead nowhere. The developer of a curriculum program commented that collaboration "takes a million meetings that might result in a million more." Collaboration and sustained efforts, therefore, demand patience and a willingness to invest time in a process that has no guaranteed outcomes or immediate payoff. Adding to this ambivalence are concerns about the severity of problems facing inner city families. The challenges confronting urban communities are both difficult and enormous. The enormity of problems alone serves for many as a justification for a piecemeal approach-even when the intertwined nature of problems is recognized. Some city leaders readily admit that the best one can hope for is a "band-aid" solution. Focusing on their own individual programs and interests may be a way for people to cope with what, in its entirety, would seem to be an overwhelming task. As one child advocate put it, "In a world with unlimited resources and interests, we would fill every need a child has but we don't live in such a world. We can't do everything." Another maintains, "To say you can't deal with one problem unless you deal with all problems is a reason for inaction." Facing the enormity of problems can foster a sense of resignation. One member of a community advocacy group in Baltimore said that when she started working on child welfare issues she saw that there were many good people working at it and was optimistic about the future. She was shocked to discover how bad problems actually were and could not believe that things could still be so bad in spite of the tremendous effort being made. Her feelings illustrate a sense of frustration that sometimes seems to pervade urban policy. As one observer in New Orleans put it, "Can you really change a system so large that has been going so badly for so long?" In both cities, despite multitudes of programs and a number of collaborative efforts to improve children's educational experiences, the fact is that there are still many problems unsolved and many needs unmet. This has prompted some to ask, "Are we engaged in a losing battle? Are we dealing with a situation that can't be remedied?" Even for those not overwhelmed by the enormity of the challenges nor in favor of the status quo, enthusiasm for change can wane when failure is the norm. As one scholar notes, "Rather than reshaping the larger social context,

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each new initiative is progressively shaped by that context. Each new generation of ideas has to cope with the legacy of unfulfilled promises and tasks of prior ones" (Halpern 1995: 5). A program organizer in New Orleans explained that the worst part about programs is that "once you go in, and then have to pull out, you leave a more negative situation than before you first arrived." Over time, and with successive programs, enthusiasm diminishes. Failure can devastate future possibilities for change-particularly when the failed program was comprehensive and involved the restructuring of an entire school.

Organizational Structures and Turf A more basic explanation for the reluctance to collaborate may be that organizations are not generally structured to coordinate with others and that funding streams have tended to preclude collaboration. Agencies are disposed to compartmentalizing problems. Thus, comprehensive attention to the family as a unit or to the whole child isn't the norm. Moreover, agencies are often unaware of the other agencies servicing their clients. Michael Kirst (1994) points out that the typical needs of disadvantaged children today require the services of five or more different agencies with different locations, forms, rules, and eligibility requirements. In contrast to this approach, there is much evidence that disadvantaged communities benefit from comprehensive intervention. Lisbeth Schorr (1988) explains: The programs that work best for children and families in high risk environments typically offer comprehensive and intensive services ... they are able to respond flexibly to a wide variety of needs. In their wakes they often pull in other kinds of services, unrelated in narrowly bureaucratic terms but inseparable in the broad framework of human misery. These programs approach children not with bureaucratic or professional blinders, but open eyes to their needs in a family and community context. Speaking on the fairly typical divide-and-conquer approach to problem solving, one observer in Baltimore said, "It is ridiculous that if you deal with some child, you don't know the other people who are dealing with them." In the end, "It's impossible to have a coordinating meeting because you'd have a thousand people in the room trying to coordinate ... " Why do agencies and organizations fail to change this dominant approach? Beyond issues of organizational structure, one reason some organizations fail to work together is the fear of having to expose one's successes and failures. Collaboration requires a sharing of information but-in an attempt to protect their reputations and positions in the funding world-many organization leaders do not want others to know what exactly they are doing and how they are doing

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it. According to one non-profit director, people say to themselves, "If I collaborate, or reveal my plans, somebody might take them or siphon off important dollars that should go to my organization." Working with others can be risky for organizations and agencies. Rather than take the risk of collaborating, most organizations are inclined to protect themselves and their turf. Turf issues are about organizational imperatives, survival, and perpetuation of a role that collaboration may put in jeopardy (Wilson and Davies 1994; Finn and Rebarber 1992). According to one Baltimore foundation director: There are too many non-profits trying to raise money and trying to do the same thing. They should give some ego and turf and try some mergers. The only way to know if there is duplication is to be in communication with one another, and they are not. People get caught up in their task and their mission. As a New Orleans civic leader explained, it is turf "that prevents longstanding collaborative efforts that are more than just coalitions.... Organizations feel that some issues are 'their issues ... ' In addition to turf consciousness, organizations and agencies sometimes see one another as less than truly dedicated to the causes they serve. Some accuse agencies and organizations of having priorities that have little to do with a direct concern for children. Officers and staff want to protect their authority and power. This becomes an important issue when one contemplates collaboration or comprehensive services that require cross-agency cooperation. Each agency wants to be the lead agency when its operations are going to be affected. As one Baltimore stakeholder explained, "Everyone wants coordination but nobody wants to be coordinated." Fighting such tendencies is hard work. A change in the status quo requires, as one educator explained, "a redefinition of roles." Furthermore, establishing a broad, common understanding is difficult. When consensus can be reached, it is usually narrow. For instance, a number of stakeholders in Baltimore recounted an attempt by various organizations and advocates in early 1996 to compose a letter outlining the policy priorities they wanted addressed by political leaders at both the city and state level. Representatives from approximately fifteen groups met to write a letter that was acceptable to everyone. One of the participants said that by the time they had drafted a letter that everyone was willing to sign, it had lost its focus. As such, the letter failed to generate a meaningful response. Shortly thereafter, the coalition dissolved and each group returned to its own routine.

Competing Strategies Getting consensus on the "how-to-do-it" is an important first step in problem solving that requires the effort of multiple sectors of the community. For

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example, almost all stakeholders in Baltimore and New Orleans agreed to a basic vision of education: prepare children and youth for productive careers and lifelong learning. Putting that goal into action, however, became a challenge because stakeholders defined problems and feasible solutions differently. The varied, and sometimes diverging or competing definitions of the problem by various community stakeholders can make collaboration problematic. The efforts of the business community have focused on the transition of students into the workforce. In New Orleans, the centerpiece of the business community's school-to-work program was the creation of occupationalbased "career academies" which operate in nine metropolitan-area schools. The academies divide high schools into four main career clusters-business and technology, hospitality and tourism, health care and human services, and construction and engineering. Baltimore businesses share a similar focus. However, unlike business communities in other cities, they have gone beyond simply developing career academies. The Baltimore Commonwealth Compact-which involves BUILD, the GBC, and city hall-was designed as an umbrella under which groups could bring together resources and develop strategies for education reform. The Compact included a pledge to provide jobs to students and encourage students to move on to higher education. Unfortunately, the business community is not a team player. Businesses more often see their role in education as that of charity-giver, not stakeholder. One public official in New Orleans described the city as somewhat at the mercy of business: "There is still this kind of division. The business community is over there, the rest of us over here. Every time we need money we've got to go begging." As one community activist argued, business, "is much more aggressive when it comes to getting money for a new convention center than for the school system." The business community, it is argued, is willing to "move mountains" to complete economic development projects but is not willing to do the same for education. When it comes to education, the business community in most cities sticks to traditional pursuits: focusing attention on the expansion of Adopt-a-School efforts. Furthermore, business defines the major education problem as school system inefficiency. Since it concentrates on solving that problem, businesses tend to be distrustful of the school system. When they do get involved with schools, however, they often start and run their own programs. Businesses focus on job training and career academies whereas schools currently train for college entrance which may not be practical since most students in the city do not move on to higher education. The great majority of inner city students seek jobs after graduation. Not all community stakeholders share the business vision of educational improvement. In New Orleans, the business approach has run into criticism by those who believe that, rather than using schools to teach children how to become bank tellers or get employment in the tourism or service industry,

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schools should prepare students for college. One New Orleans civic leader has described the problem this way: I mean, yes, you should be able to graduate and work somewhere, but every student should get a college prep education whether they go or not. I don't think you have to sacrifice a college-prep education for competence at McDonald's. You don't decide, even at high school age, who's going to go to college and who's not. Everyone should be trained as if they are going. Don't dumb down the curriculum. Thus, opposing the business viewpoint are a group of community actors who encourage high academic achievement in college preparatory education. Organizations such as Baltimore's Abell Foundation has put a significant amount of its resources into curriculum and classroom. Yet another group of community actors, particularly those at the grassroots level, believe that the primary focus for efforts at improving the lives of inner city children should be placed on the underlying causes of disadvantage. They argue that you cannot effectively address the problems that students face at graduation unless you have met the basic needs of children all along. For example, it is extremely difficult, if not impossible, to improve the academic achievement of a child who is hungry or is constantly sick because he or she does not have adequate health care. This view highlights the idea that not only are collaborative strategies a necessity for inner-city children and families, but such efforts must be sustained over time and throughout the duration of a child's school career and beyond. A facilitator of a comprehensive school program in New Orleans has indicated that programs which "kick in at high school graduation" are too late. Also, while cities like New Orleans have a variety of preschool programs-from HIPPY and Head Start to Toyota Families in Learning and various Title I initiatives-there are serious program gaps. As a program director in New Orleans has explained, while it is easy to get money for young children and a number of programs have already been designed to assist students leaving school, those in the middle often get left out. The inbetween years are a "critical period" of transition when many students go astray. Our study found lack of support during the middle period to be one of the major gaps in building an infrastructure of support in the inner city. Because people focus on problems in different ways, coming to an agreement on priorities is not likely to occur without clashes between agendas. For example, one inherent clash of interests that our research found to be particularly relevant involves the way in which initiatives are designed to "help" the disadvantaged. Approaches imposed on the disadvantaged stand in opposition to the need for communities to gain self-sufficiency, determine their own destinies,

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and connect isolated community members as part of building individual and community capacity. Furthermore, community members are not usually part of the programmatic structure. As a result, many community members are skeptical that agencies are out for anything but their own perpetuation. Service agencies and philanthropies depend on people being "needy." As one New Orleans stakeholder described the situation: If you are an agency that has spent the last fifteen years being proud of the number of people you have served, and you hope to be able to serve more people-that is the sign of the success of your agency-I say that is a sign of failure of society.... I think the goal of all social service agencies should be to put themselves out of business. A program director in New Orleans explained: the language of program specialists is to talk about "target" communities, and "at risk" youth. Even if not meant to be, using such terms may easily be construed as condescending and disrespectful; moreover, they imply that the poor have no capacity to take care of themselves. A Baltimore employment director explained that those wanting to help cannot tell communities, "thou shalt do this." The community must be included in improvement efforts and must support those efforts if they are to be successful. The St. Thomas Resident Council, a neighborhood leadership group in New Orleans, has asked foundations and agencies to withdraw programs that were undertaken for the benefit of the neighborhood but without the Council's consent (Young and Christos-Rodgers 1995/96). One activist in St. Thomas put it this way: "As the agencies got involved they realized that what we were saying is not that we want you to leave but that we want a different relationship with you". A leader of the New Orleans City Wide Tenant's Council (a governing body for the city's public housing projects) remarked: We used to be used as statistics. You can come in and get us, use us as statistics, go out and get a proposal, get a grant, get it funded. But when the money's gone, you're gone. But the problems we endure everyday are still here. This said, some respondents still cautioned that community involvement in programs could be risky. From the perspective of one program specialist: When you do allow communities to make a joint consensus it ends up snowballing. There's a place for community buy-in, but you have to recognize that there is a flip side and too much community buy-in can lead to a very weakened result.

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Beyond issues that make community involvement challenging, some actors are resentful of the fact that their good work is criticized by the people it is intended to help. As one foundation head explained, it is understandable that people want to know how organizations are making decisions about how money is spent, but still: It's our money. We don't have to spend it on poor people. We could spend it on other things .... Who are you to say we should be doing this rather than that? We don't make anybody take our money. These comments illustrate competing priorities and a tension in viewpoints between those in need of assistance and those providing services. This tension can lead to feelings of skepticism, suspicion, or mistrust, all of which can doom collaborative efforts. The Legacy of Race

A major source of tension capable of thwarting collaborative initiatives is the issue of race. The tensions created by race are particularly pronounced in the education arena because of the issue and history of desegregation. In Baltimore and New Orleans, African Americans make up a majority of each city's population. Until the I 950s, Baltimore remained a segregated city. By the late 1970s, sensing the strength of its burgeoning majority, the city's black community began to flex its political muscle. An unspoken agreement gave blacks control of the school system while the mayor's office maintained control of the city's remaining activities. Because this power was hard won and long in coming, there is little interest in relinquishing it; thus, control of the education arena is jealously guarded. As a consequence, African Americans often view attempts to reform the schools as attacks on black control and power (Orr 1996). According to one city leader: The black middle class that controls many of the institutions that deal with poor black people are insecure in their status-they haven't had power in this country or haven't had many generations of being middle class. They are very reluctant to hold fellow African-Americans accountable, and often times they are more concerned about their own jobs and who gets what other job than they are about whether the people they are helping get helped. African Americans also dominate local politics in New Orleans. The mayor and a majority of the school board and school administration are black. The message that African American leaders in New Orleans get from the larger community, according to one respondent, is that "blacks are

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incapable of organizing a good school system." African Americans often become defensive because the general public has little understanding of the historical context under which such arrangements were formed: segregation, white flight, and a shrinking central city tax base. As a New Orleans leader explained: Just because 90 percent of the students in the system are African American, and over 90 percent of teachers in the system are African American, the school board is majority African American, the administration staff is 90 percent African American, something must be wrong with them. What isn't reported is that the schools are in such bad shape and you have the demographics that you have because the white community left. And that is just a fact. Race has other implications as well. While people of diverse races may work together or even sometimes attend school together, they tend not to socialize with one another. This diminishes the chances for building the informal relationships that are important for building trust. The fact that the business community-which is mainly white-still maintains economic control while blacks have political control adds to the tensions that already exist. Thus, there is much suspicion about white business involvement in education. As one businessman in New Orleans explained: there is a view that "any time a businessman gets involved with the school system, the apparent reaction is, what's in it for him? Why is he doing this? Is he going to get a contract or something like that?" How it plays out in terms of education, one observer suggested, is that "the majority of the white community really could care less what happens to the school system." Some respondents recount incidents in which they have personally experienced the effects of racial tension and the suspicion that it breeds. A white program director in New Orleans recounts the community mistrust of activities by the "white Y[MCAJ." Another New Orleans program director said, "When I, as a white person, walk into an all black inner city school, I can feel the resentment." Robert Embry, the president of the Abell Foundation and former president of both the Baltimore and Maryland boards of education is a controversial figure in part because he is white and has the ear of the mayor (Banisky 1993). Of his personal experiences, Embry says that it has been said to him, "You're a white person, what are you doing messing around with these problems?" Howard P. Rawlings, one of the city's state legislators and an outspoken critic of the school system, says he can get away with his outspokenness because he has a long record of fighting for the city and because he is black: "You can't call me a racist. You can't accuse me of not being knowledgeable of city public schools. Because I'm in a position to raise these questions, it peels away some of the other issues that cloud the focus" (Jensen 1996).

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Despite its wide-ranging impact, it is interesting to note that race is not an issue that most people talk about in these cities. When the topic is broached, there are very different perceptions among stakeholders about the importance of race. One New Orleans stakeholder described white business in that city as in "denial." Indeed, a major business player in New Orleans, even when pressed, insisted that race was not a serious problem facing the city. While respondents in Baltimore were much more willing to admit that race is an issue, many said that the problems it creates are rarely talked about. According to one program director, "We are still reluctant to deal with our Neal past and resistant to dealing with our own internal ethnic st~reotypes." Peirce (1993) suggests that the issue of race is not talked about much because it is the issue facing cities. Cit)' Politics

Race is an important issue in the overall politics of each of these cities and further reinforces the ways in which city politics acts as a barrier to collaborative and comprehensive attention to the needs of inner-city children. Race and race-related issues also play an important role in shaping each city's relations with its surrounding counties and metropolitan area which are majority white. A city official in New Orleans described the dynamic of the situation between the cities and suburbs and the context of race in the following way:

It would seem to an outsider that we are directing all of our resources and all of our energies to the minority population. But, it is not a concerted effort on anyone's part ... that is where demand is greatest. That creates its own set of problems because the white population is saying, 'Every time some money becomes available, off it goes. What are you going to do for us?' You have to be able to demonstrate that it's not a black thing. Stakeholders in Baltimore and New Orleans recognize an "Us versus Them" attitude-this attitude pervades the metropolitan region. When asked about the relationship between the cities and the suburbs, most respondents felt that suburbanites have little use for the city. While race is a clear source of tension between cities and suburbs, it is not the only one. Another major source of tension is money. Both Baltimore and New Orleans have seen their tax bases decline dramatically as much of the middle class-first whites then blacks-has fled to the suburbs. The cities need money and the suburbs have it. Consequently, the suburbs are likely to view the cities' offers of collaboration as simply attempts to capture the resources of the wealthier jurisdictions. Compounding all of this are the tensions that come from the fact that cities have seen their political influence at the state level decline as the power

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of the suburbs has grown. Current events in Maryland epitomize this problem. In September 1995, the city of Baltimore filed suit against the state of Maryland. The city contended that the state's "equitable" funding formula failed to provide the city with its fair share of resources given its financial situation. The lawsuit also sought relief from some state-ordered mandates that added to educational costs in Baltimore. The state agreed to give the city an additional $254 million in aid over a five year period, but suburban delegates demanded similar funding increases for their districts. Even when the money was finally appropriated, officials felt compelled to establish a task force that would re-examine state funding. A former suburban legislator was appointed to head the task force. At no point did any of the suburban voices acknowledge that concentrated poverty was a special problem of the central city and itself was a reason for extra funding. All things considered, the likelihood of regional collaboration to confront the challenges of disadvantage seems remote. Collaborative efforts are also influenced by other aspects of city politics, not the least of which is the structure of politics. Baltimore has a strong mayoral form of government. The mayor appoints all department heads, and, until a recent restructuring, the school board-school board appointments are now made through a power-sharing arrangement with the state. For most of the 1970s and 1980s, Baltimore's mayor, William Donald Schaefer (1971-87), paid little heed to school issues. However, Kurt Schmoke, first elected in 1987, is considered to be an education activist. In his inauguration speech he declared that he wanted to make Baltimore "the city that reads." One of Schmoke's first projects was the Baltimore Compact. He also experimented with privatizing public schools. In 1992 he signed a contract with Education Alternatives, Inc. (EAI) to operate nine schools in the district. While this experiment was abandoned, it did signal a willingness by the mayor to push innovation (Orr 1996). The potential for Baltimore's mayor to playa leadership role in building an infrastructure of support for disadvantaged children and youth is expressed by one educator, who said of the city: Baltimore has an advantage over some cities. It has a consistent authority structure. The mayor is in control. This consistent leadership structure creates the potential for change that might not otherwise exist, as well as provide more potential for collaboration among various parts of the system than might otherwise be the case. New Orleans is not in the same political position as Baltimore. The school board is elected and is independent of the mayor's office. While a representative for New Orleans Mayor Marc Morial affirmed that a good relationship exists between the mayor and the school leadership, it seems to be as

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much by "coincidence" as by cultivation. The citizens of New Orleans elected Morial to the mayor's office in 1994. That year they also ousted every school board member in a reform campaign called "Erase the Board." With a new mayor, superintendent, and school board starting together, the potential for a cooperative relationship seemed promising. While the mayor's office in New Orleans is not centrally involved in leading school-related initiatives, the mayor can playa leadership role. Recently, city hall and the school board worked closely together in passing a multi-million dollar bond issue for capital improvements to the city's schools. Most of the city's stakeholders point to this event as an example of the leadership potential of the mayor's office in the area of education. Depending on the political leadership to guide long term collaborative efforts that improve the lives of disadvantaged children and youth is not an effective strategy. Because of turnover in key city and school offices, programs and initiatives can be short-lived. New executives want to make their mark and promote their own initiatives rather than build upon those established by a previous administration. As a result, initiatives often come and go with election cycles. Collaboration, in addition to requiring time, requires other resources such as staff and money that are in short supply in the city. These are commodities too valuable to waste on efforts that are not guaranteed to produce dividends. This is reflected in the priorities of city leadership, most obviously in their penchant toward economic development over education priorities. Both Baltimore and New Orleans have experienced extensive physical revitalization efforts: the Inner Harbor in Baltimore, and the Convention Center and Riverfront Developments in New Orleans. Elected officials are more likely to give priority to economic development initiatives that have a visible presence than to problems that require long term commitments and have little immediate payoff. School Dynamics

Recent front page newspaper reports in Baltimore and New Orleans have criticized these city school districts for being plagued by cronyism, mismanagement, and patronage (Adams 1993; Bowler 1996). Polls indicate that support for public education is weak. It is no surprise that, under these conditions, cynicism is high and disengagement from schools is the norm. In New Orleans, a large private and parochial school system allows parents to opt out of the public system. As the number who choose not to attend public school increases, the demand for change in these schools decreases. Moreover, a dwindling student body significantly cuts into the support base for public education and the resources that can be brought to bear on the system. Orleans Parish public schools serve almost 80,DOO students-77 percent of that population resides within the city (Department of Education 1994). A

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sizeable number of students (60,000) also attend the city's parochial schools. Many students who attend New Orleans' parochial schools, however, do not live in the city. For inner city students, private school is not a readily available alternative. On the other hand, in the suburbs, they "can't build them [private/parochial schools] fast enough." Thus, according to New Orleans stakeholders, the city's pool of private school students is shrinking because of suburbanization. In both Baltimore and New Orleans our research found that while individual schools undertook heroic efforts, overall these urban public school systems did not seem to be major players or leaders in guiding efforts at community revitalization through education and efforts aimed at disadvantaged families and children. Though administrators touted various programs and highlighted the positive aspects of their school systems, program specialists describe a situation where the school system will "put up with" programs or let them happen. There is little active leadership. Central school administrators had little information about the multitude of programs operating within their school systems. As one New Orleans business leader said of the school system, "the leadership in the system is more concerned with maintaining things as they are and making fixes around the edges, but not any real significant change." The Baltimore school system was described as "not a userfriendly place" for both those inside and outside the system. Some school administrators talk about the need for a new form of interaction but one with less central coordination. Program specialists also want administrators to step back, allow for change, and cut red tape. However, the school systems of these major cities do not always seem to be receptive to outside involvement in education. Richard Hunter, the first superintendent of Baltimore schools in the Schmoke administration, did not like outside involvement. An observer with years of experience dealing with the city's school system described the superintendent as "very centralizing." According to some stakeholders who worked with him, Hunter resisted involvement by those not part of the school system. He tried to push people away and, according to some, tried to sabotage reform efforts. Hunter's attitude, some believe, crippled the Baltimore Commonwealth. While the agreement was successful in creating a number of initiatives to improve post-graduate opportunities for students, the Compact failed to achieve its full potential because "there was massive resistance to institutional change on the part of Baltimore City Public Schools." This sentiment was echoed by a foundation director who said that the Compact was weakened because "it wasn't supported by the superintendent, and you can't do much in education if you don't have the support of the superintendent." Reform efforts aimed at children and youth sometimes require, by school administrators' own admission, circumventing the school system itself. The central administrative office of the New Orleans school system, for example,

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Building Communities, Building Coalitions

spends much time issuing waivers to exempt schools from the central office's own regulations. Sometimes resistance stems from the typical turf concerns that are often found within agencies, i.e., systems resist working with outsiders because doing so is threatening. Other times resistance is sparked by past experiences. According to a Baltimore employment director, school administrators and faculty feel that "there have been an awful lot of outsiders coming in and saying we'll do good things for your kids and after six months they are gone." In addition to these barriers to reform, race confounds all efforts. A program specialist says of her personal dealings with the school system, "We're seen as a white organization and have to be careful about that." All these issues make it difficult for stakeholders to collaborate with public schools. The problems of the system are not confined to its external relations. Large central city school systems are beset with a host of internal problems as well. In both cities, antagonism between the central administration and individual schools was identified as an important obstacle to consistent, comprehensive, and broad attention to the needs of children. Top-down reform efforts are described as being "forced down the throats" of individual schools and teachers. Those principals who want to reach out to the community or provide the best they can for their students, often need to fight the central administration. One Baltimore principal tells the story of her fight to establish a rigorous curriculum and maintain her school's partnerships with community stakeholders. The principal says that the process of fighting the school system was so difficult that "when I started out I was six feet tall, and they knocked me down to five feet." Part of the problem with these school systems is that every time they get a new superintendent, new programs are brought in, and old ones are discarded because "each superintendent has to prove to the community and to the city that he/she is going to make a difference." Thus, there is little institutional memory. Enthusiasm wanes for reform and the standard mode of operation for administrators, principals, and teachers, becomes one of simply "waiting out" programs. One foundation official has argued that it would be impossible for Baltimore Public Schools to undergo institutional change because they lack "the essential ingredients of a system." There is a "lack of communication and lack of central standards," and the system fails to "share best practices or failures." This critic concluded that the school system "has no goals, doesn't measure them, and can't measure them if they wanted to. They don't communicate how to get there. And then there's no one accountable." Another aspect of the Baltimore and New Orleans central city school systems is that, like so many other struggling urban school districts, people have a tendency to spend their time responding to immediate crises instead of developing long-term strategies.

