Pat Cusick, a longtime fighter for the low-income residents of Boston’s South End, ought to know better than to get his hopes up. As executive director of the South End Neighborhood Action Program, or SNAP, Cusick has seen government programs — urban renewal, Model Cities, enterprise zones — come and go, sometimes helping, sometimes hurting, always inadequate.

But when he heard in December 1993 about President Bill Clinton’s plan to spend $1.5 billion to boost jobs and economic opportunities in impoverished urban areas — declaring them “empowerment zones” — he got excited.

“I was so taken with it in the beginning,” says Cusick. “In 1990, at SNAP, we decided that job creation was our [organization’s] priority for the ’90s. So to hear this, it was right up my alley. I had a copy of the draft guidelines before the mayor did.”

Those guidelines were, in some ways, a community-builder’s dream — assuming the community-builder could meet federal eligibility requirements. To qualify, a city had to come up with a “strategic plan” for economic development in a designated “zone” and pitch it to the federal Department of Housing and Urban Development. The grand prize: $100 million per city.

So Boston Redevelopment Authority planners and neighborhood activists cobbled together a map of impoverished neighborhoods stretching from Mattapan to the South Boston waterfront and crafted a 300-page game plan for its revival. The proposal contained a wish-list of business assistance and education-and-training programs costing $94 million.

It looked good on paper. But the economic development program Boston ended up with is a good deal more modest, to say the least. The city was denied full-blown “Empowerment Zone” status and was promised less than half of that $94 million. The funds that did come through were primarily not for education, job training, or business assistance programs, but loans and grants for construction of business facilities — “bricks and mortar,” as one advisory-board member puts it.

“Bottom line, this is still worth participating in,” says Cusick, a member of the enterprise zone’s governing board. The original idea, he admits soberly, “was probably too ‘blue sky’ to begin with.”

In its three years of existence, Boston’s “Enhanced Enterprise Community,” which in exquisite federal bureaucratese is the category below “Empowerment Zone,” has been criticized for a sluggish start-up and apparent mayor’s-office cronyism in its first major deal. But these criticisms in the press and from HUD, whatever their validity, miss the point. The problem is not that a promising program is being held back by lethargy and venality, but that the program no longer promises much.

The product of presidential initiative, congressional action, and heroic planning efforts by city bureaucrats, business leaders and community activists alike, Boston’s Enhanced Enterprise Community is settling in as just another bit player in the alphabet soup of helping agencies. It is more participatory than most, with broad representation from the community it’s trying to serve. And its minions are doing good and necessary work. But gone are the boldness, sweep and vision that could excite as grizzled a veteran of the successive wars on poverty as Pat Cusick.

In short, the disempowerment of Boston’s empowerment plan stands out as a case study in how a big idea gets small.

From Enterprise to Empowerment

The big idea, in this case, was born nearly 20 years ago in Great Britain. Economist Peter Hall first proposed reviving deserted industrial areas by declaring them “enterprise zones” and unleashing an economic free-for-all within their borders, slashing taxes and suspending regulations. Conservative Prime Minister Margaret Thatcher latched onto the idea, and soon it was imported in the United States by devotees of supply-side economics. Then-U.S. Rep. Jack Kemp introduced enterprise-zone legislation in 1980, and President Reagan talked it up. In 1988, Congress gave its approval to enterprise zones in which states and localities could reduce taxes, fees, and regulations, but provided no federal inducements. Seeing federal tax breaks as the heart of the program, Kemp, by then Secretary of Housing and Urban Development under President Bush, refused to designate the 100 enterprise zones authorized by Congress.

In 1992, riots in Los Angeles put urban redevelopment back on the national agenda. Congress incorporated a sweeping enterprise-zone program into a bill that contained some modest tax hikes. But Bush, anxious to restore his “read my lips” anti-tax credentials for his re-election campaign, vetoed the measure.

Though the program was stymied in Washington, 40 states established their own enterprise zones in some form during the 1980s, with mixed results. The modest menu of tax incentives — ranging from investment tax credits to sales tax exemptions — proved an attractive, low-cost method of encouraging business to invest in urban areas. Massachusetts, which came to the enterprise-zone party late, inaugurated its own “Economic Opportunity Areas” in 1993.

Though liberals and progressives criticized enterprise zones throughout the 1980s, Democrats eventually warmed to the idea. In the traditional liberal critique, tax incentives, seen as marginal to most business decisions, served only to reward companies for actions they would take anyway. And giving privileged status to a designated area seemed more likely to drain surrounding neighborhoods of their job base — as businesses in other parts of the city migrate to the tax-advantaged site — than to entice suburban-based companies to move in.

