HUD Auditing Empowerment Zone

Nearly four years after awarding Chicago $100 million in Empowerment Zone funds, a federal agency is auditing the city’s program for irregularities, The Chicago Reporter has learned.

The audit, by the Office of the Inspector General of the U.S. Department of Housing and Urban Development in Washington, D.C., was launched last spring and will be completed in early October, said officials from the Chicago Department of Planning and Development.

“We do not know what the audit will likely show, but we will be ready to respond to the recommendations that it gives to the department,” said Susan G. Connelly, a deputy planning commissioner.

One possible finding: the Empowerment Zones/Enterprise Communities Coordinating Council–”an advisory board appointed by Mayor Richard M. Daley and confirmed by the Chicago City Council–”failed to separate the federal funds from a $35 million state Empowerment Zone grant.

The monies were combined in the council’s August 1997 progress report to HUD, Connelly said. The combination makes it more difficult for federal and state officials to track spending.

Critics say the auditors also should be focusing on the Empowerment Zone’s poor record on job creation and the Empowerment Zone Council’s awarding of grants to its friends and political allies.

But city officials won’t disclose anything more about the audit, other than to say they learned about the inquiry when the Inspector General’s office called with questions after the program received negative publicity.

John Camper, Daley’s deputy press secretary, said the city has “no idea” who initiated the audit. “The mayor is not going to have anything to say about your story,” he said.

Michael Zarega, public affairs specialist for the Inspector General’s office, would not comment on the Chicago audit. But anyone can request an audit, from a community resident to a congressman, Zarega said.

Audits are “a helpful procedure on how things are being spent,” he said.

Connelly said HUD officials told her they were auditing four of the six Empowerment Zone cities, but HUD would not confirm this.

Empowering People

Empowerment Zones were created under a federal spending bill signed into law by President Clinton on Aug. 10, 1993. It authorized HUD to designate up to six urban Empowerment Zones and 65 urban Enterprise Communities to provide job opportunities and promote community development in low-income neighborhoods.

Each of the six zones received up to $100 million in block grants; Daley announced Chicago’s award in December 1994. About 250 applications poured in, and the City Council approved the first grants in March 1996.

But some say the Chicago zone has stalled. In the last 30 months, the City Council, which has final approval of all projects, has disbursed $11.7 million from $51.1 million approved for 84 projects over 10 years.

On Sept. 10, 1997, the City Council unanimously approved Daley’s proposal to reduce the number of seats on the Empowerment Zone Council from 39 to 17. Planning Department officials said a new director and streamlined procedures have eliminated many problems.

Last month, the zone council issued a progress report that promised not to repeat the mistakes of the first funding cycle, including “lack of specific goals and benchmarks to gauge progress, unfocused [requests for proposals], inadequacy of evaluation criteria, failure to adhere to evaluation criteria, and the consolidation of federal funds and state funds.”

The second cycle of funding should “focus on creation of real, lasting benefit to the zone, not just on who gets the money,” the report said.

But the program remains unnecessarily cumbersome and political, critics say.

Too many grants went to social service agencies with ties to city departments, said Willie Hayes, executive director of the Community Workshop on Economic Development, a Chicago coalition of about 50 organizations that helped prepare the city’s Empowerment Zone application that was submitted to HUD.

A June 1997 investigation by The Chicago Reporter, “Zoned Out,” was the first to report that the zone was falling short of its promise: real jobs and private investment. Most of the grants were underwriting staff and creating temporary positions for organizations that promised to provide social services to residents of the South and West sides. And the zone council’s selection process was tainted with racial politics and self-dealing, the Reporter found.

A city consultant originally estimated that the first-round funding would create between 3,000 and 5,000 new jobs. But the Reporter’s 1997 story revealed that the zone had created only 283 full-time jobs.

Avery L. Goodrich Jr., director-special assistant of the Chicago Empowerment Zone, now estimates that about 2,000 full-time and 2,400 part-time jobs have been created so far.