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Given these problems, it is not surprising that most of the people interviewed for this study preferred to work with individual schools rather than with the central administration. Many talked about the ability to establish personal relationships with principals. The frequency with which people mentioned building such relationships suggests that principals are a key point of entry for communities interested in helping children. Although people prefer working at the school level, doing so is not without its own problems. There are often tensions among principals, teachers, program specialists, and parents. In New Orleans, all public schools are required to submit school improvement plans that include meaningful participation by parents and other community stakeholders. (Baltimore has a similar requirement.) Each school is required to have a minimum of four yearly community meetings. However, as one school official explained: Some principals embrace it and some administrators look at is as a nightmare; because now we are talking about parents being empowered. No longer are parents going to the school to wash cafeteria tables or help monitor the hallways. We are talking about parents working on the budget, selection of staff, selecting programs.... So if a principal has his agenda and he's not open to other people's needs and concerns, there will be tension. As one parent explained, "There's an attitude that we [principals] know what we need to be about to educate your children, and please, we're glad to listen to what you have to say, but just let us do our job. Leave us alone, let us do our job." A mentoring director who has been successful in working with schools says that people in such connections have to convince those in the school that they are not out to usurp their power. Here too, at the school level, issues of race and jobs come into play. While individual schools do not suffer from the degree of dysfunction existing at the district level, they do have their problems, and collaboration with individual schools is not devoid of challenges. Scaling Up

Despite the potential challenges, there are many promising initiatives being carried out at the school level. Toyota Families in Learning, for example, is a family literacy program in New Orleans that addresses both the needs of disadvantaged children and of their parents with four main componentsimproving parenting skills, child literacy, school readiness, and the quality of parent-child relationships (National Center for Family Literacy 1996). This program has helped participating children improve their test scores, has helped 25 percent of participating adults receive GEDs, and has assisted

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Building Communities, Building Coalitions

33 percent of participating adults obtain employment (Toyota Families for Learning 1995). Why is it that such an innovative program, and one that makes a significant difference, operates for a small number of children in three New Orleans schools? Program specialists worry about the effects on the quality of their programs that scaling up or expanding them would have. As one New Orleans program specialist explained, "We are not so interested in expanding, but we are very concerned about quality. So we are not out to dragnet schools" for the program. This comment reflects the concerns of many people who direct successful programs. The New Schools Initiative, a project of the Baltimore public school system, was designed to have some individual schools function as autonomous units with full site-based management. In order to have the program up and running by the next school year, applicants were given ten weeks to submit a proposal. A program specialist questioned this rush: "How you expand is just as important as what is expanded. You need time to work with people." A number of respondents pointed to the danger of moving too fast and expanding programs before the relationships needed to support them have been developed. In order for an initiative to be sustained, those affected by it must take an active interest. Along these lines, a number of program specialists were concerned that scaling up would "dilute" the quality of their initiatives. These people attributed a good part of program success to the abilities and dedication of the people operating them. As more people get involved in a project, the risk of losing commitment grows. Thus, moving initiatives to a system level presents a difficult challenge. Funding is perhaps the most often cited obstacle to expansion. First, stakeholders describe a dwindling availability of resources to expand programs-from both federal and private sources---even if programs are shown to work. Second, funding is often short-term. Typically, foundations fund programs for only three years, but program specialists assert that it is usually not until the third year that a program begins to learn to stand on its own. As a New Orleans stakeholder explained: There isn't a problem dealing with education that you can solve in five years or less. Not one ... So the question is who is going to fund it for the fifteen years I need to make a dent in this problem. Foundation communities and corporate communities have not been willing, with very rare exception, to go the long haul. And of course taxpayers never want to spend more money. And politicians never think past the next election. Adding to concerns about time is the fact that there is almost always a lag between the time when a successful program begins operating and

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when it produces positive results. It is the rare program in any discipline that can extract immediate results, and such programs are almost certainly unheard of in education. It is not uncommon for a program to require four or five years before it sees measurable change. This lag presents several problems to building an infrastructure of support. Most important, innovative programs may be hastily rejected. If not deemed outright failures, programs are sometimes disposed of because a short funding period does not allow enough time for the program to show its worth. Furthermore, program managers-almost from day one-need to spend a considerable amount of time looking for additional funding rather than concentrating steadily on program implementation. The success of Baltimore's School, Family, and Community Partnerships comes from the ability of its developers to secure long-term funding. This has allowed them to move slowly and expand the program in increments. Long-term funding gives those who are running pilot projects the time to find and correct problems and learn from their mistakes. Foundations and other funders can also fall victim to a "been there, done that" attitude toward programs. Thus, they may suffer from the same churning and turnover in their support of programs that is characteristic of city and school system efforts. This, too, can cause funding difficulties in the long run. From the foundation perspective, the failure of school systems to pick up and expand programs that are shown to be effective foundation-funded pilot projects is also an obstacle to increasing support. As one Baltimore stakeholder put it: As a general rule it is certainly true in cities that even when they have things that they know to be successful, they often don't expand them. That's as true in Baltimore as anywhere else. And [they] don't even have an intelligent strategy about "if this works we're going to take the next step," and how that might occur. This appears to be the case with the Success For All (SFA) program in Baltimore. The intensive reading program has been extensively researched (Slavin et al. 1994), has been shown to be effective, and is currently being used in hundreds of schools across the nation. Yet in Baltimore, the program has not expanded beyond the initial five schools in the pilot program. One explanation is "political difficulties" with the school system. The program was originally brought into the school system by then-superintendent Alice Pinderhughes. The program specialists worked with the superintendent and were closely associated with her. One year into the program, the newly elected mayor Schmoke replaced Pinderhughes with Richard Hunter. Hunter disliked outside involvement in the schools, particularly from the Johns Hopkins University community that developed Success For All. The

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program found itself in a fight for its survival. Thus, the general perception among Baltimoreans about the SFA program is that "it's been around for ten years and it hasn't solved all of our problems." As a result, support and enthusiasm have waned. Another obstacle to creating an infrastructure of support on a broad scale is the desire for a magic bullet: one program capable of solving a problem once and for all. While attractive in theory and tempting to hope for, there is not likely to be a program that works for all children who experience it. Ignoring this reality can sometimes lead to an all-or-nothing approach to program implementation. If a program does not show improvement for all children, it is unlikely to get a strong endorsement even if it is helping many children. As one professor of education described the situation: A problem of school reform generally, and especially in large urban districts, is that no program gets every kid in the district to a year above national norms. So in a way, after a program has been around for a while, even if it has had a significant impact on student achievement compared to what it would have been, or control groups, you're on the spot. Let's say that kids were two years below level and now they are one year below level, are you going to say that is enough? No. There's a tendency to say "that's not enough, let's try something else." Ultimately, these tendencies lead to a constant turnover in programs which makes expansion a difficult challenge above and beyond the test of sustaining collaborative arrangements and comprehensive programs. Strategies for Sustaining Collaborative Efforts

What can be done to overcome these obstacles? The discussion above makes clear that the establishment of partnerships is not an instant process. Yet, partnerships and other collaborative approaches may be the best available method for coping with diminished funds. Granting agencies, particularly public ones, encourage collaboration as they attempt to get more out of their dollars. Also, program monies from the federal government have decreased in some cases and not increased in most cases. An employment officer responding to the federal cutbacks framed the issue this way: The trend now for everyone involved in human services is to explore a wider range of resources. The key is to find a way of identifying resources that will sustain themselves. This is the challenge. The writing is on the wall. The federal government is not going to expand its support. I don't care who gets into office in November.

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It's not the trend. So we need to be about the business of changing the way we support our services. We all have to think outside of the old paradigms that we've been living with since the 1960s. It's very hard to do. .

The same trend is evident in the private sector. As a New Orleans stakeholder observed: The push in private foundations and now corporate givers is to support collaborative efforts, because their resources are shrinking, and many of these funding sources have been burned by their funds being used to reinvent the wheel. So the trend for the last few years has been to use money to encourage collaboration or fund existing collaboratives. How can urban stakeholders stay focused and work toward collaborative and comprehensive attention to inner city problems? Despite turf issues and other challenges, many stakeholders in Baltimore and New Orleans agree that there is more potential for collaboration around children and youth than almost any other issue on the urban scene. So, how can groups and organizations keep children first? Building Trust

At the heart of sustained efforts is the building of trust. Building trust in any relationship takes time. When trust has been broken or when people fail to follow through on promises, rebuilding trust becomes increasingly difficult and that trust can be easily damaged. One New Orleans businessman described a task force that did not accomplish all that it had hoped to. Because the group adopted a confrontational approach with the school system, it gained a "watchdog" reputation that was hard to shake, and it made the kind of trust that might allow collaboration between those stakeholders difficult to build. A Baltimore observer explains that when trying to build trust, it helps to bring something to the table. You must be a partner in the true sense of the word. If you're only in it to get, get, get, and you aren't willing to give, or have nothing to give, then it becomes very difficult to have a valuable relationship. Building trust requires that people act in a manner that inspires it. The challenge is not only to build trust between groups of stakeholders-parents and teachers or administrators and businessmen-but among them and within groups at every level.

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Leadership and Vision

Many of the obstacles we have highlighted point to a need for leadership. It is evident that people are not likely to come together in a meaningful way without a catalyst and leader to guide them. Accordingly. many respondents say that collaboration around the needs of children and youth demands leadership that has an active interest in having a more coherent approach to coping with the needs of disadvantaged children in the inner city. In Baltimore the mayor has a potential role to play in the education arena. He does not need to fight with an elected board that might challenge his authority. Further. the city council is not particularly powerful. Nonetheless, taking a leadership position in education issues requires will. Many politicians are not inclined to take the political risks necessary to make such an effort. One program director in Baltimore claims that "When our leaders come forth, it's after the fact. [I] don't see people rallying support early enough." While the mayor has shown some desire to take an active leadership role, some stakeholders argue that he lacks a consistent strategy for reform. Leadership also needs to be inclusive, participatory and non-confrontational. As one New Orleans stakeholder pointed out, school and city leaders must be willing to "give up their traditional ways" of interacting. Leaders in the community and the school system must be facilitators and be willing to reach out to each other and to the larger community. Substantive reform requires a great deal of effort and resources, and cannot be accomplished by the school system alone. Sharing Ideas and Learning about What Works

Many stakeholders do not seem to have an understanding of the "big picture" in their communities. Some argue that these cities are still not learning the lessons of program development and implementation. There is evidence available about what works and what does not, but many fail to use it. Stakeholders do not share experiences and the results of practices. Consequently, the same mistakes are repeated over and over again, wasting valuable resources in the process. Thus, it is important to share information. Because of the tarnished reputation of many urban school systems, an independent structure for sharing information may be necessary. A reputable and credible clearinghouse and site for developing policy and process could be an invaluable asset. The Metropolitan Area Committee (MAC) in New Orleans, for example, has a reputation for bringing different interests in the community to the table to discuss, reach consensus, and share goals through their Leadership Forum. MAC is the organization charged with developing a strategic plan for the Annie E. Casey Jobs Initiative. The Committee's effort is built around an open process, inviting all stakeholders to the table. This

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type of setting for community leaders would seem to be essential as it creates a neutral ground for sharing information and experiences. In Baltimore, the Citizens Planning and Housing Association (CPHA) is part of a new network called the Baltimore Education Network (BEN), through which numerous organizations and individuals work cooperatively on important educational issues. BEN holds periodic open meetings where people have the opportunity to share information, get feedback on their activities, and discuss future efforts. Not only does this network allow a dissemination of information, but it also serves to begin the process of institutionalizing collaboration. Institutionalizing Relationships

The challenge, again, is not a lack of initiatives but sustaining them over time in these cities. What needs to be done was articulated by a business stakeholder in New Orleans who said, "we need to create a structure that brings partnerships together." Having a local structure within which to work may be key. In New Orleans, for example, the public school system has created an associate superintendent for parent involvement and community participation. One of the superintendent's main goals has been to break down turf issues and make stakeholders understand "how [our] destinies are tied together." The role of the office is to train parents as leaders; to organize agencies that come into schools; to make sure that leaders are knowledgeable about the schools; to serve as a "direct ear" to the district superintendent from the community; to allow all stakeholders access; and to encourage a "team effort" at improving the lives of children. Part of the associate superintendent's strategy has been to encourage and support the development of parent leadership teams that meet monthly, discuss issues, give feedback, and strategize for problem solving. The associate superintendent also serves as a sounding board for parents who want to voice their complaints, concerns, and anger. The office has an outreach component, canvassing each school at the beginning of the year, assessing needs, concerns, and demands; and the superintendent takes a leading role in encouraging and guiding the community to help develop each school's improvement plan. The efforts of this office are guided by the principles of the Comer School Development Program, with an atmosphere of no fault, collaboration, and consensus among stakeholders. When this position was created in the early 1990s, the associate superintendent needed to communicate to a skeptical audience of stakeholders that, as she says, "I was for real. This is not some hoax the superintendent is throwing out to you. And it is not going to go away." In this way, beyond providing parents and community

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with a forum for communication, the establishment of a school superintendent for communication and community involvement in these areas is symbolic of a commitment in the school system and a willingness to institutionalize participation in a broad dialogue. Legitimacy is added to the process because the associate superintendent is a high ranking official of the school system. Participation can be more meaningful, in this case, because there are potential consequences. To the extent that the associate superintendent can make connections between forums, subsequent discussions and real change will be the long term test of this institutional change. Accentuate the Positive

Many stakeholders, particularly in New Orleans, emphasized the important role that the media plays in reinforcing negative stereotypes, highlighting school corruption, and focusing on stories of children's failures within the city. The good things that stakeholders are doing, the "bright spots," "talent," and the good results often gained seem to get little attention. According to the Greater New Orleans Foundation: The community in general, young people in specific[,] need to know that accomplishment, good works, achievement and service are worthy of attention and praise. This trend of dramatizing the negative has done more than acquaint us with the break-downs and dysfunction in our community. We must shift our attention to what works, who's doing well, who's succeeding, and who's achieving (1996: 28). This is not a call to be dishonest about the reality of the problems facing inner city children and youth, but it may be important to recognize that the image of children that is reflected to society affects the self-image of children, as well as affecting the hope and expectations that society invests in them. As another New Orleans civic leader explained, "There needs to be a balance .... They [the media] are more suspicious of the positive than they are of the bad things. 'This can't be this good'-you get that tone." Focusing on the positive might raise expectations and help diminish the sense of resignation some have about the problems in the inner cities. Also, highlighting positive actions can help to make people more willing to trust one another or, at the very least, less willing to distrust each other, making for an atmosphere more conducive to collaborative efforts. Recommendations

Ultimately, people must remember that the problems of inner cities are large and cannot be resolved easily. Creating new patterns of problemsolving requires hard work and overcoming a great deal of resistance.

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Resistance to collaboration-at least on a conceptual level-is mitigated by an organization's dwindling financial resources and by skepticism from the public towards social welfare spending and bureaucracy. As a practical matter, collaboration and coalition-building on the part of organizations require more proactive steps. To start, foundations might consider longer-term commitments to the collaborative and comprehensive programs they fund. School systems could adopt more effective programs. Urban stakeholders need to communicate with one another in formal and institutionalized settings. This research has primarily focused on the role that public and private agencies-at the state and municipal levels-play in building communities and coalitions. Congress and federal agencies can also play significant roles. We suggest four promising approaches. First, give priority to the problem of concentrated poverty. As the Maryland experience illustrates, even though political pressures demand that solutions be inclusive of all jurisdictions and cover all problem areas, states find it difficult to target money. Therefore special problems such as concentrated poverty in the inner city may be resolved by federal intervention. Second, move away from pilot projects. Small-scale experiments rarely convert to general practice. Thus, it is better to search for general points of leverage than to assume that a successful experiment will somehow "catch on." Third, re-examine funding patterns. Separate funding streams pose a barrier to local collaboration. Accumulated experience makes it clear that problems are best dealt with in a community context rather than as a series of isolated occurrences (Schorr 1997). Federal funding should facilitate a community approach. Experience also indicates that comprehensive and in-depth social intervention is more effective than narrow or "light" intervention. This is an additional reason for pursuing federal monies. Fourth, promote research and evaluation. Research and evaluation are means for bringing diverse agencies together with concerned stakeholders and members of the university and research communities. Conclusion Enhancing an infrastructure of support is not a program that can be simply enacted and funded. It is a task that calls for a multitude of efforts and a variety of resources; it calls for a degree of community-mindedness that is often absent in the day-to-day affairs of most people. The concept of an "infrastructure of support" emphasizes the idea that particular programs and steps toward improving the lives of disadvantaged youth and families are likely to be effective only if they build toward a more substantial and encompassing effort. Every long walk is a series of single steps. The success of each step builds momentum for the next step until the journey is

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completed. Building an infrastructure of support represents a formidable challenge but one that can be overcome and thus improve life conditions for poor and inner-city youth. Appendix Table 3.1 City Profiles New Orleans Population: Race (city): White Black Race (metropolitan area): White Black Families below poverty line: Number of public schools: School board: Public school enrollment: Students eligible for free/ reduced price lunch: Race of city student population: Black White Hispanic Asian

Baltimore

496.938

736,014

35% 62%

39% 59%

62% 35% 27% 122 elected 79.870

71% 26% 18% 178 appointed 110,662

86.8%

62%

88.7% 6.9% 1.4% 3.0%

82.3% 16.5% 00.3% 00.5%

Sources: Council of Great City Schools (1992-1993); U.S. Bureau of the Census (1990).

NOTE I.

This study of comprehensive efforts to build an infrastructure of support for children. youth and disadvantaged families focuses on the efforts of two cities-Baltimore. Maryland. and New Orleans, Louisiana. We used an openended interview schedule directed at program specialists, non-profit organization leaders. school officials. business leaders. community groups and public officials. The interview schedule was aimed at learning more about the following: the extent to which each city is involved in comprehensive approaches to dealing with disadvantage and with improving urban schools. the willingness of community actors to participate in collaborative efforts, the challenges associated with partnerships. the obstacles to coordinating different sectors of the community (even when they share the same goals and purposes). and the difficulties in "scaling-up" successful programs to a system-wide level. The authors conducted over thirty interviews in the fall of 1996. All quotes in the text of this chapter are verbatim from the text of these interviews. For information about the interview schedules. please contact the authors.

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REFERENCES Adams, Chris (1993) "The burden of waste," Southern Exposure 21 (Winter): 5759. American Psychological Association (1994) "Comprehensive and Coordinated Psychological Services for Children: A Call for Service Integration," Task Force on Comprehensive and Coordinated Psychological Services for Children. Annie E. Casey Foundation (1995) Kids Count Data Book: State Profiles of Child Well-Being, Baltimore, MD: Annie E. Casey. Banisky, Sandy (1993) "Aggressive Abell Foundation puts its mark on city: from Norplant to schools, it influences social policy," Baltimore Sun, February 7, p.IA. Bowler, Mike (1996) "Shape of school reform emerges: reorganization plan modeled on Chicago's," Baltimore Sun, January 17, p. IA. Chavkin, Nancy Feyl (1989) "Debunking the myth about minority parents," Educational Horizons 67 (Summer): 119-23. Clark, Reginald (1983) Family Life and School Achiel'ement: Why Poor Black Children Succeed or Fail, Chicago: University of Chicago Press. Cohen, David (1995) "What is the system in systemic reform?" Educational Researcher 24 (December): 11-17. Comer, James P. (1988) "Educating poor minority children," Scientific American 259 (November): 42-48. Committee for Economic Development (1995) Rebuilding Inner-City Communities: A New Approach to the Nation's Urban Crisis, New York: CED. Council of the Great City Schools (1996) National Urban Education Goals: 1994-95 Indicators Report, Washington, DC. Covello, Leonard (1958) Heart Is the Teacher, New York: McGraw-Hill. Dauber, Susan L. and Joyce L. Epstein (1993) "Parent's attitudes and practices of involvement in inner-city elementary and middle schools," in Nancy Feyl Chavkin (ed.) Families and Schools in a Pluralistic Society, Albany, NY: State University of New York Press, pp. 53-71. Delgado-Gaitan, Concha (1990) Literacy for Empowerment: The Role of Parents in Children's Education, New York: Falmer Press.

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_ _ _ (1991) "Involving parents in the schools: a process of empowennent," American Journal of Education 100 (November): 20-46. Dryfoos, Joy G. (1994) Full Service Schools, San Francisco: Jossey-Bass. Education Week (1998) Quality Counts 98: The Urban Challenge, Washington DC: Education Week. Epstein, Joyce L. (1986) "Parents' reactions to teacher practices of parent involvement," Elementary School Journal 86 (Fall): 277-94. Finders, Margaret and Cynthia Lewis (1994) "Why some parents don't come to school," Educational Leadership 51 (May): 50-54. Fine, Michelle (1991) Framing DropoUTS: Notes on the Politics of an Urban Public High School, Albany, NY: State University of New York Press. Finn, Chester E. Jr. and Theodore Rebarber (1992) Education Reform in the 90's, New York: Macmillan. Garvin, James R. and Alma H. Young (1993) "Resource issues: a case study from New Orleans," in Louise Adler and Sid Gardner (eds) Politics of Edllcation Association Yearbook i 993, Washington, DC: Falmer Press, pp. 93-106. Greater New Orleans Foundation (1996) A Report on the Ford/MacArthur Leadership initiative, New Orleans (September). Halpern, Robert (1995) Rebuilding the inner City: A History of Neighborhood initiatives to Address Poverty in the U.S., New York: Columbia University Press. Henderson, Anne T. (1988) "Parents are a school's best friend," Phi Delta Kappan 70 (October): 148-53. Henderson, Anne T. and Nancy Berla (eds) (1994) A New Generation of Evidence: The Family Is Critical to Student Achievement, Washington, DC: National Committee for Citizens in Education. Jensen, Peter (1996) "Rawlings undeterred by flack over school aid: children's education at stake, he believes," Baltimore Sun, February 17, p. lAo Kirst, Michael W. (1994) "Equity for children: linking education and children's services," Educational Policy 8 (December): 583-90. Kretzmann, John P. (1992) "Community-based development and local schools: a promising partnership," Neighborhood Innovations Network, Northwestern University.

