CLEVELAND, OHIO (USA): THE TALE OF A
SUPPLEMENTARY
EMPOWERMENT ZONE
W. Dennis Keating
Professor and Associate Dean
Levin College of Urban Affairs, Cleveland State University
1717 Euclid Avenue, Cleveland, Ohio 44115 USA
Tel: (216) 687-2298
Fax: (216) 687-9342
E-mail: dennis@wolf.csuohio.edu
Paper presented at the conference “Area-based initiatives in contemporary
urban policy”
Danish Building and Urban Research Institute and European Urban
Research Association,
Copenhagen, Denmark 17-19 May 2001
1
Preface
This paper briefly describes and analyzes the Supplemental Empowerment
Zone program in Cleveland, Ohio, USA during the period 1995-2000. It is
intended to complement the paper being presented by Robin Boyle and
Peter Eisinger entitled “Empowerment Zones: Much Ado About Something in
U.S. Urban Policy”, which provides an overview of the Empowerment Zone
program initiated in the United States in 1994-95 by the Clinton
administration. I was the leader of an evaluation team that followed the
Cleveland program for Abt Associates and the U.S. Department of Housing
and Urban Development (HUD) and is reflected in the as yet unreleased Abt
report entitled “Interim Assessment of the Empowerment Zones and
Enterprise Communities Program: A Progress Report”. The views of the
author are not those of Abt Associates or HUD.
2
Introduction
Cleveland, Ohio is located on the shores of Lake Erie. Once the sixth largest
city in the United States, it has experienced a lengthy decline over the past
half-century. From a peak population of 914,000 in 1950, this fell to a
reported 478,000 in 2000. This loss of population reflects the loss of
manufacturing jobs, the decline of the central business district, and the
general pattern of a suburban exodus from central cities that continues in
metropolitan Cleveland (Bier 1994; Hill 1994, 1999). All of these trends have
resulted in devastated neighborhoods and high rates of unemployment and
poverty, exacerbated by racial tensions (Chandler 1999; Coulton and Chow
1994). In 1967, Carl Stokes was elected mayor, becoming the first AfricanAmerican mayor of a major U.S. city. Since 1989, Michael White has been
the city’s second African-American mayor.
White and his immediate predecessor, following the lead of Cleveland’s
corporate leadership, have given a very high priority to the redevelopment of
the city’s downtown. The city’s “Civic Vision” plan emphasizes the downtown
as an employment center featuring financial services, retail, and
entertainment. The city has sought to become a regional convention and
tourist destination. Over the past decade, this has led to the building
downtown of three new sports stadia (Keating , 1997), the Tower City officeretail complex, the Rock and Roll Hall of Fame Museum, and the Great
Lakes Science Center, all heavily-subsidized by public funds. The city also
seeks to promote new housing downtown, as well as in its residential
neighborhoods. As a result of these activities, Cleveland has called itself the
“Comeback City”, seeking to reverse its negative image from the Cuyahoga
River fire of 1969 and its financial default in 1978 during the turbulent
administration of populist mayor Dennis Kucinich (Swanstrom, 1985).
However, other data and realities overshadow this effort to paint
Cleveland in its best light. In the 1990s, the city continued to lose jobs as
businesses left despite the offer of incentives, most notably British Petroleum
(formerly Standard Oil of Ohio)’s North American headquarters office from its
tower on Public Square in the heart of the city. In the past few months, the
city’s last major steel works declared bankruptcy for the second time. In
March 2001, the experienced the third rupture of an aging main water pipe in
fourteen months.
The poverty rate was over 40 percent citywide and much higher in some
neighborhoods in the 1990s. The public school system has long been in
crisis, subject first to supervision by the federal courts, then a takeover by
the state of Ohio, and more recently being transferred to the control of the
mayor of Cleveland. Its students are mostly poor and minority, with a dropout
rate exceeding half of those students entering and some of the lowest
scores reported in the state on standardized tests. It was only recently
released from a federal court cross-town busing order designed to overcome
past racial segregation. The city remains highly segregated by race, with
only a few of its neighborhoods having any significant racial and ethnic mix.
Much of the city’s housing is below code standards and the metropolitan
housing authority which provides federally-subsidized low-income housing
has long been in crisis, with its housing racially segregated, much of it in
disrepair, and with long waiting lists due to limited funding and the ending of
new construction by the federal government(Chandler 1994).
In response to some of these conditions, Cleveland is home to many
neighborhood-based community development corporations (CDCs), which
have attempted to reverse the decline of the city’s neighborhoods. With the
3
assistance of the city, local philanthropic foundations, corporations, and
banks, these CDCs have an impressive record of building and rehabilitating
housing for lower-income residents and assisting the city in improving
neighborhood commercial districts and retaining employers. The Cleveland
Housing Network, a citywide CDC coalition, has gained national recognition
for its accomplishments (Krumholz 1997).
