By Thomas Tseng, Abhijeet Chavan, and Christopher Steins
Urban Land, (May, 2000)
The Internet and dot.com phenomena are expanding beyond their own virtual borders and into America's cities. New technologies are causing changes in the social, economic, and physical landscape of neighborhoods and regions. More than ever, technology is playing an intimate role in people's day-to-day livesinfluencing decisions about where to live, work, and shop. Digital technologies have been creating numerous opportunities for individuals, entrepreneurs, and business venturesspawning new products, companies, occupations, and methods of communication.
The information technology industry in Los Angeles generates one out of every eight dollars in the local economy. In a report compiled by the Milken Institute, a Santa Monica-based economic policy think tank, Los Angeles is ranked third on a list of the country's technology hotbeds, earning the designation "Digital Coast" and joining the likes of Silicon Valley in northern California and Silicon Alley in Manhattan. But while the digital revolution is generating tremendous opportunities for some, it also is raising significant concerns over how evenly its benefits are being distributed. The gap between those with information technology and the economically disadvantaged is being referred to as the "digital divide."
As technology continues to evolve, questions arise: How well positioned are inner-city communities to capture the benefits of emerging technologies? What opportunities are available for low-income communities? Six innovative approaches are being used in Los Angeles to revitalize its inner-city areas and to bridge the digital divide through unique combinations of technology, land use, and investment initiatives.
Among the many challenges faced by inner-city communities are urban divestment and abandonment. Precipitated by post-World War II federal housing and transportation policies, suburban flight has been the norm since the mid-1900s, resulting in a lack of investment, employment, and business creation opportunities in urban areas. The Egg Company 2 Incubation Project and Zone Ventures are examples of two projects providing investment and support to new technology ventures in low-income areas to help reverse the trend in urban divestment.
Egg Company 2. Financing high-tech ventures is one approach to nurturing technology businesses; another is business incubators. Technology incubators nurture small technology businesses during the startup stage, providing a variety of business development assistance, including below-market space, shared office services, and managerial and technical assistance.
The Egg Company 2 Incubation Project (EC2) resides on an emerging high-technology campus about a half-mile from USC. EC2 was established in September 1995 through funding from USC's Annenberg Center for Communication. One of the original high-tech business incubators in Los Angeles, its impact is being observed in the neighboring community.
Located in one of Los Angeles' most important historic architectural centers on West Adams Boulevard, the offices of the Annenberg Center are housed in a 1906 Tudor Revival building. Adjacent to the building, EC2 has completely renovated a modernist Richard Neutra building to become the high-tech home to nine diverse emerging technology companies. Occupants range from the Los Angeles Regional Technology Alliance, a public/private technology association, to Adventure Online Gaming, a developer of Web-based multiplayer games. The buildings are fully wired and connect directly to southern California's Internet backbone. The design principle behind the EC2 is to maximize shared resources and to encourage creative interaction and collaboration among tenants, researchers, and students.
EC2's impact in the neighborhood is tied to USC's own efforts, which include college programs for local school children and a program encouraging faculty to purchase homes near the campus. EC2 provides fast Internet access to its friends and neighbors; for example, it manages a Web site for the neighboring John Tracy Clinic, which provides services to children. The incubator also has started to form alliances with neighboring historical buildings to preserve the community's diverse and architecturally significant buildings.
For those seeking to replicate EC2's success, James Klein, marketing director for EC2, offers this advice: "Try to provide as great a spectrum of services as possible. Don't just focus on real estate or funding or business development or management recruiting or production facilities, but try to provide a complete business support system to startup companies."
Zone Ventures. A public/private joint venture project is using technology venture capital to redevelop some of Los Angeles' most-neglected communities. The Los Angeles Community Development Bank (LACDB) and the Silicon Valley-based venture capital firm Draper Fisher Jurvetson partnered in July 1998 to form Zone Ventures, a $35 million e-commerce venture capital fund.
To receive an infusion of capital, funded technology companies must locate or already reside within L.A.'s empowerment zone (EZ). The 20-square-mile area EZ, which stretches from east Los Angeles through downtown to south central Los Angeles, is targeted for economic revival through capital and financial incentives. The goal of the fund is to create one new job for each $35,000 the bank invests, with 51 percent of all new jobs being filled by area residents once the business begins growing.
"Venture capital funds can be used to spark economic growth in low- and moderate-income areas," explains Rena Haviland, vice president for the LACDB and manager of its venture capital program. The concept is to create hot spots of technology innovation from the distressed districts in the EZ. This innovation likely will begin around centers such as the University of Southern California (USC) and the fringe of downtown Los Angeles and spread throughout the zone. There are a variety of historic buildings throughout the area, with rents as low as $9 a square foot.
