Reports, 1966

Plain Talk

on
Keonomic Renewal
in

New York City

The
Samuel J. and Ethel Lefrak Foundation, Inc.

Report

CITIZENS BUDGET COMMISSION. INC.
S1 EAST 42nd STREET. NEW YORK, N.Y. 10017

(212) 687-0711

A NON-PARTISAN CIVIC RESEARCH ORGANIZATION SUPPORTED BY PUBLIC CONTRIBUTIONS

rene

—

PLAIN TALK ON ECONOMIC RENEWAL IN NEW YORK CITY

The Samuel J. and Ethel Lefrak Foundation, Inc.
- Report
= September, 1966
CITIZENS BUDGET COMMISSION, INC. 51 East 42nd Street

New York, N. Y., 10017

PLAIN TALK ON ECONOMIC RENEWAL IN NEW YORK CITY

This report was prepared by:

Dr. David Bernstein, Project Director
John M. Leavens

John L. Fava

Dr. Herbert J. Ranschburg

Mark D. Savory

Mark Leeds

Table of Contents

cg a a

Introduction e e a e e @ ce e ° ° @ z « ° ° s e ° 6 °

PART I - BACKGROUND FOR ECONOMIC RENEWAL IN NEW YORK CITY. .. .
The Meaning and Nature of Economic Renewal . .
Existing Approaches to Economic Renewal. ......

PART II - AVAILABLE GOVERNMENTAL FISCAL AIDS FOR ECONOMIC RENEWAL.
Department of Housing and Urban Development or HUD Programs.

Urban Renewal (Including Air Rights Projects). .

Related Program: Urban Renewal Demonstration Grants .

Urban Mass Transportation Grants... c=: : 2
Related Program: Public Works — Advances a oe
Related Program: Mass Transportation Demonstration Grants .

Supplementary Programs . “eae e a
Grants for Advance Acquisition of — a ae es ee ee ee
Grants for Basic Sewer and Water Facilities. .......
Relocation Assistance. .. }eceh + Se we hm
Grants for Neighborhood Pacilities ‘eee e ew we ee
Open Space Land and Urban Beautification Grants.

Economic Development Administration or EDA Programs. ......
Area Eligibility .... ; oe» e
Grants for Public Works _ ‘Peveloonent ‘Factlities a6 i
Public Works and Business Loans. .......-++-e eee.
Related EDA Programs .......+. + © «© © «© we we ee

DABEEIet ACCIWiCiog. cw we ww kw lh

Technical Assistance . ‘ ,
Small Business Administration or SBA en
Bank Participation Loans ........5 +6242 6+4 ee ee
Direct Loans . ...% «.. « . ee ee ee ee ee ee ee er ee
Disaster Loans For Dischaced Businesses. .
Loans Under the Small Business Investment Act of 1958.
New York State Job Development Authority or JDA Programs ‘
Economic Renewal Activities At The City Level. ....
CHART I - Lines of Credit for Economic Renewal...
CHART II - Hypothetical Example of Financing for — tn
Industrial Development Projects . :
The Impact of Anti-Poverty Programs on Economic Renewal.

Table I - Summary Outline of Financial Aids For Economic Renewal .

PART IIT - CONCLUSIONS AND RECOMMENDATIONS AFFECTING ECONOMIC

RENEWAL IN NEW YORK CITY.
Conclusions. ... “-— se © & we ®

Recommendation For hatin At the Daderal -_ Stabe ee
Recommendations Pertaining to HUD Programs .

Recommendations Affecting EDA Programs .

Recommendations Applicable to SBA Programs .

Recommendations Regarding JDA Programs ........-+..ee-.
Recommendations For Action at the City Level .....
Suggested Basic Steps For New York City.

Foreword

As the fiscal problems of the City of New York have mounted in recent
years, it has become increasingly important to maintain and enlarge the economic
base upon which the City's citizens and its governmental finances depend. In-
creasing attention is being given to the role of all levels of government - federal,
state and city - in encouraging economic development. Various programs of financial
aid - grants, loans and guarantees - have been authorized, particularly in the last
few years, which can aid economic growth.

Because these programs are included in a variety of laws at different
government levels, businessmen who might be able to use them as part of their plans
for economic development have been handicapped by not having in a single document
a convenient compilation of the most significant aids.

To remedy this defect, the Citizens Budget Commission undertook, with the
aid of a grant from the Samuel J. and Ethel Lefrak Foundation, to compile a list of
governmental fiscal aids available for economic development and renewal. In the
course of compiling the list, it was found that certain gaps and inadequacies pre-
cluded the effective use of the full potential of these aids. In addition to conm-
piling the list of programs, therefore, this report comments on their inadequacy,
and suggests some remedies.

The Citizens Budget Commission gratefully acknowledges the support of the
Samuel J. and Ethel Lefrak Foundation, and hopes that this report will be helpful
in encouraging the highly desirable objective of increased economic renewal in New
York City both by providing a convenient catalogue of major existing aids and by
suggesting ways of improving them.

John M. Leavens
Executive Director

Introduction

In the course of compiling a list of the governmental fiscal aids available
for economic renewal, gaps and inconsistencies were noted in them that precluded their
full and effective use in New York City. In turn, this raised questions as to the
nature and status of economic renewal in New York:

-- Why is it needed?

-- What is its status now?

-- What is its potential?

-- Is economic renewal working out in practice as it should?

-~- If not, what steps are needed to “get it off the ground?"

Answers to all five questions are the concern of this report. The chief
question, however, is what to do about economic renewal in the broad sense of what
are believed to be the essential ingredients of a successful program for economic
renewal, without endeavoring to set forth a detailed blueprint in the process.

Perhaps the most significant factor in New York City at the end of the
second third of the 20th Century is change. While, over the years, there has always
been change in varying degrees of magnitude in the City, the pace is accelerating
and today has reached a new high rate. Some of the significant changes of recent
years that bear on economic renewal need only be mentioned in highlight. Among them
are:

Changes in people

-- the changing socio-economic mix of the City's population

-- the concentration of disadvantaged ethnic groups here

-- the flight of middle income people to the suburbs

-- the rise of metropolitanism and its effects on the functioning
of established levels of government, at state, county and

municipal levels.

Changes in the City's economy
-- the expansion of the corporate headquarters’ office function
~- the steady and protracted erosion of the City's industrial base

-- the sidewise movement of activity in shipping, and wholesale

and retail trade.

Changes in requirements of modern business and industry

~- increasing demand for vertical high-rise office structures
concentrated in down-town and mid-town areas of Manhattan

~- increasing demand for horizontal one-story industrial space

-~- increasing need for ultra-modern automation, communication and
materials - handling techniques and devices which were completely
unknown a decade ago

-- increasing need for effective means of transportation that will
enable goods and people to move freely and without fear of

strangulation.

Changes in the physical nature of the City and the layout of facilities,

both public and private, available for economic activity.

Decreasing ability of the City, financially speaking, to lift itself

by its own bootstraps.

The greatest single need today is for better means of matching people and

jobs whether, one, by educating people to fit the rising number of jobs directly or
indirectly related to the headquarters’ office function or, two, by economic renewal
to create new jobs consistent with the potential of the available people. This need
is recognized in its large dimension by all three levels of government, federal,
state and local, and by private enterprise. In Part II of this report, there are
listed a wide variety of programs at all three levels of government designed to bring
about economic renewal. In addition to the Citizens Budget Commission, many of the

City's leading civic and trade organizations -- the New York Chamber of Commerce,

o Fw

the Commerce and Industry Association, the Downtown-Lower Manhattan Association,
the Economic Development Council, and CLICK {Commerce, Labor and Industry Corporation
of Kings County (Brooklyn) | , to name a few -- have expressed their concern.

As will appear, the programs set forth in Part II are in many respects
piece~meal, uncoordinated, inconsistent and not well thought-out in the essential

details of implementation. While much has to be done to bring these programs into

harmony with one another and to streamline procedures, even more remains to be done
on basic approaches to economic renewal. New and bolder thinking today is imperative

to achieve effective results in both the short and long range future.

