COMPTON — It was just the kind of partnership Congress had in mind: a predominantly black city suffering from decades of urban decline and a federal government flush with money for revitalization.
So in 1978, a new U.S. Housing and Urban Development (HUD) program designed to rescue areas in "severe economic distress" gave the City of Compton a $2.1-million grant to start the community's first home construction in 20 years.
A few blocks of blighted apartments within sight of City Hall were to be replaced with 133 prefabricated town homes. The goal was not only to meet a serious housing need but to create a lasting local construction company that could bring permanent jobs to 100 of the city's hard-core unemployed.
To accomplish it all, Compton loaned the money to Hub City Urban Developers Inc., a nonprofit firm organized by a group of community leaders.
In the seven years since, however, the venture has fallen far short of its billing as a textbook blend of federal resources and local resourcefulness. Rather, it has absorbed increasing amounts of money, frustrated officials, spawned charges of corruption and cost Compton taxpayers millions of dollars.
It has also proven to be an expensive lesson in the limits of the city's redevelopment ability.
"It was a good idea that didn't work because those who ran it didn't have the experience to make it work," City Councilman Maxcy Filer said recently. "They just didn't know what they were doing."
Hub City officials, while acknowledging their lack of experience, say the project mostly fell victim to the same kinds of economic forces that private developers often face--slow sales, unanticipated construction delays and difficulties in securing mortgage financing.
However, many officials believe that neither Compton nor HUD watched Hub City closely enough, that the grant contract was drawn too loosely and that taxpayers were made to carry too much of a financial burden. As a result:
- Although the project was supposed to have been completed in 30 months--by February, 1981--construction delays and a slumping real estate market have extended it to nearly three times that length. Yet even with the extra time, it has produced barely a quarter of the 133 town homes promised.
- The amount of local tax money contributed to the cause has now swelled to more than $3 million--nearly triple what city officials anticipated.
Hub City's assembly plant on East Alondra Boulevard, a renovated Foster Freeze factory once bustling with project workers, has stood virtually idle for the past several months, staffed by less than a dozen employees. And HUD officials who oversee the massive Southern California region regard the whole endeavor as one of their biggest failures.
"It would have been a real showcase kind of story," said Herbert L. Roberts, HUD's regional director of community planning and development. "For many months and several years it looked like it was going to happen." Since August, Roberts said, he has been trying to get a status report on the project from Compton officials, but so far they have not responded.
"It's always been one excuse after another," he said. By the end of this week, he expects to have sent some of his staff to the Hub City plant and construction site to gather information.
After that, it will be up to HUD administrators in Washington to decide if the city should be declared in default of the grant agreement and made to repay about $1 million that still sits in a loan-guarantee fund.
"We've got an (all but) abandoned ex-ice cream factory that tried to be a housing factory," Roberts said. Beyond that, "I'm not sure what there is to recover."
Compton officials, too, are worried about Hub City's ability to complete the project and repay the debts that have accumulated. They include:
- $2.1 million that Compton loaned Hub City from the grant, roughly half of which remains in a loan-guarantee fund. In theory, the money was to be repaid gradually as each town house was sold, and then recycled by the city into some other worthy project.
- $3 million in other city loans made after Compton had already spent a similar amount making improvements to the town house sites.
In a memo in July, City Manager Laverta Montgomery wrote that Hub City was mired in a "financial crisis."
"Hub City may never be able to generate a significant amount of revenue to meet their (own) financial obligations, let alone repay the city," Montgomery wrote.
In fact, when Hub City missed about $68,500 in interest payments on a $1-million construction loan from Family Savings & Loan Assn. last spring, records show that the city paid off the debt to protect the loan-guarantee fund.
After Montgomery's memo, City Councilman Robert L. Adams said Hub City was given 90 days to show results or face being taken over by the city. When that deadline expires this month, he said, "we may consider selling the whole project or turning it over to a private developer."
Unusual Escape Clause