4
The Empowerment Zone Program: Original
Application, Goals and Programs
When the U.S. Congress enacted the Clinton administration’s Empowerment
Zone (EZ) program in 1994, Cleveland applied. While it met the criteria for
the six major empowerment zones to be selected, it lost in this competition to
its larger Midwest counterparts – Chicago and Detroit. However, despite the
Republican takeover of the U.S. Congress in the November 1994 election,
Cleveland’s longtime African-American Congressman Louis Stokes (the late
Carl’s brother), even though now in the Democratic minority and soon to
retire, was able to exert his considerable influence with the Clinton
administration to gain a consolation prize for Cleveland. Moreover, Los
Angeles, assumed to an obvious winner in this competition to offset the
destruction of the 1992 South Central riot, also was not named as an Urban
EZ, with the award of a full 10-year grant of $100 million in direct assistance
and tax credits for EZ employers hiring area residents. Nevertheless, HUD
decided in late 1994 to name Cleveland and Los Angeles “Supplemental
Urban Empowerment Zones (SEZ)” (Gale 1996: 139).
What Cleveland received was only $3 million in direct aid and $87 million
through HUD’s Economic Development Initiative (EDI), intended to promote
economic development in distressed cities through grants and loans to area
businesses, but not the tax credits awarded to the six urban EZs. Cleveland,
therefore, had to adapt its original proposal in order to be able to use this
funding in its EZ.
Cleveland selected four east side neighborhoods to comprise its
supplementary EZ (see attached map). Three – Fairfax, Glenville, and
Hough – are primarily residential and the fourth – the Midtown Corridor – is
almost entirely commercial and industrial (including major businesses, the
Cleveland Clinic hospital and cultural institutions like the Cleveland
Playhouse). The population of the three residential neighborhoods is almost
entirely black and mostly poor (see Appendix 1). For example, Hough, the
site of a major riot in 1966 (Gale 1996: 42-44), saw its population
subsequently drop from a high of 65,000 in 1950 to under 20,000 in 1990
(Krumholz 1999: 93). Each of the four neighborhoods had a pre-existing
CDC, supported by the city of Cleveland and their representatives on the
Cleveland City Council – the Fairfax Renaissance Development Corporation
(FRDC), the Glenville Development Corporation (GDC), Hough Area
Partners in Progress (HAPP), and MidTown Cleveland.
Cleveland’s strategy was to promote economic development in order to
create jobs for EZ residents. To achieve this goal, it intended to use EDI
funds to assist existing businesses located in the EZ and to attract other
businesses to locate there, to use other funds for job training and placement
assistance for unemployed residents, and to improve the housing,
infrastructure and safety of the area to make it more attractive to both
businesses and residents. One prominent example is the Church
Square/Beacon Place mixed residential-commercial project in the heart of
the EZ, where then Vice-President Al Gore unveiled the EZ initiative
(Suarez 1999). To carry out the EZ programs, the city relied upon existing
organizations, represented on a Citizens Advisory Council (CAC), to advise
the city’s EZ office. These organizations included city agencies, other public
institutions, and private organizations. This included a newly-initiated
Cleveland Community Building Initiative launched by the Cleveland
Foundation Commission on Poverty, operating in the Fairfax neighborhood.
5
In addition to HUD funds for economic development, the city also had its
own programs and also hoped that a newly-opened community development
bank (ShoreBank) located in the Glenville neighborhood would fund new
enterprises employing EZ residents. The main innovations of the EZ
program were a new loan program for small businesses and the introduction
of a private security patrol in the EZ area, primarily serving businesses in the
commercial districts. In addition to economic development, the other two
major goals of the Cleveland EZ program were labor force development and
community building.
To achieve the former, the city contracted with several employment
training/counseling agencies, most notably Job Match, established a new
Center for Employment and Training (CET), and also expanded its own One
Stop Career Center to the EZ area. Complicating the efforts to help
unemployed and underemployed EZ residents to enter the work force was
the 1996 enactment of federal welfare reform. As implemented in the state of
Ohio, welfare recipients, primarily single women and their children, were
limited in the future to only three years on welfare. This 3-year cut-off took
effect in Cuyahoga County on October 1, 2001. This urban county, in which
Cleveland is located, has the highest number of welfare recipients in the
state of Ohio and a significant but unknown number live in the three
residential EZ neighborhoods. Like the EZ program, Cuyahoga County
embarked upon its own job training programs to assist recipients in finding
work before they were cut off from welfare benefits.