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Lareau, Annette (1987) "Social class differences in family-school relationships: the importance of cultural capital," Sociology of Education 60 (April): 73-85. Lauria, Mickey, Robert K. Whelan, and Alma H. Young (1995) "The revitalization of New Orleans," in Fritz Wagner, Timothy E. Joder, and Anthony J. Mumphrey Jr. (eds) Urban Revitalization: Policies and Programs, Thousand Oaks, CA: Sage. Lightfoot, Sara Lawrence (1978) Worlds Apart: Relationships Between Families and Schools, New York: Basic Books. Long, Norton E. (1972) The Un walled City, New York: Basic Books. Maryland State Department of Education, Division of Planning, Results, and Information Management, (l996a) Maryland School Pelformance Report: State and School Systems 1996, Baltimore, Maryland. _ _ _ (1996b) The Fact Book 1995-96: A Statistical Handbook, Baltimore, Maryland. McAfee, Oralie (1987) "Improving home-school relations: implications for staff development," Education and Urhan Society 19 (February): 185-99. Moles, Oliver C. (1993) "Collaboration between schools and disadvantaged parents: obstacles and openings," in Nancy Feyl Chavkin (ed) Families and Schools in a Pluralistic Society, Albany. NY: State University of New York Press, pp. 21-49. National Alliance of Business (1989) "The Compact Project: School-Business Partnerships for Improving Education," Corporate Action Package, ERIC (ED312 487). National Center for Family Literacy (1996) The Power of Family Literacy, Louisville, KY: National Center for Family Literacy. Neal, Terry M. (1997) "Counties' plan: money for all schools in Maryland," Washington Post, March 16, p. B1. Ogbu, John U. (1988) "Diversity and equity in public education: community forces and minority school adjustment and performance," in Ron Haskins and Duncan MacRae (eds) Policiesfor America's Public Schools: Teachers, Equity, and Indicators, Norwood, NJ: Ablex, pp. 127-70. Orr, Marion (1992) "Urban regimes and human capital policies: a study of Baltimore," journal of Urban Affairs 14 (Summer): 173-87. _ _ _ (1996) "Race, jobs, and politics," paper prepared for the Annual Meeting of the American Political Science Association, San Francisco, CA, August 29September I.

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Peirce, Neal (1993) Citistates: How Urban America Can Prosper in a Competitive World, Washington, DC: Seven Locks Press. Rich, Dorothy (1988) "Bridging the parent gap in education reform," Educational Horizons 66 (Winter): 90-92. _ _ _ (1993) "Building the bridge to reach minority parents: education infrastructure supporting success for all children," in Nancy Feyl Chavkin (ed.) Families and Schools in a Pluralistic Society, Albany, NY: State University of New York Press, pp. 235-44. Schorr, Lisbeth B. (1988) Within Our Reach: Breaking the Cycle of Disadvantage, New York: Doubleday. _ _ _ (1997) Common Purpose: Strengthening Families and Neighborhoods to Rebuild America, New York: Doubleday. Scott-Jones, Diane (1987) "Mother-as-teacher in the families of high- and lowachieving low-income black first-graders," Journal of Negro Education 56 (Winter): 21-34. Seeley, David S. (1989) "A new paradigm for parent involvement," Educational Leadership 47 (October): 46-48. Slavin, Robert E., Nancy A. Madden, Lawrence J. Dolan, and Barbara A. Wasik (1994) "Success for all: longitudinal effects of systemic school-by-school reform in seven districts," paper presented at the annual meeting of the American Educational Research Association, New Orleans, April. Swap, Susan McAllister (1993) Developing Home-School Partnerships: From Concepts to Practice, New York: Teachers College Press. Szanton, Peter L. (1986) Baltimore 2000: A Choice of Futures, Baltimore, MD: Morris Goldseker Foundation of Maryland. Toyota Families in Learning (1995) Annual Report 1994-1995, College of Urban and Public Affairs, University of New Orleans. Tyack, David and Elisabeth Hansot (1982) Managers of Virtue, New York: Basic Books. United States Department of Commerce, Bureau of Census (1992) 1990 Census of Population and Housing, Washington, DC: Government Printing Office. United States Department of Education, National Center for Education Statistics (1994) School District Data Book Profiles: 1989-1990, Washington, DC: Government Printing Office.

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United States Department of Education, National Commission on Excellence in Education (1983) A Nation at Risk: The Imperative for Educational Reform, Washington, DC: Government Printing Office. Waddock. Sandra A. (1993) "Lessons from the national alliance of business compact project: business and public education reform," Human Relations 46 (July): 849-78. Williams, David L. Jr., and Nancy Feyl Chavkin (1989) "Essential elements of strong parent involvement programs," Educational Leadership 47 (October): \8-20. Wilson, Kenneth G., and Bennett Davies (1994) Redesigning Education, New York: Henry Holt and Company. Young, Alma, and Jyaphia Christos-Rodgers (1995) "Resisting racially gendered space: the women of the St. Thomas Resident Council, New Orleans," in Michael Peter Smith (ed) Marginal Space: Comparative Urban and Community Research, New Brunswick, NJ: Transaction Publishers.

_ _ _ (\996) "Conversations of power: community organizing strategies of the St. Thomas Resident Council, New Orleans," in Christophe Demaziere and Patricia Wilson (eds) Local Economic Development in Europe and the Americas. New York: Mansell.

4 Tenant Organizing in Public Housing: A Case Study of Kansas City, Missouri, and New Orleans, Louisiana ROBERT O. WASHINGTON AND ROBERT K. WHELAN

This chapter analyzes tenant organizing in public housing as a strategy for human capital investment. Within the central city, public housing tenants are in dire need of effective human capital investment strategies. These residents find themselves trapped, not only in poverty, but also in a segregated culture that has social norms which are different from and in opposition to the norms of mainstream U.S. society. Extended exposure to these oppositional social norms has the effect of psychologically conditioning residents to engage in behavior that is shunned by mainstream society. This conditioning cripples them in their attempts to find living-wage jobs and otherwise integrate successfully into mainstream society (Massey and Denton 1993). This chapter addresses human capital investment as a means of resolving these problems, so as to improve the lives of public housing tenants and contribute to the revitalization of the central city. The chapter is organized into three sections. First we discuss the theoretical concepts that underpin tenant organizing; next we present a historical sketch of tenant organizations in Kansas City, Missouri, and New Orleans, Louisiana; and finally we interpret lessons from the Kansas City and New Orleans experiences and discuss their implications for public-housing policy. These cities were selected because they have long histories of publichousing settlements and of neighborhood organizing, resident councils, and self-help initiatives. Therefore, they represent prototypes of tenant organizing in public housing developments throughout the United States. The information presented in this chapter was collected from public meetings, personal interviews, and a review of public documents. In the case of New Orleans, these public documents were prepared as part of the 1994 City of New Orleans application for an Empowerment Zone-Enterprise Community grant. In the case of Kansas City, materials used in preparing the Strategic and Comprehensive Plan were reviewed.'

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Definitions and Research Aims Stone's concept of the urban regime provides the analytical framework for this study. He defines an urban regime as the set of informal arrangements by which public bodies and private interests function together in order to make and carry out governing decisions (Stone 1989). In other words, it is a network of symbiotic relationships formed between business owners and politicians within which no single person or single group rules the city. Rather, the city is ruled by the regime. Stone further postulates that politics is about production rather than about the distribution of benefits. Therefore, within the urban context, corporate land-use interests will pursue policies intended to advance urban development. In the process, public-policy decisions will be biased in favor of other corporate interests who provide resources to the regime, and against economically disadvantaged groups who are perceived as providing nothing to the regime. Therefore, regime theory tells us that the urban regimes that govern U.S. cities do not view public housing residents as making useful contributions to the regime and so consider that it is not in the self-interest of the regime to attend to the needs of the residents. This situation creates both internal obstacles in the form of cultural conditioning and external obstacles in the form of political isolation. This urban ecology contributes to the extreme difficulty that tenants have in improving their standard of living. David Rogers (1971) helps to provide scope and context to the study with his argument that studying the political and organizational ecology of cities is critical in order to understand the capacities of cities to transform themselves in the face of rapid economic, demographic, and technological change. He asserted that the political and organizational ecology of cities is the human network that determines how resources are produced and distributed and how power relationships are structured. Therefore, it determines the extent of concentration or dispersion of power, the organization and functioning of city government, the way in which major interest groups relate to city government and to each other, the way in which political coalitions are formed within cities, and the status of relationships of cities to state and federal agencies. In his study of the cities of New York, Philadelphia, and Cleveland during the late sixties, Rogers (1971) sought to identify obstacles to the implementation of innovative public- and human-services programs and institutionalchange strategies. The primary obstacle was the two-tiered class economy which had well-educated professional and high-technology workers at the top, and service-industry workers with low-paying unskilled jobs at the bottom. He concluded that a bifurcated economy causes instability which in tum impairs a city's powers to implement change. This leads to "fragmentation and baronial power-seeking among their many interests, including state and

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federal agencies" (Rogers 1971: 9), which causes cities to dissipate their limited resources in dysfunctional political infighting. Political scientists and market-centrists refer to the consequences of a bifurcated economy as "economic restructuring" (Fainstein 1994), and "the new urban reality" (Peterson 1981). Rogers' work is an example of the early responses to, and a critique of, pluralistic theories of urban politics as espoused by Dahl (1961), Polsby (1963), and others. As a political philosophy, pluralism asserts that: (1) power is fragmented and decentralized; (2) there are dispersed inequalities in so far as all groups have some resources to articulate their case, even if their demands are not necessarily or successfully acted upon; and (3) this dispersion of power is a desirable feature in any system approaching the status of democracy (Judge 1995). This study also considers the profound impact on the city and its political order that comes from the changing role of racial regimes, although many studies do not. That is, other works fail to treat race as a constitutive element of the political order (Holden 1995). Hockfeldt and Weitzel-Kohfeld (1989: 22) noted that the politics of class has declined in American politics as the politics of race has become ascendant, which is a view that is supported by local, state, and national election data showing that politics has become racially polarized. They argue that, between the 1948 Democratic National Convention and the 1964 presidential election, the Democratic Party was transformed from a party that relied fundamentally upon the solid Democratic white South to one that relied fundamentally upon the solid, overwhelming support of blacks. These authors concluded that "the transformed environment of American politics is structured around racial conflict and has led to volatile, shifting alignments in electoral politics" (1989: 18). The politics of race has become ascendant, in part, because cross-cutting linkages are absent. Even when whites and blacks share the same religious denominations, class memberships, and party affiliations. they live in racially segregated neighborhoods, they worship at racially segregated churches, and their interests lie along racially structured lines. Racial conflict has become more intense because racial groups are separated across a wide range of social experiences. As a result, the potential has been created for high levels of political polarization along racial lines and for political volatility driven by racial conflict (Hockfeldt and Weitzel-Kohfeld 1989: 38). This chapter examines one dimension in that shift by looking at political and economic activities (though marginal) among public housing residents and at public housing developments as symbolic concentrations of inner city political power and as levers of influence in governing decisions. We also explore the proposition that public housing residents represent more than mere consumers or clients of governmental programs and services, although they lack substantial access to institutional resources. In other words, activities that

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occur in most organized public housing developments are directed at more than just survival; residents may also be viewed as a small but significant group of regime partners who help shape, promote, and even deliver services. Their activities may be explained by what Zukin (1991: 10) has called the "opposition between market and place," which is a topic we shall return to in our concluding remarks. Some urban regime theorists have neglected important elements of the social order that relate to the realities of the inner city, including racial segregation and political isolation. Such mid-range theories may be more applicable to Rogers' political and organizational ecology. In addressing issues of human capital investment, this chapter explores ways of organizing and training public housing residents in order to give them the tools to break free of the harmful cultural, social, and psychological conditioning that cripples their attempts to enter mainstream society and become partners in the regime.

Conceptual Framework Referring to the era during which Rogers (1971) conducted his study, Massey and Denton argued that any hopes that the coincidence of rising economic status and growing civil rights developed for desegregation were dashed by the decade's end. Despite the fact that most whites said in public opinion polls that they oppose segregation, and despite such provisions as the Fair Housing Act, segregation continued. In contrast to the steady improvement in black socioeconomic status through 1973, the decade ended in record unemployment, inflation, falling wages, increasing income inequality, and rising rates of black poverty. As segregation persisted, black isolation deepened, as did the social and economic problems that result from such isolation. 2 Thus the ghetto gave shelter to the underclass (Massey and Denton 1993: 61). Massey and Denton not only lay the conceptual groundwork for the ecological perspective of our chapter; but they also offer an intertextua1 framework (of racial segregation) for explaining the gap we perceive in current urban regime theory. According to their study, American Apartheid, one-third of all African Americans in the United States live under conditions of intense racial segregation and are among the nation's most spatially isolated and geographically secluded people, suffering extreme segregation across mUltiple dimensions simultaneously (1993: 77). Drawing from this, we argue that perhaps one of the reasons that regime theorists may not have given race prominent attention is that racism and residential segregation did not fit pluralist philosophy. Massey and Denton have argued that the residential segregation of blacks provided no basis for pluralist politics because it precluded the emergence of common neighborhood interests. Since no one except blacks lived in the ghetto, no other ethnic group had a self-interest in seeing that they

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were provided with public services or political patronage. This geographic isolation forced nearly all issues to cleave along racial lines. The historical confinement of blacks to the ghetto meant that they perceived few shared political interests with whites. As a result, their incorporation into local political structures differed fundamentally from the pluralist model followed by other groups. Due to their geographic and political isolation, blacks had virtually no power when their numbers were small, and only when their numbers increased enough to dominate one or more wards did they acquire any influence at all. Rather than entering the pluralist coalition as an equal partner, however, the black community was incorporated in a very different way-in what Massey and Denton call a machine within a machine. Ultimately, public housing developments became the focus of black political power. Lawyers, for example, set up shop not far from these developments, and this proximity allowed them direct access to the management and operation of public housing programs and services. Politicians also served a key role, since many served on local public housing boards. However, mayors and other political leaders fonned strong interest groups and coalitions only to enhance their political power but not to enhance the lives of public housing residents.

Tenant Organizing in Public Housing Since the late 1970s, this country has witnessed a remarkable resurgence of neighborhood activism (Dreier 1996; Boyte 1980, 1989; Kling and Posner 1990), which has developed in response to a variety of conditions. For example, much of the grassroots organizing has championed causes on behalf of populations at risk, fonning coalitions with social activists and civil-rights advocates to find ways of translating the tactics learned during the civil rights, anti war, and anti nuclear movements into strategies to address the new urban reality. Residents in public housing have played a major role in this new community empowennent movement because they have learned that human and public services tend to be more available, accessible, and responsive when they are a part of a political organizing strategy (Washington 1976; Lenz 1988; Miller 1992; Traynor 1993; Dreier 1996). Dreier (1996) notes that, although there has been a great deal of grassroots organizing in public housing, there are relatively few success stories. Some public housing tenants have been more successful than others in saving their homes from the wrecking ball through direct action and litigation, and some struggles have led tenant organizations to demand greater participation in the day-to-day management of their developments, including the creation of resident-management corporations and even tenant ownership. Although a growing number of tenant associations, resident councils, and tenant-management corporations exist in public housing today, Dreier

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notes that they represent only a handful of the nation's public housing developments. Many tenant groups are relatively weak in terms of leadership and organizational capacity, and few enjoy widespread participation by residents or have regular elections. A number could even be categorized as "company unions" which lack the level of independence from the housing authority management that makes tenant groups effective. A framework for accountability between residents and tenant leaders is often problematic, and in only a few cities have residents formed citywide tenant councils that bring together leaders from various developments to negotiate their common concerns with the housing authority (Drier 1996: 134). Thus, resident organizing and participation in the nation's public housing developments remains ad hoc. due in part to the opposition between market and place. However, there are enough activities among public housing tenants to argue for their inclusion in the "landscape of power" (Zukin 1994: 134). Residents of public housing developments, as organic entities of inner city communities, derive their sense of well-being, as well as their senses of despair, fear, and urgency from the same set of forces that influence citywide politics. Organized tenant councils and associations perform the same instrumental roles as neighborhood associations: they are vehicles through which neighbors learn about problems, formulate opinions, and seek to intervene in the political process to protect their local interests. Current regime theory may not be inclusive enough to accommodate the conflicts and ambiguities inherent in the lives of public housing tenants. As Lauria, Whelan, and Young (1995) note, there were events in the 1960s and 1970s which could not be subsumed by the pluralist paradigm, e.g., the rise of African-American politicians, the increased importance of neighborhood organizations, and the expanded protests of tenants. Moreover, empirical evidence does not support the assumptions that power was widely distributed in communities or that slack political resources in the system allowed for institutional change. Lowi (1968) suggested that pluralism, often characterized by interest group politics. is inherently conservative and appeals to vested interests. Therefore, any change that is likely to occur will be disjointed and create outcomes with cross purposes. Interest group politics also has the tendency to reduce all issues to the aggregate of private group interests and to delegate authority for policy formulation and implementation to special interest groups. As a result, public responsibility for policy execution is reduced, resulting in the dissipation of limited resources in dysfunctional political infighting. Brown (1996) reminds us that the problem of uneven distribution of power may seem so intractable and so deeply affected by large scale forces such as the changing economy and racism that it is difficult to generate the confidence and political will that are necessary to mount and test new empowerment approaches. Yet we know that modest "tinkering around the edges" is unlikely to have measurable effects.

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Case Studies: Kansas City and New Orleans

Our examples of resident organizing in Kansas City and New Orleans may shed some light on factors that influence successful organizing by public housing tenants and on the current and potential role they play in urban politics. We begin with discussions of the development of the Housing Authority of Kansas City (HAKC) and of the Housing Authority of New Orleans (HANO), which provide the historical backgrounds and contexts for tenant organizing in the two cities. Kansas City

Kansas City, Missouri, is located at the western edge of Missouri near the state's border with Kansas. It covers 318 square miles of land that are punctuated with impressive networks of boulevards, parks, and fountains. The city's population grew nearly seven percent between 1960 and 1990: its 1990 population was 431,236. Four percent of the city's population (17,250 persons) live at or below the official poverty line and also live in public housing developments. The Housing Authority of Kansas City (HAKC) operates ten public housing developments, providing housing and rental assistance to 6,000 low income and elderly households. The housing authority directly owns and manages 2,058 multi-family units of which 91 percent are apartments and 9 percent are single family residences. Table 4.1 describes the numbers and types of housing available in each of the HAKC public housing developments. Kansas City provides an important backdrop for studying the impact of tenant organizing, since neighborhood associations have played an integral role in shaping the fabric of this city, that is, its political and organizational ecology. In the 1940s, for example, the city's welfare department created "community councils" with specific geographic boundaries to deal with the problems of youth, juvenile delinquency, and social welfare. By the late Table 4.1. Public Housing Developments Operated by Housing Authority of Kansas City Name Guinotte Riverview Chouteau Heritage Wayne Manor T. B. Watkins West Bluff Dunbar Brush Creek Pemberton

Type

Units

Bedrooms

2 story townhouse 2 story townhouse 2-3 story walk-up elderly/disabled 3 story walk-up 3 story walk-up low-rise elderly bungalow elderly high-rise elderly high-rise

418 232 140 80 74 288 100 65 135 120

1-4 1-3 1-5

studio

1-5 1-5 1-5 1-2 1-2

studio

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I 960s, neighborhoods began fonning smaller associations and getting involved in city government and related issues. During the 1970s government and community fonned a tighter bond. The planning and development department designated a field office to address neighborhood concerns, and development issues are no longer summarily decided by government. The Kansas City Planning Commission will not hear a development case unless the developer has met with the appropriate neighborhood group. The knowledge that residents can exert some influence has encouraged virtually the entire city to organize into associations that work with local government to improve the quality of life. This attitude has carried over into public housing tenant activism.

Tenant Organizing in Kansas City Kansas City established its first tenant organization in the late 1960s, when resident councils throughout the United States began organizing to force improvements in the management of public housing authorities. While resident councils were particularly concerned with upgrading the physical condition of their developments, the goals of the city's first tenant organization included security, public safety, job training, child care, and counseling. However, the council suffered from lack of organizational influence and leadership skills, which Dreier (1996) recognized as being among the major limitations to the effectiveness of tenant associations, resident councils, and tenant management corporations. These groups also have difficulty developing strategies that strengthen their respective bases. Therefore, successful activism requires leadership development and capacity building, which stabilize membership and promote fundraising. A decade after founding its first resident council, the government recognized the gaps in leadership. To correct its shortcomings, the government fonned the organization "Neighborhood Alliance" to serve the city's neighborhoods and public housing developments as a neighborhood capacity-building organization. These capacity-building activities have resulted in a cadre of public housing leaders in Kansas City whose reputations are comparable to Kimi Gray of Kenilworth-Parkside in Washington, DC; Bertha Yilkey in St. Louis; Mildred Hailey in Boston; and Irene Johnson in Chicago. For example, Mrs. Lyde Doston, a twenty-seven year resident of Guinotte Manor and a community activist, has served as resident council president, as citywide council president, and on many state boards. Mrs. Connine Flowers, the president of the Public Housing Resident Council at the time of this writing and a twenty year resident of public housing, travels frequently to Washington, DC, to participate in conferences and workshops and to maintain linkages with larger organizations and networks whose political influence extends beyond the city. Miss Florine Jones' experiences fonn an outstanding example of civic activism among public housing residents. For more than 30 years, Miss Jones

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has been a community activist. Several years ago she organized the tenants association, the tenant council, and the resident-management group at the Theran B. Watkins Development. She also served as president of the tenants association until 1995. Miss Jones currently serves as a liaison between residents and the Kansas City public housing authority, is on the board of the Samuel Rodgers Community Health Center, and has played a vital role in creating the Paseo Corridor Drug and Crime Free Community Partnership. The leadership of these women and the activities they lead in housing developments have penetrated the social structure and the informal partnerships between city hall and the downtown business elite.

Public-Private Partnerships The Public Housing Council, which is the citywide umbrella resident group, engages in a number of public-private partnership activities. Through a subcontract with a minority-business construction firm, it provides an apprenticeship program and employment opportunities for housing residents who are interested in employment in housing rehabilitation. It is affiliated with the First Step Program, which is an organization that provides entrepreneurial business training. Also, through a $100,000 HUD Tenant Opportunity Programs Grant (TOPS), the Public Housing Resident Council hired a five person consulting team that provides economic development counseling, job training, and community organizing services for public housing residents. The Public Housing Resident Council manages a $47.6 million HOPE VI grant at Guinotte Manor. Designed to address the problems of severely distressed public housing, HOPE VI grants require that public housing agencies (PHA) develop plans that focus on the economic and social needs of the residents, as well as on the physical conditions of the development. Revitalization plans developed under HOPE VI emphasize reintegrating public housing developments into the surrounding communities from which they have been physically, economically, and socially isolated. By reducing this isolation, integrating developments and adjacent neighborhoods helps to overcome the negative social aspects and influences of ghetto life. HOPE VI gives the PHA flexibility in designing an appropriate approach for rehabilitating public housing developments.

