Thoughs corporate support has been growing for its community redevelopment efforts, Local Initiatives Support Corp. faces the possibility of losing its congressional backing.
Private-sector investments in its inner-city housing programs are soaring. Last year banks, nonbanking corporations, and others poured $300 million in new equity into the coffers of the New York-based nonprofit.
Its redevelopment project in the South Bronx has become a showpiece - dramatic evidence, the group says, of the power of corporate funding and grass-roots energy to resurrect even the worst urban basket cases.
But the Republican congressional majority is threatening to knock down the government pillars that indirectly support the organization.
Budget plans floated this week would cut in half the community development block grants that its president, Paul Grogan, called "critical" to its projects. And regulatory relief bills in the House and Senate would dilute community reinvestment requirements for banks.
The group's supporters say that would be a big mistake.
Local Initiatives Support Corp., which was established by the Ford Foundation, "is a window on an almost unbelievable phenomenon in the country today," Mr. Grogan said Wednesday at a press conference for its 15th anniversary. "We offer our own success as an example of what can be done, and as a rebuke to those who would walk away from the cities."
Leaders of the housing finance industry were on hand to laud the success of the group's strategy of linking private capital with local community groups in projects that restore neighborhoods and produce profits.
"In the past two decades, we in the corporate sector have learned a valuable lesson - that we can do well by doing good," said James Montgomery, chairman of Great Western Financial Corp. and a Local Initiatives director. "Our investments in these community-based renewal initiatives have been quite profitable."
"My goal is to invest in things that are successful, things that work," said another director, Leland Brendsel, chairman of the Federal Home Loan Mortgage Corp. The organization brings the "discipline and innovation of the private sector" to bear on urban problems, he added.
Since 1980, Local Initiatives has channeled nearly $2 billion from more than 1,300 corporate investors to nonprofit community development corporations for construction or renovation of 57,000 housing units nationwide. Another $3 billion has flowed into distressed neighborhoods through a secondary market it sponsors for low-income housing loans.
Besides Great Western, the nonprofit's supporters are a virtual Who's Who of banking, including BankAmerica Corp., Citicorp, NationsBank Corp., and First Chicago Corp..
A key to its success in attracting corporate money is the array of legislative carrots and sticks that reward community investment and punish banks that ignore poor neighborhoods. Tax credits for investment in low- income housing, CRA requirements for banks, and federal grants for community redevelopment spur investment in Local Initiatives projects, Mr. Grogan said. All are under threat in Congress this year.
"These are programs that ought to not only be sustained but expanded," he said.
Ellen Seidman, special assistant to President Clinton for economic policy, sought to allay Local Initiatives' fears that the community reinvestment bills would overturn changes in the Community Reinvestment Act approved recently by the administration, banks, and community groups.
"I think we're going to come through this O.K., and we may come through this totally whole," Ms. Seidman said.
But extending community reinvestment requirements to nonregulated financial businesses that control a growing share of the nation's investment capital will have to wait, Ms. Seidman said after a Local Initiatives policy symposium.
"What we need to do now is hold on to what we've got," she said.
Mr. Cahill writes for the Medill News Service.
