Back to the Old Neighborhood: Empowerment Zones Out, December 1996

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To hear Dorothy Pitman Hughes tell it, she’s a modern-day Job. Hughes applied for a loan to expand her business, Harlem Office Supply, from the Upper Manhattan Empowerment Zone (UMEZ) in 1996. But Hughes was told that her 15-year-old company did not meet all the criteria the UMEZ required: experience in the industry, impact on the community, equity provided by the business and, most of all, sustainability.

The UMEZ later refused to help Hughes start a bed-and-breakfast, while giving a $50,000 startup loan to Jane Mendelson–a white newcomer to Harlem. Mendelson, who says she never considered opening a bed-and breakfast until she saw the UMEZ’s request for proposals, eventually opened the Urban Gem Guest House just two doors down from Pitman Hughes’ proposed location.

A clear case of discrimination, says Pitman Hughes, and in a December 1996 article, City Limits aired her complaints. But the story is not so simple. Pitman Hughes’ loan prospects were scotched by her failure to pay rent and $23,000 of federal taxes on time. UMEZ called her initial proposal “incomplete in several fundamental areas.” Harlem Office Supply still fails to turn a profit; in fact, she has put her house up for sale to keep the business afloat.

So was the UMEZ right to reject her? Yes and no. Unconventional business practices are as much as anything a consequence of lending institutions’ longtime failure to invest in Harlem. “The lack of access to capital for so long has made it impossible for [small businesses] to operate by standard business practices,” observes Darren Walker, chief operating officer of Abyssinian Development Corporation. Lacking outside funding, many businesses delay payroll tax payments, take loans at usurious rates and engage in other “alternative” survival techniques–“a host of practices we would not call best practices,” says Walker–to survive.

Not one to lose faith, Pitman Hughes cooked up her own empowerment model. She sold 6,700 shares in Harlem Office Supply at $1 apiece to local parents and children in a private stock offering. She initiated a merger with Hand Brand, Inc., a Miami-based nutritional supplement distributor. Pitman Hughes wants the resulting holding company to act as an umbrella for small businesses that have faced similar difficulty securing loans. She hopes marginalized people nationwide will invest in the company’s stock to “mainstream” themselves.

Pitman Hughes has used the stock offering as a launching pad for financial education to the hundreds of families that attend economics classes she teaches at the National Black Theater. In her presentations, she encourages parents and children to “let their money make money for them” by investing in the companies that make products they buy. “We ask the children, ‘Do you own Nikes? How many pairs? Well, that’s fine, but why not buy stock with that money?’”

The state Attorney General held up her plan for two years with an investigation into the registration of the shares, but this August, Pitman Hughes finally received clearance to resume the merger. (She says she had filled out and returned the state’s registration forms; the Attorney General’s office refused to comment.)

At a recent meeting of the East Harlem Chamber of Commerce, Hughes spoke with UMEZ representatives and Rep. Charles Rangel, who has promised to look into locals’ complaints that the Empowerment Zone has not come to their aid. Rangel and the UMEZ have both encouraged Pitman Hughes to apply for assistance again, and a UMEZ spokesperson now says the agency has clarified terms under which it would agree to assist her.

Though her company is losing money, Pitman Hughes hangs on. She considers her message about ownership and financial planning her most valuable contribution to the community. “If I could turn that into dollars,” she says, “it would be worth millions.”

Back to the Old Neighborhood
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