New Orleans Public housing residents in New Orleans account for ten percent of the city's total population, which was 496,938 in 1990. The Housing Authority of New Orleans (HANO) is the sixth largest public housing authority in the United States, and oversees nine developments and 1,697 scattered sites. Table 4.2 describes the numbers and types of housing available in each of the HANO public housing developments. New Orleans was the first city in the United States to benefit from the Public Housing Act of 1937. This legislation created the United States Housing

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Table 4.2. Public Housing Developments Operated by Housing Authority of New Orleans Name B. W. Cooper Desire Fischer Guste Iberville Lafitte C. J. Peete SI. Bernard SI. Thomas

Type

Units

Bedrooms

3-4 stories 2 stories elderly/disabled elderly/disabled 2-3 stories 2-3 stories 1-3 stories 1-3 stories 1-3 stories

1600 500 1235 718 809 876 1301 1260 854

2-4 2-4 2-4 2-4 1-3 1-3 1-3 2-4 1-4

Authority, which has since become a division of the U.S. Department of Housing and Urban Development (US HUD), and provided grants-in-aid for local housing. The public housing itself was built and administered by local public agencies, while private realtors and contractors handled land sales and construction. Funding provided by this legislation allowed New Orleans to construct the St. Thomas and C. J. Peete housing developments, which were the first of their kind in the nation. The problems faced by the Housing Authority of New Orleans are typical of many of the nation's older public housing authorities, including management problems, spiraling crime rates in their housing developments, and the lack of modernization funds. In 1997 HANO estimated that its units needed $9.8 million in renovations. In 1979, the U.S. Department of Housing and Urban Development declared that HANO was financially troubled, with operating reserves that were dangerously low. Nine years later, HAND's performance had still not improved; a comprehensive review identified twenty-four administrative problems. As a consequence, HUD ordered the City of New Orleans to tum over the management of its nine public housing developments to a private management company. This attempt at restoring the public housing program's efficiency and effectiveness failed, however, and the private management approach led to four consecutive changes in the authority'S executive. A second HUD-sponsored comprehensive audit report, released June 29, 1994, concluded that HANO was failing to fulfill its primary mission of providing safe, decent, and sanitary public housing. On August 1, 1994, prompted by the audit report, then HUD Secretary Henry Cisneros drafted a letter to both Mayor Marc Morial and then Louisiana Governor Edwin Edwards, in which he announced a new "recovery partnership" between HUD and the City of New Orleans. Under this new partnership, HUD agreed to go beyond its traditional role of monitoring programs and enforcing regulations to become actively involved in management decisions for the housing authority. The new arrangement included provisions for active engagement of

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residents by appointing them as members of the executive council to provide policy guidance for HAND's Board of Commissioners. In April 1995, Michael Kelly was named as HAND's permanent executive director, and he remains in this position at the time of this writing (April 1999). In February 1996, HUD remained dissatisfied with the rate of improvement in HANO's performance. It negotiated an agreement with New Orleans Mayor Marc Morial to shift control of HANO from the seven member, residentdominated Board of Directors to a Tulane University official who would act as Executive Monitor of HANO's operations. The monitor's appointment has commonly been referred to as the "HUD friendly takeover." In April 1996, the resident councils of the Iberville and St. Bernard developments jointly filed suit against HUD claiming that its stripping the board of its authority was illegal. As in Kansas City, the city of New Orleans has received HOPE VI grants to revitalize three of its housing developments: Desire, St. Thomas, and B. W. Cooper. Tenant Organizing in New Orleans Tenant organizing in New Orleans was born in the late 1960s, following the success of the civil rights movement, the mushrooming of the National Welfare Rights Organization (NWRO), the growing demand for tenant operated public housing, and long-standing complaints of poor management. In 1976, prompted by the apparent success of tenant-operated public housing in St. Louis and by the active interest of the Ford Foundation, HUD agreed to a national demonstration in tenant management. Six local housing authorities, including HAND, were selected to participate. Four of the participants, also including HANO, found the early results of the three-year demonstration sufficiently promising to ask for continued HUD funding for another two years. All four jurisdictions continued the tenant management practices even after the supplemental funding was exhausted, relying entirely on their share of the PHA's operating budgets. New Orleans currently has duly elected resident councils for each of the nine public housing developments, as well as a citywide association. The Citywide Tenants Organization holds monthly meetings in which the leadership from each development can raise issues of importance to their constituents. All public housing residents are invited to these meetings, as are the executive director of HANO, the HANO Board of Commissioners, and the HUD monitor. These meetings provide administrators the opportunity to hear residents' comments and concerns, and one of the primary responsibilities of the tenant association is the evaluation of housing administrators. However, resident participation has been low, at roughly one percent. Public-Private Partnerships Following the reorganization of HANO in 1994, the board of commissioners launched its strategic plan which included the establishment of a public benefit corporation, the development of a resident

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management program, and the privatization of some services. A primary goal of the public benefit corporation was to take management control of two housing developments: Desire and Florida. These two housing developments, along with some scattered site resident organizations, were later funded $100,000 each under the HUD Tenant Opportunity Program. The funds were used for resident management training, and for business and economic development. In early 1993, the resident council, with assistance from the HANO Board, formed the HANO Resident Loan Corporation, which was designed to assist residents in becoming entrepreneurs. Currently, there are three businesses that were formed through this program: Guste High Rise Dry Cleaners, Peabody Lawn Care Services, and a retail clothing store named Pretty N. Pink. The residents of B. W. Cooper, who had been involved in training through the National Center for Neighborhood Enterprise in Washington, DC, since 1986, took over the management of their development in early 1994. The HANO Citywide Tenants Association, in conjunction with the HANO board, has sought cooperative ventures with the Chamber of Commerce. One such venture, the annual HANO Job Fair, has been very successful. Several resident councils have formed job bank centers and work with HANO staff to provide referrals to fill HANO job openings. Other cooperative programs include the Resident Economic Development Initiatives (REDI), the HANO Tenant Initiative Employment and Training Program, and the HANO Economic Development Center Job Bank and Placement Center.

St. Thomas/Irish Channel Consortium The St. Thomas/Irish Channel Consortium is perhaps one of the more successful public-private alliances dedicated to improving conditions in a housing development and its adjacent neighborhood. The Consortium comprises the St. Thomas Resident Council/Economic Development Corporation and twenty-nine other agencies and organizations that operate in an area of New Orleans known as the Irish Channel. In June of 1989, the offices of the St. Thomas Resident Council (STRC) initiated an effort to bring together all of the social service agencies and community organizations that were providing services to the St. Thomas Housing Development. This action was prompted by discontent among residents who read in newspapers and heard on radio and television about agencies and organizations receiving grants to provide services and programs to the residents without the residents themselves having participated in the planning process. The meeting was "a call by the council to come to the table as equal partners" (Jones 1993: 46). The Consortium was formed in August, and the Resident Council was given four of the thirty seats on the Consortium Board. In addition to the thirty-member consortium, there is a thirteen-member Consortium Advisory Board made up of representatives from the business

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sector, religious community, parents, school administrators, and community leaders. Their membership consists of two New Orleans School Board members, one state representative, one state senator, two community activists, two ministers, a social service agency director, a physician, a university professor, an attorney, and a grassroots community-based organization. The purposes of the Advisory Board include: grooming members to become Consortium Board members; advising the Consortium on short-tenn, long-range, and future planning; developing a greater network; improving communications to a larger community; and advising and making appropriate recommendations to the Consortium and staff relative to the improvement of the quality of its programs and respective services (Jones 1993: 73). The consortium brought a number of benefits to the S1. Thomas/Irish Channel community, such as: -A community-based teen pregnancy prevention program supported by a $1.0 million three-year grant. -The opening of the Kuji Center (short for Kujichagulia, a Swahili word meaning "self-detennination"), which operates the pregnancy prevention program and also serves as an activity center for teenagers from the housing development and surrounding communities. -The Plain-Talk Initiative, which is a community strategy for reaching sexually-active youths, funded by a $1.0 million three-year grant from the Annie E. Casey Foundation in 1992. Not all of the joint ventures engaged in by the consortium were successful. One unsuccessful case was the Robert Wood Johnson Foundation's invitation for the Consortium to develop a comprehensive community-based health care program to serve poor communities. The consortium learned that Tulane University School of Public Health and Tropical Medicine had submitted a proposal using the St. Thomas/Irish Channel community as its target, without consultation with the consortium or other community leaders. The consortium then convened a meeting with administrators of the Tulane School of Medicine to explore the feasibility of submitting a joint proposal letter to the Johnson Foundation. The consortium and Tulane fonned a small planning committee, and a draft proposal was completed. The consortium decided not to join in the submission of the proposal, however, arguing that Tulane wanted too much control and ownership over the grant. Over the same time, the consortium learned that Tulane had already received a $100,000 planning grant as a joint venture with the St. ThomaslIrish Channel community. The consortium then met with the Tulane administrators and infonned them that the community leadership would protest any agency's or organization's effort to use the St. ThomaslIrish Channel neighborhood as a target for a grant without the consortium coming to the table as an equal partner.

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The consortium and Tulane next decided to work collaboratively on another planning grant. This would be to develop a five year community needs assessment and strategic plan for solving the socioeconomic problems of the area, and to develop an integrated service/case management model, which would include a continuing education program and a masters-level curriculum to train counselors, social workers, community outreach workers, and private provider staffs working with residents living in this community. A planning group made up of consortium members, residents of the St. Thomas/lrish Channel community and representatives from various Tulane entities, including the School of Law, School of Social Work, and School of Medicine, met for one year before submitting the proposal to the PEW Charitable Trust. The consortium did receive funding from PEW to assist in the development of community committees and the planning process, but the five-year joint proposal was not funded. Implications for Planning and Policy There are several limitations to this study, foremost of which is our inability to make broad generalizations. While a small sample size is useful in detailed and comprehensive studies, in this study it has limited our ability to project accurate generalizations to a larger population. As an exploratory effort, however, the case study method has provided us with some impressions and insights which can be used to develop theory and can be translated into hypotheses for further study. We began this exploration with several presuppositions: 1.

Activism among public housing residents makes useful contributions to regime politics. 2. Residential segregation and its psychological consequences affect the way in which public-housing residents participate in urban politics and coalitions. 3. Race is a constitutive factor in analyzing citizen activism in public housing development politics. 4. Through strategies of leadership development and capacity building among public-housing residents, planners could reduce the social and economic drain on local governments represented by the residents. We will now discuss these presuppositions in light of the prior discussion. Contribution to Regime Politics

Public housing residents, in general, are rarely recognized by the local urban regime. When they are organized and empowered, however, public housing residents can make important contributions for governing the city. Examples of this include voter registration campaigns, anti-drug abuse

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programs, neighborhood watch, anti-graffiti and neighborhood cleanup and beautification campaigns, job-training, child care, counseling, and human services programs. Job training, child care, medical care, and counseling improve a publichousing resident's standard of living through enhanced employability, health, and financial status. Voter-registration campaigns and community-organizing workshops tend to increase tenant participation in the political process and thereby improve the relationship between residents and the urban regime. An urban regime is more likely to recognize the needs of an empowered group of public housing residents, such as those who vote in elections and are politically adept, than the needs of residents who are apathetic and naive. The success of public-housing resident groups has been due largely to charismatic leadership. To sustain the success of these public-housing resident groups, however, requires formal leadership and capacity-building measures. The St. Thomas Resident Council is a rare example, with the creation of the St. Thomas-Irish Channel Consortium, and the People's Institute. The Institute provides leadership-development training as well as workshops on "undoing racism" and has helped the St. Thomas Resident Council become more stable and politically stronger over the years. According to public records, the St. Thomas-Irish Channel Consortium has a budget in excess of $20 million, all of which is generated through program grants. In the vast majority of cases, the necessary resources to help novice tenant groups link with successful public-housing resident groups are missing (Dreier 1996). The role of citizen participation in the federal funding process has been spotty, although the establishment of Empowerment Zones and Enterprise Communities (EZ/EC) Initiative represents an effort to engage citizens. The city of New Orleans can genuinely boast about the broad-based participation among all sectors of its community in preparing the EZ/EC application, which clearly revealed the contribution that public housing residents make to the urban regime. The consultants who were hired to develop the EZ/EC application believed that individuals most likely to reside in the Empowerment Zone should be represented in all phases of the planning process, and they used a variety of methods to engage the New Orleans community. These included community workshops, breakfast round tables, and citywide forums. From these various meetings, sixty-four people were selected to define the EZ/EC boundaries. Among these sixty-four delegates, at least ten of them were representatives of resident councils or of community-based organizations whose primary clients were tenants of a public housing development. Residential Segregation and Political Participation

Massey and Denton (1993) have suggested that residential segregation limits the opportunities for black-white coalition building. Most coalition politics cleave along racial lines, and public housing residents (who are mostly black)

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have very little in common with the political elite. These authors contend that one-third of all African Americans in the United States live under conditions of intense racial segregation: They live within large, contiguous settlements of densely inhabited neighborhoods that are packed tightly around the central business district. However, they are not physically part of the business district, so they receive none of the financial benefits of the district. Instead, they live in an environment of concentrated poverty and physical decay. That is, they live in ghettos. Historically, the term ghetto has referred to urban enclaves where one racial or ethnic group resides and the level of poverty is high (Jargowsky 1997: 12). In modem times, especially since the 1960s when many white ethnic groups have assimilated into mainstream society, the ghetto has been associated with the residential concentration of poor African Americans. Massey and Denton suggest that the typical ghetto resident is unlikely to come into contact with whites within the particular neighborhood where they live. Even in an adjacent neighborhood, a resident would still be unlikely to see a white face, and there would be no whites in the next neighborhood beyond that. People growing up in such an environment have little direct experience with the culture, norms, and behaviors of the rest of American society. Ghetto families experience a culture with norms and behaviors radically different from, and in opposition to, the norms and behaviors of mainstream society. Once they are psychologically conditioned by this culture, they will talk, dress, and act in ways offensive to mainstream society. Therefore, no one in mainstream society will choose to employ them in anything but menial, degrading, low-wage jobs-assuming that the young person from the ghetto is fortunate enough to find employment at all. It is this type of experience that shatters the self-esteem of poor blacks and convinces them of their own worthlessness. These feelings of despair may lead to criminal activity and violence. Race and Citizen Activism in Public Housing Developments

Wilson (1987) contends that race has declined as a significant factor in social and economic matters, but Massey and Denton (1993) and Zukin (1991) argue otherwise. Race, and the attitudes and behaviors with which it is treated, influences a person's sense of worth and their aspirations. It looms large in residential patterns across the United States and helps explain poverty. Zukin (1991: 10) asserts that market and place have separated, arguing that markets have globalized and place has diminished: "Although the opposition between market and place has every structural reason to persist in a capitalist world economy, it can be altered by elites, and buffered by the organization of consumption." The connection between Zukin's notions of market and place and our concern with tenant organizing in public housing is related to the idea of place as a concentration of people and economic activity. Place, in a broader sense, is a cultural artifact of social conflict and cohesion; it expresses the

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way in which a spatially connected group of people mediate the demands of cultural identity, state power, and capital accumulation. Burchell and Listokin (1995) suggest that when the country's metropolitan areas are viewed as a whole, it is not central city versus suburban rates of growth that differentiate metro areas but racial composition. Census data for the New Orleans metropolitan area show that 39 percent of the population is black; in the Kansas City metropolitan area, just 13 percent of the population is black (U.S. Census 1990). Furthermore, 70 percent of the New Orleans metro area's black non-Hispanic population lives in the central city and 30 percent live in the suburbs. In the case of the Kansas City metropolitan area, 64 percent of the black non-Hispanic population live in the central city and 36 percent live in the suburbs. Burchell and Listokin (1995) further report that the central city is a place where non-family households exist at an incidence level of 1.5 to 2 times their incidence level in the suburbs, and both female-headed households and single person households are over-represented in the central city. A majority of central city residents have only a grade-school education, and a smaller proportion have a high-school education. Median incomes in central cities are 20 percent lower than in the suburbs. Central city residents have access to relatively few "at place" jobs but are three to four times more likely than suburbanites not to have an automobile. The separation between locations where many public housing residents live (place) and where work opportunities exist (market) is a function of race and racism. Based on our extrapolation from Zukin's concept-the opposition between market and place-we assert that social structure and social arrangements in society (I) affect the lifestyles and life changes of public housing residents and (2) limit the chances of public housing residents to participate in mainstream political coalitions. Leadership Development and Capacity Building

Reducing racial conflicts, racial isolation, and discrimination allows public housing residents to actively participate in local regime politics. Based on our survey of tenant management activities in Kansas City and New Orleans, we suggest that planners and others need to implement innovative strategies of leadership development and capacity building in order to tap a larger share of the resources in public-housing for citizen participation. However, planners must be careful not to encourage public-housing tenants to organize into selfcontained communities. Political, social, and racial isolation from the mainstream can lead to the formation and maintenance of the ghetto (Massey and Denton 1993). Therefore, tenants should be trained to acquire skills that allow them to move toward integrating successfully into mainstream society. Dreier (1996) suggested that successful efforts to influence urban politics by community improvement groups such as public housing resident

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councils require a number of factors: strong, skilled, indigenous leadership; a stable organization in terms of membership and funding; a clear sense of mission that includes a long-term stake in the community; and an overall strategy that allows an organization to build on its victories and its defeats. These attributes do not emerge overnight, however. They evolve through a process of leadership development, organizational capacity building, and education. Additionally, resident council members should learn such skills as chairing meetings, dealing with the media, negotiating with government and business institutions, fundraising, and handling budgets. These are the simple building blocks for becoming an effective community activist, organization builder, and problem solver. Transforming these skills into action is not easy, as the residents of one rural public housing development realized. The residents of this development had become dissatisfied with the management of the units and sought advice from a team of consultants associated with the University of New Orleans on how to proceed. The team and the residents concluded that the first order of business was to organize into a resident council. After two meetings at the housing-authority office, the housing director informed the group that it could not meet at the housing office any longer. This presented the group with its first organizational problem. Meeting in residents' homes for two consecutive sessions, the group decided to request a meeting with the regional supervisor who arranged a meeting at the local housing-authority office. The group achieved its first victory when the supervisor ordered the director to provide meeting arrangements on a regular basis. Armed with its first success, the group then decided to elect officers to represent the hundred families in the development. This election of resident council officers followed the procedures usually found in a local political election. The residents registered to vote, individuals were nominated, and candidates campaigned for positions over a two week period. Residents also had to learn how to use voting machines since none of them had gone to the polls in a long time; the consultant group arranged with the County Board of Elections to provide a voting machine. A day was set aside for the residents to learn how to use the machine and how to crossover vote among the three slates. The exercise was a success, with more than 60 percent of the development's population voting in the election. The consultants hoped that, because of this experience, some residents would vote in the next citywide election. Two conclusions may be drawn from this anecdote. These are (I) that training tends to be more successful when the goal is clear and (2) that training is more effective when feedback is immediate. The design of leadership-training and capacity-building measures that are directed at public-housing residents must account for issues of both race and status, however. Public-housing residents are sensitive to training programs, which often carry implications of inferiority of residents.

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Perhaps one of the most effective training models for working with public-housing residents is the train-the-trainer model, which can substantially reduce race and status issues. Southern University in New Orleans, for example, received a HUD grant in 1991 to provide leadership training to residents living in New Orleans' nine public housing developments. The citywide tenants association selected thirty-six trainees on the basis of their past interest and participation in tenant organizing, their willingness to provide training and counseling to other public-housing residents, and their potential to be future leaders. The group was divided into three sections of twelve persons, and each section received a semester of intensive training. The courses provided instruction on management fundamentals, budgeting, conducting meetings, researching documents, and asking the right questions when meeting with government officials. Of the thirty-six residents who entered Southern University's training program, twenty-seven completed the program. In reviewing recent federal programs designed to facilitate resident empowerment, we believe that HUD's Community Building initiative offers an appropriate framework within which to expand leadership-development and capacity-building programs in public housing. Community Building and its asset-oriented, holistic approach to community improvement, coupled with new opportunities under HOPE VI, offers new avenues for public-housing residents to create new social structures and relationships by investing in human capital. Conclusion We started this research with the premise that an understanding of the political and organizational ecology of cities, that is, their political regime, is an important framework to assess a central city's capacity to implement innovative public and human services. We have argued that the failure of elected officials, political scientists, and regime analysts to assign proper significance to the ascendance of race in electoral politics may be the reason that politicians and special interest groups have failed to make and carry out feasible governing decisions, manage conflicts, and make adaptive responses to social change. Perhaps the emergence of race and the decline of class requires a reconceptualization of the urban regime. When the regime understands that it is in its political selfinterest to assist public-housing residents to improve their conditions, residents will benefit from the delivery of municipal services. The inapplicability of the pluralist theory of urban politics can be seen in the lack of resources of the public-housing residents of Kansas City and New Orleans, and in their subsequent inability to undertake independent action to improve their situation. We have seen, in opposition to the assertions of Dahl and Polsby, that power was very centralized, rather than decentralized and

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fragmented; that inequalities were concentrated rather than dispersed; and that there was no dispersion of power. These are the very characteristics that have led to the social, economic, and political isolation of public-housing tenants and to the despair that they have felt. With the participation of government, as well as the institution of public-private partnerships, however, tenants were given access to resources, training, and opportunities and have been able to initiate and undertake activities that benefitted themselves as individuals, their communities, and the city as a whole. The experiences of organized public-housing tenants illustrate the reconfigured "landscape of power" and lend support to analyses based on Rogers' call for the study of a city's political and organizational ecology and on Stone's concept of urban regime. The case studies of Kansas City and New Orleans reveal that the size and magnitude of organized public-housing residents are insignificant at present, but that their potential is enormous and could be realized with the breakdown of racial conflicts and with leadership and capacity-building training. Efforts in tenant organizing should not encourage residents to develop an isolated and self-contained community, however, but the goal of capacity-building efforts should be to bring publichousing tenants closer to the social and economic mainstream of American society

NOTES I. The senior author was one of the principle consultants to the plan that received the 1999 Plan of the Year Award from the American Planning Association. 2. A recent study conducted at Harvard University found that communities and schools have resegregated since 1974. (Vaishnav, Anand (1999) "Schools resegregate, study says; nation's gains in integration are reversed, authors claim," The Times-Picayune, July 27, 1999, page AI.)

REFERENCES Boyte, H. (1980) The Backyard Revolution: Understanding the New Citizen Movement, Philadelphia, PA: Temple University Press. ___ (1987) Commonwealth: a Return to Citizen Politics, New York: Free Press. Brown, P. (1996) "Comprehensive neighborhood based initiatives," Cityscape: A Journal of Policy Development and Research, 2(2). Burchell, R. and D. Listokin (1995) "Influences on United States housing policy," Housing Policy Debate, 6(3), 559-617. Dahl, R. (1961) Who Governs? New Haven, CT: Yale University Press.

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Dreier, P. (1996) "Community empowerment strategies: the limits and potential of community organizing in urban neighborhoods," Cityscape: A Journal of Policy Development and Research, 2(2). Feinstein, S. (1994) The City Builders, Cambridge, MA: Blackwell Publishers. Hockfeldt, R. and C. Weitzel-Kohfeld (1989) Race and the Decline of Class in American Politics, Urbana, IL: University of lIIinois Press. Holden, M., Jr. (1995) "The changing racial regime," The National Political Science Review, 5. Jones, C. H. (1993) "The bottom-up approach to collaboration for social change: a case study of the Saint ThomaslIrish Channel Consortium," unpublished master's thesis, University of New Orleans. Judge, D. (1995) "Pluralism," in D. Judge, G. Stoker, and H. Wolman (eds), Theories of Urban Politics, Thousand Oaks, CA: Sage, pp. 13-34. Kling, 1. and P. S. Posner (1990) Dilemmas of Activism, Philadelphia, PE: Temple University Press. Lauria, M., R. K. Whelan, and A. H. Young (1995) "The revitalization of New Orleans," in F. W. Wagner, T. E. Joder, and A. J. Mumphrey Jr. (eds), Urban Revitalization: Policies and Programs, Thousand Oaks, CA: Sage Publications, pp.102-27. Lenz, T. (1988) "Neighborhood development: issues and models," Social Policy, 18, 24-30. Lowi, T. J. (ed) (1968) Private Life and Public Order, New York: W. W. Norton and Company. Massey, D. S. and N.A. Denton (1993) American Apartheid, Cambridge, MA: Harvard University Press. Miller, M. (1992) "Citizen groups: whom do they represent?" Social Policy, 22, 54-56. Peterson, P. (1981) City Limits, Chicago, IL: University of Chicago Press. ___ (1985) The New Urban Reality, Washington, DC: Brookings Institution. Polsby, N. W. (1963) Community Power and Political Theory, New Haven, CT: Yale University Press. Rabinovitz, F. F. (1970) Politics and Planning, New York: Athinton Press. Rogers, D. (1971) The Management of Big Cities, Beverly Hills, CA: Sage Publications.

