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Clinton Seeks Larger Aid Program to Include L.A. : Grants: City is left off list of 'empowerment zone' recipients. Valley had requested $700,000 for six projects.


WASHINGTON — Faced with California officials' anger over the Administration's decision to exclude Los Angeles from the urban "empowerment zone" program, President Clinton will ask Congress today to enlarge the lucrative new anti-poverty initiative to include Los Angeles and another city, senior Administration officials said.

Officials acknowledged Tuesday that Los Angeles will not be among the six cities to receive the multimillion-dollar package of federal grants and tax breaks aimed at redeveloping depressed urban areas.

After the city's 1992 riots helped spawn the new urban renewal effort, it was widely presumed Los Angeles would be at the head of the line when packages of grants and business tax breaks worth hundreds of millions of dollars were doled out.

But in an embarrassing blow, Los Angeles finished out of the running this week in the intense competition for so-called empowerment zones after other cities, which federal officials said drafted far clearer and financially richer blueprints to breathe new life into troubled neighborhoods.

As a consolation prize, Los Angeles had been offered a package of other assistance, and on Monday night, Clinton decided to ask Congress to create two more empowerment zones at a cost of $500 million--enough to include Los Angeles and Cleveland, the last two cities dropped from the list, officials said.

Congressional sources said that the six cities to be officially designated as empowerment zones today will be New York, Chicago, Baltimore, Atlanta, Detroit and the combined urban center of Camden, N.J., and Philadelphia.

In the San Fernando Valley, more than $700,000 was sought for six projects within a 1.8-square-mile empowerment zone including Pacoima and part of Lake View Terrace. Proponents, including City Councilman Richard Alarcon, said they would simply seek other sources of funding for the projects.

It is far from certain that the new Republican Congress, which is seeking massive cuts in social programs, will agree to expand the program, already scheduled to cost more than $3.5 billion over the next five years.

But Administration and California officials expressed guarded optimism Monday that Republicans would support the addition of Los Angeles and Cleveland because the funds would be used to provide tax credits to businesses that hire workers in depressed urban areas.

"The promise of tax benefits is much better than nothing and we will do whatever we have to do to get them passed," said Sen. Barbara Boxer (D-Calif). "It's going to be difficult."

California Rep. Jerry Lewis (R-Redlands), who will chair an appropriations subcommittee overseeing urban development programs, was even more cautious:

"I must say that tax incentives that create jobs would probably have a pretty positive reaction. But sometimes a special additive to a tax package makes the other folks (who aren't in line to get it) wonder about it."

Clinton has spoken for weeks of expanding the empowerment zone program and officials portrayed his decision to seek the legislation as reflecting his belief that all eight of the top finishers deserved inclusion.

But many in California and elsewhere saw the promise to seek additional benefits as an effort to control the political damage to the Administration in a state indispensable to Clinton's hopes for reelection in 1996.

"The political people (in the Administration) are frightened," said one ranking Los Angeles city official. "They see this as a problem, that there is going to be a backlash. Even if in reality the package is going to be fairly beneficial there is a sense (from the decision to exclude Los Angeles) that there is a lack of full confidence in the city."

Indeed, Boxer said Tuesday night that the decision to pass over Los Angeles for the program had generated an "outpouring of emotion, anger and outrage."

In a sign of White House sensitivity over the program--which generated a frenzy of lobbying from cities around the country--Clinton is expected at a news conference today to label 12 cities as empowerment zones. But the statute only allows the Administration to designate six cities to receive the full range of benefits from the program, which includes $100 million each for social services, and tax incentives worth about $277 million over the next five years.

The other six cities will receive grants from another pot of money that the Administration has established as an alternative source of assistance to cities denied inclusion in the empowerment zone project.

Los Angeles will receive by far the most funds in that group: a grant of $125 million and $300 million in federal loan guarantees that the city has indicated it intends to use to capitalize a community development bank. That bank, modeled in part on the South Shore Development Bank in Chicago, would make loans to support housing and commercial development in depressed areas of the city.

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