S NEW MARKETS TRIP
Highlighting the Need for Investment in East St. Louis and America'
s Inner Cities
July 6, 1999
TODAY, PRESIDENT CLINTON WILL VISIT EAST ST. LOUIS, IL TO FOCUS ATTENTION ON AMERICA'
S INNER CITIES AND EMPOWERMENT ZONES. President Clinton will visit East St. Louis, IL, where he will tour and speak at a newly-opened Walgreens in the largest shopping center to be built in East St. Louis since the 1950s to highlight the need for retail investment and capital investment in inner cities.
President Clinton is building on his strong record of promoting economic development by launching the New Markets initiative and mobilizing corporate America to recognize the untapped potential of our inner cities so that all communities can share in the prosperity of this economic expansion.
EAST ST. LOUIS FACES SIGNIFICANT ECONOMIC CHALLENGES, LIKE OTHER INNER CITIES
- High Unemployment Rate. In 1998, East St. Louis'
s unemployment rate was 9.6 percent more than twice the national average.
- High Poverty Rate. The city had a poverty rate of 44.3 percent in 1995 compared to 7.8 percent in the surrounding suburbs and 29.5 percent in neighboring St. Louis.
IN EAST ST. LOUIS, PRESIDENT CLINTON WILL BE JOINED BY NUMEROUS CORPORATE EXECUTIVES AND OTHER LEADERS TO HIGHLIGHT NEW INVESTMENTS IN OUR INNER CITIES. These include: Cathy Bessant (Pres., Community Development, Bank of America); David Bernauer (Pres., Walgreens); Mel Farr (CEO, Mel Farr Automotive Group); Richard Huber (CEO, Aetna); Jackie Joyner-Kersee (Pres., Elite International Sports Marketing); Rev. Jesse Jackson; and Joe Stroud (General Manager, Jovan Broadcasting).
CORPORATE AND ECONOMIC DEVELOPMENT LEADERS JOINED THE PRESIDENT TO ANNOUNCE THE FOLLOWING COMMITMENTS FOR EAST ST. LOUIS AND AMERICA'
S INNER CITIES:
Bank of America Commits $500 Million to New Markets. Bank of America will make a commitment of $500 million of equity to support community development opportunities in the New Markets of inner-city America. This is in addition to the $100 million CDFI commitment that the Bank will announce in the Delta earlier in the day. This new venture fund will be known as the Bank of America Catalyst Fund. Representing Bank of America CEO Hugh McColl, President of Community Development Cathy Bessant will join the President today in East St. Louis. The Catalyst Fund builds on Bank of America'
s history of investing in inner city businesses, including the following here in East St. Louis:
- Bank of America also has provided more than $3 million in construction loans to help create the new Walgreens in East St. Louis.
- In addition, a $500,000 construction loan to East St. Louis'
CDC Development Corporation will create 18 new affordable single-family homes in the South End neighborhood of East St. Louis.
Mel Farr Automotive Group and Triple M Financing. An affiliate of the Mel Farr Automotive Group, the Triple M Financing company finances vehicles for urban consumers in underserved markets. Until now, Triple M could only fund these loans with its own capital. Triple M is announcing that it will securitize its car loans and sell them to major investors including Bank of America, TIAA-Cref, Goldman Sachs, Bank One and Ford Motor Credit Company. This increased access to capital will allow the Mel Farr Automotive Group to expand its dealerships and increase employment in inner-city markets. Mel Farr will be with the President today in East St. Louis.
Walgreens Opens New Store. The company is locating an anchor store in the largest shopping center to be built in the area since the 1950s, bringing additional jobs and vitality to the city. Walgreens has made investments in other inner city areas as well. Walgreens'
President David Bernauer will be with the President today in East St. Louis.
Aetna Investing in Inner City of Hartford. Aetna CEO Richard Huber, who will be with the President in East St. Louis, is taking a leadership role in developing the new MetroHartford Investment fund through which Hartford-based corporations will raise $50 to $100 million dollars to support regional economic development projects. This Fund will be modeled after the type of SBIC-based funds that the New Markets Initiative will support.
Department of Housing and Urban Development.
- The St. Louis/East St. Louis Empowerment Zone Agreement will be signed today. The agreement formally establishes the new Empowerment Zone and triggers the initial $3 million in federal funds needed for the cities to implement their strategic Plan.
- The HUD CDBG program has provided funds to lay the infrastructure and build roads surrounding the Jackee Joyner Kersee Center. The Center is a major new community center that will offer educational, social, recreational, and health services. Several companies have helped to finance development of the center, including May Department Stores and Bank of America. East St. Louis receives about $2.4 million annually in Community Development Block Grant.
