Mayor Marion Barry, jolted by cutbacks in federal aid and by the success of suburban competitors in wooing new business, has moved aggressively in his second term to make Washington more attractive to businessmen both inside and outside the city.
The effort already has produced some notable changes in the way the city does business and has won praise from some formerly cool members of Washington's private establishment.
The effort, the first time since the city's extensive urban renewal program of the 1950s that government has actively tried to take the lead in directing business development, also is an operation that has revolved in large measure around a single person: Ivanhoe Donaldson, the mayor's longtime adviser, who now is expected to leave city government before the year is out.
Several business leaders said they viewed Donaldson's appointment this year as deputy mayor for economic development an important indication of a commitment to business revitalization and growth. They describe him as a realist, who because of his close relations with the mayor can make a decision they know will not be changed by bureaucratic infighting or intransigence.
Donaldson "is perceived as being awfully close to the throne and that helps because people know that he is speaking with the authority of the mayor," said Kenneth Sparks, executive vice president of the Federal City Council, an influential group of city businessmen.
Such attitudes raise questions about how well any successor to Donaldson will be able to continue the momentum of the mayor's drive, but Barry and Donaldson insist that the city's program rests on more than simply Donaldson's well-known ability to get things done.
"Obviously Donaldson is trusted in the business community," Barry said last week. "He knows the business community. He knows government. He's a unique person because he knows both."
But, he added, "We've institutionalized the deputy mayor for economic development now, in the minds of the public and in the minds of the bureaucracy . . . the government should not fall or rise on the basis of one individual. Something is wrong if that happens."
"Clearly perceptions are important," Donaldson said last week, adding that it is clear that much of his successor's strength will lie in "the mayor's ability to let people know that he speaks for him."
Barry said he is devoting more of his own time to work on these issues and that he has told his staff he wants something on his schedule relating to economic development every day.
Business development became a top priority for Barry's second term, according to James O. Gibson, former head of the city's planning office and a longtime friend of both Barry and Donaldson, because it became clear that the private sector would have to provide the jobs needed by city residents. In addition, he said, there was "the realization that the city was in competition with other jurisdictions, and you cannot be passive."
Barry said his increased emphasis in this area does not amount to a change in philosophy but reflects the fact that he believes he has taken care of some of the problems that plagued his first term, including an unexpected deficit and problems with water and sewer billing and the summer jobs program.
"I now have the institutional time to spend on that which I really wanted to spend time," he said. "I ran on jobs and economic development in 1978, but I got engulfed with these other problems that weren't forseeable. We've gotten those behind us now, by and large."
Economic development is not the only issue before the mayor, who now faces, for example, overcrowding problems at both the D.C. Jail and Lorton Reformatory, nor does the emphasis on private business please all his constituents. Some of his labor supporters have complained that he is not putting sufficient emphasis on jobs programs and on direct action to lower the local unemployment rate.
City officials say they hope their new effort will spur private developers to build stores, offices and hotels, especially downtown, to bring badly needed jobs and revenue to the city.
"The government is entering the market to be a stimulus and a catalyst as best it can," said Donaldson, adding that the city administration's first priority is to retain existing businesses and its second to attract new ones.
"We spent an awful lot of time talking about business development," Donaldson said. "One of the reasons Barry sent me down here was to stop that kind of dialogue and get something done."
"Any modern city mayor who is not working hard on economic development is stupid," said Walter Lewis, a longtime member of the city's zoning commission and an urban affairs professor at Howard University. " Barry knows the federal government is not the source of help except in a limited way. You've got to go to the private sector."
Since Donaldson's appointment in January the city has moved forward on several fronts:
* To streamline the government's bureaucracy for businessmen needing permits and licenses, the city opened a one-stop center that issues 118 different business licenses and 71 permits from two large rooms at a D.C. office building at 614 H St. NW. Formerly, businessmen had to visit government offices scattered throughout the city to get the necessary approvals for their projects.
* To get things moving on two key downtown efforts, officials led by Donaldson reached agreements on land-sale terms with the developers of the long-delayed Metro Center and Gallery Place redevelopment projects. Officials hope both projects will serve as anchors for rehabilitation of downtown areas. The reduced prices agreed to for those lots were the subject of some criticism. Donaldson responded that the value of such projects "is not the price we get for the land but the spinoff of jobs and revenue which are worth tens of millions of dollars to us" in the future.
* To spur improvements east of the Anacostia River, officials plan to invest $725,000 to help a local community economic development corporation buy a rundown but major shopping center in that neighborhood. The city also helped arrange more than $1 million in private loans to help a community group purchase a shopping center on nine acres at Minnesota Avenue and Benning Road SE.
* To guide the location, density and size of new residential and commercial developments, a long-awaited comprehensive land-use plan has been completed and will go to the City Council for approval this fall.
Barry decided to launch his economic development program within the District government first, partly in response to complaints from business that the bureaucracy and some officials were hindering business growth.
In addition to Donaldson's appointment, there were personnel changes "to get rid of personalities" and get managers who could work together, Gibson said.
Kwasi Holman, a longtime acquaintance of Donaldson, replaced Larry Schmake at the Office of Business and Economic Development. James E. Clay, former deputy director of the D.C. Department of Housing and Community Development, returned from a job as head of the public housing authority in Kansas City, Mo., this year to replace Robert L. Moore as housing director.
The long-term success of all the development efforts will depend on more than just Donaldson's successor. The general state of the economy, particularly whether interest rates go up or down and whether the current glut of empty downtown office space grows or dwindles, will play a decisive role in determining how attractive Washington will be for new development.
Some businessmen recalled that while city-owned sites languished in the midst of the real estate boom at the end of the 1970s, private developers constructed more than a dozen high-rise office buildings east of 15th Street. Now they say the opposite could happen because high interest rates and high land costs make private development unprofitable.
Robert Pickeral, senior vice president for real estate at Riggs Bank, said the city's effort will help, "but if all the economic forces are not there in the first place it will not work," particularly if the city's activities cause land prices to rise. "The numbers still have to work, and the biggest one is the price of the land."
"I don't know that the time is very auspicious, but can the city afford to wait?" said Thomas J. Owen, president of the Greater Washington Board of Trade. "At least it is some action."
The city is still struggling to issue its first industrial revenue bonds to subsidize business development, rebuild H Street NE, and lure more businesses to the District.
But Owen said the business community is being patient. "When your child walks for the first time," he said, "you don't criticize it for not being able to run."