L.A. Leaders Move to Rebuild

PRESIDENT Bush's visit here this week has thrust the city into spotlights as the premier urban socio-economic lab in America.

State and local officials are trying to harness the mood of national crisis to solve long-entrenched problems - from legal chokeholds on business to education and training barriers for minorities.

Several economists here say they are encouraged by the speed with which local business and government leaders have mobilized to mend neighborhoods rent by the worst US riot in this century.

But they warn that unless long-term policy and funding commitments are solidified at local, state, and federal levels, the social and economic discontent that exploded in violence will remain tinder waiting to flash.

"We are intrigued and buoyed by the seriousness with which the city is moving," says David Hensley, director of the Business Forecasting Unit at the University of California in Los Angeles. "But this is not just a problem of L.A.... It shows a policy failure of the American urban agenda." (New York's Mayor Dinkins draws praise for keeping city calm, Page 3.)

As the community awaits more details of a special, extragovernmental task force headed by Olympics czar Peter Ueberroth, businesses and banks are forming loan programs and investment groups to rebuild and spur minority businesses. Federal funds of $600 million have been earmarked for small-business loans. Significant reserves of the Community Redevelopment Authority have been freed up for revitalization.

"Business leaders are coming out to cooperate en masse the way they did for the 1984 Olympics," says Lynn Reaser, chief economist for First Interstate Bancorp. "They know it is critical for momentum to be achieved quickly to spur further commitment."

Echoing Mr. Bush's sentiments here this week that the need is to give "residents a piece of the action" rather than pour on "government largesse," Mr. Ueberroth says his goal is for corporations to make long-term commitments to the scarred south-central L.A. neighborhoods. Such efforts should be aimed at creating "sustainable jobs on a profitable basis" rather than short-term donations, he says.

The attempt to rebuild the riot-torn south-central area will be a case study in urban renewal. Key to rebirth are the plans of high-profile businesses. Fortunately, three top supermarket chains have announced plans to rebuild there.

"Early commitments like these will do much to persuade other [businesses] and residents not to give up," says Jack Kyser, chief economist for the Los Angeles Economic Development Council. Nearly three decades after the Watts riots nearby, only one nationally franchised restaurant has returned to that community.

Besides pushing for more federal funds, Mayor Tom Bradley is urging Bush to establish enterprise zones that will provide tax incentives and other benefits for businessmen and residents.

A recently announced state plan to make California more conducive to small-business growth has received a significant push as well. Gov. Pete Wilson (R) is seeking a $40 million measure for job training and public assistance.

Economists here and in Sacramento know the economic repercussions of last week's rioting - between 5,000 to 10,000 businesses destroyed and $770 million in damage - will delay regional recovery from the recession. Most push the recovery date forward six months from the end of 1992 to early 1993.

But the number of jobs lost is unclear. Estimates range from 20,000 to 50,000, with 10,000 at permanent risk, according to Mr. Kyser. About 95 percent are from businesses with fewer than 20 employees. The number of businesses covered by insurance is also unclear. Both are key to future turnarounds in retail sales, tax base, and property values.

Richard Carlson, analyst for Spectrum Corporation, a Palo Alto consulting firm, says the attitude of Korean businessmen, hard hit by the rioting, will be crucial. "If they pull up stakes, the community will lose a whole generation of its top entrepreneurs," says Mr. Carlson.

Others stop short of that prediction.

"There is no question the area will go through a slow, grinding recovery," says Joe Wahed, a state business analyst for Wells Fargo Bank. "But with the kind of commitment we are seeing now, they will make it."

Pauline Sweezey, chief economist for the State Department of Finance, says there are ways to prevent such an exodus, "but we can't make plans until we know some of these [unemployment] figures."

Even before recent riots, local business leaders had been soul-searching to fill massive employment gaps left largely by aerospace firms hit by post-cold-war defense cuts. Los Angeles County unemployment was already the worst in the state, with 208,000 jobs lost over the past year, according to Ms. Reaser.

Now, Ueberroth's long-term emphasis is expected to focus on developing small- to medium-sized firms from textiles, to high-tech, to aerospace subcontracting. "Ueberroth can rally both minorities and whites who are skittish at a crucial time like this," says Joel Kotkin, senior fellow at the Denver Center for the New West.