Through the end of 1999, Zone Ventures invested $15.9 million in 11 technology start- ups. eStyle, Inc., which operates an e-commerce site (www. babystyle.com) selling clothing for babies, was one of the fund's first investments in October 1998. eStyle, which received $750,000 in first-round financing, is now valued at $50 million and expected to go public. Most investments by the fund are for early-stage financing and average $750,000 to $1 million, notes Haviland.
The LACDB was established in 1996 to provide high-risk loans within the EZ, which is heavily populated by retail, garment, and service businesses. The bank allocated $55 million of its $430 million in federal funds for venture capital in other growing industries. Haviland's advice to communities that would seek to create such a technology fund: "Get an experienced investment manager to manage your funds."
Efforts such as EC2 and Zone Ventures are proving to be useful for revitalizing communities through investment and support for new technology ventures, though the impacts of these strategies are measured in years or decades. However, efforts by Break Away Technologies and LISC's Computer Technology Cooperative are aiming at bringing technology directly into inner-city communities.
Break Away Technologies. Achieving technology access and capacity are among the greatest obstacles to bridging the digital divide. The economically disadvantaged often cannot afford personal computers and access to computers and adequate training are limited. Break Away Technologies was founded by president Joseph Loeb as a response to the 1992 civil unrest in Los Angeles to provide the healing he felt was needed in his community. "I sold my car to buy the first set of computers and started the firm in my garage. Then for one year we were in a small room behind a bookstore," says Loeb.
To enable urban children and families to make the break from unproductive activities, Break Away provides technology education to inner-city youth and adults. Its mission is to prepare urban youth for higher-paying jobs and to help them become contributing members of society. It attempts to do this by helping community-based organizations and schools establish computer learning centers to educate and train people for the world of computers. The impact of Break Away has extended beyond its local community: it has established computer learning centers across the country and has provided technical support and consulting services to other community groups interested in setting up similar computer learning centers.
Initially, the community responded slowly to Break Away, but since 1995, with the explosion of the Web, the organization has attracted increasing numbers of students. Break Away uses flyers, radio, and visits to schools as a means of increasing its student population. Today, it serves over 400 students from different age groups. A majority are young people age 14 and over, but Break Away also works with a large number of adults and seniors. Funding sources include grants, fee-for-service, and support from businesses.
Loeb cautions that for a project of this kind to succeed it is important to track the trends in technology, to be responsive to change, and to solicit community participation. He encourages others to start similar learning centers. "There is a lot of money out there so just get started," advises Loeb.
The Computer Technology Cooperative is an initiative sponsored by the Local Initiatives Support Corporation (LISC) in Los Angeles. A major national intermediary of affordable housing financing, LISC supports the development projects of various community development corporations (CDCs) throughout the country. Locally, LISC provides millions of dollars in financing each year for new residential development in neglected urban neighborhoods, primarily for affordable housing construction.
Recognizing that the best place for computer learning is in the home, Louise Manuel, senior program officer at LISC, has established a program that brings computers directly into the dwelling units of CDC-supported housing developments. Concerned Citizens of south central Los Angeles and Dunbar Economic Development Corporation, two well-known Los Angeles CDCs, are the first participants in the pilot phase of this technology cooperative, and will receive new, high-end PCs provided by Break Away Technologies. These computers will reside in Concerned Citizens, One Wilkins Place and Dunbar's Sommerville Place, both located on south Los Angeles' Central Avenue. Tenants in these units will have access to state-of-the-art computer hardware, office/education software, and fast digital subscriber line (DSL) access to the Internet.
Access to computers is only one part of the technology cooperative; connecting community residents to the Internet is another important part. SuccessNet, a local Internet service provider, is another partner in the initiative, offering full-service, dial-up Internet accounts at a reduced monthly rate to cooperative members who reside in L.A.'s empowerment zone. These dial-up accounts are designed as a unique tool for technology access and community reinvestment. CDC members participating in the technology cooperative will be responsible for selling dial-up Internet service provider (ISP) accounts to members of their own community networks. For every dial-up account sold, SuccessNet will give a $5 per month rebate to the technology cooperative, which will be divided between the technology cooperative (currently managed by LISC) and the originating CDC.
The initial phase of this technology cooperative is being supported through a variety of grants from various sources, such as the Microsoft Foundation, which is funding equipment and wiring. Over time, however, as more accounts are sold to community members, the revenues generated from rebates are expected to become a substantial income stream, and eventually will be used to pay for new technology education and training, support new equipment acquisitions and upgrades, and create additional programs and services. Eventually, LISC intends to include numerous CDCs in the cooperative.
