A terminal case

By virtually any measure, Atlanta's Empowerment Zone has fallen short of expectations. Its administrators have been accused of corruption, and its track record has been pathetic. Sure, the 9 square miles of urban blight it was supposed to help turn around has improved, though it's difficult to tell whether that has anything to do with the program itself.

And now Atlanta's Empowerment Zone is slated to go the way of the city's recently departed mayor — into the annals of ignominious history.

Over the next two months, the zone will become part of the federal "renewal community" program, a designation that makes Atlanta companies eligible for billions of dollars in tax credits if they'll just set up shop and hire residents from economically distressed areas.

The feds will no longer fund salaries for bureaucrats who run the zone, and nobody yet knows what's to be done with the $50 million still left over in the empowerment zone budget. One thing's for sure: Taking it out of the hands of empowerment zone is an idea whose time has come.

When the city was named as an empowerment zone in 1994, Bill Campbell predicted that the program's success would mirror the success of his administration. Too bad he was right. Although Washington earmarked $250 million in grants, loans and tax breaks to improve a swath of land — which extends as far south as Lakewood Freeway, as far north as Ashby Street to the west and North Avenue to the east — the potential was never realized.

The first director of the Atlanta Empowerment Zone Corporation (AEZC) blew through the $4 million in federal money allocated to run the zone during its envisioned 10-year life in just over two years. At the same time, his staff accomplished next to nothing. So Campbell fired him along with most of the zone's managers. He then appointed Joseph Reid as executive director.

Reid, of course, pleaded guilty to a corruption charge in December, and former Atlanta Chief Operating Officer Larry Wallace, who was another zone decision maker, was indicted on numerous federal charges the same month. Meanwhile, where the zone had envisioned creating 450 jobs from its $12.8 million business development fund, only 47 people have found employment as part of the program, according to the AEZC's 2001 annual report.

Like the zone itself, the businesses that have taken advantage of empowerment zone money have fallen short of expectations. In November 1998, the zone loaned Light & Energy Management Inc. $3.25 million. But the company folded in June 2001, leaving vacant its 770 English Ave. digs four months before its first loan payment was to be made and leaving the city on the hook for the money. Now the company wants the city to effectively buy the property for $2.65 million, which would basically wipe out the company's debt.

The only problem is that Light & Energy purchased its building for just $250,000 and spent only $150,000 to refurbish it. And the neighborhood isn't the type where property values are exactly skyrocketing.

But what's even more outrageous is that Ron Diamond, the empowerment zone's interim (and, it appears, final) director, seems to be interested in the offer. The interim zone director mailed Chantal Matthews, state Department of Community Affairs' Business and Financial Assistance Division head, a letter March 13 asking what she thought.

Matthews replied in an e-mail that any official opinion would have to come from the state Attorney General's Office but "regardless of the legality of the transfer, we believe that reducing LEM's debt by the company's estimate of the property's value ... would constitute a gross abuse of ... funds."

While officials with the state and the zone try to figure out what to do with what's left of LEM, they also must monitor companies like Excellatron, which won a $3.9 million loan from the zone in March 2000.

The last time Creative Loafing wrote about Excellatron — in March 2001 — the company had set the first of this year as a move-in date at its Decatur Street digs. Even that was a setback for the company, which had envisioned hiring 74 people by the end of last year and to have created 327 jobs by the end of 2003.

But a tour of Excellatron's buildings last week makes it clear that the company is still months away from moving into its 172,000-square-foot complex.

The high-tech rechargeable battery manufacturer is the brainchild of inventor Lonnie G. Johnson, who most famously introduced the Super Soaker to American back yards. When he pitched the idea to zone officials, Excellatron figured its eventual start-up costs at $150 million, so the empowerment zone's portion of the costs is relatively small. Still, the loan comes due in June, and there's no sign that the company is set to produce anything in Atlanta.

The company has made significant progress on the exterior of the building, but Chief Operating Officer Tony Pace says the interior is two months away from completion, though by the looks of it, that might be an extremely generous estimate.

Still, Pace seems unfazed by the prospect of the loan coming due. "It's always a challenge to manage debt," he says. And Excellatron has counted on Johnson's deep pockets to keep the project going. In that regard, it has an advantage over other companies that have borrowed money from the zone.

The question is whether it will be enough to keep Johnson's firm alive, and if so, will there be anyone in Atlanta's Empowerment Zone to answer his phone calls.

One thing is certain. The feds will not take the money back. It's Atlanta's. The only problem (and it's a good problem) is that the city will have to figure out how to spend it and who will be in charge of it. Right now, no one is completely sure how much money there is.

Of the $92 million in grants made available to Atlanta when it became an empowerment zone, only $34.7 million has actually been spent. Close to $90 million has been earmarked for one initiative or another but only a portion of that figure has a specific destination and is under contract. Much of it has been allocated in a "broad, vague and probably not legally binding" way, Matthews says. And that means it's still up for grabs.

A HUD spokeswoman said that Atlanta has submitted a plan for the money, but she did not know the details. Leah Creque, the city's director of grants development, says she also is unaware of the plan. Diamond did not return e-mails seeking comment.

Under federal guidelines, the city must pick someone to administer the new "renewal community" program. Whoever that is also will be in charge of what's left of the empowerment zone. The only direction they have to go is up.??