PART I — BACKGROUND FOR ECONOMIC RENEWAL IN NEW YORK CITY

The Meaning and Nature of Economic Renewal

For present purposes the term "economic renewal" has been used to refer to
existing and proposed governmental programs which aim at facilitating the investment
of private capital in job-creating facilities, as well as to the intended results of
such programs. A great deal of private capital investment, of course, has occurred
in the past and will occur in the future without any governmental aid at all. Yet
there is growing evidence that, under present conditions, certain kinds of job-
creating investments cannot, and will not, be undertaken in New York City unless some
kind of governmental aid is forthcoming. If, as seems likely, it is in the public
interest to further the job-creating process through a partnership of private and
public capital, not only must the methods used and the tools made available for this
purpose be adequate, but, even more important, there must be a will, both on the part
of the private entrepreneur and of the public official, to use them.

To be specific, the need for economic renewal in New York City arises out
of a paradox: while overall employment in the City has grown by 3.2 percent over
the past 15 years, manufacturing employment has declined over the same period by
16 percent, although there are recent indications that the situation in the manu-
facturing sector is becoming more stable. In spite of the inroads made by inflation

— * ~

and the draft on the available labor supply, individuals who worked, or could have
worked, in relatively low-skilled or semi-skilled positions in manufacturing enter-
prises have apparently been unable to shift into other occupations.

The problems created by this disappearance of manufacturing jobs go even
further. Many, if not most, of the individuals affected are members of minority
groups. Their inability to compete for what are called "higher~-type" jobs is attri-
buted, often quite correctly, to age-old patterns of educational neglect and occupa-
tional discrimination by both unions and employers. It is doubtful whether the
expectations held by such displaced individuals could be fulfilled by creating large
numbers of unskilled jobs - even assuming the jobs could be created. Unskilled
workers, like everybody else, want to reap the benefits of the technological revolu-
tion: better jobs with better pay and more status.

Economic renewal programs would, in general, tend to degenerate into an
overly expensive "“leaf-raking" program unless two points are kept clearly in focus:
(1) any partnership of private and public capital established to effectuate economic

renewal must utilize the fruits of modern technology, and (2) the labor force to be

employed in renewal projects must be trained in the skills of that same type of
technology. One without the other would be wholly inadequate to job seekers, to
private investors, and to the taxpayers who will foot the public share of the bill.

Until now, economic renewal in New York City has been largely non-existent.
The reasons are many and include, among others, lack of clear-cut legal authority for
some industrial development proposals, lack of strong public support for govern-
méntally assisted industrial development projects and lack of funds.

There are now indications that the official and financial climates are
changing. The structural and functional reorganization of the City government should
result in making economic renewal a proper concern of the top leadership. The Con-
gress, at the behest of the President, has spoken, and funds now have become available

Private enterprise leadership has started to plan and organize for the task ahead.

~ i =

It is in the City's interest to promote an increase in manufacturing jobs.
With the recent changes in the City's tax structure, particularly the introduction
of City taxes on personal and business income, the City's own fiscal fortunes are
closely bound up with economic conditions in general. Well-informed sources indicate
that the City may obtain as much as $1,000 annually in taxes on the basis of one
manufacturing job. By this reckoning, the City's tax loss from the cumulative 15
year loss of about 170,000 manufacturing jobs approaches $170,000,000 per annum.
This is in excess of the $160,000,000 that the City hopes to obtain from the recently
imposed personal income tax.
Existing Approaches to Economic Renewal

Numerous approaches to the problem of economic renewal in New York City
have been expounded. Among the earliest was the creation of industrial parks in
Brooklyn, Queens and Staten Island. Studies have been done on these areas but, as
of now, only one area in Brooklyn -- the so-called Flatlands Industrial Park -- is
in its initial stage of development. While the concept of industrial parks cannot
provide the sole, or even a major, answer to the City's economic renewal problems
because of such factors as the limited amount of land available, its high cost, etc.,
it is nevertheless a valid concept. It certainly should be given primary considera-

tion for such areas as western Staten Island, College Point in Queens, Washington

Market in Manhattan, and the Brooklyn Navy Yard.
Other approaches to economic renewal in New York City have attempted to
deal with the problems involved in a more comprehensive manner. These include the

Housing and Redevelopment Board report, Industrial Development in New York City, and

the Arthur D. Little, Inc. report, A Program to Meet New York City's Industrial

Problems, both published in 1964. The first report covered a wide range of sugges-
tions. A few of them have been acted on in one fashion or another, but most have yet
to be implemented. The second focused heavily on the need for, and usefulness of,

a public Development Corporation along with the financial structure needed to support

=

its operation. A Public Development Corporation is now in the formation stage, but
its exact organization and program responsibilities are as yet unclear.

The critical relationship between urban life and its problems and our
national well-being is becoming increasingly recognized on the national level. Con-
sequently, the key factor in economic renewal is the Federal government and its
commitment to the revitalization of urban areas as part of the "Great Society" pro-
gram. While the exact outline and form of Federal participation have not been com-
pletely spelled out, the organization of the Office of Economic Opportunity in 1964,
the organization of the Department of Housing and Urban Development in 1965, and the
organization of the Economic Development Administration, also in 1965, are the first
steps toward making good on the Federal commitment. The proposals this year for the

"Demonstration Cities’ program further indicate the direction in which Federal pro-

grams for urban betterment will go.

Recent approaches to economic renewal in New York, developed against the
backdrop of increasing Federal commitment, are proposed in the Temporary Commission
on City Finances, Sviridoff and Logue reports. The TCCF report: Stimulating
Industrial Development, 196€,concentrates heavily on the steps that can be taken by
local governmental agencies and the means by which economic growth may be fostered

through improvement of traditional municipal services as well as by direct govern-

mental financial participation.

The Sviridoff report, Developing New York City's Human Resources, 1966,is

concerned primarily with the social and educational aspects of urban development.

It concentrates on programs for welfare, social services, vocational training, and

employment counseling and services, as well as the recrganization of agencies dealing

with these particular areas.

The Logue report, Let There Be Commitment, not yet officially published,

concentrates principally on the housing and planning aspects of urban development,
with much attention given to a reorganization along the lines of the Federal Adminis-

a we

trative pattern of the City agencies concerned with such matters.

All the foregoing approaches and reports have produced much valuable in-
formation and have suggested many thought-provoking and enlightening proposals. There
is no need to go over the same ground again. However, in this crucial period for the
City, a general guiding perspective and sense of direction may be useful. The City
is in the process of reorganizing its agencies, and this will have a profound effect
on the operational reality of programs for economic renewal. Federal participation in
the economic renewal effort will also deeply influence the ability of urban areas to
meet their problems. The City must, therefore, have a clear overall conception of
where it wants to go and how best to get there, if it is to gain full effectiveness
from the instrumentalities and agencies now emerging.

In summary, some of the things that should be kept in mind in reviewing the

specific programs set forth in Part II and the conclusions and recommendations in

Part III are as follows:

-- For many reasons Federal assistance is essential to economic renewal
in New York.

-- The City is not an isolated entity. Its problems cross its borders
and must be viewed in the national context, because their solution
has national implications.

-- The City must organize its agencies in such a way that maximum
effective use is made of resources from all quarters, private as
well as public.

-- A balanced, well-integrated and comprehensive approach to economic
renewal is necessary both to achieve the best results from the
City’s own efforts, and to secure the maximum effective assistance
from other levels.

-- Economic renewal is essential for urban renewal. Conversely, in
New York, urban renewal -- in the sense of removal of physical

~~ 2

blight and the modernization of non-residential areas -- is
essential to successful economic renewal.
-~- Last, but not least, human renewal and economic renewal must go

hand in hand.

PART If - AVAILABLE GOVERNMENTAL FISCAL AIDS FOR ECONOMIC RENEWAL

Part If of this report presents a tabulation of the various governmental
fiscal aids for economic renewal currently in effect. Details of the programs at
the various levels of government - federal, state and local - are listed so that their
relationship and applicability to economic renewal in New York City may become more
apparent.