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Stone, C. N. (\989) Regime Politics: Governing Atlanta 1946-/988, Lawrence, KS: University Press of Kansas. Traynor, B. (1993) Community Development and Community Organizing, Shelterforce. Washington, R. (1976) "Integrated services: a case study of the East Cleveland project," Journal of Social Welfare. Wilson, W. J. (1987) The Truly Disadvantaged, Chicago, IL: University of Chicago Press. Zukin, S. (1994) Landscape and Power: From Detroit to Disney World, Berkeley, CA: University of California Press.

5 The Impact of Community-Reinvestment Agreements on Mortgage Lending to Minority and Low-Income Households and Neighborhoods ALEX SCHWARTZ

The Community Reinvestment Act (CRA) of 1977 requires banks and other lenders to provide loans and other services to all areas from which they draw deposits. Armed with this legislation, community advocates across the United States have challenged proposed bank mergers and acquisitions, claiming that the banks have failed to provide adequate service to low-income and minority families and neighborhoods. In response to these challenges, several hundred banks have negotiated community-reinvestment agreements, pledging to improve mortgage lending and other services. Additionally, an increasing number of banks, including some of the nation's largest financial institutions, have launched voluntary community-reinvestment commitments. By early 1996, these negotiated and voluntary agreements exceeded more than three hundred in number and amounted to more than $80 billion (NCRC 1996). Because the CRA gives community groups and other organizations legal leverage to challenge bank mergers and other transactions and to negotiate community reinvestment agreements the legislation may be viewed as a form of "regulation from below" (Fishbein 1992). These organizations make use of the Home Mortgage Disclosure Act (HMDA) to analyze bank mortgage lending data and examine how the bank has treated mortgage applications from minority and low-income households and for properties located in minority and low income neighborhoods. Passed in 1975 and strengthened in 1989, HMDA requires most banks and other mortgage lenders to disclose a variety of information about the race and income of each mortgage applicant, the census tract of the property to be mortgaged, and the outcome of the mortgage application. The availability of mortgage lending data, as required by HMDA, has been vital to the enforcement of the CRA. Until now, there has been little if any research on the outcomes of negotiated or voluntary CRA agreements. Most research has concentrated on analysis of mortgage lending (e.g., Munnell et al. 1992, Goering and Wienk 1996). 100

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To a lesser extent, some studies document the genesis of particular CRA agreements (Squires 1992). This paper marks a new direction in CRA research by examining the outcomes of CRA agreements through the comparison of the mortgage and home-improvement lending of banks with and without agreements. I The analysis examines HMDA data for all states and metropolitan areas with CRA agreements in effect and compares lending to low-income and minority households and neighborhoods by banks with and without agreements and by banks with different types of agreements. 2 Background

The CRA and HMDA are both the result and vehicle of community-based efforts to combat redlining and other discriminatory bank lending practices. The enactment of these laws resulted primarily from grass-roots pressure on local governments and congressional representatives (Bradford and Cincotta 1992; Christiano 1995; Weiss and Metzger 1988). Afterwards, they became central to local, regional, and national campaigns to make bank credit more accessible to minority and low-income households and neighborhoods. Most histories of the community reinvestment movement begin in Chicago, where several dozen community organizations, including some founded or inspired by legendary community organizer Saul Alinsky, started organizing against "block busting" and disinvestment afflicting many city neighborhoods in the 1960s and 1970s. Those organizations came to see the lack of mortgage credit as a primary cause of neighborhood deterioration, and they were frustrated by the failure of government to enforce such civil rights statutes as the Fair Housing Act of 1968. In 1969, Alinsky and his associates wrote and distributed a pamphlet that denounced redlining, calling for public disclosure of lending records and the withdrawal of community support for uncooperative lenders. In the early 1970s, a coalition of two Chicago groups, the Organization for a Better Austin (DBA) led by Gale Cincotta and the Northwest Community Organization (NCO) led by Shel Trapp, presented local financial institutions with a list of demands, including community input in the review of loan applications. Aggressive protest tactics by organizers persuaded banks to meet with the community. Subsequent meetings produced some temporary relief through individual agreements with a few banks, but the activists were not satisfied and continued to press the issue and expand the scope of their struggle. In 1972, Chicago hosted the First National Housing Conference, which was the birth of the national reinvestment movement. Led by Cincotta and Trapp, the event drew about a thousand delegates representing some 228 community groups and seventy-two cities. Many came in response to a 1971 study released by the Center for Community Change and the National Urban League. The study largely blamed financial institutions for failing to react to

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the negative impacts of racially transforming neighborhoods. At the conclusion of the conference, two groups formed to combat the national trends of redlining and disinvestment. The National Training and Information Center (NTIC) was to gather information and coordinate activism, and the National People's Action (NPA) was to serve as a neighborhood lobbying group (Christiano 1995; Nicholas 1991). The momentum in Chicago established a high-pressure atmosphere for local government actors. In 1973, the local branch of the Federal Home Loan Bank Board (FHLB) asked financial institutions to volunteer information regarding the number and dollar amount of residential loans for each zip code in the city. Although questionnaires were not completed by all banks and savings and loans, and the lenders' confidentiality was protected, the resulting data did show mortgage lending declines in specific areas: lending declines were especially strong in those neighborhoods that had been complaining the most about disinvestment and redlining. The following year, the Chicago City Council established a city ordinance mandating lending disclosure by zip code as well as census tract for any savings and loan association or bank holding deposits from the city (Christiano 1995). Also in 1974, Illinois Governor Dan Walker appointed a commission on redlining. Commission members included representatives from community groups, financial institutions, real estate, and academia. Following the commission's recommendations, in 1975 the state legislature passed an anti-red lining disclosure law modeled after the one established by the City of Chicago (Christiano 1995). National organizers, boosted by the implementation of fair housing initiatives in Illinois, pushed for federal disclosure regulations. Under the sponsorship of Wisconsin Senator William Proxmire, Congress passed the Home Mortgage Disclosure Act (HMDA) in 1975 for a five year term. The Home Mortgage Disclosure Act mandated all federally regulated financial institutions, with assets greater than $10 million, to report mortgage lending information by census tracts for all metropolitan areas. Congress further strengthened HMDA in 1985 by establishing a municipal depository institution in each metropolitan area and creating a system by which the data is computerized on an annual basis. The policy, which was extended indefinitely in 1987, also required that the reported information be provided to the public at a reasonable cost. Two years after the passage of HMDA, in 1977, the Community Reinvestment Act was signed into law by President Jimmy Carter. Communityreinvestment advocates had realized that public disclosure of bank lending data was not enough to stop disinvestment-they needed a way to exert direct pressure on individual banks. The Community Reinvestment Act (CRA) addressed this limitation of HMDA. Based on the idea that federally regulated financial institutions have an obligation to serve local credit needs, the CRA forces regulatory agencies to rate the lending performance of each

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banle Regulators use this rating information when considering a lending institution's application for a new charter, merger, or acquisition. Additionally, poor performance by banks opens the door for community groups to file a challenge. Such challenges create potentially costly delays and unflattering publicity for the institutions. The federal bailout of the Savings and Loan industry in 1989 strengthened both HMDA and the CRA. The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of that year extended HMDA to require mortgage lenders to report the race, gender and income of the households that apply for loans and the outcomes of all loan applications (Fishbein 1992). FIRREA modified the CRA by requiring regulatory agencies to release to the public CRA ratings of every bank (previously, ratings were not publicly available), and it also changed the rating scheme from a numeric code (1-5) to four expressive categories--outstanding, satisfactory, needs to improve, and substantial noncompliance. In 1995, regulatory agencies released new regulations for enforcing CRA. Previously, CRA assessments were based on 13 criteria. The new regulations, which differ for different types of banks, give more emphasis to a bank's service delivery, i.e., its lending record rather than its marketing efforts. One of the most novel aspects of the new regulations is the "Strategic Plan Option." This option allows any bank to substitute its own CRA evaluation criteria for those established by its federal regulator. The strategic plan must be developed in consultation with community groups and be approved by the bank's federal regulator. These plans must specify the bank's lending, investment, and service goals and the standards for assessing their achievement. In many respects the strategic plans as described in the new federal regulations resemble some of the more sophisticated community reinvestment agreements signed by banks and community groups. It remains to be seen whether banks will choose the strategic plan option and, if so, whether community groups will see the option as a substitute for a community-reinvestment agreement. This question is especially intriguing since the strategic plan would seem to carry more legal authority than a CRA agreement which has no legal status (i.e., it is not a binding contract). Overview of CRA Agreements Community reinvestment agreements became increasingly common in the 1980s and 1990s. Through 1983 only 16 CRA agreements had been established (Christiano 1995). Between 1984 and 1989 at least 147 agreements were initiated and more than 165 others were announced between 1990 and 1996 (NCRC 1996b ). The proliferation of CRA agreements from the mid1980s stems from several causes. One element was the deregulation and rapid restructuring and consolidation of the financial services sector, including the

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bank and thrift industries. Since the CRA enables community groups and other organizations to challenge bank mergers and acquisitions, as well as applications to expand interstate banking, the industry's restructuring gave community groups numerous opportunities to negotiate CRA agreements. The number of Savings and Loans declined by 40 percent from the late 1970s to 1990, and in recent years the number of commercial banks has been declining by several hundred annually (Bradford and Cincotta 1992). A second element was the reluctance of the four federal financial regulatory agencies to consider a bank CRA performance in deciding to approve a proposed merger, acquisition, or other regulated activity. In testimony before the Senate Banking Committee, federal regulators revealed that, between 1978 and 1988, only eight of 40,000 bank applications had been denied for inadequate compliance with the CRA (Christiano 1995; Bradford and Cincotta 1992). The regulator's refusal to enforce the CRA prompted community advocates to press their own CRA challenges. With assistance from several national organizations, including National People's Action, National Training Institute, ACORN, and the Center for Community Change, community groups and other organizations have challenged several hundred proposed bank mergers and acquisitions. According to Bradford and Cincotta (1992), the NPA and NTIC assisted in eighty-one CRA agreements, ACORN negotiated twenty-five, and the Center for Community Change assisted in twenty-five agreements. CRA agreements express a bank's goal or commitment toward improving its services to minority and low-income households and/or neighborhoods. Agreements almost always include provisions for home mortgage lending. Some agreements present a variety of mortgage products in considerable detail, specifying the interest rate, the maximum mortgage origination fee ("points"), minimum down payment requirements, the need for private mortgage insurance (PMI), and borrower eligibility standards (income, debt-service-to-income ratios). Additionally, agreements increasingly encompass other areas: smallbusiness loans, home-improvement loans, construction loans, permanent mortgages and other types of financing for new housing development, lines of credit for community-development corporations, investments in low-income housing financed with low-income-housing tax credits, and grants to community-based organizations. Some agreements pledge not to close bank branches, and some set goals to hire more minority employees and purchase more goods and services from minority-owned firms. (See Table 5.1 in Appendix for a summary of the topics and provisions of CRA agreements.) Banks sometimes frame their agreements' provisions as goals, objectives, targets, or commitments. Most often, agreements are signed by bank executives and representatives of the other lead organizations in the negotiations (if the agreement is negotiated). Sometimes agreements remain unsigned. The language and appearance of many agreements resemble that of a formal contract,

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but CRA agreements do not appear to be legally binding. However, they have not been tested in court. Regulatory agencies responsible for the enforcement of the CRA (FDIC, the Federal Reserve Bank, OCC, OTS, HUD, and the National Credit Union Association) have not required examiners to monitor bank compliance of CRA agreements; agreements do not need to be considered when a bank's performance under the CRA is assessed. 3 While some agreements are negotiated, others are voluntary. Negotiated agreements often result from an actual or threatened challenge to a bank merger or acquisition. Banks usually settle the challenge before the community group or other antagonist formally submits a letter of protest with the regulatory agency that must approve the merger or acquisition. Voluntary agreements are announced unilaterally by the banks and do not result from a negotiation process, although some banks may convene an advisory panel to help them shape the agreement. In some instances a bank will announce an agreement to forestall or preempt a CRA challenge. Most of the largest CRA agreements are voluntary. National banks such as Fleet Bank, Bank of America, and Chase Manhattan have initiated national agreements involving several billion dollars each. In 1995, when Chase Manhattan and Chemical Bank announced their plan to merge, they unveiled a national five-year $18.1 billion community reinvestment commitment. National HMDA Analysis Research Design

This study compares mortgages and home-improvement lending of all banks in states and metropolitan areas with one or more CRA agreements. The analysis draws on two data sources: national HMDA data on CD ROM for 1994 and a comprehensive national listing of CRA agreements compiled by the National Community Reinvestment Coalition (NCRC) (NCRC 1996). The NCRC listing identifies more than three hundred agreements dating from the 1970s through early 1996, totaling more than $80 billion. It provides information on several aspects of the agreements including the bank, the community group (or other type of organization), whether the agreement is negotiated or voluntary, the geographic coverage of the agreement, the year of the agreement, and the amount of money involved. This information enabled the author to identify all geographic areas (states or metropolitan areas) with at least one CRA agreement in effect, to identify the banks with agreements, and compare different types of agreements. As noted earlier, HMDA provides raw data on each application for home-purchase mortgages, home-improvement loans, mortgage refinancing, and multifamily loans submitted to banks that are located in metropolitan areas and have assets in excess of $10 million or more. For each loan

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application, HMDA offers data on the bank's identification code and its regulatory agency, the location of the property to be mortgaged, selected census data on the property's census tract (median income, percent minority, percent single-family housing), certain characteristics of the applicant and coapplicant (household income, race, and gender), the type of loan (conventional, FHA, VA. FmHA), and the action taken (e.g., denied, originated, approved but not accepted, withdrawn by applicant, file closed for incompleteness, and loan purchased).4 This information makes it possible to compare the practices of various banks in lending to minority and low-income households and neighborhoods. Using the NCRC listing as a guide, the study extracted all HMDA loan data for each state or metropolitan area (MSA) with at least one agreement. If the NCRC listing indicated that an agreement covers a metropolitan area, city, or, in a few instances, a neighborhood, the study extracted all the loan data from the HMDA CD ROM for the bank loans in that metropolitan area. If all the agreements in a state were statewide in scope, loan data were extracted for the entire state. If a state contained a combination of local and statewide agreements (as in New York, North Carolina, and elsewhere) the study extracted loan data separately for each of the state's metropolitan areas. National CRA agreements were treated somewhat differently than the others. States or MSAs with no local or regional agreements were excluded from analysis. As a result, in these areas the lending of banks with national agreements was not covered by the study. National agreements were covered in all states or MSAs with one or more local or regional agreements. After extracting raw loan data for a state or MSA, the study first deleted cases pertaining to multifamily loans, mortgage refinancing, loan purchases, applications withdrawn by the applicant, and records denoted as having quality or editing errors. Next, the study created a series of temporary variables to indicate the race and income of the loan applicant as well as the income and racial composition of the property's census tract. Household income is categorized as low, moderate, middle, and upper, as defined in relation to national median household income. Census tract income is defined in relation to the MSA's median family income. The racial composition of the property's census tract was defined as the percentage of minority population (see box for definitions ). Each record yielded more than fifty temporary variables. Individual temporary variables were created to denote loan application, denial, and approval for each category of household race, household income, census tract race, and census tract income. A separate series of temporary variables were created for total home mortgages, conventional home mortgages, and home improvement loans. These temporary variables were created for each state or MSA with one or more CRA agreements. After creating the temporary variables, the study aggregated loan data for each state or MSA so that the unit of analysis shifted

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from individual loan applications to individual banks. For each bank with mortgage and/or home improvement loan applications in the state or MSA, the data base listed the total loan applications, total loan approvals, and total loan denials for each type of household and census tract (see box). Next, the study created several indicators to measure bank lending performance for each of these market segments. Indicators include the following: Market Share Percentage share of total loan applications and approvals in the state or MSA for each type of household and census tract (calculated for both mortgages and home-improvement loans). Percentage of Bank's Total Approvals and Applications Each type of household and census tract as a percentage of bank's total loan applications and approvals (calculated for both mortgages and home-improvement loans). Denial Rate Loan denials as a percentage of total applications (calculated for both mortgages and home-improvement loans). Percent Conventional Mortgages The percentage of loan approvals for each type of household and census tract that is conventional (calculated only for mortgages ). Market Share Index Bank market share for each type of household and census tract divided by its share of state's or MSA's total loan applications and approvals (calculated for both mortgages and home-improvement loans). Denial Rate Index Denial rate for each type of household and census tract divided by denial rate for the most advantaged group (i.e., white households, high-income households, low-minority census tracts, and high-income census tracts [calculated only for mortgages]). The box (following) lists other key definitions used in the study. Having calculated the indicators of bank lending performance, banks with CRA agreements were identified and variables describing key characteristics of the agreements were created. Using the NCRC listing along with supplementary information from local sources,5 the study created a set of variables that denoted (I) whether the bank has an agreement, (2) the agreement's type (voluntary vs. negotiated), (3) its geographic scale, (4) the year it was signed,6 (5) the agreement's financial commitment (in millions of dollars), and (6) the total number of agreements negotiated by the same organization. HMDA data was processed, as described above, for each state and MSA with one or more CRA agreements. Finally, the completed data sets for each state and MSA were merged to create a single data set for analysis. (All data tables in Appendix.)

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KEY DEFINITIONS HOUSEHOLD RACE White (Non-Hispanic white) Black Hispanic Other (including Asian, American Indian, and others). HOUSEHOLD INCOME Low-Income: Less than 50 percent of median national household income in 1994 (less than $16,100) Moderate-Income: 50-80 percent of median national household income in 1994 ($16,100-$25,799) Middle-Income: 80 to 120 percent of median national household income in 1994 ($25,800-$38.699) High-Income: above 120 percent of median national household income in 1994 ($38,700 and higher) CENSUS TRACT RACE Low-Minority: Less than 50 percent nonwhite population in 1990 Moderate-Minority: 50-74 percent nonwhite population in 1990 High-Minority: 75-100 percent nonwhite population in 1990 CENSUS TRACT INCOME Low-Income: Less than 50 percent of MSA's median family income in 1990 Moderate-Income: 50-79 percent of MSA's median family income in 1990 Middle-Income: 80 to 119 percent of MSA's median family income in 1990 High-Income above 120 percent of MSA's median family income in 1990

Overview 0/ Sample The data base accounts for nearly 3.3 million applications: 2.4 million home mortgage applications and 851,000 home improvement loan applications. These represent 27 percent of the 12.2 million records (FFIEC 1995) covered by HMDA nationally in 1994. A significant share of the HMDA data involves mortgage refinancing, multifamily loans, and loan purchases, all of which were excluded from analysis in this study.

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It is useful to examine, briefly, the characteristics of the sample as a whole before comparing the lending records of banks with and without CRA agreements. Mortgage applications and approvals are first described by the racial and income status of loan applicants and secondly by the racial and income composition of the census tract containing the properties to be mortgaged (see Table 5.2). White households account for more than three-fourths of all mortgage applications and nearly 80 percent of all mortgage approvals. Hispanic and Black households comprise almost identical proportions of total applications and approvals, each with about 8 percent. Asian and other racial groups represent about 5 percent of total mortgage applications and approvals. High-income households (with incomes at least 120 percent of the national median in 1994) represent almost two-thirds of all applications and approvals. Low- and moderate-income households, in contrast, together comprise just 15 percent of total applications and 13 percent of total approvals. The overwhelming majority of mortgage lending-89 percent of applications and 91 percent of approvals-involves housing located in census tracts with fewer than 50 percent minority households. Census tracts with 50 to 75 percent minority households represent 6 percent of the mortgage applications and 5 percent of approvals. Census tracts with more than 75 percent minority households comprise slightly lower proportions. Middle income census tracts (80 percent to 120 percent of the metropolitan median) comprise the single largest number of mortgage applications and approvals with 49 percent of the total for each, followed by high-income tracts with just under 40 percent of total applications and approvals. Lowincome tracts (less than 50 percent of metropolitan median) make up less than 2 percent of mortgage applications and approvals. The data for home-improvement loan applications and approvals follow the same pattern as home mortgages. White households, for example, account for almost exactly the same share of all home improvement loan approvals as they did for mortgage approvals-80 percent. Low- and moderate-income households, however, claimed 18 percent of total home improvement loan approvals compared to 13 percent of total mortgage approvals. Among minority households and census tracts, black households usually represent a somewhat larger share of total applications and approvals than Hispanic households. The data base records mortgage and home improvement activity for 13,980 "banks." In this study a bank is designated as a lender within a given state or MSA. If a bank operated in more than one such area it is treated as a separate entity in each locale. When banks originate mortgages in multiple MSAs or states, these mortgages are aggregated separately within each geographic area. Thus, large national and regional banks such as Fleet, Chase, and Norwest appear in the data set as a series of separate institutions for each geographic area in which they do business.