But by the early 1990s, Democrats came to see enterprise zones as an effective vehicle for delivering concentrated development assistance to capital-drained urban areas. Upon taking office, President Clinton sent to Capitol Hill a proposal to establish “Empowerment Zones,” which was incorporated into the 1993 federal budget.

The shift in terminology from “enterprise” to “empowerment” may have been cosmetic, but the substance of the Clinton plan also differed from the Republican model. “There are tax credits associated with the Clinton program, but they’re the tail on the dog,” says Bennett Harrison, economist and professor of urban political economy at the New School for Social Research in New York City. “The focus is much more on workforce development, technical assistance to businesses, and renewal of the physical environment. It’s a much more comprehensive approach.”

Comprehensive, and costly. That’s why, in December 1994, only six cities were granted Empowerment Zone designation — Boston not among them.

It was perfectly predictable. “You could almost guess who the six would be,” says Cusick. Democratic Congressman Charles Rangel of New York was instrumental in moving the empowerment-zone legislation, which made Harlem-South Bronx a shoo-in for one EZ slot. So was then-Sen. Bill Bradley, Democrat of New Jersey, who inserted language requiring one of the zones to “include areas located in two states,” paving the way for a Camden-Philadelphia tandem. Ultimately, Atlanta, Baltimore, Chicago, and Detroit also got the designation, along with $100 million in social-services block grant funding, wage tax credits for businesses located in the zone that hire zone residents, and new tax-exempt bonding authority.

But this left out Los Angeles, a politically untenable decision just two years after the riots. So HUD created two “supplemental” empowerment zones that got grants in a different form, and for different amounts — $125 million for L.A.; $87 million for Cleveland.

Boston, and 61 other cities, got bumped down to the second tier of the empowerment-zone program, becoming “Enterprise Communities.” The lesser title carried with it tax-exempt bonding, and a paltry $2.95 million for each city in social services funding. “That’s totally inadequate in terms of training,” says Cusick. “It’s not quite what the city spends on summer jobs.”

This junior-empowerment-zone category was a dubious — and politically expedient — proposition from the start. “The Enterprise Communities side of this thing was largely a political fix to satisfy a greater number of congressional districts,” says Harrison. “There wasn’t enough money to go around, so they invented this half-pregnant thing.”

For Boston and three other cities — Kansas City, Houston, and Oakland — HUD sweetened the pot by declaring them Enhanced Enterprise Communities, or EECs. “Our proposal was so well received, they created a whole new category,” boasts Joseph Feaster, a Roxbury lawyer, consultant and, at the time, interim head of the Boston Housing Authority, who headed the steering committee that developed the plan. What that category got Boston was funding of a wholly unanticipated sort: $22 million in HUD-backed loans, and $22 million in matching Economic Development Initiative grants, which can be used to write down interest rates or otherwise subsidize the loans.

Of the many activities proposed in Boston’s plan, running a loan fund wasn’t one of them. “You look at the plan, and this isn’t what Boston was interested in doing,” says Karl Seidman, a lecturer in the Department of Urban Studies and Planning at MIT who followed the Boston process as part of a HUD evaluation team. “They got this federal money that wasn’t what they wanted.”

What kind of program to build around it was not immediately obvious. “We still got a major piece of money,” says Feaster. “[But] we had to sit down and think this through.” Not that the city rushed to do so. It took Mayor Thomas Menino 10 months to appoint a new community advisory board, chaired by Feaster, and to form a separate governing board, which had decision-making power. After much negotiation, the governing board struck a rough balance of power between community and City Hall: a majority of the board (10 of 19 members) elected by the community advisory board, with seven city officials, two bankers, and the city holding veto power over any commitment of funds.

But during the long delay in set-up, “they dropped the ball,” says Seidman. “It wasn’t until spring of ’96 that they started implementation.”

A Tale of One Zone

Today, the headquarters of the Enhanced Enterprise Community speaks volumes about the task at hand. The Boston Empowerment Center, as it is called, is housed in the old Digital Equipment Corp. keyboard assembly plant in Crosstown Industrial Park, which DEC abandoned in 1992. Nearby is the former Stride-Rite distribution center, which shut down the same year. Those two closings alone represented a loss of 340 jobs.

