Empowerment Zone: EZ Money?

Ten years after getting Empowerment Zone funding, have Knoxville's poorest neighborhoods changed for the better?

For Gilbert Lusk, the Empowerment Zone was a deal too good to pass up.

His auto body shop, Lusk Body Company, at 127 Jennings St. off of Broadway, is in what many call the skid row of Knoxville—it's where all the homeless shelters are, in addition to a halfway house, and it is not uncommon to see drug dealers and prostitutes hanging out.

"This part of Knoxville had always been terribly neglected by the city of Knoxville," Lusk says in his office, as he sits surrounded by computer screens. "The sidewalks were in terrible shape. [The neighborhood] had a down-and-out image. It's never been a garden spot, probably never will be."

But thanks to an Empowerment Zone program, Lusk was able to get funding to help renovate his building's exterior. The building was given a fresh coat of paint, new windows, and three new doors (all painted a distinctive dark red), the sidewalks were replaced, and the police cracked down on street-walking prostitutes. And perhaps the most distinctive element of his building—the iconic art-deco sign that was originally made in the '50s—was renovated. His block looks downright hip these days. "The whole area has a better outlook of itself now," Lusk says.

But a few miles away in Lonsdale, someone has a much different take on the Empowerment Zone.

The Rev. Steve Simpson, pastor of the Open Door Church, says that he's felt nothing but disappointment from the program. "It seems like when it gets to Lonsdale, funds are awful short," Simpson says. "I just think there comes a time when the whole community should have a fair shake. Lonsdale gets the leftovers."

When Knoxville was approved to receive Empowerment Zone funding in 1999, many in the city were thrilled at the potential a windfall of $100 million could have for the city's poor neighborhoods. A few cautioned that the city not waste the opportunity. But it was hard to imagine how that kind of cash wouldn't make a significant difference.

Now, almost 10 years later, nobody is saying the Empowerment Zone has been a booming success. Some are even disgusted with what they say has been a complete failure.

But while there are many critics of what has happened with the Empowerment Zone, there are some who defend what the city has done with the money it got. They say that a lot of good things came out of the program, initiatives that have improved Knoxville and that have the potential for an enduring legacy.

It's All the Feds' Fault

The Empowerment Zone was a program started by President Bill Clinton in 1994 to help rebuild impoverished urban neighborhoods, through grants and incentives, to help encourage business growth and reform housing stock. Six cities were awarded Empowerment Zone status in 1994. It was expanded in 1998 to 15 more cities, including Knoxville.

Knoxville's plan was ambitious and well documented. Goals included creating a climate to encourage business start-up and expansion, create sustainable, mixed-income neighborhoods, and eliminate institutional barriers to economic opportunity and self-sufficiency.

Knoxville's Empowerment Zone is 16 square miles in the center of the city. It includes the city's downtown and its poorest and oldest neighborhoods—Parkridge, Lonsdale, Mechanicsville, Vestal, Five Points, Burlington, Fourth and Gill, and the Old City. It also includes all of the city's housing projects.

The hopes that city officials had for the program can be seen in its application's vision statement, titled "Knoxville, Summer 2010," a reference to James Agee's prose piece, "Knoxville: Summer of 1915," though without Agee's melancholy. "The year is 2010," the statement begins. "The Knoxville Empowerment Zone is widely recognized as one of America's most desirable places to live, work, and raise a family. Economic development initiatives have had profound positive impacts. Data from the 2010 Census show significant improvements in the rates of employment, high school graduation, income and home ownership."

The statement goes on to describe a utopian Knoxville, whose core neighborhoods have been transformed by the magic of government and community working together. Housing values are up and available to a range of incomes and family sizes. The older neighborhoods (once sliced up by urban renewal and interstate highways) have been reconnected to downtown. Business is booming. Crime is down. Neighbors look out for one another, as they chat on front porches and walk the sidewalks in the summer evenings. The citizens are involved in the city government.

It's easy now to view that vision statement as a naïve fantasy, but also impossible to know what could have happened. The federal government never delivered the $100 million it promised. When President George W. Bush took office in 2000, he slashed the EZ funding to a quarter of its original size, shrinking Knoxville's grant to a little more than $25 million. (In comparison, the city's budget for this year topped $370 million.)