Economic renewal is the concern of three federal agencies, one New York
State agency and three existing or planned quasi-public corporations. The three
federal agencies are: HUD, the Department of Housing and Urban Development; EDA,
the Economic Development Administration; and SBA, the Small Business Administration.
The New York State agency is JDA, the New York State Job Development Authority. The
three quasi-public corporations are: PDC, the New York City Public Development

Corporation; NYIDC, the New York Industrial Development Corporation; and CDC, the

Commercial Development Corporation.

Department of Housing and Urban Development or HUD Programs

A variety of programs is available for housing and urban development. Of
these, two constitute what might be called basic programs with their attendent re-

lated programs and five others constitute the supplementary programs. The basic

programs are, as follows:
Urban Renewal (Including Air Rights Projects) (Title I, as amended, of the Housing
Act of 1949 and Section 110 of Title I, as amended by the Housing Act of 1964
so far as concerns Air Rights Projects.)
This is the core program of the Department of Housing and Urban Development.
Its purpose is to assist cities undertaking local programs for the elimination and

~§ -

prevention of residential or non-residential slums and blight. Projects are long
range and are executed by means of a partnership among local government, private
enterprise, citizens and the Federal government.

Renewal programs for the rehabilitation and redevelopment of a blighted area
are carried out on a community-wide basis under a "Workable Program for Community In-
provement" certified by HUD. Actual projects and related activities are financed by a
combination of Federal advances and loans, Federal grants, and local contributions.
Federal grants generally pay up to two-thirds of the net public cost (cost to the local
agency less resale price), with local contributions covering the remainder. Projects
are undertaken through local public agencies authorized by State law and may involve:

-- acquiring and clearing a blighted area and disposition of the

land for redevelopment in accordance with planned uses, or
-- rehabilitation of structures and improvement of community

facilities in a blighted area.

Federally assisted planning for urban renewal projects may be undertaken on
a general neighborhood basis or a specific project basis. The general neighborhood
basis is used in areas of such size that renewal activities may have to be initiated
in stages over a period of years, and where a preliminary comprehensive plan is needed
to establish the eligibility, feasibility and details of execution of the project.
Expenses of both types of planning may be met by Federal advances repayable out of

funds made available for execution of the project.

Urban renewal projects under the HUD air rights provisions are comparative-
ly new. They are of particular importance in large cities where land is at a premium.
The law provides for the acquisition of air rights and the construction of necessary
foundations and platforms over highways, railway or subway tracks, or similar
facilities. Five percent of urban renewal funds may be allocated for such projects.
At present, however, air rights projects are limited to housing and related uses, and
will not be authorized where the anticipated cost involved would be greater than the

cost of renewing a comparable surface slum area in the community. In view of the

~~

tremendous potential of air rights renewal projects in fostering economic renewal in
major American cities, removal of this limitation is highly desirable.

Related Program: Urban Renewal Demonstration Grants (Section 314, Housing
Act of 1954) - Grants are permitted under this law for up to two-thirds of the cost
of undertaking demonstration projects which include the development and testing of
new or improved techniques or methods of blight prevention or elimination.
Urban Mass Transportation Grants (Urban Mass Transportation Act of 1964)

As the name implies, grants under this law provide help to localities for
urban mass transportation facilities and equipment. Grants can be made for up to

two-thirds of the cost of facilities and equipment that cannot reasonably be financed

by revenues. Local grants are required for the other one-third. Federal loans are
available for a period of up to 40 years for the entire cost of proposed capital
improvements, where financing is not available privately on reasonable terms. Pro-
jects are carried out through qualified local public agencies and must be part of an

integrated program for a coordinated transit system and the planned development of

the urban area.

Related Program: Public Works Planning Advances (Section 702, Housing
Act of 1954) - Interest free advances for engineering studies, designs and plans for
specific public works, including transportation facilities are made available under

Section 702.

Related Program: Mass Transportation Demonstration Grants (Section 6,
Urban Mass Transportation Act of 1964) - Federal grants are available under Section
6 for up to two-thirds of the cost of projects to test and demonstrate new ideas and
methods for improving mass transportation systems and services.
Supplementary Programs

The five Department of Housing and Urban Development supplementary programs
which may be of use in non-residential, as well as residential, renewal are as

follows:

=» 36 =

ee eee

Grants for Advance Acquisition of Land (Section 704, Housing and Urban
Development Act of 1965) - Grants under Section 704 are intended to encourage com-
munities to acquire land for future construction of public works and facilities.
Grants are for the interest charges incurred on loans to finance the acquisition of
land for a period of not more than five years.

Grants for Basic Sewer and Water Facilities (Section 702, Housing and
Urban Development Act of 1965) - Grants under Section 702 are to encourage construc-
tion and orderly growth and development of local water and sewer systems. Grants
are to local public bodies to finance up to 50 percent of projects which are part
of a comprehensively planned program for the development of the area.

Relocation Assistance (Section 114, Housing Act of 1949, Section 404,
Housing and Urban Development Act of 1965) - This supplementary program aids the
relocation of individuals, families, businesses and non-profit organizations dis-
placed by urban renewal projects. Business organizations are entitled to receive
moving expenses, including storage costs, and reimbursement for property loss in-

curred in the move, up to $3,000. Moving expenses over $3,000 may be covered by a

Federal relocation grant of up to $25,000. Small business may receive a displacement
payment of $2,500 if the net annual earnings are $10,000 or less. (Note: The Small
Business Administration, as noted hereinafter, is also authorized to assist in the

reestablishment of a small business through its loan program.)

Grants for Neighborhood Facilities (Section 703, Housing and Urban

Development Act of 1965) - Grants under Section 703 provide facilities needed for
programs carrying out health, recreation, social or similar community services in
the area. Grants cover up to two-thirds of the project cost of community centers,
health stations, and other similar public buildings, except that in Redevelopment
Areas under the Economic Development Act, the grant may cover up to 75 percent of

the project cost.

e TE =

Open Space Land and Urban Beautification Grants (Title VII, Housing Act

te ee oe

of 1961) - Title VII assists communities in acquiring and developing land for open-
Space uses and in carrying out urban beautification programs. As much as 50 percent
of the funds needed may be provided by the Federal Government to develop parks and
other recreation areas, and for such activities as street landscaping, park improve-
ments, tree planting, and upgrading of malls and squares. Programs are carricd out

by local public bodies as part of the planned development of the area.

Economic Development Administration or EDA Programs

The Economic Development Administration, familiarly known as the EDA,
established by the Economic Development Act of 1965, is an agency of the United
States Department of Commerce. EDA focusses upon the economic needs of depressed
areas with a view to establishing conditions which can lead to growth and stability.
Maximum effort is devoted to enabling private enterprise to provide jobs and increased
income. Requests for EDA assistance must originate locally, the submission being made
by an eligible area, as outlined below. However, EDA programs are not, at present,
applicable to New York City, because no section of the City has yet been designated
as an eligible area.
Area Eligibility (Titles IV and V, Economic Development Act of 1965)

Four kinds of geographical groupings are eligible for assistance under the

EDA programs:

(1) Redevelopment Areas - Counties, labor areas, and cities over 250,000,

; *
where employment or income figures reveal conditions of economic distress. No area

may be designated unless it has an approved "Overall Economic Development Program,"

to which all projects must conform.

“Generally, unemployment over 6 percent or median family income under 40
percent of national median is considered to "reveal conditions of economic distress."
New York City as a whole does not meet the requirements, but individual sections of
it would. However, since these sections are not autonomous political units with

appropriate local agencies, they have not heretofore been designated as Redevelopment
Areas.

oe AD e

(2) Economic Development Districts - Multi-county groupings of distressed

areas, with an "Overall Economic Development Program" for the entire district.

(3) Economic Development Regions ~- Multi-State regions designated for

economic planning purposes.

(4) Economic Development Centers - Communities or localized areas of not

more than 250,000 population, which are geographically and economically so related

to a Development District that the economic growth of the Center may reasonably be

expected to contribute significantly to the alleviation of distress in the Redevelop-—
ment Areas of the District. However, it need not actually be located within a

Redevelopment Area.