The headquarters is at the center of the EEC zone, if it’s possible to find the center of such a peculiar geography. Federal rules dictate that empowerment zones/enterprise communities cannot exceed 10 percent of the city population — that is, no more than 57,000 Boston residents. The zone had to be made up of contiguous census tracts, all of which have a poverty rate of at least 20 percent, according to the 1990 census, and half with a rate above 35 percent. The zone as a whole had to be in a condition of “pervasive poverty, unemployment and general distress.”

The result is a 5.8-square-mile area as gerrymandered as a Georgia congressional district (see map). Moving from the heart of Roxbury, the zone stretches out, tentacle-like in all directions.

Taken as a whole, the zone is an area of great need (see box). But it also has been the object of energetic attention on the part of both government and community-based organizations stretching back 15 years. There have been some notable boondoggles: the now-vacant Ruggles Center, financed by the state to spur economic activity in Lower Roxbury then abandoned as a “sick building” by the Registry of Motor Vehicles; and the former Boston State Hospital site, at 175 acres the largest undeveloped parcel in the city, and the subject of plan after plan, with demolition of buildings the only progress to date.

But the community development corporations that dot these neighborhoods have produced thousands of units of affordable housing, rehabilitating scores of eyesore buildings and stabilizing neighborhoods on the skids. The Dudley Street Neighborhood Initiative, one of the most sophisticated and acclaimed community revitalization groups in the country, has used the power of eminent domain — granted by the city in an arrangement unique in the country — to turn abandoned buildings and vacant lots into 300 units of housing. Under Mayor Menino, the city’s Main Streets program is giving a boost to neighborhood commercial districts — four of them in the zone — and Blue Hill Avenue has been singled out for a task force all its own. This work — and strong national and regional economies — have laid a foundation for economic revival.

“For the first time, we’re seeing a neighborhood strategy” that brings housing, commercial, and municipal-development together, says Charles Grigsby, director of the city’s Department of Neighborhood Development, the symbolically (not officially) re-named Public Facilities Department. “We’re trying to bring together the facets of growth.”

“There had to be people in the housing first” in order for business development to follow, says Greg Watson, executive director of the Dudley Street Neighborhood Initiative. Now, his formerly rundown and depopulated neighborhood is more ripe for commerce; but real economic development, Watson admits, is “uncharted territory.”

In charge of mapping that territory is Reginald Nunnally, former head of the Grove Hall Neighborhood Development Corp., who was appointed executive director of the Boston Empowerment Center early in 1996. The center, which opened in November 1995, serves as a “one-stop capital shop” — a key feature of the original strategic plan.

On one side of the large room, which is divided by mauve cubicles, are officers of all of the city’s lending programs, such as the Boston Local Development Corporation and the Boston Industrial Development and Financing Authority. On the other side is the federal Small Business Administration, another source of funding. The Department of Defense and the General Services Administration are also on hand to advise entrepreneurs about how to do business with the federal government. One cubicle is reserved for a bank loan officer, provided on a rotating basis by five of the eight commercial banks that have pledged $35 million in business loans to the inner city.

“There are 2,000 businesses in the Enhanced Enterprise Community,” says Nunnally. “Our philosophy is to help some of these existing businesses and help them grow. They’ve stuck it out. Now it’s their turn to benefit from the economic boom.”

For bigger projects, there’s the $44 million in federal loans and matching grants — the core benefit of EEC designation. “It’s a very good tool” for attracting companies to the zone, says Jim Klocke, director of governmental affairs and economic development for the Greater Boston Chamber of Commerce. The financing packages, he says, “are the thing you can get their attention with.”

The one true subsidy the EEC has in its toolkit is the Economic Development Initiative grant, which can match the loan dollar-for-dollar. But without the loan, there’s no grant. “That loan was not really a special deal,” says Eden Milroy, development manager for the New Boston Seafood Distribution Center, which was a recipient of the loan and grant package. “We had better terms on the other loan in the project. We had to take the loan to get the grant.”

And this cash is not easy to come by. Between staff review, scrutiny by the finance committee, the community advisory board, and the governing board, 30 days at the HUD regional office and 30 days at HUD in Washington, it takes a minimum of four months to get a deal approved, according to Nunnally.