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Independent mortgage companies account for 38 percent of the total sample, thrifts (savings and loans and savings banks regulated by the Office of Thrift Supervision) make up 10 percent, credit unions represent another 10 percent, and commercial banks comprise the remaining 41 percent. (See Table 5.3 for distribution of mortgage applications and approvals by type of lender. Table 5.4 shows distribution of mortgage applications and approvals by race.) Comparison of Banks with alld without CRA Agreements This section examines the mortgages and home-improvement lending of banks with and without CRA agreements. First, it compares the two groups of banks in terms of total loan applications and approvals, denial rates, and the prevalence of conventional vs. government-insured mortgages. It then examines two key indicators of mortgage lending to applicants of different races and income groups and for properties located in census tracts with varying income and racial profiles. The volume of mortgage lending activity for banks with agreements shows that the scale of lending to each market segment is significntly larger among banks with agreements than among those without agreements. For example, banks with agreements approved on average 295 mortgages to whites in 1994 and 71 mortgages to minority households; banks without agreements, on the other hand, averaged 10 I mortgages to whites and 25 mortgages to minority households (see Table 5.5). Mortgage denial rates, shown in Table 5.6, are a controversial indicator of mortgage lending behavior (Goering and Wienk 1996). Community reinvestment and fair lending advocates frequently point out that mortgage denial rates for blacks and other minorities are several times higher than those for whites, but bankers and others retort that any difference reflects objective differences in credit worthiness, such as income, assets, employment history, debt burden, loan-to-value ratio. This latter position is supported by the now famous Boston Federal Reserve Bank study (Munnell et al. 1992). Munnel et al. (1992) controlled for as many objective factors as possible and still found that blacks were denied mortgage credit about 80 percent more often than whites. The study, however, has been repeatedly attacked for failing to consider every possible and relevant variable that might correlate with race (Yinger 1996; Tootell 1996). Banks which deny a high proportion of their minority loan applications may in some cases actively seek out minority borrowers, while banks with relatively low minority denial rates may put little effort into soliciting minority business. As a result, banks with high minority denials may contribute more to the credit needs of minority households and communities than banks with lower minority denial rates. It should also be remembered that discrimination does not manifest itself only in the decision to deny a loan. Banks may not market their services to minority popUlations and when minorities do

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express interest in applying for a loan, banks may discourage them from filing an application (Yinger 1996). In terms of race, banks with agreements deny mortgages to 16 percent of white, 25 percent of black, 24 percent of Hispanic, and 15 percent of Asian and other applicants. Non-agreement banks deny mortgages to a lower percentage in each category. The pattern repeats itself for the other three categories of loan applicants-household income, census tract by income, and census tract by race (see Table 5.6). Another indicator of bank lending practices towards minority and lowincome households and neighborhoods is the percentage of conventional mortgages that a bank approves. Unlike Federal Housing Administration (FHA) or Veterans Administration (VA) mortgages, which the federal government insures against default, conventional mortgages involve no government subsidy or insurance, and require banks to assume some risk. While FHA loans require lower down-payments than conventional mortgagesand are thus often more accessible to low-income households with limited savings-they also involve higher origination fees than conventional mortgages with private mortgage insurance (Yinger 1996: 56). Thus, banks whose mortgage lending to minority and low-income households is dominated by conventional mortgages may be providing credit on more favorable terms and showing greater commitment to serve these markets than banks that mostly issue government insurance mortgages to these households. Banks with agreements approved nearly 75 pecent of black households for conventional mortgages, while non-agreement banks approved less than 60 percent of black households for conventional mortgages. As for white households, agreement banks approved 84 percent for conventional mortgages, while non-agreement banks approved 77 percent (see Table 5.6). Two indices were developed to measure bank lending performance. One index compares a bank's share of its region's (state or MSA) total mortgage applications or approvals for a particular group to the bank's regional share of total applications and approvals. An index of 1.00 indicates that a bank's regional share of total mortgage approvals to a certain group, say, blacks, is identical to its regional share of total approvals. An index value higher than 1.00 shows that a bank's market share of applications or approvals exceeds its share of total applications or approvals, and a value less than 1.00 shows a lower share. The second index compares a bank's mortgage denial rate for a particular group to a reference group. For household race, the index divides the denial rate for each group by the denial rate for whites. For income, the reference group is high-income households, and so on (see Table 5.7). Banks with agreements score significantly higher than non-agreement banks for black mortgage applicants. Whereas the index score for blacks is 1.18 for banks with agreements, indicating that on average their share of black mortgage applications is nearly 20 percent higher than their share of

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total applications, the score for non-agreement banks is 0.92. With respect to mortgage approvals, banks with agreements continue to register 1.18 but nonagreement banks score 0.86. Intriguingly, there are no significant differences in the index values for Hispanics. This might suggest that banks with agreements have concentrated their mortgage outreach and marketing efforts in the black community (see Table 5.7). The second index compares mortgage denial rates for particular market segments to the denial rate for a reference group. This index shows the difference between the denial rate for a given market segment and that for the group with the lowest denial rate. For example, denial rates for black, Hispanic, and "other" households are each divided by the denial rate for white households. In terms of household income, low-, moderate-, and middleincome, denial rates are each divided by the high-income rate. An index score greater than one indicates that a bank denies mortgages more often to that group than to the reference group (see Table 5.8). Banks with agreements post significantly higher denial rate index scores for low-income households, moderate-income households, moderate-income census tracts, middle-income households, and middle income census tracts. For example, banks with agreements register a mortgage denial index score of 2.6 (i.e .• deny mortgages to moderate-income households 2.6 times more often than to high-income households); banks without agreements register a mortgage denial index score of 1.9. The analysis indicates that banks with agreements tend to increasingly approve mortgage applications for black households as opposed to Hispanic households for high and middle income households, and in high income and middle income census tracts.

Mortgage Lending Analysis. Excluding Independent Mortgage Banks and Small Banks The preceding discussion focused on the performance of all types and sizes of lenders. Small banks, those receiving fewer than thirty mortgage applications, however, may skew the distribution of mortgage applications and approvals. Thus, they are removed from further analysis. As noted earlier, HMDA covers several types of mortgage lenders, including commercial banks, thrifts, credit unions, and mortgage banks. The last are particularly distinctive. Unlike the others, mortgage banks are nondepository institutions; they do not offer savings, checking, money market, or other accounts to individuals or businesses. Mortgage banks rely exclusively on bank loans and corporate capital for funds to loan out as mortgages. They quickly sell the mortgages they originate to other investors and the secondary mortgage market (Miles 1986; Pogge and Flax-Hatch 1991 ). Historically, mortgage companies have specialized in FHA mortgages and have accounted for a large share of the nation's mortgage lending to black

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households. In 1990, for example, FHA loans accounted for 56 percent of all qualifying loans to black borrowers, 29 percent for Hispanics, and 27 percent for whites (Yinger 1996). In recent years, commercial banks and thrifts, taken together, have originated about as many FHANA loans as mortgage banks, and mortgage banks increasingly originate conventional mortgages (Yinger 1996). Although HMDA now requires mortgage banks to provide data on each loan application they receive, independent mortgage banks are not covered by the eRA. Mortgage banks have not, therefore, faced eRA challenges. Independent mortgage banks are responsible for 39 percent of total mortgage approvals and 46 percent of the approvals for black households. With so many minority mortgages approved by independent mortgage banks, these institutions may affect any comparison of banks with eRA agreements to banks without agreements, especially since mortgage banks have not entered into such agreements. Excluding mortgage banks and small banks from consideration magnifies several key differences between banks with and without eRA agreements. Banks without eRA agreements show significantly weaker service to minority and low-income households and neighborhoods. Table 5.9 shows the index of state or MSA market shares for each group of banks. Before mortgage banks were taken out of the picture, the only significant difference between banks with and without agreements concerned black households. Now, banks without agreements post significantly lower scores for minority households, lowand moderate-income households, moderate-minority census tracts, and lowand moderate-income tracts. Before, there were few significant differences in mortgage lending to minority and low- and moderate-income census tracts. Now, banks without agreements perform significantly worse. Unlike the market share index, the denial rate index shows only one sub-

stantial change when mortgage banks are removed from consideration. For the first time, banks with agreements post a significantly lower denial rate index than banks without agreements for black mortgage applicants. The only other significant difference concerns middle-income census tracts, where banks with agreements register a higher denial rate index. Otherwise, the two groups of banks show no significant difference in mortgage denials.

Home Improvement Loans Most studies of bank lending and community reinvestment focus on mortgage lending. This emphasis is certainly sensible since home-purchase mortgages are the primary gateway to homeownership. Without access to mortgage credit it is extremely difficult for all but the most affluent to purchase a home. Indeed, two of the other three types of loans that HMDA covers-mortgage refinance, home improvement, and multifamily loansalmost always involve households that already have mortgages; one must already own a home before obtaining mortgage refinancing or a home

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improvement loan. Nevertheless, these other forms of credit are also important. Just because a household has already obtained a home-purchase mortgage does not mean that it will not confront discriminatory lending practices when it applies for a home improvement loan or mortgage refinancing. Thus, many bank CRA agreements establish specific goals or commitments for improving home-improvement lending. (Agreements do not seem to target mortgage refinancing very often.) In addition to home-purchase mortgages, this study also compares the home improvement lending of banks with and without CRA agreements. As noted above, far fewer lenders provide home improvement loans than home mortgages. While all 13,854 banks received applications for home-purchase mortgages, less than half (6,397) received home improvement applications. Banks approved 1.9 million home-purchase mortgages but only approved 487,000 home improvement loans. (See Table 5.10.) Mortgage Lending of Banks with Different Types of Agreements

Community Reinvestment Act agreements are not all alike. As discussed above, agreements vary along several dimensions: some are negotiated, others are voluntary; some agreements pertain to a particular city or even neighborhood, others encompass entire states, and a handful of very large agreements are national in scope. Agreements vary in size from less than $1 million to more than $15 billion. The organizations that negotiate CRA agreements also vary. Some have negotiated only one or two agreements and others have done more than a dozen. They include many different types of organizations, including coalitions of community development organizations, fair housing advocacy organizations, and even a couple of local governments (most notably the City of Cleveland). Until now, no one has compared the performance of different types of agreements. This section compares the regional market share index for banks with agreements of different types (negotiated or voluntary), geographic scales, or involving organizations with different levels of experience in negotiating CRA agreements. The analysis is based on HMDA data for all banks with agreements that have thirty or more mortgage applications. Perhaps the most vital question concerns the effectiveness of negotiated and of voluntary agreements. Some might argue that negotiated agreements lead to stronger outcomes since community-based organizations or other reinvestment advocates helped structure the agreements and are presumably monitoring its implementation. On the other hand, voluntary agreements may rest on nothing more than the good will of the bank. Others may argue that the voluntary or negotiated origin of any agreement has much less to do with the agreement's success than with procedures and practices the bank adopts to implement them. For example, the community advisory councils established by many agreements may be more effective

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in dealing with some banks than with others. More fundamentally, some banks may work harder than others to ensure that all bank departments honor the agreement and the bank's CRA responsibilities in general. (See Tables 5.11 through 5.13 which present the market share index for banks with different types of agreements, excluding those with fewer than thirty mortgage applications. ) Community groups and other organizations have negotiated varying numbers of CRA agreements, ranging from just one to more than a dozen. To what degree are these differences reflected in the performance of CRA agreements? In this study, the market share index of banks with negotiated agreements is compared to the market share of banks with voluntary agreements (See Table 5.13). The negotiated bank agreements are measured in terms of groups that have negotiated one, two to three, four to nine, or ten or more CRA agreements. It could be argued that groups with more experience negotiating CRA agreements are more sophisticated and skilled in designing, monitoring, and enforcing their agreements than are groups that have negotiated few agreements. As with the other comparisons of banks with CRA agreements, each category of banks scores at or above 1.0 for most categories of disadvantaged households and neighborhoods. Although several differences are significant, they are inconclusive. The market share index for banks that have agreements with groups with ten or more CRA agreements tend to be considerably higher than the others for black households and high-minority census tracts and for moderate- and middle-income households. For example, these banks score an average index value of 1.46 for black mortgage approvals, compared to values ranging from 1.02 to 1.38 in the other categories. However, there is no apparent relationship between the number of agreements negotiated and the market shares of mortgage applications and approvals. Banks with agreements with groups that have only two or three agreements frequently post higher scores for minority and low-income and neighborhoods than banks that have agreements with groups that have four to nine agreements. Moreover, banks with voluntary agreements often fare better than at least one category of banks with negotiated agreements. Summary and Policy Implications

This study has examined mortgage and home-improvement lending during 1994 in states and metropolitan areas with one or more CRA agreements. Besides comparing lending to minority and low-income households and census tracts by banks with and without CRA agreements, it also compared the lending performance of banks with different types of agreements. Before summarizing the chief findings and policy implications, it is important to underscore a few caveats to the analysis. First, the study examines the mortgage and home-improvement lending of banks with CRA agreements, but does not evaluate actual agreements. Not

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only does the analysis not cover small business lending and other common elements of many eRA agreements, it does not assess the extent to which banks are meeting the goals of their agreements for mortgage and homeimprovement lending. For example, the analysis does not (and cannot) ascertain the degree to which banks with agreements are originating mortgages with reduced interest rates, points, or closing fees or are waiving the requirement for private mortgage insurance. A second caveat is that the spatial unit of analysis in this study may not always correspond to the areas covered by the agreements. This study examines bank lending on a metropolitan or statewide basis, but some agreements limit their scope to a central city or, in a few instances, an area within a city. As a result, the study's inclusion of (mostly suburban) areas outside the scope of some agreements may cause it to underestimate the effect of some agreements on bank lending within their targeted areas. A second geographic limitation is that the study does not necessarily cover all the lending activity of banks with national eRA agreements. Third, the study examines bank lending in only one year, 1994. It presents a snapshot in time. A more comprehensive analysis should consider bank lending over a long time horizon. Finally, it is not clear what happens to a bank's eRA agreements after that bank is acquired by or merged with another institution. Just as the rapid pace of bank mergers and acquisitions gives community-reinvestment advocates many opportunities to mount eRA challenges and strike eRA agreements, this restructuring also makes any given agreement vulnerable to a subsequent bank merger or acquisition. As noted previously, approximately one-third of the banks listed in the NCRC roster of eRA agreements no longer exist, mostly because of mergers and acquisitions. The analysis yields several significant findings. Above all, it shows that banks with eRA agreements appear to be more responsive than other banks to the credit needs of minority and low-income households and neighborhoods. The analysis indicates that banks with agreements show their greatest success in reaching black households. Banks with agreements have significantly higher regional shares of mortgage applications and approvals for blacks. The evidence regarding Hispanic households is mixed. Only when independent mortgage banks are omitted from analysis do banks with agreements register significantly higher propensities than other banks to lend to Hispanic households. Banks with agreements also loom larger than banks without agreements in lending to moderate-income households (but not to low-income households). The findings may disappoint community advocates who view eRA agreements, and the eRA itself, as a tool to combat geographic redlining of minority and low-income neighborhoods. HMDA and eRA were both passed into law as a result of grassroots campaigns against neighborhood disinvestment.

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Indeed, HMDA originally provided data only on the geographic location of bank loans, not on the racial or socioeconomic characteristics of individual loan applications. This did not happen until 1990. It is ironic, then, that the findings suggest that banks with eRA agreements seem more successful at reaching minority households than they are at serving predominantly minority census tracts. Only when independent mortgage banks and small banks are taken out of the picture do banks with agreements become significantly more responsive than other banks to minority and lower income census tracts (see Table 5.9). This study does not address the debate over racial disparity in loan denial rates. It does not dispute the importance of understanding factors that contribute to a bank's decision to deny a loan application. It does, however, question the validity of an individual bank's loan denial rate as evidence of discriminatory lending practices. As noted previously, banks that aggressively pursue minority and lowincome markets may attract many loan applications from minority and lowincome households. While they may approve large numbers of loans to these households they may also find that many do not qualify for loans and so tum down their applications, producing a high denial rate (see Holmes 1995). On the other hand, other banks may do little outreach to the minority population but still decline a lower percentage of the minority loan applications that they do receive. Any analysis of loan denial rates must be sensitive to the banks' efforts to attract minority and low-income applications and to the possibility that banks with large volumes of minority and low-income applications may also have a higher proportion of applications that do not meet their credit standards. Besides mortgage denial rates, the study also developed a denial rate index that expresses the denial rate for a particular group as a percentage of the denial rate for the most advantaged group (e.g., black denial rate divided by white). Banks with agreements showed no significant difference from other banks with respect to household or census tract race, but they posted significantly higher scores for most household and census tract income categories. Interestingly, when independent mortgage banks were removed from the analysis, banks with agreements posted significantly lower denial rate indexes for black households (although only at the .10 confidence level). Finally the study found few significant differences in the lending patterns of banks with different types of agreements, or among banks that have agreements with groups with varying levels of experience in negotiating agreements. Whether an agreement is negotiated or voluntary seems to be less important than how a bank carries out the agreement. It is important to understand the role of community advisory councils and the degree to which banks incorporate the agreements into their day-to-day operations and corporate culture.

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The Impact of Community-ReinvestmeIII Agreemellls

Appendix Table 5.1. Overview of CRA Agreements and Provisions: Subject Categories and Subcategories HOUSING Specific Loan Targets • Single Family • Nonprofit and Minority Housing Developers Loan Terms and Conditions • Low Interest Loans • Waive or Reduce Closing Costs • Waive or Reduce Points Underwriting Standards • Credit History • Income Source Participation in Public Programs/Loan • Federal Housing Administration and Veterans Administration Programs • Federal Home Loan Bank Programs

• Multifamily • Housing Cooperatives, Land Trusts, and Mobile Homes/Manufactured Housing • Loan Size • Downpayments and Private Mortgage Insurance • Employment • Obligation Ratios Pools and Consortium • Housing Finance Agency Bonds • PubliclPrivate Loan Pools and Consortia

• Low-Income Housing Tax Credits Other Forums of Housing Support • Loan Counseling • Loan Review • Lending Discrimination Testing • Foreclosed Properties BUSINESS AND ECONOMIC DEVELOPMENT Specific Loan Targets • Small Business • Minority and Women-Owned Businesses • Micro-Business • Economic Development Projects Participation in Public Programs/Loan Pools and Consortium • Small Business Administration • PubliclPrivate Loan Pools and Loans Consortia Other Forms of Business Support • Counseling and Technical Assistance • Loan Review • Minority Vending CONSUMER LOANS

FARM LOANS BUILDING COMMUNITY CAPACITY Support for Community Development Credit Unions Support for Community Development Loan Funds Loans and Credit Lines to Community Development Corporations Grants to Community-Based Organizations Continued

Alex Schwartz

119

Table 5.1. (Continued) BANKING SERVICES, BRANCH, AND STAFF POLICIES Banking Services • Cash Government Checks • Offer Basic or Lifeline Checking Branch Policies • Commitments to open new branches • Commitments to keep bank branches open in selected neighborhoods Bank Staff and Structure • Hiring Policies • Train Bank Staff • Bilingual Staff • Diversify Board NEEDS ASSESSMENT, MARKETING AND OUTREACH, AND ACCOUNTABILITY TO THE COMMUNITY Credit Needs Assessment Marketing and Outreach • Advertising • Call Programs • Marketing Through Community • Seminars and Training Groups • Create New CRA Position • Create a Special Unit Accountability and Community Participation • Review Board • Reports and Disclosure Source: NCRC (no date: 21-22).

.....

c

N

RACE White Black Hispanic Other Total INCOME Low-Income Moderate-Income Middle-Income High-Income Total CENSUS TRACT RACE High-Minority Tracts Moderate-Minority Tracts Low-Minority Tracts Total CENSUS TRACT INCOME Low-Income Tracts Moderate Income Tracts Middle-Income Tracts High-Income Tracts Total 77.4% 8.4% 8.6% 5.7% 100.0% 4.3% 10.7% 21.6% 63.4% 100.0% 5.0% 5.6% 89.4% 100.0% 1.7% 11.5% 48.7% 38.1% 100.0%

109,092 269,539 543,561 1,594,629 2,516,821

122,168 135,902 2,176,307 2,434,377

42,095 278,810 1,186,459 927,013 2,434,377

Pct.

1,871,524 203,047 207,228 137,536 2,419,335

No.

Mortgage Applications

27,790 197,756 926,166 757,970 1,909,682

81,555 95,840 1,732,287 1,909,682

64,849 183,029 414,458 1,305,041 1,967,377

1,516,078 137,504 149,946 103,562 1,907,090

No.

1.5% 10.4% 48.5% 39.7% 100.0%

38,081 138,527 409,067 230,060 815,735

98,012 54,151 663,572 815,735

69,227 116,840 189,126 475,751 850,944

3.3% 9.3% 21.1% 66.3% 100.0% 4.3% 5.0% 90.7% 100.0%

517,689 89,877 48,353 27,424 683,343

No.

4.7% 17.0% 50.1% 28.2% 100.0%

12.0% 6.6% 81.3% 100.0%

8.1% 13.7% 22.2% 55.9% 100.0%

75.8% 13.2% 7.1% 4.0% 100.0%

Pct.

Home Improvement Loan Applications

79.5% 7.2% 7.9% 5.4% 100.0%

Pct.

Mortgage Approvals

Table 5.2. Total Mortgage and Home Improvement Loan Applications and Approvals

0 78,717 276,488 164,891 520,096

48,849 29,161 460,709 538,719

34,520 66,518 119,738 342,068 562,844

393,984 51,342 28,693 17,301 491,320

No.

0.0% 15.1% 53.2% 31.7% 100.0%

9.1% 5.4% 85.5% 100.0%

6.1% 11.8% 21.3% 60.8% 100.0%

80.2% 10.4% 5.8% 3.5% 100.0%

Pct.

Home Improvement Loan Approvals

121

Alex Schwartz Table 5.3. Distribution of Lenders by Type and Regulatory Agency Lenders

Mortgage Approvals

Lender Type/Regulatory Agency

Total

Percent

Independent Mortgage Companies U.S. Department of Housing and Urban Development

5,650

38.2%

775,061

39.4%

Savings & Loans and Savings Banks Office of Thrift Supervision

1,524

10.3%

387,982

19.7%

1,742

11.8%

246,215

12.5%

2,390

16.2%

206,218

10.5%

2,003 6,135

13.5% 41.5%

330,847 783,280

16.8% 39.8%

1,484

10.0%

21,054

1.1%

14,793

100.0%

1,967,377

100.0%

Commercial Banks Federal Reserve Bank Federal Deposit Insurance Corporation Office of the Comptroller of the Currency Total Commercial Banks Credit Unions National Credit Union Association

Percent

Total

TOTALLENDERS~ORTGAGE

APPROVALS

Table 5.4. Distribution of Mortgage Applications and Approvals by Percentile Applications

Approvals

Percentile

Total

White

Minority

Total

White

Minority

90 80 70 60 50 40 30 20 10

350 135 66 29 14 7 3

67 21 8 4 2

48 15 6 2

0 0 0

308 123 58 27 14 7 3 2 1

253 99 48 23 11 6 3

1

311 124 59 30 15 8 4 2 1

I I

0 0 0

164 732 14

138 546 15

39 234 2

140 581 14

111 431

28 167

Mean SD Median

I

I

11

I I

.......

N N

125.7 35.2 13.4 14.1 9.3 7.1 17.2 35.6 105.9 147.3 22.1 21.7 2.7 18.0 78.4 62.4

7.9 19.4 39.2 115.1

161.4 23.6 23.7

3.1 20.3 86.4 67.5

No Agreement

137.8 38.5 15.0 15.3 10.1

Total

10.2 63.1 234.1 161.7

421.3 41.4 47.2

22.4 60.4 106.0 286.4

363.4 100.1 42.9 37.2 25.0

Agreement

115.1 6.4 5.2

126.2 7.0 5.9 2.0 14.4 67.4 55.2

123.5** 11.78** 23.8** 169.4** 149.0** 133.7** 67.9**

1.8 12.8 61.3 50.9

4.3 11.7 27.2 86.5

4.7 13.2 29.9 94.2

36.0** 121.7** 134.1 ** 70.7**

101.3 25.2 9.1 10.3 7.0

No Agreement

111.3 27.5 10.1 11.0 7.6

Total

7.1 44.2 180.9 134.1

177** 147.8** 130.9** 74.7**

125.9** 28.78** 58.0**

19.37** 161.3** 142.7** 78.2**

12.1 41.5 80.4 236.8 330.9 17.5 17.8

134.8** 49.0** 137.8** 19.3** 24.4**

F Statistic

295.2 70.6 29.5 25.7 19.0

Agreement

Mortgage Approvals

126.3** 50.8** 102.3** 22.5** 23.6**

F Statistic

Note: ** Significant at.OI confidence level; * significant at.05; # significant at. 10.

RACE White Minority Black Hispanic Other INCOME Low-Income Moderate-Income Middle-Income High-Income CENSUS TRACT RACE Low-Minority Tracts Moderate-Minority Tracts High-Minority Tracts CENSUS TRACT INCOME Low-Income Tracts Moderate-Income Tracts Middle-Income Tracts High-Income Tracts

Mortgage Applications

Table 5.5. Average Number of Mortgage Applications and Approvals

.......

N to..