All eligible areas are subject to annual review.
Substantive EDA assistance is administered through two main programs: one,
grants for public works and development facilities, and, two, public works and

business loans. Two related programs provide funds for district activities and

technical assistance.

Grants for Public Works and Devclopment Facilities (Title I, Economic Development
Act of 1965).

Title I authorizes a $500 million annual appropriation for public works

and development facilities grants, no more than 15 percent of which may be expended

in any one State.

Type of Assistance - This title authorizes direct grants for up to 50 per-
cent of the cost of needed public works, and supplementary grants to this or other
Federal grant-in-aid programs which may bring total Federal assistance for worthy
projects in areas of greatest economic distress up to 80 percent - but in no case
may the combined direct and supplementary grants exceed 80 percent.

Eligible Applicants - Public or private non-profit agencies in the Re-

development Area.

Project Criteria - Projects must directly or indirectly tend to improve

« *§

eee ee ae

the opportunities for the successful establishment or expansion of industrial or
commercial facilities, or otherwise assist in the creation of additional long-term
employment opportunities, or primarily benefit the long-term unemployed and members
of low-income families, or otherwise substantially further the objectives of the
Economic Opportunity Act of 1964. There must be a pressing need for the project and
it must conform with the approved Overall Economic Development Program for the area.
No assistance may be provided projects intended to facilitate the relocation of
industry from one area to another.

Eligible Projects - include water and sewer facilities serving principally
industrial and commercial users, water pollution control projects aimed at the treat-
ment of industrial wastes, general site improvements, including utilities and access
roads, for industrial parks.

Public Works and Business Loans (Title II, Economic Development Act of 1965)

Title II authorizes a $170 million annual appropriation for public works

and business loans administered by EDA.

Public works loans may be made for as long as 40 years to meet up to 100

percent of the cost of public works that are similar to the projects made eligible
for EDA grant assistance. Interest is 3-3/4 percent. Loans may be made only if
funds for the project cannot be obtained from private lenders or from other Federal
agencies on terms which will permit accomplishment of the project. There must also
be a reasonable expectation that the loan will be repaid.

Business loans may be made for as long as 25 years, to meet up to 65 per-

cent of the cost of land, buildings, machinery and equipment for industrial and com-
mercial plants located in Redevelopment Areas. The interest rate for such loans is
based on the cost of government borrowing. Included under the business loans pro-
visions are guarantees of up to 90 percent of the outstanding balance of private

working capital loans for business projects receiving direct Economic Development

Administration loans.

~ 14 -

There are certain special requirements for business loans. To be eligible
for a business loan any project must be consistent with the EDA-approved Overall
Economic Development Program for the area. It must provide new permanent employment.
It must be a new or expanding facility and not the relocation of an existing business
from another area. The project cannot be in an industry experiencing long-run over-
Capacity.

Economic feasibility studies prepared by qualified consultants at the
applicant's expense must be madc for all projects costing in excess of $1 million.
The loan must be unobtainable from other sources on terms that will enable the pro-
ject to be carried out and there must be reasonable assurance of its repayment. At
least 15 percent of the total cost must be provided in the form of equity capital or
a loan inferior in lien to that of the Federal Government, of which at least one-
third must be provided by a State or local government or local area organization.
Related EDA Programs

The two related EDA programs are for district activities and technical
assistance, as follows:

District Activities’ (Title IV, Economic Development Act of 1965) - Title
IV sets up a $50 million annual appropriation for supplementing by 10 percent grants
under Title I for eligible projects within Redevelopment Areas taking part in
Economic Development District activities. The appropriation also provides financial

assistance to Economic Development Centers in District programs.

Technical Assistance ~-(Title III, Economic Development Act of 1965) - Title

Itt sets up a $25 million annual appropriation for five years to be used for technical
assistance of two basic types:
(1) Direct assistance from EDA either through its staff or by contract
with expert consultants. This assistance includes: providing feasibility studies
of how to tap natural and human resources: identifying, planning and programming
many types of economic development projects; management and operational assistance

«= ¥5 «

to firms; and preliminary design, planning and feasibility studies of development
facilities.

(2) Technical assistance planning grants to eligible States, districts
and local organizations for aid in planning, programming and administering economic
development programs.

Direct assistance (where EDA itself performs the services) may be up to
100 percent of project cost, but a maximum non-Federal contribution in cash or kind
is encouraged. Grants may be up to 75 percent of project costs, but a maximum non-
Federal contribution is sought. EDA reserves the right to approve plans for spending
such funds, as well as the right to approve the qualifications of personnel, ccn-
sultants, or contractors. No assistance can be applied in a way that will result in
the relocation of employment. The Federal costs of technical-assistance projects of
primary benefit to a private corporation or other business organization are expected
to be repaid by arrangements agreed upon between the government and the potential

beneficiary.

Small Business Administration or SBA Programs

The Small Business Administration - SBA - administers four loan programs
intended to benefit small business organizations. The four programs are: bank
participation loans, direct loans, disaster loans for displaced businesses and loans
under the Small Business Investment Act of 1958. Small business loans are designed
to assist small enterprises which are independently owned and operated and are not
dominant in their respective fields. Loans may be used to finance construction,
conversions, or expansion; to purchase equipment, facilities, machinery, supplies or
materials, and to acquire working capital. The business aided must be unable to
secure financing from private commercial sources, and must show sufficient probable
future income to provide reasonable assurance of repayment. The loan must be secured
by real estate mortgages or other suitable collateral. Loans cannot be used to
facilitate relocations which will cause unemployment in the firm's present area.

- 18 =

Bank Participation Loans

Small Business Administration may participate with a bank or other lending
institution in up to 80 percent of a small business loan on one of two bases:

In an immediate participation loan, the SBA purchases "immediately" from
a bank, or sells to a bank, a percentage of a loan which has been approved by both it
and the bank. The loan may be serviced either by the bank or the SBA.

In a guaranty participation loan, the bank makes and administers the entire

loan, with the SBA guaranteeing 90 percent of the loan.

Terms - loans are repayable in regular installments over a period of up to

10 years; however, working capital loans are generally not made for longer than 5
years. Interest on regular Small Business Administration loans is generally 5% per-
cent, but may be lower in Redevelopment Areas and in "Areas of Substantial Unemploy-
ment" designated by the Secretary of Labor.

Amounts - The maximum Small Business Administration share in a bank partici-
pation loan to any one borrower is $350,000. Exceptions are made for loans to
corporations formed by "pools" or groups of small business concerns. The maximum
pool loan is $250,000 multiplied by the number of small firms which have formed and

capitalized the pool corporation. (The interest rate on the Small Business Adminis-

2

tration share of "pool" loans is 5 percent).

Direct Loans
Where a private lending institution will not make the full loan and will
not participate, the Small Business Administration may make a direct loan. The terms

for direct loans, including repayment, maturity, interest, and amount, are the same

as for bank participation loans.
Disaster Loans For Displaced Businesses

If the SBA determines that a small business has suffered substantial

economic injury as a result of displacement by a Federally-aided urban renewal or

highway construction program or by other construction conducted by or with funds

=» 17? .

provided, in part or whole, by the Federal Government, the SBA may participate with
private lending institutions in up to 90 percent of the amount of a disaster loan

on either an immediate or guaranteed basis.

There is no fixed limit on the amount of an SBA disaster loan. The maturity
may be up to 20 years and interest is usually between 3 and 4 percent. A bank

participating in this type of loan may charge a higher rate of interest on its share,

provided the rate is reasonable.

Loans Under the Small Business Investment Act of 1958

The SBA also administers loan programs under the Small Business Investment
Act of 1958 designed to stimulate the flow of private equity capital and long-term
financing of small businesses.

Section 501 of the Act authorizes SBA loans to State development companies.
The proceeds of these loans are to be used only to provide equity capital or make
long-term loans, or both, to small business concerns. Maximum maturity is 20 years,
with 5 percent interest. The total amount of such loans may equal the total amount

borrowed from all other sources.