But final numbers and supporting documentation won’t be available until the Planning Department finishes monitoring the first 84 projects, Goodrich said. Connelly added that a review of 55 projects will be completed in early October.

Job Placement

In February 1997, Access Living, a non-profit that works with the disabled, was awarded a grant for nearly $300,000 for a two-year period to provide community organizing and independent living skills, said Elce Redmond, an Empowerment Zone team leader at Access Living. But “it took about 18 months for the city to give us our funds,” said Rene David Luna, director of programs for the organization, at 310 S. Peoria Ave. on the near West Side.

“We hired a staff to start working on the project,” Luna said. “We built up expectations and started working with other communities and residents. But we were unable to [keep our] promises when the funding did not come right away.”

The city has released few Empowerment Zone funds because most organizations have not completed their work, Connelly said. The city issues vouchers in lieu of funds, she said, adding that “they get paid for what they have done, which is consistent with their contract.”

In July, Access Living received a $300,000 voucher from the city.

Eighteenth Street Development Corp. trainees at work at Seigle’s, a material supplier at 977 W. Cermak Road. The organization received a $25,000 grant to place Pilsen residents with local companies. The group has placed 10 residents with various companies using Empowerment Zone funds. (Photo by Richard Stromberg)

One grant recipient, the Eighteenth Street Development Corp., 1839 S. Carpenter Ave., submitted four Empowerment Zone proposals for $856,500. So far, the group has received $25,000 in vouchers to place Pilsen residents in jobs with local companies. It also “provides classes to show residents how to fill out a job application, create a resume and handle a job interview,” said Executive Director James Isaacs. According to the Latino Institute, a Chicago research group, 28.9 percent of Pilsen’s Latino residents are low-income.

The development corporation has placed 10 residents in jobs using Empowerment Zone funds, said Communications Manager Renee Camargo.

Hayes and other critics of Chicago’s Empowerment Zone say that while grant recipients may be providing needed services to zone residents, many are not, in fact, creating real, sustainable jobs.

The Empowerment Zone Council has yet to decide when it will accept proposals for the second cycle of funding. In July, the Planning Department announced that $70.2 million of the $100 million grant remained: $59 million in federal funds and $11.2 million in state grants.

Since Feb. 5, the zone council has granted $30.2 million for 10 projects. About $14.2 million of the grant went to projects to be overseen by the Chicago Department of Housing. The department will disburse the grant among community groups to build affordable housing.

But the zone council acted improperly when it funneled the funds to the Housing Department instead of directly to community organizations, Johnnie Cole, director of research and policy development at the Community Workshop, said at the zone council’s Aug. 13 meeting.

Many community residents and organizations complained that the zone council was giving funds to city agencies without issuing requests for proposals.

Under the Empowerment Zone’s strategic plan, organizations are required to compete for the funds, he said.

“The city cannot break the cycle of dependency by having other institutions do for poor people, when poor people should be doing for themselves,” Cole said.

“People in Rockwell and Ida B. Wells did not come out to fight for an Empowerment Zone process and participate for hours on end to let the city agencies get funded.”

Planning Department Communications Director Rebecca Carroll said the zone council has responded to Cole’s accusations. She further added that the September 1998 Zone Process Report pledged to improve the process.

Chicago will not be among the cities applying to HUD for new grants on Oct. 9. The city already has one Empowerment Zone, Connelly said. Daley has agreed to nominate an independent proposal from the Humboldt Park Empowerment Partnership, but the city will not be involved in the day-to-day operations if the group wins a grant, she said.

Cook County plans to apply for Empowerment Zone status for the south suburbs of Chicago Heights, Robbins, Harvey, Ford Heights, Markham, Blue Island and Crestwood, said Jack Beary, press secretary for Cook County Board of Commissioners President John H. Stroger Jr.

The communities could receive between $130 million and $230 million in new federal grants. HUD will announce the winners in early January.

Michael Rohner and Cedric L. Stines helped research this article.

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