"People anticipated $100 million. The original program was much larger and a lot of folks expected to see good things happen," says Madeline Rogero, Knoxville's director of community development, which overseas the EZ program. "But we only received 25 percent of the funds. It's understandable people would be disappointed."

Not only did the Bush administration slash the funding, it mandated that every EZ program had to have an impact on economic development, says Rebecca Wade, community development administrator with the city. The money couldn't be used solely to improve living standards or housing in a neighborhood.

"There were a lot of programs in there that really could not go forward. All of a sudden, we had to tie everything into economic development," Wade says. "That came down from HUD after our plan had already been approved."

"Giving us a quarter of the money and then changing the rules once they agreed to give us the money, I think hurt a whole lot," says City Councilman Bob Becker.

Still, $25 million is nothing to sneeze at. And Rogero and others insist it's made significant improvements.

But impressions often break down along institutional lines. "It's not only brought some neighborhoods back to life, it's creating jobs," Rogero says.

"I can't say it's been a failure because the funds the city received have been put in place," says Alvin Nance, director of Knoxville's Housing Development Corp.

Contrast those statements with this one from Zimbabwe Matavou of the local Black Business Contractors Association, who has been a loud and vocal critic of the EZ process all along: "It was a failure. Pretty near absolute failure. I can't say nothing came out of it or no one benefited…. I think there were a couple of folk who got a little boost. We'll see if that will leave a legacy worth applauding."

Zimbabwe says that the money didn't go to the people who needed it most. And he says the projects that got the most money were those detached from the poor neighborhoods—brownfield developments. But his broader complaint is that the people who the EZ was designed to help never had a say in how the money was spent.

Where the Money Went

As of December 2008, Knoxville had spent (or allocated) $15.8 million of the EZ money it had been approved. It has another $9.7 million to spend (some of which is already earmarked for programs, some of which isn't). However, it could lose that money if it's not spent by the end of the year.

The city is pushing—along with the other 14 round-two EZ cities—to get more time to use the money, Rogero says.

Of the money spent so far, more than $1.6 million has gone toward administrative costs, including $1.2 million for the Partnership for Neighborhood Improvement, the non-profit group that was originally contracted to oversee the EZ program for the city. But a power struggle at the PNI led the city to take over the program. A PNI board still exists, which votes on EZ spending measures, but the administrative functions and staff work have been taken over by the city, which contracts some services to the Metropolitan Planning Commission.

One of the biggest chunks of EZ money, almost $2 million, went toward the redevelopment of two brownfields in the city. According to the U.S. Environmental Protection Agency, a brownfield is a property where "the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant."

They are generally old industrial areas. Knoxville's EZ targeted two in the center city, according to the EZ annual report: "The Center City Business Neighborhood is a 560-acre area with approximately 150 acres of developable land located between I-40 and Western Avenue, extending from the World's Fair Park to Liberty Street and adjacent to the Mechanicsville HOPE VI development and the West View neighborhood. The I-275 Business Park is located adjacent to I-275 and the I-40 Industrial Corridor, which is a 583 total acre environmentally contaminated area with scattered pockets of development."

For the Center City Business Neighborhood, the city and KCDC acquired land, disposed of hazardous wastes on behalf of three private businesses—the News Sentinel, which built a new office off of Western Avenue; the new Food City grocery store on Western near what was College Homes; and Cherokee Health Systems, also on Western. Getting a grocery store had long been a goal in Mechanicsville, as it had been in just about every other poor neighborhood in Knoxville.

Because money shifted back and forth between all the involved agencies, it took a bit of research for Rogero's office to pinpoint specifically how much EZ money went to the Center City Business Neighborhood. According to Rogero, $1.9 million of EZ funds were used to buy, demolish, and clean up buildings on the Center City Business Neighborhood and the nearby Coster Shop, an old train repair shop next to Interstate 275. But the city reimbursed the EZ program $1.5 million for the Coster Shop work. Other federal grants were leveraged for the work as well. In the end, about $725,000 of EZ money was used for the Center City Business Neighborhood, she says. In kind, the Sentinel gave its old property downtown to the city, which then swapped it with the county for the the S&W building.

