Powerful Allies for Poor Neighborhoods

April 04, 1994|By NEAL R. PEIRCE

WASHINGTON — In America's most disheartening hours -- violence spreading, the poor getting poorer, inner cities imploding -- there's an occasional signal to rekindle one's faith, a sort of secular Easter or Passover.

One of those bright moments occurred in Washington in late March. Assembled in a single room were leaders of two financial giants (J.P. Morgan & Co. and Prudential Insurance), eight foundations famed for their size or imagination (Rockefeller, MacArthur, Surdna, Knight, Pew, Annie Casey, McKnight and the Metropolitan Life Foundation), and the secretary of the Department of Housing and Urban Development.

And what were these power elite up to? They were celebrating, for once, a success -- the fact that the National Community Development Initiative, which most of them helped launch with a $60 million investment in 1991, has triggered construction or rehabilitation of 5,000 affordable homes, plus day care facilities for 1,000 children.

Now the leaders were announcing a new round of financial commitments -- an additional $87.65 million in grants and loans, which they predicted would stimulate a total of $750 billion in development in some of America's most hard-pressed cities and neighborhoods.

When you get up to three-quarters of a billion dollars, noted J.P. Morgan president Douglas Warner, you're starting to talk ''real money.''

With interactive television bringing the mayors of Philadelphia and Denver (Ed Rendell and Wellington Webb) into the room, broadcasting with community leaders at their side from building sites in their cities, the NCDI funders presented an image of an investment movement for poor neighborhoods truly coming of age.

OK, you may ask, where's the defect of this happy story?

My answer: The effort is exciting. It's just not enough. The number of funders, dollars, intermediaries and community development corporations are still not at the scale necessary to assure a turnaround of America's blighted neighborhoods.

Important progress is being made. America's foundations, for example, often flit from one fashionable cause to another. But here's a group not just renewing certain grants but committing themselves to community-based development for the long haul. And they're realistically insisting that the number of cities be held to 23, so as not to spread their efforts too thin.

The obvious deficiency: Only a small fraction of all U.S. foundation dollars go into community development. Hundreds more foundations ought to be involved, both with grant funds and investment of capital.

More Wall Street power is starting to move behind the effort. J.P. Morgan, for example, wasn't in on the first round in 1991. But it is now, and its participation ought to be a positive signal to other big-time financial houses. But whether they'll get the signal that these types of investments are prudent is far from certain.

The federal government wasn't a partner in NCDI's first round. But now, under HUD Secretary Henry Cisneros, it is -- to the tune of $20 million, and making a sincere effort to be just one of the players and not stifle the effort in government red tape.

''Given what's out there in foundations,in pension funds and the investment community, it may be that HUD's job is to provide an investment share that other funders multiply several times over,'' Mr. Cisneros told me.

But it took a special action of Congress to let HUD come into this deal for $20 million. It would take a dramatic turnaround in congressional thinking to ''reinvent'' Washington's role in housing -- less as dominant investor, more as a subordinate player whose soft dollars draw foundations, pension funds and corporations to invest many times as much for a new generation of inner city housing deals.

And there are weaknesses in the scale of the housing and community development side that only government and foundations could correct. The fiscal intermediaries for NCDI -- the Local Initiatives Support Corp. and the Enterprise Foundation -- have made dramatic advances in securing more investment dollars. But either they should be quadrupled or quintupled in size, or awhole new set of intermediaries should be created, to the scale we need to rebuild decaying communities rapidly and well.

And though the CDCs seem to be coming of age with national recognition, hundreds of them remain dangerously undercapitalized and understaffed. Their numbers should probably be expanded from 2,000 to 5,000, with major government and foundation investments put behind the effort.

Would all that cost a lot more money? Yes. But we know we now have a multi-partner formula to construct housing that works, to increase shopping centers and other commercial developments, to build strong community in troubled neighborhoods.

Conceptually and practically, this is the polar opposite of the '60s and '70s formula of throwing billions of federal public housing money into neighborhoods devoid of strong grassroots organizations.

If we're to have a chance, strategically, to fight back the tides of decay and violence in urban America, this new formula is the compellingly obvious way to go. The costs of not spending several billion dollars now could be many times greater in social, physical and human destruction later.

Neal R. Peirce writes a column on state and urban affairs.

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