BACKGROUND ON INNER CITIES AND EAST ST. LOUIS, IL
July 6, 1999
BACKGROUND INFORMATION ON INNER CITIES
A booming national economy, coupled with the success of strong local efforts and the Clinton administration'
s community development agenda, has helped many cities experience a strong fiscal and economic recovery. But many inner cities -- poor urban neighborhoods within larger central cities -- have been left out of that recovery and thus face multiple problems: population decline, loss of middle-class families, slow job growth, income inequality, and poverty. Furthermore, inner city neighborhoods often lag behind the strong economies of the vibrant metropolitan areas in which they are located and at the end of the 20th century there are still pockets of poverty amidst the growing national economic prosperity.
THE GOOD NEWS FOR OUR NATION'
Employment is on the rise in most central cities. The number of employed residents living in central cities grew by 11 percent, or over 4 million people, from 1992 to 1998. In the nation'
s fifty largest cities, the drop in unemployment was larger in the central city than in the suburbs. Just as important, in 77 large central cities, average annual pay rose by 4.6 percent, compared with a 3.6 percent increase for suburban jobs. Cities with dramatic declines in unemployment between 1992 and 1998 include: Detroit, MI (dropped from 17% to 7% during this period); Atlanta, GA (10 % to 5.2%); Hartford, CT (12.6% to 7.5%); and Santa Ana, CA (11.8% to 5.2%) (Department of Housing and Urban Development, "State of the Cities, 1999").
- Population increased in two-thirds of all central cities from 1980-1996. Immigrant families play a significant role in creating these population increases, especially in gateway cities such as Los Angeles, Miami, New York, and Seattle. (Department of Housing and Urban Development).
- Homeownership is increasing in central cities. For the first time in history, more than half of central city households are homeowners. Central city homeownership rates have increased from 48.9 percent at the end of 1993 to 50.3 percent in the first quarter of 1999. This increase in homeownership has been led by both African-American and Hispanic families, whose homeownership rates have been increasing faster than the rate for white families. (Department of Housing and Urban Development).
SOME CITIES STILL FACE CHALLENGES TO ECONOMIC PROSPERITY
- Not all cities are sharing in the prosperity. Some inner cities with high unemployment rates in 1998 include: Madera, CA 18.3%; Brownsville, TX 14.4%; Atlantic City, NJ 13.7%; Yuma, AZ 18.8; North Chicago, IL 10.3%; Flint,MI 9.8%; Miami, FL 9.6%; and East St. Louis, IL 9.6%. (Department of Housing and Urban Development, "No One Left Behind.").
- One in five central cities continues to lose population. Between 1980 and 1996, population declined 5% or more in 22% of the central cities. About half of these cities lost over 10% of their population, despite the fact that the overall U.S. population grew by 17% during this period. These cities lost the workers and the consumers to grow their economy, as well as the tax base needed to protect the livability and strengthen the local business climate. Shrinking cities tend to have higher rates of unemployment than cities with a growing or stable population. (Department of Housing and Urban Development, "State of the Cities, 1999").
- Poverty has also improved, but remains too high. Poverty in central cities declined from 21.5% to 18.8 % between 1993 and 1997. However, it is still significantly higher than the 13.3% poverty rate nationally. Moreover, nearly one-in-three inner cities, 170 cities total, had poverty rates of 20 percent or more in 1995. High poverty cities include: Washington, DC (20%); New Orleans, LA (34%); St. Louis, MO (30%); Philadelphia, PA (24%); Richmond, VA (25%); and Miami, FL (42.8%). (Census Bureau and Department of Housing and Urban Development).
Affordable housing shortages are worsening. Between 1995 and 1997 rents increased faster than incomes for the 20 percent of American households with the lowest incomes. Over 5.3 million very low income rent-households pay more than half their incomes for rent or live in severely substandard housingthe highest on record. The decline in affordable housing over the past two decades has continued in recent years. The nation lost an estimated 900,000 units with affordable rents less than $300 during 1996-1998 alone a 13 percent decline. (Department of Housing and Urban Development, "State of the Cities, 1999").
- Poverty concentration and job mismatches. The outmigration of middle and upper-middle income Americans has left behind concentrations of poor people and has sapped once thriving areas of their economic vitality. Rapid redevelopment outside of central cities has created a mismatch between where many potential workers live and where jobs are located. This leads to high joblessness in some pockets while jobs go unfilled in other parts of the same other wise healthy metro areas. (Department of Housing and Urban Development, "State of the Cities, 1999").