Further complicating efforts to find jobs for EZ residents in the economic
boom times of the second half of the 1990s decade was the trend of new
entry level jobs being created not only outside of the city of Cleveland but
outside of Cuyahoga County. It has been estimated that fewer than 10
percent of the expected annual new entry-level job openings in Cuyahoga
County will be in the city of Cleveland. Whether seeking jobs in the suburbs
of Cleveland within Cuyahoga County or outside of the county, many EZ
residents have a very difficult time in reaching those jobs without owning a
car. Public transit to these suburban work places is very limited. An
experimental van service provided for former welfare recipients is tiny.
Cuyahoga County even initiated an experimental subsidy program to help
welfare recipients with job-related transportation problems purchase used
automobiles.
6
EZ Assessment: 1995-2000
The final interim assessment of Cleveland’s EZ was done in 2000, the
midpoint of this 10-year program, as part of a national study of 18 cities. That
report has not yet been released by HUD. As of 2000-2001, Cleveland has
become a full-fledged EZ, with tax credits being made available to area
businesses if they hire EZ residents. HUD has approved an expansion of the
EZ area’s borders to allow more businesses to take advantage of these tax
credits, should they choose to employ EZ residents.
The first impediment to progress has been a regular turnover in
leadership. During the period 1995-2000, the Cleveland EZ program had
four different directors and all of the four CDCs in the EZ neighborhoods also
had a change of leadership. In particular, HAPP in Hough had several
directors and was suspended several times by the city’s Department of
Community Development for alleged financial irregularities. The director of
the city’s One Stop job training center was fired and ShoreBank went
through several leadership changes. This turnover in leadership at all levels
did not make for a smooth path in initiating and implementing innovative
programs. The CAC also had several vacancies and did not play a very
active role in either program direction or monitoring. Due to lack of funding,
it and the EZ office failed to develop a 10-year strategic plan, as required by
HUD. Therefore, the Cleveland EZ goals were mostly numerical.
As of July 2000, the city reported to HUD that it had made $93 million in
loans and $33 million in grants to EZ-located businesses, resulting in their
investment of $89 million and the leveraging of a total of $235 million in
private investment in the EZ area. The city projected providing financial
assistance to 255 businesses and technical assistance to 350, with a little
over 3,000 jobs for EZ residents created or retained resulting from these
efforts. Without independent verification of these data, it is difficult to assess
how much of the leveraged private investment can be attributed to the EZ
program and the actual magnitude of the jobs claimed to be created.
Job Match, a program of Vocational Guidance Services, reported training
2,371 EZ residents and placing 2,028 of them in jobs, some of them more
than once. However, Job Match also reported a significant attrition rate
increasing three and six months after placement. HUD did not require
reporting on job retention by EZ residents. Job Match has an overall 10-year
goal of job placement for 10,000 EZ residents but had placed only about 20
percent of that number after five years, rather than half. One deterrent to the
use of this program is that the clients must take a mandatory drug test as a
condition of participation. For this reason, many do not apply or drop out
later. The city has not provided any additional drug counseling or treatment
programs in the EZ.
The CET program took awhile to organize. It only began training EZ
residents in 1998 for welding and general machine work. It reported in
September 1999 that 32 EZ residents had participated in these programs,
with 25 graduates being placed in jobs. The city’s new One Stop career
center opened in the EZ area in April 1998 but due to the controversy
surrounding the firing of its director, information about its operations and
impact were not available. The impact of Cuyahoga County’s job training
programs for EZ welfare recipients also could not be determined because
such data are not available.
After five years, the overall impact of the EZ program on increasing
employment and reducing poverty in its three residential neighborhoods is
not impressive. At best, it is possible that as many as 5,000 residents
7
obtained or retained jobs, mostly low-wage entry jobs, whether in the EZ
area or elsewhere. However, these data are hard to verify. It is also unknown
just how many of those who did obtain jobs retained them after 3-6 months.
Little is known about the activities of ShoreBank and its business
incubator located in the Glenville neighborhood. To date, no EZ businesses
have applied for tax credits for employing EZ residents. Many small
businesses within the EZ, especially minority-owned, have not applied for or
received EZ loans and grants. The reasons include their inability to develop
business plans, past debts including unpaid taxes that make them ineligible,
and reluctance to become involved in this government program. This is
despite the availability of business development specialists through the four
CDCs. And, there is no evidence of many new businesses developing or
relocating in the EZ area, with the one exception of an assisted-living
employer that relocated its office from a nearby suburb. The Midtown
Corridor does have ambitious plans for the development of a bio-tech park
but that remains in the future and even if it materializes it is not clear that it
would employ that many unskilled or low-skilled EZ residents.
The EZ can and does point to several new housing developments within
the EZ sponsored by the three residential CDCs, with a total investment of
$110 million. However, it is likely that they would have been constructed
anyway using various public subsidies and private investment available to
CDCs throughout the city.