Reaction among participating CDCs to the community technology cooperative has been enthusiastic. "It's important to give residents a chance to compete," points out Anthony Scott, executive director of Dunbar EDC, which also is seeking to expand its own computer learning center. Scott sees tremendous value in digital technology as a way of highlighting the historical significance of the Vernon-Central district, the historic center of L.A.'s African American cultural life.
Through the Information Systems Los Angeles (ISLA) digital archive project at USC, the Vernon-Central community possesses a strong virtual community presence, which documents the diverse cultural history of the Central Avenue corridor. To expand upon these types of technology uses, Scott sees the need for a strong marketing plan to sell Internet dial-up accounts so that a continuing revenue stream exists to support new opportunities.
Similarly, students working at Concerned Citizens who come from nearby Jefferson High School are employing technology in other ways to strengthen their communitythrough environmental activism and participation in the POWER (People Organizing Workplace Environmental Rights) program, a campaign initially organized around the proposed construction of Jefferson Middle School on a toxic site. At Concerned Citizen offices, these students use the Internet in the computer lab to research their surrounding communitycollecting information on the effects of chromium, lead, and other toxic chemicals. In addition, the students perform an impressive array of tasks on the computers finishing schoolwork, downloading and completing college applications, developing newsletters, and writing press reports.
To address environmental, land use, and zoning issues in urban neighborhoods, access to relevant data is critical. While a large amount of digital data is usually available for most cities, it often resides in different locations and computer systems, making it difficult for those who are not technical specialists to access and understand the data. Local government agencies, community groups, and individual citizens, who all need access to data, often have to work together to devise solutions to this problem. A number of Web-based initiatives have begun offering access to public data sets with the aim of leveraging the benefits of information technology to address land use issues.
Among the tools that Concerned Citizens, Power students have used to better understand their community is the Neighborhood Knowledge Los Angeles (NKLA) project. NKLA grew out of the understanding that financial decay in a neighborhood often sets in before the physical deterioration of buildings is observed. The project's Web site helps citizen groups, individual homeowners, public interest attorneys, government officials, and others to identify areas of financial decay in a neighborhood. NKLA's objective is to prevent housing and neighborhood conditions from deteriorating by making public information broadly accessible and understandable to local communities. NKLA achieves this by using a Web-based early warning system for accessing property and neighborhood data. NKLA users can access different data sets such as property, permits, tax delinquency, and building code complaints via interactive online mapping and use this information to analyze the effects of public policy.
NKLA is maintained by the Community Information Technology Center in the Advanced Policy Institute (API) at UCLA. Using block funds to support housing research rather than development, the city of Los Angeles provided the first funds for NKLA, and the U.S. Department of Commerce awarded a matching grant. Based at UCLA, NKLA benefits from the university's access to technology and technical staff and students. NKLA has given rise to a number of associated projects, such as a community-based asset mapping project called the Mapping System for Analyzing Neighborhood Assets and a regional housing needs assessment project that features an electronic calculator for determining the level of housing production required within a locality to address population growth. Future plans for NKLA include an early warning system related to environmental health and safety issues.
Technology will not solve all of the problems inherent in real estate investment in the inner city. But as these examples demonstrate, a wide variety of approaches are being used to improve the quality of life and close the divide between technology and inner-city communities. A variety of other location-specific efforts exist, such as the 548 Spring Street Building, downtown Los Angeles' first historic commercial office building to be fully wired for high-speed Internet access and marketed as a home for high-tech businesses within L.A.'s empowerment zone.
Although some projects are still in their infancy, they already are making considerable inroads in closing the digital divide by addressing thorny land use issues and by providing technology access, knowledge, education, training, capital, financing, and entrepreneurial support to communities previously without these opportunities.
These initiatives also represent a variety of institutional supports and partnerships that include universities, community-based organizations, financial institutions, investors, and private companiesillustrating the important role of social capital in technology-driven renewal efforts. Like the technologies they employ, these initiatives and their full impact will not be realized until much later on. However, these ventures represent a technological asset base, which, if nurtured and supported, could become the catalyst for future growth opportunities and the foundation for an urban renaissance.
Thomas Tseng is research director at the Community Development Technologies Center in downtown Los Angeles and a research fellow with the Pepperdine Institute for Public Policy. Christopher Steins is the founder and chief executive officer of Urban Insight www.urbaninsight.com, a Los Angeles-based firm providing Web development solutions to the urban planning and real estate industries. Abhijeet Chavan is the chief technology officer at Urban Insight.
May 2000 (c) 2000 ULI-the Urban Land Institute, all rights reserved.