Section 502 of the Act authorizes SBA loans for plant construction conver-
Sion, or expansion, including land acquisition. The loans are made to State and
local development companies and may be made either directly or under agreements to
participate with other lending institutions. Loans may be on an immediate or deferred
basis but must be secured in all cases. Participation in a deferred loan may not
exceed 90 percent of the balance outstanding at the time of disbursement. The pro-
ceeds of a Section 502 loan must be used to assist an identifiable small business

concern and the amount is limited to $350,000 for each such concern. Maximum maturity

is 25 years with interest at 5 percent.

Where a Section 501 or 502 loan is made to assist a small business concern
located in an area of substantial labor surplus, the interest rate on the SBA share

of the loan is reduced to 4 percent.

=» 1B =

New York State Job Development Authority or JDA Programs

The New York State Job Development Authority or JDA offers financial
assistance in the construction, expansion or rehabilitation of industrial plants
through the provision of "seed money" to complement funds from conventional private
sources. The purpose is the creation of additional job opportunities in the State.
At present $50,000,000 is available in a revolving fund for JDA purposes. However,
under new State legislation, the revolving fund for 3% percent loans is being in-
creased from $50 to $75 million. Additional loan funds at market rates, or somewhat
below, may also be secured.

JDA loans are made through local, non-profit industrial-development cor-
porations. Their use is restricted to construction, expansion or rehabilitation of
a manufacturing facility. Buildings for research and warehousing connected with the
manufacturing or industrial plant may be included. However, no loans are permitted
for machinery or equipment, working capital or inventory.

Job Development Authority loans may be obtained at low (3% percent)
interest rates, generally for a 20-year maturity, on a second mortgage for up to
30 percent of the cost of land and buildings. Project cost may include necessary
demolition of old structures, land improvements and installation of utilities.
Mortgages given as security for JDA loans may not be junior to first mortgages by
more than 50 percent of the project cost. Also, at least 10 percent of the project
cost must be put up by the assisted firm in the form of equity.

Economic Renewal Activities At The City Level

At the present time, New York City cannot be said to have a real "program"
for economic renewal, carefully conceived and consistently applied. The emphasis in
New York City's urban renewal activities has, so far, been on housing and public
facilities, not on economic renewal. Action aimed at economic renewal in New York
City has been piece-meal and stop-gap. Its effect on the total problem has often

been negated by other activities in related areas. Efforts at economic renewal have

-~ 19 -

been poorly integrated with other urban renewal programs. Often a competition for
development sites has occurred between residential and non-residential uses. The
City has, in fact, contributed to the decline of economic activity by locating and
financing residential renewal projects in decaying commercial and industrial areas,
without renewing or developing sufficient areas for non-residential use. Too often,
businesses forced to relocate because of housing projects have moved out of New York
City for want of suitable available locations in the City.

New York's planning and zoning activities have often operated to tighten
the squeeze on economic activity in the City. Despite the fact that New York is the
largest industrial City in the country, the proportion of City land zoned for in-
dustrial use is not high. This proportion, estimated at 5 percent, is generally
believed to be extraordinarily low among large and medium-size American cities. Ex-
pansion of an industrial facility located in an area technically zoned for residential

use has been prohibited even if the area is predominantly industrial in actual use.

So-called “stepping up," or the use of non-residential sites for residential con-

struction, is permitted without any kind of regulation at all, thus allowing already
limited industrial areas to be further eaten away.

New York's failure to develop a practical operating program for economic
renewal has been the result of a lack of clear policies on economic renewal and the
lack of an effective agency that concerns itself with economic renewal. Hopefully,
as the City reorganizes its agencies, consideration will, at long last, be given to
the needs of economic renewal and the relationships among planning, urban renewal,
economic renewal, and human resources.

The recent organization of the Public Development Corporation (PDC) by the
City offers encouragement that neglected economic renewal activities will receive
attention. The City has no current program to provide credit assistance for economic
renewal. Consequently, if the PDC is able to issue tax-exempt bonds, it will be
able to provide low-interest "sacd money" and perhaps encourage more public and

—

private capital from other quarters. PDC coulc siso icase from the City land suitable
for industrial use, whether such land is currently owned or is acquired through con-
demnation or purchase as part of the development of industrial renewal areas. The

PDC could hold such leases and "package" areas of land for economic renewal. It could
help establish local development corporations. It could channel public and private
funds for site preparation and development. The PDC could provide the rallying point
for private (bank) participation in economic renewal by assembling the total City-

wide picture of needs and opportunities for investment and effectively meshing public

and private efforts. Aside from the financial aspects of economic renewal, PDC could
also serve as an advisory agency on such matters as planning, zoning and urban re-
newal in non-residential areas, and give leadership and guidance in the development
of consistent, comprehensive economic renewal programs.

Other City-wide private development corporations, such as the New York
Industrial Development Corporation (NYIDC) and the Commer¢ial Development Corporation
(CDC), the latter now in formation, could, in cooperation with the PDC and a local
development corporation, "assemble" a group of enterprises for a development project.
The CDC, for instance, could funnel financial assistance from both private and public
sources to firms wishing to expand into new facilities in areas "packaged" and pre-
pared by PDC through local development corporations. It could take title to in-
dividual parcels in renewal project areas and provide space to the occupying firms

on either a lease-purchase or a straight lease basis. It could also help finance
machinery and equipment. Chart 1, Lines of Credit for Economic Renewal, (page 22)

shows possible overall lines of financial and credit assistance for the development

of economic renewal projects. Chart II, Hypothetical Example of Financing for Firms
in Industrial Development Projects, (page 23) shows a hypothetical example of

financing for firms locating in such a project.

« 33 x

Lines of Credit for Economic Renewal

LAP EGS OL OS LE tm

[Private Capital Sector | Public Capital Sector

Union
Pension

Legend °
EDA = Economic Development Administration -
SBA ~ Small Business Administratiori
JDA - N.¥. State Job Development Authority
PDC - Public Development Corporation
CDC - Commercial Development Corporation
NYIDC - New York Industrial Development Corporation
LDC's - Local Development Corporations

as

CHART ITI

Hypothetical Example of Financing for
Firms in Industrial Development Projects

Manufacturing Firms
_ Land and Buildings
SBA
_ 60%

Banks

Bonds

a

Manufacturing Firms

Machinery and Equipment

SBA
BDA 80% nl 0

SBA : i _ i: __ 65% | ;

JDA

~ 54 =

The Impact of Anti-Poverty Programs on Economic Renewal

In addition to programs designed to stimulate economic development directly
and immediately, the anti-poverty and vocational education programs of the Federal
and State governments, while basically designed for a broad, long-run impact, are
also relevant to economic expansion. Programs of the Office of Economic Opportunity,
such as Work-Training and Community Action, seek permanently to increase the capacity
of individuals, groups, and communities to deal with their problems without further
assistance. This means that, in addition to basic and remedial education, and aid
in the fields of health, housing and home management, direct efforts at vocational
training and employment counseling are being attempted.

The Work-Training program seeks to give persons 16 through 21 useful work
experience, while at the same time enabling them to continue their basic education.
The employment programs are then coordinated, where appropriate, with training and
education provided by local educational agencies. The Community Action programs also
seek to provide employment services and job training on a community-wide basis for

individuals of all ages, as well as improving the social services in the community.

In both these programs, Federal assistance matches non-Federal contributions, and

State participation is encouraged in the form of grants and technical assistance.
The vocational education programs of the Department of Health, Education
and Welfare similarly have both long and short term goals. Both programs work

primarily through the education agencies of the State and seek to extend and improve
existing and new programs for vocational and technical training. In addition to
services for persons in high school, the programs are designed to provide training
and retraining on full and part-time bases to both employed and unemployed persons
who have completed or left high school. Federal assistance for such programs is
provided to match additional State and local financing. Under the Manpower and
Development and Training Program, both the Department of Labor and the Department of

Health, Education and Welfare seek to assist the states in furthering occupational

—)

training by providing weekly allowances to persons to enable them to improve their
skills in Federally assisted, State-run expanded training programs.