EZ funds didn't pay for the development that occurred on these properties—the private businesses spent about $70 million (including $50 million from the Sentinel) on the developments, according to Wade. Nevertheless, it bothers some people that money meant to empower poor neighborhoods went toward corporate projects like the News Sentinel building.

The brownfield developments bug Matavou in particular. "Those projects were absolutely detached from [the poor neighborhoods]," he says. "We are not in any way connected to those projects."

"It bugs everyone that the News Sentinel got Empowerment Zone money," Becker says. "That one even upsets me. Had [all the federal] money come through, we could have done so much more with the neighborhood projects. It's easy to say those activists were right that we shouldn't count on the federal money. But we did. So shame on us."

One of those activists was Umoja Abdul-Ahad, who has often been at odds with KCDC or the city over redevelopment plans in Knoxville's urban neighborhoods.

Early on in the process, Abdul-Ahad says he fought against using money toward big corporate projects, because he didn't believe the full $100 million would come through from the federal government. He thought the neighborhoods should get money first and he thinks the city's institutions and businesses took advantage of the program. "They should have been true to the mission of empowering the community, rather than empowering themselves or their agencies," he says.

But Becky Wade defends the brownfield projects. According to the EZ annual report, the three projects "created or retained 753 full time equivalent jobs." It also helped improve the area by developing vacant land and bringing a grocery store to the community.

"The whole goal of this was to create jobs. Those projects have proven to create the biggest number of jobs," she says. "Some of the smaller, more neighborhood-based projects took more time to gather input from the community."

The second brownfield development was the I-275 Business Park, near Lonsdale, where SYSCO opened in April 2008. The center distributes food products to hospitals, schools, and hotels.

The 353,000-square-foot building employs 300 people. But Simpson, of the Open Door Church in Lonsdale, says he hasn't noticed an impact from the facility (which is physically separated from Lonsdale by I-275). "They said it was going to bring jobs," he says. "I think they brought the jobs in from outside. I don't know nobody in the community that has a job there. Nobody in the community, black or white. There could be, but I don't know of one."

One project that Simpson says the neighborhood wanted to see was an addition and renovation to the Lonsdale community center, to give children and youth a place to hang out and offer classes. "All they had for that was a few dollars," Simpson says. "They were talking about adding a meeting room onto it and not doing anything with the gymnasium or having any classes. The [proposed addition] was just a little box. We said keep the money until they can get some more.

"We got children that need to stay off the streets," he adds. "If they have a community center, you might be able to get some people come and tutor…. A lot of people aren't just churchy. A lot of people want to come to a place without having a church involved. A community center would do that. It should be for the old, middle-aged, and young. And for the black, white, Hispanic, red, whatever-—it's community."

Rogero and Councilman Becker, who represents Lonsdale, both say there are still plans—and hopes—for a commercial development in Lonsdale, on Heiskell near the I-275 interchange. The city has committed $1.2 million for the commercial development, along with façade and blighted property improvements, and is currently negotiating with investors and property owners.

Slow Process

Becker says the challenge in dealing with Empowerment Zone projects is making sure that local businesses and people benefit. The city could have offered a large corporation incentives to open a business in the neighborhood and gotten something done a lot quicker, he says. But instead, they're working with small, local businesses, which generally have a harder time getting the financing to make a deal work.

"Clearly, there's a desire to get something done that will help Lonsdale," Becker says. "I'm frustrated partly with the choices I've had to make. I'm frustrated at how long and slow this process has been. But every time there's been a delay, I'm satisfied it's for reasons I believe in—it's to get a local business involved."

Still, Empowerment Zone programs don't seem to register among people in Lonsdale. "I know very little about it," says Erica Wilson, program director for the SOAR youth ministry in Lonsdale. She doesn't live in the neighborhood, but works with kids and their parents there. "Being involved with the parents, I would think I'd know more about it if it was doing good."

In another neighborhood, one long-anticipated commercial development that did take off—a grocery store at Five Points—ended up going out of business less than year later. The 20,000-square-foot store, called the Metro Village Market, was built with $1.7 million in EZ money and opened in March 2006.