Dialing for Dollars

The cash flowed more liberally at first. In September 1995, before the governing board was established, the Menino administration put its first enterprise zone loan on the fast track – ramming through a $3 million loan and grant package that Cusick refers to as “the infamous Harry Miller loan.” It was one of those city deals that, months later, did not immediately seem to pass the smell test. With the EEC (and no private loans) financing most of the $3.4 million project, the Harry Miller Co., a manufacturer of canvas and industrial textiles in Boston for 85 years, built a mauve-block bunker of a factory in Crosstown Industrial Park, across from the empowerment center. Not only did the project sail through with little formal review, the beneficiary was a Menino fundraiser, owner Sydney Miller.

That deal, says Cusick, was “unauthorized, inappropriate and unwise.” It also raised the specter of mayoral cronyism. But the governing board, once it was sworn in, sent a clear message to the administration that such deals were not to happen again.

“The community is very cognizant of the concern,” says governing-board member Evelyn Friedman-Vargas, executive director of Nuestra Communidad Development Corporation in Roxbury. “It would be very hard [now] for the city to really force a deal.”

Nunnally insists that even the Miller loan, “although there was some controversy,” advanced the enterprise zone’s goals. “Here was a manufacturer that generally hired low-income people, and he was expanding his operations. The project was well within our guidelines.” The new plant will result in a projected 59 new jobs, almost two-thirds of which, under federal requirements, will be filled by residents of the zone.

In a review of Menino Committee campaign-finance reports for 1996 and 1997, EEC beneficiaries, large or small, hardly stand out among the payroll patriots, big-time real-estate developers, downtown lawyers, lobbyists, and labor unions that swell the incumbent mayor’s campaign coffers. (Even Miller seems to have kept his distance since getting his loan.) Nor does a contribution mean much when it is to a political figure currently so popular that he is the first-ever mayor of Boston to run for re-election unopposed. “You could say that for half the people involved in any effort in this city, that they supported the mayor in some fashion,” says Feaster.

But if the program is turning out to be more than a Menino pork barrel, the question is how much more. With one quarter of the EEC’s financing committed — $11.2 million out of $44 million — the impact to date is far from overwhelming.

Besides financing the Miller plant, the EEC has provided $2 million toward the $8.5 million New Boston Seafood project, which will house four fish-processing firms in a new building in the city-owned Marine Industrial Park, on the South Boston waterfront. Nunnally says the firms’ expanded operations will retain 76 jobs that might have been lost to the suburbs, and create 31 new jobs. “These are four companies that would have gone elsewhere,” says Nunnally.

But if so, it would be because they were chased out. Three of the four companies currently operate out of a single building on Northern Avenue that has been taken by eminent domain, a result of the Big Dig and related infrastructure projects. Heading to the suburbs would not have been easy. As purveyors of fresh fish, rather than frozen, these companies need direct access to Logan Airport — and a presence in the city’s premier fish marketplace. “Being in the fish business in Boston, you have to be on Northern Avenue,” says Steve Nadolny, a partner in Fresh Water Fish Co.

Staying on the waterfront turned out not to be easy. As they started looking around, Nadolny says, they found the area “prohibitively expensive” — and impossibly complicated, what with on-again, off-again plans to put a football stadium or other developments in South Boston. Anytime he looked at a site, he says, “the stadium would fall on us.”

Nadolny’s grateful for the assistance he got from the EEC, as well as a slew of other agencies and public officials. But it’s also clear that the EEC’s role here was to solve a problem created by other government actions, rather than create, or exploit, an economic-development opportunity.

The biggest commitment of funds to date is $6.2 million for the new South End Community Health Center. The Boston Globe hints that this deal, like the Miller loan, can be attributed to friends in City Hall. (Executive director Tristram Blake, for instance, made a $250 contribution to the Menino Committee in 1996.) But that underestimates the widely held hopes for this $24 million project, a mix of health care, residential, and commercial space, including a pharmacy and a restaurant, that is expected to anchor the redevelopment of Washington Street. Still, the new health center is not in the zone, but just outside it. (The loan was approved on the grounds of its presumed impact on the nearby zone.) And, as a deal in the making before the enterprise zone was born, the EEC was less a catalyst than one more piece in the financial jigsaw-puzzle typical of such projects.

Thus, the role the EEC, as an economic development agency, appears to be settling into is this: stepping into the breach, filling in around the edges, plugging holes in financing packages, cleaning up other agencies’ messes. There’s no shame in that, and no scandal, but neither is there much in the way of glory.

Enterprise Zone: A Competitive Advantage?

