Empowerment Zone plans for future despite obstacles

2011-04-26T00:00:00Z 2011-04-27T00:00:05Z Empowerment Zone plans for future despite obstaclesBy Bowdeya Tweh bowdeya.tweh@nwi.com, (219) 933-3316 nwitimes.com

GARY | After disbursing nearly $26 million in federal funds, the Gary-East Chicago-Hammond Empowerment Zone isn't ready to close its doors.

The income stream isn't as steady as it used to be, but zone Executive Director Scott Upshaw is planning for a revitalization of an entity designed to improve economic fortunes in Northwest Indiana's urban core.

With a funding shortfall, waning political interest, bad deals and negative press, the efforts of the Empowerment Zone have fallen short of the lofty ambitions once planned for these entities during the Clinton administration.

But in a large building formerly owned by a media company at the corner of 11th Avenue and Broadway in Gary, Upshaw hopes the group and its six full-time and one contract employee can form more roots in the community to keep the entity churning along for years to come.

"What is left now?" Upshaw asked. "Hope."

Staying afloat

Although the decadelong federal program officially ended Dec. 31, 2009, the Empowerment Zone is continuing to operate on the income generated from business loans it made. The catch is that proceeds only can be invested in the 16.6-square-mile empowerment zone area. Upshaw said about 70,000 people lived within the zone's boundaries spanning the three cities in 2000.

The zone's future is based solely on generating more income. Loan dollars have been a lifeline for the organization, but officials admit they won't last forever. The zone and its board are considering attracting donors to invest in the nonprofit.

Retrofitting the cavernous building housing the zone office is expected to pay off in the terms of forming leases with tenants for a soon-to-be-opened business incubator. Leasing of about 6,200 square feet of office space is expected to begin as early as May 31.

The zone, which also operates a youth empowerment training program, manages the Steel City Buffet & Grill, formerly Dustie's Southern Style Buffet, in Gary.

"We're trying to get recognized as a local nonprofit now, a legitimate nonprofit 501(c)(3) that has a 10-year track record and is trying to continue to have another 10-year track record," Upshaw said. "But as all nonprofits, we need to see grants. We need to make investments wisely. We need to be in projects that are pretty much a little different than our original missions. ... Now we have to look at, are we going to get paid back, because if not, we're out of business."

The challenges minus a significant revenue stream are real. Upshaw said the zone now is competing directly against the cities to attract investments it once represented. Also, some groups may be discouraged from investing with the empowerment zone because of the end of the federal-program designation.

"We have to definitely stay in sight of people," Upshaw said. "And that's what we're trying to do. We're in a rebuilding phase with our website, with our move. Everything is now centered around us. We're in sink-or-swim mode right now.

"Going forward, when we put money into things, we have to make sure we have a concise project that has been well thought out and actually benefits the community and the Empowerment Zone," Upshaw said.

Ed Glover, co-chairman of the Empowerment Zone's advisory council and executive director of an East Chicago-based nonprofit housing developer, is convinced the group has had a successful decadelong run. But the future is uncertain operating on a month-to-month basis, waiting for loan dollars to trickle down.

"Can we continue to be a success? That is the question that's in my mind that I don't have the answer to," Glover said.

Lessons learned

The city of Boston's Empowerment Zone provided a list of lessons it learned to the U.S. Department of Housing and Urban Development in a final report of the program's operations. After commissioning an independent analysis of the program, five goals emerged on how best to manage local economic development and neighborhood revitalization efforts, including the following:

• Encourage and support collaboration among local businesses and neighborhood-based nonprofits

• Develop systems to collect data to monitor, assess and share information about progress of initiatives

• Support community-based participation and advocacy

• Increase capacities of small and local businesses in neighborhoods

• Build a vision and a comprehensive plan for reducing poverty in the city

Former Hammond Mayor Duane Dedelow Jr. said if he were granted a do-over with the Empowerment Zone, he would make sure the group wasn't spread too thin. He admitted the group attempted to fund too many projects with the resources it had available.

It should have focused on a few broad economic development projects and then leveraged that success for other efforts.

"Certainly, there is a tremendous need for community development projects in the urban core of Northwest Indiana," said Dedelow, who is now executive director of the Catholic Charities of the Diocese of Gary. "At the same token, you have to be able to pay for those community programs.

"In my view, the only way to do that is if you have large, transformative, meaningful economic development projects that help create that wealth that ... allow you to, in the end, do community development projects."

Gary nonprofit consultant Jeff Johnson worked with the Empowerment Zone created to serve areas of Philadelphia and Camden, N.J., in the 1990s. Johnson said the areas decided that to change conditions for residents, leaders had to get to the grassroots level and figure out what residents wanted to improve in their communities.

He said said there's no reason why Gary, East Chicago or Hammond couldn't do the same, but it would take a change in the mindset of public officials and determine what would benefit these areas in the future.

"We have to change the way we do business," Johnson said. "What they do in New York, Chicago, Kansas City, we can do in Gary."

Hoping for a future

Empowerment Zone officials aren't the only ones who want to see the entity thrive in some fashion.

Terence Bonich, president of the now-defunct Calumet Distribution Group, believes the Empowerment Zone should continue its work. By providing funding for small businesses such as the one Bonich used to operate, he said the zone works to enhance the community.

"The key to our area is we have to have jobs, and we have to have jobs that pay relatively well," Bonich said. "Particularly in today's financial environment, the average small-business man, potential entrepreneur, is not going to be able to get funding from a traditional source. The rules prohibit it.

"I think it's important that something like it exist."

Local media personality and zone loan recipient Garrard McClendon said the zone has provided needed financial help and services for his business. McClendon, who operates McClendon Report LLC, is optimistic the zone will find funding and continue to operate.

"They've been the perfect incubator for us," McClendon said. Their support is "greater than the funds – if you need a computer, if you need letterhead, if you need business assistance, you can go to the zone."

An EZ return?

Conversations at the federal level are focused on reducing the federal deficit, and there is little political appetite to increase spending on programs that may not provide an immediate return. Glover said states and municipalities are struggling more to figure out how to manage basic services in government than to be concerned about funding more programs.

"Anything is possible if things are brought to the table in the right amount," he said. "I don't see that being the situation within the very near future."

Patrick Kline, associate professor at University of California-Berkeley and co-author of a study on the first round of empowerment zones, said it's premature to determine whether the zones would work in a different form. Kline said he's interested in evaluating the effectiveness of the second round of empowerment zones, which include the one in Northwest Indiana.

"We barely know they worked in the first round," Kline said. "The question of whether we can afford empowerment zones is a political question, not an economic question. Do I think that large, targeted investments in distressed urban areas could potentially have impacts on urban communities? Yes."

Employment research economist Timothy Bartik wants to take the issue a step further. Bartik said helping distressed economic areas should be part of a national policy agenda, if it isn't already. He said programs such as state enterprise zones with a heavy focus on tax breaks have "very little evidence of success" in providing broad-based opportunities in economically distressed areas.

Pointing to research done by Kline and other economists, Bartik said job opportunities and the earning potential through the Empowerment Zone program improved through job training and other social development tools.

"I think the federal government should consider restarting the program and pick new areas," said Bartik, who now is senior economist at the Battle Creek, Mich.-based W.E. Upjohn Institute for Employment Research.

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