Villaraigosa: Faking an Economic Miracle

LOS ANGELES MIGHT BE in the middle of a housing crisis, suffering the nation’s highest fuel costs and plummeting in its ranking as a center of global commerce. But there’s a place in L.A. immune from turmoil, where incomes have swollen by double digits, homeownership has skyrocketed and the grass is green. It’s a land of untapped wealth.

At least, those were the conclusions of the D.C.-based nonprofit Social Compact, whose report, “Los Angeles DrillDown,” studied nine heavily minority neighborhoods, several of which are economically downtrodden: Boyle Heights, Central City East, Crenshaw/Baldwin Hills, Hyde Park, Jefferson Park, Leimert Park, Vernon Central, Watts and West Adams.

Over the last two weeks of July, the study’s conclusions made their way unhindered by critical examination into a prominent L.A. Times article in the business section, as well as a Times editorial and a KPCC public-radio discussion.

Too bad the nonprofit’s spin — that there is significantly more money in those enclaves than ever imagined — is based largely on misleading, useless, selectively chosen, egregiously rosy data and inexplicable omissions that read like a primer from the 1954 classic How to Lie with Statistics.

“I’m not comfortable as a researcher to say I can really believe these numbers,” says Jennifer Magnabosco, associate director of Loyola Marymount University’s Leavey Center for the Study of Los Angeles, echoing the concerns of several academics.

But even misleading data can serve a purpose — especially for inner-city boosters like landowners and politicians, who can point to ginned-up accomplishments. Solid examples of investment are still rare, such as Wal-Mart and Macy’s in Baldwin Hills and the new British-owned Fresh & Easy markets — think Trader Joe’s meets miniature Costco — in Glassell Park and on South Central Avenue.

Enter Mayor Antonio Villaraigosa.

Social Compact launched its L.A. study in 2007 — invited and embraced by Villaraigosa’s office, says its president and CEO, John Talmage. It finished its expensive study in May, spending $100,000 to complete “DrillDown,” which was underwritten mostly by Bank of America’s Charitable Foundation.

What accounts for much of the study’s high production cost is also what is supposed to make “DrillDown” better than other such reports. It combs private and public databases, like credit agencies, utilities, the Internal Revenue Service and mortgage data.

Social Compact’s usual message to urban leaders and corporations is that you can make money off of inner-city residents — and make them richer and healthier at the same time — by replacing the staples of slum-dom with the staples of middle-class consumerism. Replace “vig”-charging payday lenders and pawn shops with Washington Mutuals and Bank of Americas; liquor stores with Jamba Juices; and corner mom-and-pops with Costcos. Big-city politicians who cut ribbons for grocery stores in dowdy urban cores tout such events as proof that they are smart leaders with policies that work.

The idea behind Social Compact’s “DrillDown” is simple: If its studies “prove” — and, curiously, they always do — that there’s more prosperity in an area than claimed by conventional wisdom, media depictions and existing data — think the U.S. Census — then grocery stores or banks will rethink their aversion to the inner city, move in, make money and revitalize an area in the process.

After Talmage’s group studied L.A., he boldly asserted to the Times, “Retailers have said up to now there isn’t a market there. I’m telling you — you have a market.”

The most optimistic signs for this prosperity were contained in the report’s “DrillDown Highlights” and regurgitated as fact by the paper’s business section.

IF TRUE, IT WOULD HAVE been huge news. One of the most surprising statistics is that “average household income” in the nine areas is $46,000 — a startling jump of $9,000, or 24 percent, over what was found by the 2000 Census. But facts are left out that could erase, if not reverse, that claim: It doesn’t explain that it’s a mean average — which, unlike the median average, seriously distorts incomes upward and, for that reason, is not used by the Census. And it doesn’t divulge what year it’s counting — 2005? Or 2007? — preventing a calculation of inflation as the real cause of the “increase.”

In the eight years since the Census, inflation has grown more than 27 percent, says Jack Kyser, chief economist at the L.A. Economic Development Corporation. Kyser’s figure is actually conservative.

Since the households in the nine areas have seen incomes rise only 24 percent, they may have backslid, not surged forward. And it’s clear why the nonprofit quietly failed to adjust for inflation: It would defeat its central purpose of boosterism, not impartial analysis.

Consider its CEO’s explanation: “We’re not there to shill for anybody,” Talmage defends, then adds, “We don’t necessarily highlight” things that might reflect poorly on a troubled community. “Part of what we want to do is ‘Do No Harm.’ We’re trying to show that there are assets that aren’t captured. It’s not an econometric study.”