Matavou, of the Black Business Contractors Association, had been trying to get a grocery store at the site, which years before was home to a Cas Walker grocery. He said the Partnership for Neighborhood Improvement dragged its feet on supporting the venture with EZ funds, and did so only after KCDC and the city were moving ahead.

"The Five Points development was a perfect concept that went awry, significantly because the Empowerment Zone was forced to support it," he says. "And the level of support was insufficient."

Nance, of KCDC, blames the store's failure on the nearby Walter P. Taylor housing project's dysfunctional nature. If the project were rebuilt, he says, the way College Homes was in Mechanicsville, it would greatly improve the neighborhood, making a commercial development more viable. "When you can go in and address public housing, that is a positive," he says.

After the grocery store failed, Eternal Life Harvest Center—the church of the Rev. James Davis—bought the property for $2 million. Davis bristles at the perception that his church was somehow "given" the building. "We had to pay $2 million dollars for it. Nobody gave it to us.

"The grocery store didn't work out because the people didn't have the resources to sustain it," Davis says. He says his ministry's purpose is similar to that of the EZ program. "We feel our mission is the empowerment of community. Our focus, our vision, is to go into blighted communities and talk about what needs to be done. But who is reinvesting money back into the community? Who else you know that was fighting to buy that building over in Five Points? I don't know anyone else who was."

One of the more publicized—and, it turns out, confusing—elements of the EZ program was Knoxville's establishment of Zone Advisory Councils (or ZACs, as they were called). The Empowerment Zone was split into six ZACs, which were each made up of various neighborhoods.

The goal was to promote public participation in the EZ process, by bringing together representatives from these areas to talk about what they wanted and to come up with a plan for how to use the EZ money. Almost $1.7 million was spent setting up the ZAC process, in a contract to the Center for Neighborhood Development.

The ZACs were retired by PNI in October 2005 for having completed their mission.

Success Stories

Rogero and Wade say that one of the biggest success stories to come out of the Empowerment Zone has been the façade improvement program along Broadway and Central Avenues, including the Lusk auto body shop, as well as buildings in the Emory Place plaza off of Central.

As of December, $1.7 million in EZ money had been spent on façade improvements—given in five-year forgivable loans, up to $50,000, and requiring 20 percent matching funds from the property owner.

"It's one of those programs where you can really see the results. You can see the level of investment from private investors [grow]. It picks up the level of traffic, makes the area softer and provides more jobs," Wade says.

Lusk agrees it's been good for business and the neighborhood. "It's more visible," Lusk says. "We get comments all the time about the appearance. We get a great deal of comments about the red doors."

In the Broadway/Central area, 14 façade improvements have been made—12 completed and two under construction—with $952,000 in EZ money, according to Rogero. The city says this work has led to $3.2 million in private investment and created 110 jobs.

Lisa Sorenson and Scott Schimmel benefited from another EZ program. The two opened Bliss, a small gift and art store on Market Square in April 2003, while the square was torn up for renovations. It wasn't the best time, but the landlord offered them three months free rent.

Still, business was slow in the beginning. When they wanted to expand the store in 2004, they were having trouble securing a loan for the construction. Somebody at the Knoxville Area Chamber suggested they look into the EZ's small business loan program.

The two have turned a dream of a gift and home furnishings store into a local chain. After they opened a furniture store, Bliss Home, across the square, they got another EZ loan to help install a computer system. Their business has been successful enough for them to open a third location, a larger furniture store on Kingston Pike.

"When we first started, nobody would give you a loan," Sorenson says. "Small businesses really need to have some way to get some funds."

The loan program—businesses can get up to $50,000 loans—was one of the most controversial EZ programs in the early years. The city originally contracted with the non-profit Economic Ventures Inc. (EVI) to administer the loan program.

But the group came under fire for not approving loans fast enough and being too conservative in who it approved loans for. EVI was one of many non-profit groups that were contracted to oversee elements of the EZ program that eventually folded.