In 1995, the big idea of “enterprise zones” sustained a new intellectual challenge. In “The Competitive Advantage of the Inner City,” a Harvard Business Review article that redefined the urban redevelopment debate, Harvard Business School professor Michael Porter argued that attempts to suspend the laws of economics by proffering subsidies, set-asides, and tax breaks as incentives to put up with the costs and aggravations of an inner-city location were doomed to failure. Better, he argued, to pursue economic development through privately-owned businesses that compete and grow — individually and in industry “clusters” — based on genuine competitive advantage, such as strategic location, unmet local demand, and an eager, if problematic, workforce.

And Boston’s inner city, including the enterprise zone, has much in the way of competitive advantage, says Jim Klocke of the Greater Boston Chamber of Commerce. The chamber has, in particular, “adopted” Crosstown — the industrial park and the area around it — as a focus of its business-boosting activity, based on a 1995 report that extolled the area’s virtues: an anchor industry in health care (the Boston Medical Center complex and the nearby Longwood Medical Area), and convenient transportation links to Route I-93, the Massachusetts Turnpike and, thanks to the Ted Williams Tunnel, Logan Airport.

“It will be a perfect place for a medical equipment company, or a biotech company,” says Klocke. The city is already pushing in that direction, setting up a Massachusetts Biotechnology Research Institute biotech-business “incubator” in the old Digital plant along with the Boston Empowerment Center. But another promising project that seemed imminent three years ago — a hospital supply facility run by a consortium of Longwood hospitals – has been pushed to the back burner, swept aside by the mergermania that has occupied the hospital industry attentions since then.

The Boston enterprise zone, with its slim resources and short menu of enticements, could hardly be accused of overriding the laws of the free market. But Al Lovata of the Initiative for a Competitive Inner City, a non-profit organization established by Porter, says that the EEC does suffer from the “smokestack mentality” that still underlies the empowerment zone approach. In assessing potential deals, the EEC is too willing to settle for a fixed number of short-term jobs, rather than looking at an industry’s long-term potential for growth, says Lovata, who is also CEO of Be Our Guest, a party-goods rental firm in Roxbury, and a member of the EEC community advisory board.

“If the enterprise zone application were doing it correctly,” says Lovata, “it would ask, is this business in an industry that we think is going to be in existence in ten years?”

Martin Nee, executive director of South Boston Community Housing, a member of the advisory board, suggests that the EEC could pursue a more “sectoral” strategy, identifying some locations — the industrial waterfront, Newmarket meat-packing district, Boston State Hospital — and some market opportunities, then seeking out development ideas, instead of waiting for proposals to come to them. “That’s one possible scenario that could have been played out,” says Nee. “It wasn’t.”

At this point, it’s difficult to discern what impact the watered-down empowerment zone could have, if pursued differently — or even, with any precision, what impact it’s having right now. “It’s hard to know how much you’re seeing is activity that you would have seen anyway,” observes Karl Seidman of MIT. But Seidman adds that, if nothing else, the enterprise zone “is a way to focus on this area.” And the virtues of concentrated attention — governmental and private-sector — are not to be underestimated. “For business people on the street, working day to day, you have to be able to get things done,” says Klocke. The enterprise zone, he says, “has been a good vehicle for getting those things done.” At the very least, official designation gives all other zone-related activities a leg up in winning scarce federal housing and social-services funding — the kind of funds empowerment-zone proponents wanted in the first place. Empowerment center deputy director Shirley Carrington notes that the city received a $2.2 million grant for work with youths in South Boston and Roxbury in part because the target population is in the enterprise zone.

“Being in the zone has been a tremendous advantage for us, and not just for economic development,” agrees Nee, citing a $6 million, HUD-funded housing development that will mean construction jobs in the short-run and 65 units of senior housing in the long-run. “We would not have gotten that without the zone designation.”

Priority status for federal grants may not seem like much to show for the time, effort and money that have gone into Boston’s enterprise zone. Nor does creation of one more acronym in the ever-proliferating array of public and quasi-public agencies whose purpose it is to finance worthy projects (even if its purpose is, in part, to rationalize access to those resources).

But the combined energies and attentions of government, the banking industry, and community-based organizations from Mattapan to Southie may yet bear fruit, especially at a time when the forces of enterprise that once fled these Boston neighborhoods seem to be rediscovering the inner city as the last, vast untapped market.

“All the supermarkets that left, they’re all trying to get in now,” says Feaster. “Is the EEC, and the commitment of this mayor, part of it? You bet it is.”

Robert Keough, a free-lance writer in Brookline, is a regular contributor to CommonWealth.