The OEO programs include provisions for increased assistance in Redevelop-
ment Areas designated by the Economic Development Administration. Thus, they are
linked to the effort to increase employment opportunities. Firms which are assisted
in Redevelopment Areas might also benefit from the vocational education programs for
employee training.

Distressed areas in cities like New York could be completely revitalized
through a coordinated application of urban renewal, anti-poverty, vocational training,
and economic renewal programs in comprehensive projects of meaningful dimensions.
The urban renewal programs could clear blight and rehabilitate the area for both
modernized residential and non-residential facilities. The anti-poverty and voca-
tional training and counseling programs could raise the skills of the population to
the level of today's employment opportunities. The economic renewal programs could
foster the growth and expansion of industry, thus making employment opportunities

available.

- 25 -

Table I - Summary Outline of Financial Aids For Economic Renewal

Program and Total Funds

A.

HUD (Department of Housi and Urban Development)

l.

a

4.

6.

Urban Renewal (including air rights projects)

Grants cover 2/3 of City's cost of site acquisition and preparation.

Capital Grants - $5.1 billion (unspecified period) to be increased
by $725 million in 1967 and in 1968.

Not more than 124% may be spent in one state.

Urban Mass Transit

Grants cover 2/3 of project cost.

Capital Grants - $175 million (tentative for fiscal '68)
N.Y. State maximum allocation - $22 million per year (plus

$24 million balance in unused funds.)

N.Y. City share, maximum - $20 million per year.
Grants for Advance Acquigition of Land
Grants cover interest charges on funds borrowed locally to buy

land for future public facilities.

Total authorization - $25 million (until July 1, 1969).

Grants for Basic Sewer and Water Facilities

Grants cover up to 50% of project cost.

Total authorization - $200 million (until July 1, 1969).
Grants for Neighborhood Facilities

Grants generally cover 2/3 of project cost.

Total authorization - $50 million (until July 1, 1969).
Open Space Land and Urban Beautification Grant y

Grants cover 50% of project cost.

Capital Grants - $100 million (unspecified period).

~ 26 ~

Program and Total Funds - cont'd.

B. EDA - Economic Development Administration (under the Department of Commerce)

1. EDA - Title I
Grants cover 50% of cost of public works, plus supplementary
grants in cases of extreme need, to bring total to 80Z.

$500 million authorized annually for 4 years; not more than

15% may be allocated to any one state.
2. EDA - Title II
Loans for public works: 100% of project cost, 40 years, 3-3/4% interest.
Business loans: 65% of project cost, 25 years, interest varies.
90% guarantee of conventional working capital loans.
$170 million annual authorization for 5 years.
C. SBA - Smali Business Administration
Loans to development corporations to finance small businesses.
SBA will participate up to 80% directly, 5% interest, 25 years,

or guarantee 90% of a bank loan.

Limit of $350,000 to each firm, may be increased by pooling.

D. N.Y. State - Job Development Authority

Loans - cover 30% of cost of manufacturing plants.

Loans are drawn from the general purpose fund at market interest

rates or from a special purpose fund at 3%% interest, and are

generaily for 20 years.
General purpose funds: $75 million:

Special purpose funds: $50 million:

— ae

Program and Total Funds - cont'd.

E. Anti-Poverty Programs

1. Economic Opportunity Act - OEO

Total authorization, $1.75 billion (fiscal '67), approximately
1/2 for Community Action programs, covers 50% of project costs.
N.Y. City allocation $36 million.
2. Vocational Education - HEW
Grants in most programs match State or local expenditures.

Allocation of Federal funds is on a complicated population-income

basis.

—

PART III - CONCLUSIONS AND RECOMMENDATIONS AFFECTING
ECONOMIC RENEWAL IN NEW YORK CITY

Conclusions
As New York City sorts out the alternatives and decides where it wants to

go and how best to get there, it must realize that all the desirable destinations are

located in the 21st Century. The year 2000 is but one-third of a century away, only

a fraction of the City's three centuries of life. Yet the basic physical structure

of the City - the gridiron street network and the loft building pattern of the urban

industrial areas of the 1800's - was set in the last century. It is this physical
structure that is, even now, constraining economic activity in New York in the 20th
Century. This constraint foreshadows chaotic incompatibility with the economic
technology of the 21st Century unless the City begins, at once, to find ways of
adapting itself.

A number of years ago Frank Lloyd Wright, the renowned architect, proposed
that all of lower Manhattan be leveled to the ground, and that.all the existing
structures be replaced with only seven buildings large enough to house all that area's
economic activity. While such a proposal is obviously unrealistic, it does point up
an increasingly acute necessity: New York must begin a drastic and fundamental re-

building of its non-residential, economic plant, as it has begun a basic rebuilding

of its housing. Apart from the fact that there is simply no more suitable space

left for expanded modern industrial production, the clearing and rebuilding of com-

mercial and industrial structures, in one particular respect, is even more important
than the clearing and rebuilding of residential structures. The functions and needs
of the family in terms of housing have changed less in the last century than have
business functions and needs. Rehabilitation and modernization of existing structures
can serve family needs reasonably well on the whole. But the needs of modern, ef-

ficient economic activity are about to outgrow, if they haven't already completely

outgrown, the facilities that are characteristic of many of the City's decaying

a OE

non-residential areas.

Closely related to the problem of space for economic activity is the
question of City planning and zoning. Economic renewal cannot be achieved by level-
ing everything in sight, but neither can it be achieved in a haphazard fashion.
Thoroughly-considered steps must be taken individually, one at a time, along a well-

marked course. Building and zoning regulations must be formulated in such a manner

as to foster the types of activity which New York needs and for which it is suited.
For instance, since land is inherently limited in the City, businesses which can use
vertical or "layered" production lines and enterprises which can be "stacked" one on
top of another should be encouraged. The multi-story office building has long been
an accepted fact, if indeed not the cornerstone of the City's commercial and business
life. There is no reason why vertical development cannot also be effectively adapted
to industry and manufacturing of selected kinds, given imagination and a bold new
look. Certainly, with premeditation, the evolving technology of production, dis-
tribution and service can be "bent" to meet urban conditions if those conditions are
not made artificially rigid beyond their natural limits. Economic renewal must,
therefore, be flexibly planned to take advantage of, and not impose further burdens
on, new business techniques.

Obviously, the provision of space and facilities suitable for efficient

up-to-date enterprise is bound up with the problem of money. How is economic re-
newal to be financed? In the long run, it is going to involve the expenditure of
billions of dollars. Because this vast amount of money will have to be spent in a
variety of interrelated ways, some difficult decisions lie ahead regarding the
assignment of responsibility to private and public bodies. Decisions made in each
area are so interrelated, their effects so diffuse and their implementation so varied
that they cannot be made without extensive consultation. What is clear is that
neither the private nor the public sectors of the economy can accomplish economic
renewal without each other. Since it is assumed that some distinction should be

« 3) -
maintained between these sectors, and that government should not go into business for
itself, it may be taken as a matter of general guideline that public funds should be
spent only to encourage private investment and for purposes where the general benefits
will exceed the benefit to any one firm.
Recommendation For Action At the Federal and State Levels

Industrial development in large urban areas is closely interwoven with the
general problem of the physical and social renewal in the central cities. While the
vitality of urban economic life is heavily dependent on the quality of its environment,
environment is greatly influenced by the level of economic activity. In other words,
economic growth and urban betterment are different aspects of a single process that
has an inherent tendency to spiral either up or down and resists being held still.
These aspects cannot functionally be split apart. If we are to urge this spiral
upwards, both of these aspects must be encouraged simultaneously and in a coordinated
manner. However, the Federal aids which are intended to give additional impetus to
the prodding have evolved and developed piece-meal and often in an unrelated fashion.
Recommendations Pertaining to HUD Programs

The operational emphasis of the programs now grouped in HUD leans heavily
towards improving housing and related residential facilities. Little use has been
made of these programs to encourage renewal of outmoded and deteriorated commercial
and industrial areas. Such areas are also a source of physical blight in the com-
munity and, through strangulation of economic activity, a source of social disinte-
gration as well. Urban renewal should give equal emphasis to residential and non-
residential areas alike. At present, only 30 percent of available Federal aid for
urban renewal is allocated for use in industrial areas, and in New York City none of
this amount is actually being used for that purpose. It would seem desirable for
renewal funds to be allocated so as best to cope with the actual urban problem at

hand. In any event, those funds which are, at present, allocated for industrial areas

should be used for that purpose.