The small business loan program was taken over in February 2007 by the Knoxville Urban League. Since taking over the program, it's made 18 loans, totaling about $1 million, says Sherman Jones, of the Knoxville Urban League. None of the loans made by the League have defaulted. According to the city, there have been 54 small business loans made through the life of the EZ program, totaling almost $2.5 million, creating 177 jobs. Of all the loans made, eight have been written off as losses, totaling just over $162,000, Rogero says. Four have been paid back. As of January, two were 30 days late and another nine were 90 days late, she says.

Jones says the program is for entrepreneurs who have good ideas but don't have the credit or collateral to secure financing. "We don't use the same criteria as banks. We're looking for projects that will succeed, be positive for the community, and where we'll get our money back," he says.

Although the EZ funding has been limited, the small business loan program is one that could be a lasting legacy. Repaid loans become the property of the city, which can keep the loan program going, making new loans.

Other initiatives city officials are trumpeting is the Blighted/Problem Properties Redevelopment/Renovation, which has been funded with $1.8 million of EZ funds, and the Home Repair Program, which has gotten $1.4 million. The Blighted Property program helped pay for the construction of seven new homes and the renovation of another.

The new homes were all LEED certified—a standard created by the U.S. Green Building Council, which stands for Leadership in Energy and Design, and means they're extremely energy efficient. (The only other LEED home in Tennessee is owned by former Vice President Al Gore.)

Although these two programs are housing initiatives, the city justified them to HUD as economic development. "Blighted property has an economic impact on a neighborhood," Wade says. "By taking care of blighted properties, you're increasing the wealth of a community or at least sustaining it."

EZ funds— $2.6 million worth—have gone to support the Career Center operated by Pellissippi State at the old Knoxville Catholic High School on Magnolia Avenue. The center's director, Cynthia Manning, says people can get connected to job training programs at the center. A lot of the job programs are technical or health care related, she says. "The empowerment zone has helped quite a few people to jump-start careers they wouldn't otherwise think about," she says.

Empowered City?

Brian Sullivan, a spokesman for HUD, says that Knoxville has complied with the program, though it has been criticized for taking too long to implement some of its projects. "The Knoxville EZ currently has 15 active projects underway, and HUD has strongly encouraged the EZ to remain diligent about accomplishing milestones and achieving locally established goals for this initiative, particularly with regard to projects that are as yet less than 50 percent complete and continue to have a high balance of funds remaining," Sullivan wrote in an e-mail.

Whatever improvements have come about through the Empowerment Zone, critics say that overall, very little has happened. The neighborhoods in the Empowerment Zone remain the poorest and most crime-ridden in Knoxville. The Empowerment Zone was determined using census tract figures, so a detailed comparison won't be able until after the 2010 Census.

But community activists like Abdul-Ahad say that these poor neighborhoods have not been transformed, and won't be until residents own businesses there. "The system is designed so you want other people to keep making decisions for you," he adds. "But empowerment is you make your own decisions, even if you make a mistake."

But Rogero and Wade say those complaints miss the complexity of the programs and how hard city officials have worked to get everyone involved and spark genuine change. "It's always easy to criticize. What's hard is to make programs work," Rogero says.

A particular difficulty has been to get private investors involved. "It's never easy. If it were easy the private sector would have [invested] a long time ago," Wade says.

Both said the city went out of its way to gather input from the community—primarily through the ZACs. "I don't think any other round-two city had that much community input," Wade says.

Matavou says he's more disappointed with community leaders—he refers specifically to members of the PNI board and the Council of Involved Neighborhoods (COIN)—who he says should have been fighting more for their communities, but instead fell in line behind the city leaders and bankers.

"When I talk to folk, they're surprised that I'm not as irate at the City of Knoxville and the banks as I am [at] the community groups," he says. "We've never been given primacy by those institutions. The reasons we wanted those community folks on the [PNI] board were to advocate for us."

For Abdul-Ahad, the Empowerment Zone taught activists that they have to pull out all the stops in fighting for a piece of the pie. He sees the Empowerment Zone as the latest in a long list of federal programs—following Urban Renewal and Hope VI, among others—that are supposed to magically transform poor urban neighborhoods.

"There's always going to be plans to empower people because poverty is big business in America," Abdul-Ahad says. "The next group of [community activists] will have to be even more forceful than we were—and we were pretty forceful…. We know now how to fight better."