- Poor education remains a problem. In 1996, 60 percent of the children in urban schools failed to achieve basic levels of competency in reading and mathematics on the National Assessment of Educational Progress. About one-half of all high school students in large city school districts fail to graduate in 4 years. For children in high-poverty urban schools, outcomes were even worse: 77 percent failed to achieve basic competency levels in reading, 67 percent failed to achieve basic levels of competency in math. (Department of Housing and Urban Development, State of the Cities, 1998).
EMPOWERMENT ZONE /ENTERPRISE COMMUNITY INITIATIVE TO HELP REVITALIZE INNER CITIES AND RURAL AREAS
In order to help revitalize inner-cities and isolated rural areas, the Clinton Administration has, among other initiatives, designated 135 urban and rural distressed urban and rural communities across the country as Empowerment Zones (EZs) and Enterprise Communities (ECs). This includes a first round of EZs and ECs, designated in 1994, and a second round, designated in January 1999. Communities were chosen on the basis of their strategic revitalization plans, and receive special incentives and resources (Empowerment Zones receive larger incentives and resources than Enterprise Communities) to help carry out their plans.
The second round offered particular incentives to encourage regional applications to help connect poor areas (such as East St. Louis) to their broader regional economies. More than one-third of the new urban Zones selected were multi-jurisdictional.
- The 20 Second-Round EZs (15 urban, 5 rural) all consist of census tracts with a minimum poverty rate of 20%, and at least 90% of those tracts must be in areas with a poverty rate of 25%. Second-round Zones also were able to designate up to 2,000 acres of additional property outside the formal poverty criterion that as part of the Zone can receive Zone benefits and be used for job creation.
has already leveraged over $10 billion in additional public and private sector investment in community revitalization efforts.
- The Second-Round Urban Zones average about 10 square miles in area and about 67,000 residents. The average poverty rate in the urban Zones is about 41% -- ranging from the El Paso EZ'
s poverty rate of 58% to the Cumberland County, NJ EZ'
s poverty rate of 28%. The unemployment rates in the new Zones average about 14%.
- The FY 2000 budget proposes full funding for ten years for the Second Round of EZ/ECs. This includes $100 million over ten years for urban EZs. The FY 2000 budget also includes $50 million to create a new Regional Empowerment Zone Program to further assist First and Second-Round urban Empowerment Zones and Enterprise Communities in linking their economic development strategies to their broader regions.
THE NEW REGIONAL ST. LOUIS EZ
- East St. Louis and St. Louis, MO were both individually designated as Enterprise Communities in December 1994. These individual ECs have been successful in drawing additional investment to their respective areas, but both recognized that more regional cooperation was necessary to truly move forward. In the Second Round, the two jurisdictions (along with Wilson, MO) combined to apply and be awarded designation as a new Greater St. Louis Regional Empowerment Zone. The St. Louis Post Dispatch ("Regionalism Wins the Day," Jan. 20, 1999) hailed the new EZ as a "testament to the power of regional cooperation."
- The Regional St. Louis EZ includes parts of two states, three counties, three municipalities, and 22 census tracts. The Zone itself has a population of 49,507 and encompasses 14 square miles. The Zone'
s poverty rate is 47% and unemployment rate is 24% (the highest unemployment rate among the new Zones). 49% of Zone residents lack a high school diploma. 34% of Zone households receive public assistance. (St. Louis Regional Empowerment Zone application).
- The Regional St. Louis Zone'
s application entitled "Building a Bridge" stressed "partnerships and collaborations" as "the only effective means of assuring long-term sustainable solutions." Particular emphasis is being placed to draw private-sector investment and to train residents for jobs in the region.
BACKGROUND ON EAST ST. LOUIS
Once an active blue-collar town of stockyards, meat packing plants, railroads, and restaurants, the city began to decline when its industries stumbled in the 1960s. Since then, East St. Louis has dramatically lost population and commerce.
- The East St. Louis population has steadily declined by 45% in the last 25 years, from 69,947 in 1970 to 38,595 in 1996. This has happened while the populations of the surrounding suburbs have steadily increased 24%. In 1990, the population was 98% African American. (Department of Housing and Urban Development).
- The city'
s unemployment rate for 1998 was 9.6 %, more than twice the national average, and the rate for the areas surrounding suburbs is less than half that rate at 3.5%. (Department of Housing and Urban Development).
- In 1995, the city'
s poverty rate was 44.3%, compared to 7.8% in the suburbs and 29.5% in neighboring St. Louis. (Department of Housing and Urban Development).
- Homeownership in the city in 1990 was 50.5 %. The vacancy rate was 16.3 %, three times the rate in the city'
s suburbs (5.4%). The total stock of housing units decreased 39% between 1970 and 1990, while the stock in the suburbs increased by 47%. (Department of Housing and Urban Development).