—ie

Recommendations Affecting EDA Programs:

The programs grouped under EDA provide new and valuable tools for economic
renewal but, unfortunately, they are not yet functioning in the large urban areas
where some of the greatest concentrations of unemployment and poverty conditions are
to be found. Every effort should be made to implement EDA programs in such cities,
New York included, seeing to it, in the process, that they are applied in such a way
as to reinforce and expand a broad concept of urban development.

The kinds of economic problems faced by large urban centers differ from
those of other areas, The cities are not plagued by the problem of dying industries
so much as they are beset by the problem of basically healthy industries unable to
meet their needs within the City. There are great potential economic opportunities in
New York City for industries that would provide employment for the skills available
here, but such industties are greatly hampered by the lack, or increasing unsuit-
ability, of available facilities. Industries now in the City must be helped to ex-
pand by programs such as EDA, and relocated at suitable modern sites provided by
the renewal programs of HUD. The two approaches, however, need to be well inte-

grated, bearing in mind that it is pointless to assist the expansion of industries
operating under inefficient conditions by acquiring additional outdated facilities,

even at reduced costs, The inevitable flight of industry under such conditions is

only delayed.
Recommendations Applicable to SBA Programs:

The set of Federal programs under SBA could also be of great benefit to
economic renewal in New York. However, the existing procedures and application forms
for most of the regular SBA programs are so complicated and involved as to discourage
their use, These procedures and forms need to be streamlined and simplified, The
SBA programs need more adequate funding because SBA revenue for long term loans is,
at present, in short supply. Provision should be also made for working capital loans

to complement Section 502 investment funds. Other features of the SBA programs are

- 32 «

ee ee eee ee

simply not being used as they should. For example, special loans at 4 percent
interest would be available to economically-distressed areas if they were so desig-
nated. Notwithstanding the existence of areas of known distress in various parts of
the City no such area has been designated as an economically distressed area within
the meaning of SBA programs. Section 502 SBA provisions for assistance to develop-
ment corporations to make facilities available on a lease basis have not been used,
notwithstanding the heavy preference of businesses in New York for leasing rather
than purchasing facilities.

In New York, which has many relatively small firms in the garment industry,
development projects may have to be conceived in relatively large dimensions (as
opposed to single plant facilities) for Federal or other programs to have a signifi-
cant and widespread impact on the entire industry. Such projects would also have to
be undertaken with a concern for the characteristics of the City as a whole. For
instance, EDA or SBA assistance to firms in the garment industry on an individual
basis would have little effect on the overall conditions under which the industry
operates and thus would wastefully increase and duplicate the effort needed to ex-
pand each firm. Individual firm assistance would also be difficult to relate to the
City's overall development. However, a single project, involving coordinated HUD,
EDA, SBA and local programs, undertaken in a good-size renewal area, could provide
markedly improved conditions and expanded facilities for the entire garment industry.

. This would facilitate the efforts to consolidate and increase the impact of the
City's overall development program.

This kind of balanced and integrated project would be greatly expedited
by the creation of the post of Federal Agency Project Coordinator. The latter,
working at the local level in a liaison capacity, could bring together all the
various programs of different Federal agencies which might relate to a specific
economic development project. Such liaison would greatly ease the administrative

problems now involved in securing aid simuitaneously from more than one agency for

— 5S

different aspects of the same project. These types of projects are also inhibited
at present by financial limits on many of the programs, and increased funding would
be of value in giving these programs meaningful effect in the larger cities.
Recommendations Regarding JDA Programs:

In addition to the Federal aids, the New York State Job Development
Authority programs and the State programs for urban renewal assistance increase the
potential available means by which the City may foster urban improvement. However,
the JDA programs have been little used in New York City. They are also insufficient
in both level and scope. The State's urban renewal programs have developed pretty
much concurrently with, and in response to Federal urban renewal programs and, con-
sequently, have a similar one-sided emphasis on residential development.

A better distribution of JDA loans throughout the state should be achieved
because the present concentration of assistance does not adequately reflect the con-
centration of problem areas. An increase in the size of the JDA fund would both
bring its assistance more in line with the magnitude of need and facilitate more
balanced coverage. At present, the 30 percent limit on JDA participation in any one

project handicaps both its usefulness and its impact on specific development prob-

lems. A more flexible and variable arrangement, allowing higher participation,

dependent upon magnitude of need and promise for increased employment, appears

justifiable.

The scope of JDA programs should also be broadened. Warehousing, ship-
ping, distribution, and service industries, key elements in the City's economy, are
now ineligible for assistance. Such firms use a high percentage of the type of
labor which has the highest unemployment rate in the City. But JDA loans have little
impact on such labor since JDA loans are now restricted to manufacturing firms only.

They should be made applicable to all industrial and commercial enterprises above

the level of retail.

= th «=
JDA administrative cestrictions limit the use of its programs for other
than the outright acquisition of real estate. But as above, there are a great many

New York City firms interested in leasing rather than buying facilities. There are

also no JDA programs for equipment, machinery, or working capital to complement its
facilities-investment program. Together with the limited level of JDA assistance,
these restrictions hamper its general effect on development problems and lead to
maldistribution of assistance.

A much-needed complement to the direct loan programs is now lacking in
New York State. This is a guarantee program for conventional industrial mortgages.
Direct public assistance is certainly warranted to spur and foster economic renewal
but private investment will necessarily have to carry the primary load. A guarantee
program would help channel private funds into areas "seeded" by the public programs.
The amount of the guaranteed portion of such mortgages could be made flexible to
accommodate the varying degree of extraordinary risk involved in each development
project. A guarantee program also has the advantage of substantially lowering the
expenditure of public funds.

The present state program of write-down grants to match Federal grants
for urban renewal should be broadened to include industrial projects which may not
be part of a Federal project. Such a program would be carried out through the power
of eminent domain, as is the present housing renewal program. These types of pro-
jects would go a long way toward reducing the high cost of industrial sites in the
City and would help to redress the residential-non-residential balance of urban
development. Such projects would also be of great assistance in the implementation
of a “land bank" in New York City. To facilitate a state industrial write-down
program, and to clarify generally the legal status of all state and local public
programs, an effort should be made to establish definitively that industrial develop-

ment is a "public purpose" in New York State.

- 35 a=

Recommendations For Action at the City Level

The City's programs to foster urban betterment must be more broadly based
than they now are. Economic renewal and urban renewal closely parallel, and are
interdependent upon, each other. Urban renewal will be incomplete until the City's
population not only has decent housing, but the opportunity and means to support
itself. Increased social services and vocational training will not halt the de-
terioration of urban life until the jobs for which people are retrained can be made
available. Also, economic renewal cannot be accomplished without urban renewal in
non-residential areas. The deteriorated and outmoded nature of many of these areas
is a primary source of economic blight. It is no solution to replace decaying in-
dustrial areas with more housing and schools. As far as lower income and minority
groups are concerned, such an approach just leads to a “dormitory” central city and
suburban economic centers. The result often is an impairment in mobility on the part
of many low-income individuals which hinders them either in securing gainful employ-
ment or access to retraining facilities.

While it is true that retraining for non-existent jobs hurts both the

trainees and the program, and is, at the very least, a waste of time and money, it

is equally true that the provision of new physical facilities without a trained labor
force to make use of them is senseless. The City has, and always has had, at its
disposal a wide variety of training facilities. Many of them - including a good
proportion of the vocational high schools - have become human warehouses for children
deemed uneducable. This approach the City must change drastically. A new pattern

of vocational training and retraining must be instituted, aimed exclusively at de-
veloping those skills for which there is a reasonable expectation of marketability
once training is finished. By the same token, the necessity for subsidizing some of
the students regardless of age level must also be faced. Training an individual for
a specific job and making sure that a job of this kind is available on a non-
discriminatory basis is one of the ways to break the vicious cycle of poverty.

