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8.9.99  
Commentary: Help Lite from the Feds for Inner-City Entrepreneurs
An Al Gore brainchild serves mainly as a PR vehicle for private-sector initiatives

In its waning 18 months or so, the Clinton Administration is belatedly promoting efforts to spread the benefits of one of the most sustained periods of economic vitality in recent U.S. history to a group that perennially misses out on the high times: residents of inner cities, including the entrepreneurs in those neighborhoods. So hot on the heels of a Presidential tour of the nation's poorest areas, newly appointed Treasury Secretary Lawrence Summers visited New York in July to promote a new federal-private partnership called BusinessLINC.

An Al Gore brainchild sponsored by the Treasury Dept. and the Small Business Administration, BusinessLINC was started in 1998 to encourage big companies to become mentors to small ones -- and in some cases, to help finance them -- in inner cities and in impoverished rural areas. There was no shortage of heartwarming testimonials during Summers' visit. Deborah Wright, president and chief executive of New York's black-owned Carver Federal Savings Bank, told how management advice she got from Dime Savings Bank made her struggling bank more efficient. Desmond Emanuel, chief executive of Santa Fe Companies, a minority-owned construction company, got more than $300,000 in much-needed financing from the private New York City Investment Fund for several large projects.

Inner-city businesses arguably could use a break. They suffer handicaps that have cut them off from the prosperity of the larger economy. Discrimination in lending against black entrepreneurs is one. (Fed Chairman Alan Greenspan has even chided the banking industry on this score.) Dreadful schools -- whose graduates lack skills to run a business or even work for one -- are another. Encouraging entrepreneurship certainly fits the self-help spirit of the times. Just one problem: None of the examples Summers' visit celebrated had any direct connection to BusinessLINC. All were projects of existing, private-sector programs.

So, fanfare aside, what is BusinessLINC -- and what good will it do for the inner-city entrepreneurs? Mostly, it looks like Economic Development Lite -- very Lite. It has no funding -- and limited prospects for getting any. Its main role seems to be compiling a list of local programs that successfully nurture inner-city small businesses and encouraging big businesses to participate in them. So far, BusinessLINC has tracked down six programs it likes in New York, Los Angeles, Atlanta, Cleveland, Dallas, and Chicago. On the good side, BusinessLINC hardly constitutes a wanton abuse of taxpayers' money. Its budget request for fiscal year 2000 is a modest $3 million -- mostly to fund offices in Washington, D.C., and other cities. In fact, its skimpy funding seems to be a point of pride with the Administration. "This is about much, much more than money. It is about advice and networks and the provision of opportunity, and providing and sharing the kinds of knowledge that are necessary to succeed in many ways," Summers told executives in New York.

Michael Barr, deputy assistant secretary for community development and policy at Treasury, adds: "It is not a government program. It is primarily a private sector-focused effort initiative."

Then who needs it -- besides Al Gore, who presumably wants a legacy of goodwill to tap in next year's Presidential race? Why not give the $3 million directly to one of those private-sector "effort initiatives"? That molecule in the federal bucket is real money to some neighborhood.

Ask BusinessLINC officials about concrete benefits the program will bring inner-city entrepreneurs, and they point to a proposed tax break for qualified funds that invest in companies in low- and moderate-income communities. But that's part of the President's New Markets Initiative, a legislative package, and isn't directly connected to BusinessLINC. The tax break, scheduled for introduction to both the Senate and the House, would give the funds' investors a tax credit equivalent to 6% per year of an equity investment in qualified small businesses held for five years.

The fact is, interest in reviving the inner cities tends to surge when the economy is rocking. But come a downturn, fair-weather investors and politicians flee fast. Like emerging markets everywhere, America's inner cities need sustained government and corporate support -- with funding attached -- for schools and other infrastructure in order to make those areas economically attractive over the long term. They don't need public-relations programs that crop up just in time for election campaigns.


By Jeremy Quittner and Julia Lichtblau in New York
jeremy_quittner@businessweek.com
julia_lichtblau@businessweek.com

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