L.A. city officials expect to get empowerment zone; federal designation would mean tax breaks and loans.

Los Angeles city officials are feeling lucky about empowerment zones. They expect the federal government in the next two months to choose the city as one of nine sites nationally for the Clinton administration's targeted program of economic revitalization.

Promising a long menu of tax breaks and small-business loans, empowerment zones represent the long-awaited federal version of enterprise zones. If successful, the federal zones could foster new businesses, boost employment and cause property values to rise in depressed areas.

To make the zones successful, however, city officials must find a way to market the programs to local business owners, who, in turn, must be convinced the programs' complexity is worth the effort.

Mary Leslie, L.A.'s deputy mayor in charge of economic development, tries to strike a balance between excitement about the empowerment zone and the need to keep expectations moderate. "Are empowerment zones going to be the salvation of the city? No. Are they worth competing for? Absolutely," she said.

As part of last year's federal budget bill, President Clinton earmarked $3 billion for the creation of nine empowerment zones across the country, of which six will be urban and three rural. The same federal program proposes 95 "enterprise communities," which would offer some of the same benefits as the empowerment zones.

Los Angeles city officials have applied for an empowerment zone that would cove parts of downtown L.A., South Central and Pacoima. (Federal rules allow the zones to be divided into as many as three non-contiguous islands).

The city has also applied for four enterprise communities, including one covering the Pico-Union area and parts of East Los Angeles, as well as others situated along the Alameda Corridor and in South Central L.A. Enterprise communities will be eligible for up to $3 million in tax-exempt bonds to financ economic development.

Each of the empowerment zones will receive $100 million in federal benefits during the next two years, as well as tax credits, such as a $3,500 credit for each new employee hired by a participating zone business.

On a citywide basis, Los Angeles can compete for a piece of an additional $5 billion of federal aid, made available through nine different federal agencies, including the Department of Housing and Urban Development and the Small Busines Administration.

Empowerment zones represent an evolution of thought about enterprise zones. Inspired by the frenetic free-market activity in Hong Kong's free trade zone, the zones originated in Great Britain in the 1970s. Although national enterpris zones were discussed repeatedly during the Reagan and Bush administrations, the Clinton program is the first to become law.

On a state level, more than 40 states have created their own enterprise zone programs, and designated a total of 3,000 zones nationwide. California alone ha 25, including one in the Watts-Willowbrook area of South Los Angeles. Usually, state-run enterprise zones offer some relief from state taxes and other incentives.

Unlike earlier, conservative proposals for enterprise zones, which relied on ta relief, the Clinton program for empowerment zones envisions heavy government involvement in the zone, including social services, community development, crim prevention and other government programs.

Paul Dimond, special assistant to President Clinton, stressed that empowerment zones can be a backdrop for "bottom-up rebirth and revitalization" of communities. Speaking last fall to a group of enterprise zone officials in Indianapolis, Dimond said: "If a few communities can demonstrate how to end the isolation of workers in distressed communities from jobs throughout the labor market, we can end the incredible unemployment that has ravaged so many distressed communities for too long."

The locations for the proposed empowerment zone chosen by L.A. city officials reflect an "attempt to maximize opportunity," according to Leslie, who said the proposed locales are "the highest poverty areas, the most at-risk areas."

Among the benefits would be a "one-stop capital shop," a storefront operation that would cluster 35 lenders and venture-capital firms offering financial services and technical advice to businesses. Among the lenders would be one specializing in providing "micro loans" -- loans as small as $10,000, and sometimes even smaller -- to local businesses.

The "one-stop shop" would also provide advice to businesses on how to manage finances and keep records. The success of zones varies widely from place to place, and may largely depend on the efforts of zone officials to involve local residents.

"The history of enterprise zones in the city of Los Angeles has been a disappointment, but it's had great success in Santa Ana and other parts of Orange County," said Jack Kyser, chief economist of the Economic Development Corp. of Los Angeles County.

One city official said enterprise zones need more than tax incentives to work. They must be accompanied by other policies that address underlying social issue in the inner cities -- the very issues that caused businesses to flee from slum in the first place.

"Tax incentives alone are not going to get you very far," said Marilyn Lurie, who runs the enterprise zone program for the City of Los Angeles. "The problems that affect businesses are really complex, and are not all dealt with by tax incentives -- crime, drugs, security, insurance costs."

Kyser said he is also concerned about government's ability to "sell" the empowerment zone to local businesses. Although the federal zones "have more goodies to offer, the question is: How well do you market these goodies and communicate their existence? Can the people who are running the program communicate with the business community?" he asked.

According to Kyser, businesses want to know: "What are the benefits? How soon can the program pay off for businesses? How much paperwork is there to do?"

City officials are "very conscious" of the need to market zone programs, according to Leslie. Getting businesses to sign on, she said, "will require a very broad outreach."

One way to publicize the program is to spread the word through lenders and business organizations already in the community, she said. Again, the one-stop capital shop might be a bully pulpit for empowerment zone benefits, according t Leslie, who said she has asked all the lenders involved in the program to "continue to do outreach," and has charged them with the responsibility to make contact with businesses inside the zone.

Beyond that, popularizing the empowerment zone "will still require more effort, she added.