- 36 -

Consequently, adequate financing must ve made available for whatever living allowances
are required to sustain the jobless individual during the training and placement

periods.

The effect of decades of social neglect and discrimination against minori-
ty groups, where the City's unemployment is concentrated, cannot be eradicated simply
with the passage of an Equal Employment Opportunity Act and the establishment of a
few ‘'skill" training courses. The community's educational and social service efforts
have been inadequate in their impact on most of the "hard core" unemployed. The
problem of the unemployed is not merely lack of job skills but also lack of cultural
education to equip them to function effectively in a modern industrial society.

A "vocational" training program for those who have never completed their
basic education must involve certain stages of pre-vocational training, as well as
actual skill training, if sustained employment is to result. Before vocational
training in mechanical skills can be expected to be effective, three kinds of pre-
vocational training and counseling are essential. These are:

First, rudimentary training in the accepted customs and manners

essential to every-day living in a modern American City and in

a modern industrial society. Such training is intended to pro-
vide an understanding of the mutual expectations in any employer-
employee relationship regarding such things as standards of
dress, punctuality, forms of relationships with supervisors, etc.

Second, training in the basic elements of communication, such as

simple English and mathematics. Communication, in this sense,
involves acquiring a sufficient working facility in basic
language and mathematical skills to be able to receive, under-

stand and properly execute instructions and to be able to acquire

further technical skills directly related to job performance.

= OT a

Third, suitabic guidance and counsciing should accompany this
pre-vocational training. The aim of such guidance and counsel-
ing is to inculcate in each trainee a basic understanding of
aptitudes and abilities, a broad knowledge of the types of jobs
and career lines open to a person with those aptitudes, and the
steps needed to secure a suitable position within the appro-
priate career category.

Obviously, the duration and intensity of this pre-vocational training will
depend largely upon individual needs. It is especially desirable - as soon as possible
and definitely before starting employment - to help the trainee lose the feeling that
he is a deprived person or an outcast.

Actual skill training can be accomplished within the existing vocational
education system. Indeed, once the pre-vocational training phases are completed, use
of the usual training facilities is preferable to specially established facilities.
However, the existing vocational education programs and facilities are not as well
meshed with the other elements of economic renewal as they should be. One way of
making sure that the skill training "fits" present and future job opportunities is
to seek the active involvement of industry and labor in the training programs. Such
involvement would also expedite job placement and followup.

The City must carefully conserve its limited land resources and give due
consideration to the balanced development of renewal areas. Since land is scarce
and expensive, and non-residential land is disappearing with the increase in housing
construction, it would be well for the City to create a "land bank” of sites suitable
for economic renewal. Into this bank should be placed all present unused holdings
suitable for industrial use, and all property condemned for renewal in planned non-
residential areas. With a land bank, the City would, at all times, have a reserve
of available sites from which development corporations could choose a location with

the characteristics desired by an expanding or new enterprise. Concommitant with a

« 8 .<

“land bank" program, the City should establish a clearing house where information
on all available commercial space, its characteristics, and potential uses, may be
easily obtained by firms looking for new locations.

Careful attention must be paid to the type of organization devised to
carry out economic renewal. Emphasis must be concentrated on the functional reality
of organizational structure in relation to future needs. The seemingly clear and
simple associations described on organization charts too often fail to correspond to
actual need. Whatever the formal relationship, careful coordination and integration
must be obtained among the activities of the proposed Housing, Planning and Redevelop-
ment Administration, the Human Resources Administration, and the Economic Development
Administration. Programs separately devised and undertaken are liable to accentuate
existing problems. Urban renewal, social service and vocational training, and
economis renewal are all equally essential to urban betterment, and New York must not
inadvertently advance one element at the expense of another.

In the area of economic renewal, organizational structure is just evolving.
Economic development will, of course, require the active participation of private
enterprise. To facilitate this participation, semi-public and private organizational
structures will be required. Flexibility is naturally desired to meet the variegated
needs of the City's economy, but programmatic flexibility must not be allowed to
degenerate into a piece~meal approach. Although the formal connections between the
new Public Development Corporation and other more limited development corporations on
the one hand, and governmental agencies at all levels on the other, need not be
overly formal, the PDC must have enough authority to apply available resources for
economic renewal in a concerted, compreliensive manner if economic renewal is not to
become the neglected stepchild of residential renewal. Failure to maintain an
operational balance and an integrated effort among the organizations working in these
three interdependent fields (urban renewal, human resources, and economic renewal)

will mean a failure of the total program for urban betterment.

a

ee eee eee lll—~—“—™OOOOOSOC

It is at the City level that all the assistance programs of the Federal,
State and local governments must be drawn together into a consistent whole, and ap-
plied to the particular conditions prevalent in New York. It is here that the sub-
stantive financial program for economic renewal will take its effectual form.
Aithough money for economic renewal can be provided in a myriad of forms, all sources

are limited. Four questions must, therefore, be kept in mind as any program is built

" up:

-- From what sources is the money to come?

~- Through what channels is it to be distributed?

-- To whom is it to go?

-- For what purposes is it to be used?
The various outright public grants should be used only for the broadest possible
purposes, such as site clearance and preparation, and should stay under the control
of public agencies. Public loans and guarantees, while benefiting private concerns
more directly, should be under the final control of, at least, semi-public bodies.
Indirect public assistance, such as temporary or limited tax abatement, should be

under public control, subject to the advice of the chief quasi-public body concerned

with economic renewal.

It must, above all, be kept in mind that the purpose of these various
forms of public assistance is to stimulate, and not to replace, private investment.
In the long run, private capital is the most important element in economic renewal
and the assistance programs of both the City and other governmental bodies must be
carried out in such a way as to involve the maximum private participation possible,
especially the participation of the City's banks. This participation will probably
be brought about under the auspices of the Public Development Corporation, which is
all the more reason for seeing to it that the agencies concerned with economic re-
newal are coordinated so as to get the maximum private multiplier-effect out of

public investment.

- 40 -

Suggested Basic Steps For New York City

The following basic steps are hereby recommended:

1. New York City must treat the problems of economic renewal with
the same urgency now accorded to the problems of more traditional govern-
mental concern, i.e., health, welfare, education, etc. This will require,
on the part of the City, an investment of time, effort and resources
commensurate with the aims to be achieved.

2. New York City must bend every effort to utilize any and all of
the multitude of State and Federal programs which now exist in this area.

a. In the immediate future, despite the demonstrable

weaknesses and contradictions in these programs, New York

City must apply for every last dollar of aid available even

though this will involve the City in a competitive struggle

with other governmental jurisdictions.

b. In the near future, the City must press actively for
changes in various aid programs in order to increase the flow
of funds and to liberalize the terms of their applicability.
c. Over the long run, the City must attempt to convince
higher levels of government that, both for operating and
capital purposes, unrestricted grants are more appropriate
and effective than grants narrowly restricted as to scope,
eligibility and terms of performance.
3. New York City must avoid the traditional bias in favor of housing
and against industrial redevelopment. There is room for both, because jobs

and decent housing are both needed. One without the other is only half a

loaf.

4. New York City must provide administrative machinery sufficiently

flexible to recognize, and take advantage of, technological advances and

—

oe a ee ee ee er ee) oe

breakthroughs. A "far out'’ idea, leading to fifty new jobs now, must
not be shunted aside in favor of traditional concepts leading to 500
jobs three years hence. There is an element of prudent risk which
appropriately can be taken by a combination of private and public
capital, and often must be taken, if economic redevelopment is to

succeed.

5. New York City needs more and varied training, despite

several job training projects already in existence in the City, but

this training must be coordinated with efforts to insure that jobs

in sufficient numbers are waiting for individuals upon completion of

training.

-~ 42 -