Note:

12.8 19.4 22.6 17.0 14.0 30.9 21.2 16.8 11.4 14.2 19.5 23.1 22.6 19.1 15.1 11.6

13.0 19.7 22.8 17.3 14.1

31.7 21.6 17.1 ll.5

14.5 19.8 23.6

22.6 19.4 15.4 11.7

No Agreement

22.5 24.9 19.9 14.1

18.5 23.9 28.5

40.9 26.0 21.3 14.6

16.3 23.6 25.5 23.0 15.5

Agreement

0.008 24.6** 26.1 ** 8.1 **

23.83** 9.70** 11.22**

38.0** 15.1 ** 18.5** 16.4**

16.9** 12.8** 4.7* 6.1 * 1.5

F Statistic

** Significant at .01 confidence level; * significant at .05; # significant at .10.

RACE White Minority Black Hispanic Other INCOME Low-Income Moderate-Income Middle-Income High-Income CENSUS TRACT RACE Low-Minority Tracts Moderate-Minority Tracts High-Minority Tracts CENSUS TRACT INCOME Low-Income Tracts Moderate-Income Tracts Middle-Income Tracts High-Income Tracts

Total

Mean Mortgage Denial Rates

57.9 68.4 75.7 79.7

58.5 20.3 16.2

66.8 69.7 72.2 81.0

78.0 67.5 59.6 60.2 69.0

Total

Table 5.6. Average Mortgage Denial Rate and Percent Conventional Mortgages

56.4 67.8 75.3 79.2

58.3 19.6 15.6

65.7 69.1 71.2 80.7

77.7 66.9 58.7 59.1 67.9

No Agreement

78.5 79.1 82.1 88.4

61.2 32.7 28.0

81.1 79.4 79.5 87.3

84.1 76.9 73.5 75.1 83.9

Agreement

79.2** 38.4** 30.3** 39.5**

4.21* 98.08** 107.14**

50.8** 32.0** 22.4** 23.7**

20.4** 30.6** 54.0** 51.3** 63.8**

F Statistic

Percent Conventional Mortgages

.......

N -l::..

Note:

0.98 1.11 1.18 1.26 1.12 1.04 1.08 0.98 1.04 0.98 1.06 1.36 1.24 1.14 0.98 0.96

0.98 0.88 0.90 1.09 0.99 0.96 1.07 1.42 1.02 0.96 1.02

0.98 0.89 0.90 1.09

0.99 0.97 1.08

1.41 1.03 0.96 1.01

Agreement

1.01 0.95 0.92 0.99 1.09

No Agreement

1.01 0.95 0.94 1.01 1.09

Total

1.34 0.99 0.91 0.92

0.92 0.90 1.05

1.078 0.511 3.25# 0.32 3.37# 1.01 2.18

0.98 0.86 0.84 0.99

0.94 0.90 0.88 0.94 0.99

Total

0.27 9.99** 4.8* 7.14**

5.0* 4.5* 5.8* 1.66 0.03

F Statistic

** Significant at .01 confidence level; * significant at .05; # significant at .10.

RACE White Minority Black Hispanic Other INCOME Low-Income Moderate-Income Middle-Income High-Income CENSUS TRACf RACE Low-Minority Tracts Moderate-Minority Tracts High-Minority Tracts CENSUS TRACT INCOME Low-Income Tracts Moderate-Income Tracts Middle-Income Tracts High-Income Tracts

Index Mortgage Applications

1.35 0.98 0.91 0.92

0.92 0.89 1.03

0.99 0.85 0.84 0.99

0.94 0.89 0.86 0.93 0.99

No Agreement

1.11 1.07 0.95 0.93

0.94 0.97 1.33

0.80 1.01 0.93 0.99

0.95 1.06 1.18 0.95 1.08

Agreement

Index Mortgage Approvals

Table 5.7. Index of Bank Shares of Total State/MSA Mortgage Applications and Approvals

0.554 1.45 3.9* 0.21

4.97* 0.297 2.02

1.61 5.25* 7.32** 0.029

0.02 5.4* 8.3** 0.003 0.38

F Statistic

Alex Schwartz

125

Table 5.S. Mortgage Denial Index Mortgage Denial Index Total RACE White Minority 1.93 Black 2.54 Hispanic 1.74 1.40 Other (N) 13,577 INCOME Low-Income 4.08 Moderate-Income 2.38 Middle-Income 1.58 High-Income (N) 13,853 CENSUS TRACT RACE Low-Minority Tracts Moderate-Minority Tracts 1.91 High-Minority Tracts 2.17 (N) 13,480 CENSUS TRACT INCOME Low-Income Tracts 2.64 Moderate-Income Tracts 1.96 Middle-Income Tracts 1.12 High-Income Tracts (N) 13,731 Note:

No Agreement

Agreement

F Statistic

1.92 2.55 1.73 1.40 12,882

2.06 2.38 1.86 1.40 695

0.9 0.6 0.4 0

4.00 2.33 1.57

4.96 2.94 1.79

7.7** 12.7** 5.8*

13,144

709

1.91 2.17 12,784

1.93 2.16 696

0 0

2.60 1.90 1.08

3.05 2.60 1.64

2.4 19.8** 83.0**

13,027

704

** Significant at .01 confidence level; * significant at .05; # significant at .10.

0-

..... tv 0.98 1.10 1.27 472

0.79 0.91 0.92 1.07 3,381 1.00 0.81 0.74 3,355 0.87 1.02 1.00 0.97 3,357

0.82 0.95 0.93 1.06 3,854

1.00 0.85 0.81 3,827

0.92 1.04 1.00 0.97 3,830

24.78** 8.78** 2.54 0.65

7.20** 20.15** 41.82**

19.59** 51.29** 19.68** 20.12**

25.87** 85.49** 65.74** 33.72** 9.98**

F Statistic

* significant at .05; # significant at .10.

1.27 1.17 0.98 0.95 473

1.04 1.18 1.00 1.00 473

1.04 0.77 0.73 0.80 0.86 3,378

1.04 0.81 0.78 0.84 0.87 3,851 0.99 1.10 1.14 1.15 1.00 473

Agreement

Index Mortgage Applications No Agreement

Note: ** Significant at.01 confidence level;

(N)

RACE White Minority Black Hispanic Other (N) INCOME Low-Income Moderate-Income Middle-Income High-Income (N) CENSUS TRACT RACE Low-Minority Tracts Moderate-Minority Tracts High-Minority Tracts (N) CENSUS TRACT INCOME Low-Income Tracts Moderate-Income Tracts Middle-Income Tracts High-Income Tracts

Total

0.96 1.08 1.01 0.95 3,830

0.90 1.06 1.01 0.95 3,357

1.00 0.84 0.75 3,355

l.OO 0.88 0.82 3,827

0.78 0.95 0.92 1.04 3,381

1.03 0.77 0.72 0.79 0.86 3,378

1.40 1.19 0.98 0.94 473

0.98 1.15 1.30 472

0.92 1.18 1.00 1.00 473

0.99 1.12 1.18 1.16 1.00 473

Agreement

Index Mortgage Approvals No Agreement

0.80 0.98 0.93 1.04 3,854

1.03 0.81 0.77 0.83 0.88 3,851

Total

25.60** 4.59* 2.42 0.07

4.14* 17.36** 38.44**

4.68* 31.28** 13.48** 12.04**

23.59** 89.24** 71.09** 36.02** 6.99**

F Statistic

Table 5.9. Index of Bank Shares of Total State/MSA Mortgage Applications and Approvals, Excluding Independent Mortgage Banks and Banks with Fewer Than 30 Mortgage Applications

.....

N 'J

Note:

1.2 0.4 0

0 0.8 1.1 0

1.02 0.91 0.89 417 0.92 0.95 0.98 1.04 417

1.04 0.83 1.20 5,829 0.97 0.89 1.01 1.04 5,829

1.4 1.2 0.1 2.2

1.08 0.98 0.95 1.01 417

0.97 0.91 0.94 1.05 5,829

4.1* 0.1 4.8* 0.1 0.3

F Statistic

1.01 1.04 0.98 0.81 0.98 405

Agreement

1.05 0.96 0.77 0.88 1.13 5,640

No Agreement

** Significant at.OI confidence level; * significant at .05; # significant at. 10.

RACE White 1.05 Minority 0.96 0.79 Black Hispanic 0.87 Other 1.12 (N) 6,045 INCOME Low-Income 0.97 0.91 Moderate-Income 0.94 Middle-Income High-Income 1.05 (N) 6,246 CENSUS TRACT RACE Low-Minority Tracts 1.04 Moderate-Minority Tracts 0.83 High-Minority Tracts 1.20 (N) 6,246 CENSUS TRACT INCOME Low-Income Tracts 0.97 Moderate-Income Tracts 0.90 Middle-Income Tracts 1.0\ High-Income Tracts 1.04 (N) 6,246

Tolal

Index Home Improve. Loan Applications

0.00 0.92 0.92 0.90 6,246

0.94 0.84 0.71 6,246

0.95 0.90 0.90 0.94 6,246

0.96 0.89 0.84 0.83 1.03 6,045

Total

0.00 0.92 0.92 0.90 5,829

0.94 0.85 0.69 5,829

0.94 0.90 0.90 0.94 5,829

0.96 0.88 0.83 0.83 1.04 5,640

No Agreement

0.00 0.96 0.94 0.96 417

0.98 0.80 1.02 417

1.06 0.96 0.93 0.97 417

0.97 1.03 1.04 0.78 0.89 405

Agreement

0.2 0.3 1.9

3.1# 0.1 7.1**

1 0.7 0.4 1.4

0.4 2.5 3.0# 0 0.4

F Statistic

Index Home Improve. Loan Approvals

Table 5.10. Index of Bank Shares orTotal State/MSA Home Improvement Loan Applications and Approvals

......

00

N

Note:

0.99 1.03 1.23 1.02 0.90 55 1.40 1.41 1.03 0.94 55 1.00 1.19 1.22 55 1.32 1.28 1.04 0.87 55

0.98 1.10 1.14 1.23 1.02 187 0.96 1.14 1.00 1.03 187 0.98 1.10 1.22 187 l.l9 l.l5 0.98 0.93 187

1.01 1.15 1.00 0.99 231

0.98 1.08 1.32 231

1.33 1.16 0.96 0.99 231

Combination

0.99 1.12 1.12 1.11 1.01 231

Voluntary

0.98 1.11 1.43 231 1.49 1.17 0.96 0.98 231

0.3 0.64 2.6# 2.2

0.91 1.18 1.00 0.99 231

0.98 1.15 1.18 1.12 1.03 231

0.5 0.2 0.2

3.7* 2 0.1 2.65#

0.8 0.3 0.2 0.9 0.5

F Statistic Negotiated

** Significant at .01 confidence level; * significant at .05; # significant al.lO.

RACE White Minority Black Hispanic Other (N) INCOME Low-Income Moderate-Income Middle-Income High-Income (N) CENSUS TRACT RACE Low-Minority Tracts Moderate-Minority Tracts High-Minority Tracts (N) CENSUS TRACT INCOME Low-Income Tracts Moderate-Income Tracts Middle-Income Tracts High-Income Tracts (N)

Negotiated

Index Mortgage Applications

0.90 187

1.00

1.27 1.18

0.98 1.17 l.l5 187

0.85 1.11 0.99 1.02 187

0.98 1.12 1.18 1.24 0.99 187

Voluntary

1.6 0.5 0 0.5 0.5

2.5# 2.2 0.1 1.8

0.6 0.2 0.9

0.5 0.3 2.8# 2.6#

1.02 1.02 1.20 1.08 0.90 55 1.22 1.42 1.02 0.95 55 1.00 1.23 1.27 55 1.41 1.27 1.04 0.89 55

Combination F Statistic

Index Mortgage Approvals

Table 5.11. Index of Bank Shares of Total State/MSA Mortgage Applications and Approvals by Agreement Type (Voluntary vs. Negotiated)

.......

N \0

1.01 1.03 1.27 19 1.12 1.29 1.04 0.93 19

0.96 1.10 1.25 120 1.22 1.22 1.00 0.89 120

1.00 0.94 0.84 154 1.06 1.10 0.99 1.01 154

1.53 1.68 1.15 0.88 19

0.92 1.03 0.97 1.06 120

0.91 1.20 1.05 1.04 154

1.00 1.07 1.06 1.33 0.91 19

0.97 1.11 1.16 1.19 0.98 120

1.02 0.98 0.98 1.02 1.06 154

** Significant at .01 confidence level; * significant at .05; # significant at .10.

RACE White 0.97 Minority 1.20 Black 1.27 Hispanic 1.20 Other 0.99 (N) 180 INCOME Low-Income 1.17 Moderate-Income 1.20 Middle-Income 0.97 High-Income 0.94 (N) 180 CENSUS TRACT RACE Low-Minority Tracts 0.97 Moderate-Minority Tracts 1.25 High-Minority Tracts 1.65 (N) 180 CENSUS TRACT INCOME Low-Income Tracts 1.50 Moderate-Income Tracts 1.19 Middle-Income Tracts 0.94 High-Income Tracts 0.95 (N) 180

Note:

Index Mortgage Approvals

1.8 0.8 2.3# 1.9

2 1.8 5.9**

3.6* 3.0* 1.8 6.8**

004

2.5# 2.4# 1.8 0.9

1.62 1.20 0.94 0.95 180

0.98 1.26 1.68 180

1.07 1.19 0.97 0.96 180

0.97 1.21 1.31 1.18 1.00 180

1.15 1.12 0.99 0.99 154

1.00 0.99 0.89 154

0.84 1.26 1.05 1.01 154

1.01 1.00 1.02 1.04 1.05 154

lAO 1.22 1.03 0.86 120

0.96 1.17 1.23 120

0.76 0.98 0.95 1.05 120

0.97 1.15 1.22 1.24 0.94 120

1048

1.28 1.34 1.06 0.92 19

1.00 1.16 1.49 19

1.29 1.72 1.13 0.90 19

0.91 19

1.00 1.11 1.09

204#

1.2 0.6 3.3*

1.8 1.1 4.2**

3.0* 4.1 ** 1.7 4.3**

004

2.1# 1.8 1.5 1

Local Statewide National Combination F Statistic Local Statewide National Combination F Statistic

Index Mortgage Applications

Table 5.12. Index of Bank Shares of Total State/MSA Mortgage Applications and Approvals by Agreement Scale

v." 0

.......

Note:

0.99 1.02 1.11 0.81 0.69 36 1.29 1.11 0.98 1.02 36 0.96 1.01 1.90 36 1.73 1.23 0.97 0.93 36

0.99 1.08 1.14 1.22 1.04 182

0.96 1.12 1.00 1.03 182

0.98 1.05 1.18 182

1.14 1.15 0.99 0.93 182

1

1.43 1.28 0.99 0.91 51

0.98 l.l3 1.47 51

1.28 1.29 1.01 0.92 51

0.98 1.20 1.26 1.19 1.13 51

2to3

1.23 1.08 0.96 0.99 141

0.99 1.10 1.10 141

1.04 1.07 0.92 1.03 141

1.00 1.02 1.13 0.97 1.02 141

4to9

1.37 1.29 0.96 0.98 63

0.97 1.25 1.39 63

0.91 1.53 1.21 0.91 63

0.96 1.30 1.40 1.48 0.96 63

Plus

10

Index Mortgage Applications

1.04 1.2 0.52 0.74

0.28 0.35 1.81

1.68 3.18* 5.2** 3.55**

0.9 2.0# 1.3 3.22* 1.94

1.24 1.18 1.01 0.89 182

0.98 1.12 1.13 182

0.86 1.09 1.00 1.02 182

0.98 1.11 1.17 1.23 1.00 182

Voluntary (NA) F Statistic

** Significant at .01 confidence level; * significant at .05; # significant at .10.

RACE White Minority Black Hispanic Other (N) INCOME Low-Income Moderate-Income Middle-Income High-Income (N) CENSUS TRACT RACE Low-Minority Tracts Moderate-Minority Tracts High-Minority Tracts (N) CENSUS TRACT INCOME Low-Income Tracts Moderate-Income Tracts Middle-Income Tracts High-Income Tracts (N)

Voluntary (NA)

1.92 1.25 0.97 0.93 36

0.95 1.11 2.39 36

1.12 1.12 0.92 1.03 36

0.99 1.07 1.38 0.75 0.69 36

1

1.67 1.33 1.00 0.90 51

0.98 1.22 1.48 51

1.15 1.32 1.02 0.93 51

0.98 1.24 1.21 1.22 1.13 51

2to3

1.33 1.07 0.96 1.00 141

0.98 1.14 1.07 141

0.92 1.07 0.91 1.02 141

1.00 1.01 1.02 0.96 1.03 141

4to9

1.48 1.30 0.96 0.98 63

0.97 1.19 1.50 63

0.80 1.59 1.23 0.92 63

0.95 1.35 1.46 1.59 0.96 63

0.9 1.37 1.07 1.64

0,49 0.07 3.5**

1.37 4.11** 5.3** 3.6**

0.98 2.12# 1.5 3.6** 1.56

Plus F Statistic

10

Index Mortgage Approvals

Table 5.13. Index of Bank Shares of Total StateiMSA Mortgage Applications and Approvals by Number of Agreements

Alex Schwartz

131

NOTES I.

2.

3.

4.

5.

6.

A few studies document the perfonnance of CRA agreements in a single city (See Camden 1995a; PCRG 1995; and Ford and Carver 1996). In a different vein, Mills and Lubulele (1993) analyze the peIfonnance of community-reinvestment loans made by seven financial institutions between 1980 and early 1992. A second element of the study, which is not discussed in this paper, consists of several case studies of CRA agreements in four sites: Chicago, Cleveland, New Jersey, and Pittsburgh. The objective of the case studies is to learn about the effect of CRA agreements on a broader range of bank lending activities besides home mortgages. A review of CRA examinations of Cleveland and New Jersey banks with CRA agreements showed that some examinations refer to the agreements and some do not. Moreover, the reports vary in the extent to which they discuss the agreements. Some allude to them indirectly. At the other extreme, a few reports detail the extent to which different goals of an agreement are being met. In addition to applications for new loans, HMDA also reports on the purchase of loans that have already been originated. If a bank originates a mortgage and then sells it to another institution, that mortgage will appear twice in the HMDAdata. In addition to the CRA agreements contained in the NCRC listing, the study also included other agreements identified from other sources. These additional agreements were identified from case studies in Cleveland, Pittsburgh, and New Jersey (subject of another paper) and from telephone interviews with some of the community groups listed in the NCRC inventory ofCRA agreements. When a bank has more than one agreement, the year of the first agreement was recorded.

REFERENCES Campen, J. ( 1995a) "Changing Patterns: Mortgage Lending in Boston, 1990-1993," Boston: Massachusetts Community and Banking Council. _ _ (1995b) "Changing patterns: Mortgage Lending in Boston, A 1994 Update," Boston: Massachusetts Community and Banking Council. "Chase and Chemical announce $18.1 billion community investment commitment," (1995) In The Community (Newsletter of the Community Development Group, Chemical Bank) 3, 2. Christiano, M. R. (1995) "The Community Reinvestment Act: the role of community groups in the fonnulation and implementation of a public policy," unpublished Ph.D. dissertation, University of Maryland. Dreier, P. (1997) "The new politics of housing,"Journal of the American Planning Association, 63, I: 5-27.

132

The Impact o/Community-Reinvestment Agreements

Federal Financial Institutions Examination Council (FFIEC) (1995) Home Mortgage Disclosure Act: 1994 HMDA raw data, Washington, DC: Federal Financiallnstitutions Examination Council. _ _ _ (1993) Home Mortgage Disclosure Act: 1992 HMDA raw data, Washington, DC: Federal Financial Institutions Examination Council. Fishbein, A. J. (1992) "The ongoing experiment with regulation for below: expanded reporting requirements for HMDA and CRA," Housing Policy Debate 3, 2: 601-36. Ford, F. and R. Carver (1996) "Analysis of mortgage lending activity of banks participating in the Denver Community Reinvestment Partnership," Denver: Colorado Center for Community Development. Galster, G. (1992) "Research on discrimination in housing and mortgage markets: assessment and future directions," Housing Policy Debate 3, 2: 639-83. Goering, J. and R. Wienk (1996) Mortgage Lending, Racial Discrimination, and Federal Policy, Washington, DC: Urban Institute Press. Hamill, E. (1990) "Community Reinvestment Act agreements: what is working," Washington, DC: Center for Community Change. Holmes, S. (1995) "All a matter of perspective: lawsuit sees bias where Nationsbank sees none," New York Times (Oct. 11): DI, Dii. Marsico, R. (1996) "The new Community Reinvestment Act regulations: an attempt to implement performance-based standards,"Clearinghouse Review (March): 1021-33. Metzger, J. (1992) "The Community Reinvestment Act and neighborhood revitalization in Pittsburgh," in Gregory Squires (ed) From Redlining to Reinvestmelll, Philadelphia: Temple University Press. Miara, J. (1995) "A Progress Report: Initiatives by Massachusetts Bankers and Neighborhood Lenders to Meet Community Credit Needs, 1990-1995," Boston: Massachusetts Community and Banking Council. Miles, B. (1986) "Housing finance: development and evolution in mortgage markets," in R. Florida (ed) Housing and the New Financial Markets, New Brunswick: Center for Urban Policy Research, pp. 3-24. Mills, E. (1993) "Performance Analysis of Community Reinvestment Lending Programs." Chicago: Woodstock Institute.

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Munnell, A., L. Browne, J. McEaney, and G. Tootell, Mortgage Lending in Boston: Interpreting HMDA Data, Boston: Federal Reserve Bank of Boston, Working Paper 92-7. National Community Reinvestment Coalition (NCRC) "Catalog and directory of Community Reinvestment agreements," Washington, DC: National Community Reinvestment Coalition. National Community Reinvestment Coalition (NCRC) (1996) CRA Dollar Commitments Since 1977, Washington, DC: National Community Reinvestment Coalition. Nicholas, P. (1991) "Taking back the neighborhood: the implementation of the Community Reinvestment Act," unpublished master's thesis, University of Albany, State University of New York. Pittsburgh Community Reinvestment Group (1995) Follow the Money: Pittsburgh Community Reinvestment Group Neighborhood Lending Report, 1991-1994, Pittsburgh: Pittsburgh Community Reinvestment Group. Pogge, J. and D. Flax-Hatch (1991) "The invisible lenders: the role of residential credit in community economies," in P. Nyden and Wim Wiewel (eds) Challenging Uneven Development: An Urban Agenda/or the 1990s, New Brunswick, NJ: Rutgers University Press, pp. 85-112. Squires, Gregory D. (1992) From Redlining to Reinvestment, Philadelphia: Temple University Press. Tootell, G. (1996) "Turning a critical eye on the critics," in J. Goering and R. Wienk (eds), Mortgage Lending, Racial Discrimination, and Federal Policy, Washington, DC: Urban Institute Press, pp. 143-82. U.S. Department of Housing and Urban Development (HUD) (\996) U.S. Housing Market Conditions, Second Quarter 1996, Washington, DC: U.S. Department of Housing and Urban Development. Weiss, M. and J. Metzger (1988) Neighborhood Lending Agreements: Negotiating and Financing Community Development, Cambridge, MA: Lincoln Institute of Land Policy, Occasional Paper #88-06. Yinger, J. (1996) "Discrimination in mortgage lending: a literature review," in J. Goering and R. Wienk (eds), Mortgage Lending, Racial Discrimination, and Federal Policy, Washington, DC: Urban Institute Press, pp. 29-74.