8
Conclusion
The goals of Cleveland’s EZ program were well intentioned. They included
the creation of jobs sufficient to significantly reduce unemployment and
poverty among its residents, almost all of whom are African-American, and
to improve the physical, social and economic conditions of its four
neighborhoods. The hope was that financial assistance provided to
businesses, especially those in the Midtown Corridor with its many major
employers, would spur their employment of residents, whose job readiness
would be provided through a combination of existing and new job training
and placement agencies located in or near to the EZ area. Instead of
creating new entities, Cleveland chose to rely almost exclusively on existing
agencies, both public and private, other than the creation of its own EZ office
and the CET.
As the above narrative recounts , many factors combined to frustrate the
achievement of those goals over the first five years of this program. This was
in spite of relatively prosperous economic times. Allowing for the necessary
initial time for organization of EZ programs and considering the turnover in
key leadership, the results are still disappointing. This is partly due to
Cleveland’s forced reliance upon very limited economic incentives that
require businesses to take out loans, rather than receive grants only, in order
to receive assistance from the EZ programs. The absence of tax credits
may have been a factor, although small businesses are unlikely to be able to
take advantage of them anyway.
Whether that many EZ residents will be able to obtain new jobs and
improve their personal situation for long remains to be seen, especially if
most of those jobs are outside the EZ. The cumulative losses in welfare
benefits previously received by many of those EZ residents could largely
offset the economic gains from the EZ programs, particularly since their jobs
are mostly paying just above minimum wage ($6-7 per hour), may not
provide health care, disability and retirement benefits, require the mothers to
find and pay for private child care (which the city and the county have not
provided on a major scale), and often involve transportation costs that are
not subsidized by employers (and only temporarily, if at all, by public job
assistance agencies). The EZ also has some fledgling programs aimed at
improving public education for children in the EZ-located public schools but
this has more long range than short term implications.
Therefore, it must be said that Cleveland’s ambitious EZ program has not
been sufficiently funded or effectively implemented to date so as to reach its
fairly modest goals. With a new and conservative Bush administration now in
office and a recent downturn in the U.S. economy, the prospects for
increased federal assistance to areas like Cleveland’s EZ area do not seem
bright. Finally, to the extent that the EZ program does provide jobs for EZ
residents, it is unknown whether they will stay in its neighborhoods, even if
improved with new housing and additional services like increased security. If
the result would be the departure of the most energetic and able of the EZ
residents, especially if their new jobs are located outside of the EZ area, it
becomes doubtful as to whether the overall impact would necessarily be
beneficial to the EZ residential neighborhoods if the poorest, most
dependent and least employable residents are left behind.
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BIBLIOGRAPHY
Bier, Thomas E. 1994. “Housing Dynamics of the Cleveland Area, 19502000” in W. Dennis Keating, Norman Krumholz, and David C. Perry, eds.
Cleveland: A
Metropolitan Reader. Kent, OH: Kent State University Press.
Chandler, Mittie Olion. 1994. “Politics and the Development of Public
Housing” in
Keating, Krumholz and Perry.
Chandler, Mittie Olion. 1999. “Race Relations in Cleveland” in David C.
Sweet, Kathryn Wertheim Hexter, and David Beach, eds. The New American
City Faces Its Regional Future: A Cleveland Perspective. Athens, OH: Ohio
University Press.
Coulton, Claudia J. and Julius Chow. 1994 “The Impact of Poverty on
Cleveland Neighborhoods” in Keating, Krumholz and Perry.
Gale, Dennis E. 1996. Understanding Urban Unrest. London: Sage
Publications.
Hill, Edward W. 1994. “The Cleveland Economy: A Case Study of Economic
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Hill, Edward W. 1999. “Comeback Cleveland by the Numbers” in Sweet,
Hexter and Beach.
Keating, W. Dennis. 1997. “Cleveland: the Comeback City” in Mickey Lauria,
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Krumholz, Norman. 1997. “The Provision of Affordable Housing in
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Redevelopment in the United States. London: Sage Publications (Urban
Affairs Annual Reviews 46).
Krumholz, Norman. 1999. “Cleveland: the Hough and Central neighborhoods
–Empowerment Zones and other Urban Policies” in W. Dennis Keating and
Norman Krumholz, eds. Rebuilding Urban Neighborhoods: Achievements,
Opportunities, and Limits. London: Sage Publications.
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Press.
Appendix 1: 1990 Profile of the Three Residential EZ Neighborhoods
(Source: 1990 U.S. Census)
Neighborhood Population %Black %Poverty Rate (Families)
%Unemployment
10
Fairfax
8,973
98
50
26
Glenville
Hough
25,845
19,715
97
97
39
55
24
30
11