6 Conclusion: Human Capital Investment and Central City Revitalization FRITZ WAGNER, TIMOTHY JODER, ANTHONY J. MUMPHREY JR., AND LOUIS CRUST**

The chapters in this book represent a departure from previous studies of urban revitalization which have concentrated on business-oriented and infrastructure-related discussions and strategies. This book focuses instead on ways in which the poor, who constitute a significant number of central city residents, can be helped to improve their own situations, their living conditions, and the central city itself. Poverty is seen as isolating people physically, socially and politically, and as minimizing their opportunities to participate fully in city life. Rather than considering poverty to be a never-ending or self-perpetuating cycle, the authors of these chapters discuss poverty as a condition that is fed and renewed on a daily basis by social, political, and economic structures. While these structures may predate the individuals caught in the condition of poverty, many of the poor adopt the attitudes that poverty generates, including self-deprecating attitudes of worthlessness, hopelessness, and despair. If left unchecked these attitudes may lead, in tum, to unproductive or counterproductive activities, including criminal activity and violence, which further isolate individuals. Human capital investment is presented here as a way to alter those structures that perpetuate poverty. Therefore it is being advanced as more than just another expenditure on another program in the central city, or as providing a little extra training to a few more people, but rather as a way to provide real improvement in the lives of the poor and in the central city. The Current Context

In the Introduction, Becker and Collins introduce the concept of human capital, defining it as the sum total of a person's knowledge and skills. Following

** The authors thank Dr. Krishna M. Akundi for his comments. 134

Fritz Wagnel~

Timothy Joder, AnthonyJ. Mumphrey Jr. , and Louis Crust

135

from this, human capital investment is considered to be investment intended to improve individuals' knowledge and skills. This includes investment in people through initiatives such as schooling, on-the-job training, and housing, as well as other initiatives that deliver measurable benefits to individuals. The study of human capital investment has a long and respected history within the discipline of economics, and several calls such as those by Fainstein and Markusen (1993), Stegman (1993), and Rusk (1993) have been made within the planning profession for comprehensive planning, which includes human capital investment. While the lack of an integrated approach to redevelopment has been viewed as a source of many program failures, comprehensive programming that includes human capital investment is considered to strengthen individuals, community organizations, and communities themselves. The problems of central city residents are well known. As Becker and Collins state, 42.6 percent, or 14.3 million, of the country's 33.6 million poor live in central cities and constitute 20 percent of the central city population. The Census Bureau, reporting on adults 25 years and older, also states that 11.2 percent of this adult population of central cities have 9th to 12th grade educations but not a diploma, while 9.3 percent of these adults have less than a 9 th grade education (Bureau of Census 2000: 158-59). Prior studies have found income to be correlated to years of education and have also observed that recent global economic restructuring has brought a significant decline in blue-collar jobs in the United States, with a subsequent fall in the wages of moderate- to low-income families. Given these data, it is not surprising that large segments of the central city popUlation are being left behind in the current climate of economic development and expansion. A high level of outmigration of employed and wage-earning populations increases or perpetuates central cities' high unemployment rates, and using business taxes as a means of recovering diminishing revenue leads to business closings, relocations, and disinvestment. This leads to further erosion of central cities' tax bases, to diminished abilities of central cities to provide needed services, and to neglect of infrastructure improvements. The remaining chapters of this book provide studies of specific cases of human capital investment, and demonstrate the ways in which they have affected central city popUlations. They discuss and evaluate a range of possibilities for action that are available, and provide hope and inspiration to those who are struggling with similar issues. While the authors of these chapters each address different specific issues and types of human capital investment in central city revitalization, they share a number of common concerns. Together they provide a comprehensive set of recommendations for investment that can assist residents through school, employment, community life, and home ownership in the central city.

136

Conc/usion

An Evaluation of the Empowerment Zone Program In chapter 2 Margaret Dewar discusses one application of the Empowennent Zone (EZ), which is an initiative that the federal government developed in 1994 to promote central city revitalization. The purpose of Empowennent Zones is to allow communities to create jobs and opportunities which contribute to the solution of economic, human, community, and physical development challenges. Through the Empowennent Zone program, federal, state, and municipal governments offer a number of incentives to employers to locate and expand businesses in Empowennent Zones and to hire Empowerment Zone residents. Dewar reports that the full effects of the Empowennent Zone and its incentives are difficult to detennine but that a significant body of research indicates that they may not be effective in creating economic opportunity. Reasons for this ineffectiveness are many. For example, there is evidence of job-skill mismatch, whereby Empowennent Zone residents' skills are suited for jobs in other parts of the city rather than within the Empowennent Zone itself. Many employers find that EZ program paperwork is too time-consuming to bother with, and many do not know about or misunderstand the program. A number of employers do not meet certain program eligibility criteria, and few employers in the EZ employ Empowennent Zone residents. Finally, small businesses with low or no profits would derive no benefit from tax reductions that the program offers. Ultimately, Dewar concludes that "Empowennent Zone incentives are illdesigned to achieve their goal of creating economic opportunity." While her study was limited to the city of Detroit, it is not unreasonable to expect that the conditions that she found in Detroit would be replicated elsewhere. In this way the Detroit experience may serve as a bad omen for the Empowennent Zone program generally. Based on this report, the establishment of Empowennent Zones as currently constituted may not be effective as a means to achieving human capital investment and related central city revitalization. A number of recommendations to strengthen the Empowennent Zone program follow from Dewar's study. These include the need to create new connections between neighborhood residents and jobs in industrial districts; to aid workers to overcome a lack of education, minimal work experience, and inappropriate behavior on the job; to support workers on the job until they become acculturated to the job and the work environment; and to publicize the Empowennent Zone program regularly, to alert new employers to the program's existence, and to infonn employers of its characteristics. Also, the benefits that the program offers to employers may need to be altered to be beneficial to small businesses that operate in these areas, and the application process for business owners to participate in the program may need to be streamlined.

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Use o/School-Based Activities

Doherty, Jones, and Stone, in chapter 3, address the problem of bettering the lives of children and youth. They observe that schools are at the center of local community life, and so are natural loci of activity. With a large store of physical and material assets, as well as able and concerned staff, schools have the capacity to develop and maintain a broad range of programs. This may include educational programs for early childhood, youth development, after-school activities, mentoring, internships for older students, counseling, adult education, and job training, as well as social, recreational, and health care services. To be successful, though, these programs require social supports. They must be collaborative, involving various sectors from the surrounding community, such as professional educators, administrators, parents, and business. The involvement of parents can allow them to participate in decision-making at the schools; can give parents the skills they need to reinforce their children's learning; and can reduce gaps between the home and school environments. The involvement of business provides opportunities for enhanced mentoring, guidance, internships, and job placement. Ultimately, such programs and activities can increase mutual respect among local groups and can give central city residents greater confidence in dealing with professionals, as well as in participating in the larger life of the community and the city. They provide links to opportunities for success beyond the community, and improve the life chances of central city children and youth. As such, these school-based activities can enhance neighborhood ties and foster community development. Doherty, Jones, and Stone provide numerous examples of such initiatives from the cities of Baltimore, Maryland, and New Orleans, Louisiana. Both of these cities saw the development of coalitions and collaborative efforts to improve the education and lives of disadvantaged children and their families. In Baltimore these included the Greater Baltimore Committee (which is a private nonprofit association of over 950 businesses) and projects such as the Baltimore Commonwealth; CollegeBound; School, Family, and, Community Partnership; the Child First Authority; Project RAISE; Success For All; Ready at Five; Baltimore Reads; New Schools Initiative; and the Barclay-Calvert partnership between private and public Baltimore schools. These groups and projects concentrate on education, training and employment preparation in Baltimore. Others, such as the Maryland Roundtable; Advocates for Children and Youth; the Fund for Educational Excellence; the Center for Research on the Education of Students Placed at Risk (CRESPAR) at Johns Hopkins University, and the Abell Foundation, concern themselves with the welfare of the city's children and youth. In New Orleans a collaboration between public and private agencies created the Toyota Families for Learning Center as a program that promotes a

138

Conclusion

comprehensive, family approach to literacy and educational achievement; the City of New Orleans is involved in a collaborative jobs initiative; and a program called Communities in Schools is attempting to facilitate partnerships and coordination to provide school-based services to disadvantaged youth. Other groups dedicated to improving the lives of the city's children and youth include the collaborative effort Partners in Education; the citizen advocacy organization Metropolitan Area Committee; the regional economic-development organization Metrovision; as well as the Greater New Orleans Foundation, numerous religious coalitions and groups, and citizen groups. Tenant Organizing in Public Housing

Bob Washington and Bob Whelan, in chapter 4, demonstrate the value and impact that tenant organizing in public housing can have. Organized tenant councils can serve as vehicles through which neighbors learn about problems, formulate opinions, and seek to intervene in the political process in order to protect their local interests. Human and public services tend to be more available or accessible to organized political activity, and so tenant organizing allows public housing residents to assist in the development of services important to the community. More than just dealing with physical characteristics, such organizations can provide training programs to develop leadership abilities, as well as knowledge and experience in various aspects of political and civic life. They can provide tools through which public housing tenants can break free from harmful cultural, social, and psychological conditioning and help the tenants move toward successful integration into mainstream society. This, in tum, helps to improve relations with political regimes. Collaboration with government and the private sector is important in tenant organizing as well. Government can provide guidance in organizational and leadership issues as well as job training, and Washington and Whelan identify HUD's Community Building initiative as being particularly effective in this context. Private partnerships can provide apprenticeship programs, employment opportunities, entrepreneurial business training, and the opportunity for entering into joint ventures. Together these initiatives serve to develop personal skills and abilities among public-housing residents, inform residents of possibilities that are available and channels that are open to them, and allow them to participate fully in the life of the city. In Kansas City, MO, the Neighborhood Alliance has aided in the development of several public housing leaders, such as Mrs. Lyde Doston, Mrs. Connine Flowers, and Miss Florine Jones. These women have organized tenant associations, councils, and resident management groups; they have served on resident councils, and state boards; they have attended national conferences and have created and maintained links with larger organizations and networks. The citywide Public Housing Council, through public-private partnerships,

Fritz Wagner, Timothy foder, Anthony f. Mumphrey fr., and Louis Crust

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provides an apprenticeship program, employment opportunities, and entrepreneurial business training. Through HUD and HOPE VI grants, the Public Housing Resident Council was also able to provide economic development counseling, job training, and community organizing services, as well as address physical conditions of the developments, in order to reintegrate public housing developments into their surrounding communities. In New Orleans, public-housing tenants became involved in housing management in the mid-1970s. There are now elected resident councils in each of the public housing developments, and a City Wide Tenants Organization. Meetings of the City Wide Tenants Organization are open to publichousing residents, the Executive Director, and the Board of Commissioners of the Housing Authority of New Orleans (HANO) and so aid in communication of resident and housing concerns. Through a HUD grant, resident organizations established programs for resident management training and for business and economic development. Also, the resident councils, with assistance from HANO, formed the HANO Resident Loan Corporation in order to assist residents in becoming entrepreneurs. Tenant associations and resident councils, in cooperative ventures with the Chamber of Commerce, have created employment and training programs, job fairs, job bank and referral centers, and economic development initiatives. In one of the most successful public-private alliances, the St. Thomas Resident Council joined with twenty-nine other agencies and organizations that were providing services to the area. This allowed residents to have input and some degree of control over activities in their own community. Financing through the Community Reinvestment Act

In chapter 5 Alex Schwartz observes that the Community Reinvestment Act (CRA) "requires that banks and other lenders provide loans and other services to all areas from which they draw deposits" and has given community groups and organizations legal leverage to challenge bank mergers and acquisitions, as well as to negotiate community-reinvestment agreements. The development of agreements began slowly but became more common through the 1980s and 1990s. The period from 1977 to 1983 saw sixteen agreements established; at least 147 more agreements were initiated between 1984 and 1989; and over 165 agreements were announced between 1990 and 1996. Agreements vary in scope, pertaining to a particular neighborhood, a city, an entire state, or, in some cases, the nation. They also include varying types of organizations, such as coalitions of community-development organizations, fair housing advocacy organizations, and even local governments. In these CRA agreements banks pledge to provide specific services within specified geographic areas, and almost always include provisions for home-mortgage lending. Most of the largest agreements are voluntary and are

140

Conclusion

announced unilaterally by the banks, although some banks enter into agreements in order to avoid regulatory action. By regulating bank lending to minority and low-income households and neighborhoods, the Act has created a situation that has been referred to as "regulation from below. " Through his study of states and metropolitan areas with CRA agreements in 1994, with specific reference to mortgage and home improvement applications and loans, Schwartz concludes that banks with CRA agreements appear to be more responsive than other banks to the credit needs of minority and low-income households and neighborhoods; show their greatest success in reaching black households; and have significantly higher regional shares of mortgage applications and approvals for blacks than do other banks. In reporting some areas of mixed results, Schwartz states that banks with agreements have a greater tendency than others to lend to moderate-income, but not low-income, households; banks (other than independent mortgage banks) with agreements show higher propensities than other banks to lend to Hispanic households; and that banks (other than independent mortgage banks and small banks) with agreements are more responsive than other banks at reaching minority and lower-income census tracts. The Community Reinvestment Act does not create a perfect situation, then, but it does reach minorities and provide benefits. These benefits take the form of mortgage lending and other banking services to a significant sector of the moderate-income, low-income and minority households. By helping members of those groups to purchase and maintain housing, the Act aids in establishing a stable population that has a sense of pride in their own homes and a personal stake in the well-being of their community. These homeowners serve as role models for other neighborhood residents, and as taxpayers they contribute to the city's ability to provide improved services. Cooperation and Trust Building

As several of the authors state, cooperation and trust building among service providers, business, government, and central city residents can enhance the effects of programs and improve their chances of success. Cooperation among the numerous agencies, organizations, and businesses that work to serve the same population can overcome problems that projects often fall victim to. These include attitudes of competition, possession and secrecy, overlap of services, as well as lack of access to beneficial information that other agencies or projects hold. Cooperation in the provision of services can improve service planning, coordination and delivery, and can enhance the prospects of success through the pooling of information, labor power and finances. Cooperation with central city residents is also critical in order to ensure that their concerns are heard and that their problems are addressed. The active

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participation of residents serves as a form of apprenticeship or training for the residents, as well as for the service providers, and helps to develop mutual respect and trust among them. Such participation would also help to counter issues of race and other factors that have been sources of long-standing frictions and would address attendant sensitivities. Long-Term Funding of Projects

The expectation of long-term benefits from human capital investment should be matched with long-term investment. Doherty, Jones, and Stone observe that programs only begin to stand on their own after three years, and they cite a stakeholder as requiring fifteen years to make a dent in an education-related problem. As time is needed to determine and measure success, initiatives must be sustained over time. Since the city as a whole benefits from this investment, then the city as a whole should make a commitment to adequately fund projects. No doubt the expense of long-term funding will be more than returned through the long-term health of the central city and its residents. Summary

The recommendations that follow from the studies in this book include: -Use of school-based activities, -Tenant organizing in public housing, -Strengthening of the Empowerment Zone program, -Financing through the Community Reinvestment Act, -Long-term funding of projects, and -Cooperation and trust-building. Together these recommendations can form the core of an integrated program to improve the quality of education, skills, and general daily life of centralcity residents. They can aid residents through major stages oftheir lives, from education to employment, to home ownership, public acceptance, and political participation. This would help them to become productive and positive citizens who take pride in themselves and in their city and will also give them the opportunity to make contributions to their own communities. The discussion of human capital investment presented in this book adds a new dimension to the dialogue on central city revitalization begun in previous NCRCC books, Urban Revitalization: Policies and Programs and Managing Capital Resources for Central City Revitalization. Like them, this book calls for pUblic-private cooperation, the improvement of the quality of life among central city residents, a holistic view, the involvement of all actors, leadership capacity building, and of course human-investment strategies. By focusing on human capital investment this book recognizes the importance of the resident and the contribution that the resident can make in

142

Conclusion

revitalizing the central city. However, it also recognizes that the current condition of our central cities and of their residents is the result of a long and continuing process and that significant investment is needed to improve this situation. It is a process in which all cities should participate and to which all cities should commit themselves for the long term.

REFERENCES Bureau of Census (2000) Table 41, Detailed Mobility of Persons 25 Years and Over, By Educational Attainment and Persons Income [Part A: All Levels to Some High School], in Current Population Reports, Series P: Population Characteristics, pp. 158-59, accessed through the Statistical Universe service of Congressionaiinformation Service, Inc. on 9/22/2000. Fainstein, S. S. and A. Markusen (1993) "The urban policy challenge: integrating across social and economic development policy," North Carolina Law Review, 71(5), 1463-86. Rusk, D. (1993) Cities Without Suburbs, Washington, DC: Woodrow Wilson Center Press. Stegman, M. A. (1993) "National urban policy revisited," North Carolina Law Review, 71(5),1737-77. Wagner, F., T. Joder, and A. Mumphrey (eds) (1995) Urban Revitalization: Policies and Programs, Thousand Oaks, CA: Sage Publications. ___ (eds) (2000) Managing Capital Resources for Central City Revitalization, New York: Garland Publishing, Inc.

Index

Abell Foundation, 48, 54, 57, 137 ACORN, 104 Aid to Families with Dependent Children (AFDC) program, 7 Alinsky, Saul, 101 American Apartheid (Massey/Denton),

81,92-93 Baltimore City Public Schools, 9,

47-72, 137-38 Baltimore Commonwealth Compact, 53,

59,61,137 Baltimore Education Network, 69 Baltimoreans United in Leadership Development (BUILD), 48, 53 bank-lending practices, 9,100-30,

139-40 Becker, Robert W., 134-35 Boston Federal Reserve Bank study, 110 Carter, Jimmy, 102 Center for Community Change, 104 children, multiple needs of, 49-51 Cincotta, Gail, 101 Cisneros, Henry, 87 Citizens Planning and Housing Association (CPHA), 69 Citywide Tenants Organization, 88-89,

139

class, politics of, 79-80 Clinton administration, 12-13 coalition-building in education: ambivalence on, 49-56 and human capital, 8-9, 42-44 and politics, 58-60 and school-based strategies, 44-46 and school dynamics, 60-63 sustaining of, 66-70 and turf disputes, 51-52, 62 Collins, Robert A., 134-35 Comer School Development Program,

69-70 Community Reinvestment Act (CRA), 9,

100-17,139,141 community-reinvestment (CRA) agreements, 1,9,100-17,139-40 Cuomo, Andrew, 18 Democratic Party, 80 Denton, N.A., 81 Detroit Empowerment Zone, 8,12,

14-38 Dewar, Margaret, 8,136 Doherty, Kathryn, 9, 137-38 Doston, Lyde, 85, 138 ecology of cities, 79-80, 97 economic opportunity, 12-34 economic theory, 3-8

143

144 education: and business, 46,53-54,57 coalition-building in, 8-9,42-72 competing visions in, 51-56 funding of, 63-68 literature on, 3-4 and poverty, 6-7 Education Alternatives, Inc., 59 Edwards, Edwin, 87 Embry, Robert, 57 Empowerment Zone (EZ) program: 1,7, 8,48,78, 141 boundary areas and, 20-21, 25 citizens in, 92 effects of, 15-20 employer/resident relations, 25-27, 31-34 history of, 12-14 incentives under, 14, 18-19,22-26,136 in industrial district, 22-27 research on, 20-22, 32-34 in retail district, 24-27 Enterprise Communities, 12-13,48, 78,92 Fainstein, S., 2 Fair Housing Act of 1968, 10 I Family Support Act, 7 Federal Housing Administration (FHA) loans, lll-13 federal initiatives, 7-8, 12-34,86-89, 1I1-13 Financial Institutions Reform, Recovery, and Enforcement (FIIREA) Act of 1989, 103 Flowers, Connine, 85, 138 Greater Baltimore Committee (GBC), 47-48, 53, 137 Greater New Orleans Foundation, 69, 138 home improvement loans, 113-14 Home Mortgage Disclosure Act (HMDA),9, 100-103, 105-17 home ownership, 2-3, 9, 100-17 HOPE VI grants, 7, 86, 96,139

1ndex Housing Authority of Kansas City (HAKC), 84-86 Housing Authority of New Orleans (HANO), 84, 86-89, 139 human-capital investment: and coalition building, 42-44 conclusions on, 134-42 defined, 1-3 and funding, 141-42 human capital theory, 3 literature on, 1,3-8 Hunter, Richard, 61, 65-66 industrial districts, 22-27 interest-group politics, 83 Islandview Industrial Association, 22-23 Job Opportunities and Basic Skill (JOBS) Act, 7 jobs: blue-collar, 4-5 entry-level,27-30 federal initiatives and, 7-8 networks and, 19-20,27-29,32-33 Johns Hopkins University, 48, 65, 137 Johnson, Lyndon, 12 Jones, Cheryl, 9, 137-38 Jones, Florine, 85-86, 138 Kansas City, public housing in, 9, 84-86,93-94,97 Kelly, Michael, 88 labor markets: hardship in, 5 leadership development, 94-96 local, 19-20,25-34 Long, Norton E., 42 market notions, 93-94 Markusen, A., 2 Massey, D. S., 81, 92 Metropolitan Area Committee, 49, 68, 138 minority lending, 9, 100-30,139-40 Model Cities program, 12, 14 Model Urban Industrial Areas, 22

Index Morial, Marc, 59--60, 87-88 mortgage approval and denial rates, 107-30, 139-40 Nation at Risk, A (U.S. Department of Education), 46 National Center for the Revitalization of Central Cities, I National Community Reinvestment Coalition (NCRC), 105-108, 116 National Housing Conference of 1972, 101 National People's Action, 102, 104 National Training Institute, 102, 104 National Welfare Rights Organization, 88 Neighborhood Alliance, Kansas City, 138-39 New Orleans: public housing in, 9, 55, 84, 93-94, 97 race in, 57-58 schools in, 9, 46-72,137-38 New Orleans City Wide Tenant's Council,55 New Schools Initiative, 64, 137 Northwest Community Organization, 101 One-Stop Capital Stop, 23, 25 Organization for a Better Austin, 101 parent involvement in schools, 44-45 People's Institute, 92 PEW Charitable Trust, 91 Pinderhughes, Alice, 65 place-based strategies, 2, 20-21, 93-94 politics: interest-group, 83 and race, 91, 93-96 of urban regimes, 79-81, 91-92, 96-97 poverty: in central cities, 135 and Empowerment Zones, 13-14,22 literature on, 6-7

145 and politics, 58--60 and public housing, 78-79 and race, 92-93 and schools, 42-43, 47-48 Proxmire, William, 102 public housing: 9 tenant organizing in, 82-97,138-39 and theory, 78-82 Public Housing Act of 1937, 86 Public Housing Resident Council, Kansas City, 85-86,138-39 racial segregation, 42-43, 56-58, 80-82, 91-95, 101-102, 107-18 Rawlings, Howard P., 57 redlining, 102, 105-108 regime theory, 79-81, 91-92 restructuring, 4-5 Robert Wood Johnson Foundation, 90 Rogers, David, 79-80 Rusk, David, 3 St. Thomas/lrish Channel Consortium, 89-92 SI. Thomas Resident Council, 55, 89-91, 139 Savings and Loans, 104 Schaefer, William Donald, 59 Schmoke, Kurt, 59, 61, 65 schools: capacity of, 43-44 dynamics of, 60-63 and politics, 58--60 public systems of, 46-72 services linked to, 1,45-46 strategies based in, 44-46, 137-38 Schorr, Lisbeth, 51 Schwartz, Alex, 9, 139-40 Stegman, Michael, 2 Stone, C. N., 9, 79, 97, 137-38 Success for All program, 66--67 Swanstrom, T., 7 tenant-based management, 1,9 Tenant Opportunity Program Grant (TOPS), 86, 89 tenant organizing, 82-97, 138-39, 141

146

1ndex

Toyota Families in Learning, 63-64,

137-38

Trapp, Shel, to 1 trust building, 139-40 Tulane School of Medicine, 90 underclass, the,S urban regime politics, 79-81, 91-92,

96-97 urban-revitalization policies, fail ure of, 1 U.S. Department of Education, 46

U.S. Department of Housing and Urban Development (HUD), 18,48,

86-89,96, 138-39 Walker, Dan, 102 Washington, Bob, 9, 138-39 welfare-to-work, 7 Whelan, Bob, 9,138-39 work-opportunity tax credit, 23-26 Wright, W., 7 Zukin, S., 93-94