Beneath the 'rust' may be a city's treasure

A new Cleveland law required that city employees live within the city limits. So, when a suburban father landed a city job and the family faced a move, his wife phoned the city for advice. Her biggest concern: ''Are there any Cleveland neighborhoods where it's really safe to live?''

Raymond Schmidt, director of a new citywide housing promotion program here called the Living in Cleveland Center, promptly ticked off the names of at least 20. Although he laughs about the question now, he admits that street safety and school quality are often top concerns of prospective city dwellers.

The center grew out of Cleveland Mayor George Voinovich's conviction that his city's image as a place to live had become ''tarnished.'' One key aim: to get potential home buyers into urban neighborhoods to visit with people who live there.

Each of the large older industrial cities of the Midwest and Northeast has bright pockets of renewal within its boundaries. But major corporations often now check out surrounding neighborhoods before making major downtown investments. And civic leaders are increasingly aware that they must improve the whole urban climate - reducing crime and blight in all parts of the city and upgrading schools, housing, and infrastructure - to stem the exodus to the suburbs and preserve development gains.

Progress and decay are next-door neighbors in many of these cities. Only a few blocks from Baltimore's Harborplace, for instance, where the vitality and crowds offer a strong feeling of security, young women are taking an Army personnel training course in a hotel surrounded by vacant lots. They debate where, if anywhere, it is safe to walk in late afternoon.

The way Indianapolis Mayor William H. Hudnut III puts it, ''You can't just sit back, twiddle your thumbs, and say, 'Well, decay is going to set in - we're just going to have a lot of giant cavities around.' These are problems to be solved.''

Part of the answer for some cities involves correcting misconceptions. While fighting crime with more widespread block-watch programs and beefed-up police patrols, for instance, cities find they must also fight myths about the extent of the problem. ''A lot of people I know are afraid to go into Chicago even to have dinner or see a play,'' says an insurance broker from suburban Arlington Heights, Ill.

Many city workers insist that such concern is overblown. When educator Sandra Buike took a job in downtown Detroit, her suburban sons were sure it was a dangerous move. She hasn't found it so: ''When there aren't many people on a street, we all sort of watch out for each other.'' And Donald Reed, whose job as a community development officer for Cleveland's Central National Bank requires him to be in a broad mix of neighborhoods at all hours, insists: ''I've never even had a close call.'' And nationwide figures released in mid-May by the US Justice Department show the largest drop in nine years in the number of households touched by crime.

Part of the solution is in recognizing cities' natural assets, experts say. Empty spaces, for instance, can be viewed as opportunities to assemble land for development or other use rather than as cause for despair. One Cleveland developer has proposed a downtown golf course. And experts say that day could come.

And the Washington-based Partners for Livable Places argues that older cities have strong cultural and recreational assets - from zoos and jogging trails to libraries and theaters - too often dismissed as mere ''frills.''

Partners president Robert McNulty insists that many studies now show that this kind of ''amenity infrastructure'' has solid economic value and is often far more important than tax lures as a magnet in business location decisions. Morale and worker turnover, he says, are increasingly key concerns of employers, whose highest long-term costs lie in people rather than buildings.

''Cities are competing on quality of life - not cheap sites,'' he says.

Civic leaders, Mr. McNulty says, can add ''animation'' - enhancing both the attractiveness and the safety level of their cities - by reexamining the need for old city laws that may have barred such lively assets as vendors, street performers, and outdoor cafes. He would welcome more city-hall rathskellers.

City leaders can also make a significant climactic difference, urban experts say, by courting development more aggressively. Pittsburgh Mayor Richard Caliguiri, who recently returned from a promotional visit to New York City, says: ''We can't just sit here and expect people to knock on our doors. We have to sell our cities just as we would any other product on the market.''

Civic leaders must also become more skillful and imaginative, experts say, in bargaining with developers for deals that really help the city. ''A lot of towns sell their soul to the first developer, because they're afraid he'll move to another town,'' McNulty says. ''Cities need to be brave and ask for an endowment fund for public art or street trees with a maintenance fund.''

But industrial cities also will need more dollars if they are to make the economic transition they must. One key cost: replacing or repairing the antiquated water and sewer pipes and the roads and bridges that hold many of these cities together. No region of the country faces a more serious problem.

It has been estimated that Boston and Pittsburgh, for instance, have lost as much as one-fourth of their water supply through leaky pipes. Repair costs are up. Mayor Hudnut notes that the cost of resurfacing just one mile of Indianapolis streets is now $65,000, almost twice what it was when he was elected eight years ago. Yet government spending at every level for public-works construction and such repairs is sharply down. Many cities such as Cleveland and Pittsburgh have been forced into tough choices on priorities.

Most industrial cities also view more and better housing inside city limits as vital to their economic recovery. In most, cheap older housing is a natural plus, and it received a strong boost over the last decade with the national preservation movement and the energetic work of such nonprofit groups as the Neighborhood Housing Service. To a degree, high interest rates have helped by discouraging new home buys in the suburbs.

Cities such as Baltimore and St. Louis, where old red-brick homes abound, are acknowledged leaders. ''Both of these cities have had a commitment from early on to use their resources to preserve rather than bulldoze - it's a difference in attitude,'' says Peter Bell, executive director of the National Housing Rehabilitation Association.

Richard Davis of Baltimore's Department of Housing and Community Development says his city has built or rehabilitated 13,000 units (largely as rentals for low- or moderate-income residents) over the last decade. And the success of Baltimore's urban homesteading program, rescuing another 500 old homes, persuaded city leaders, he says, to scrap plans to tear down a number of other row houses in the West Inner Harbor area.

St. Louis, which had been tearing down units in the 1970s at the rate of 4, 000 a year until the preservation movement took hold, now rates first place nationally among those using tax incentives to renovate old buildings. ''This city has some tough, worn-out neighborhoods, but the last thing I have a sense of here is of people sitting idly by, waiting for the inevitable,'' says Washington University Law School professor D. Bruce LaPierre.

And new housing has been springing up lately in some totally unexpected areas - from the ranch-style homes of Charlotte Gardens in a devastated slum section of New York's South Bronx to new town houses in Cleveland's once riot-torn Hough neighborhood. ''We believe it's possible to take an area like Hough and make market-rate housing there work,'' says Mayor Voinovich, who raised funds for the project and hopes it will serve as a national model.

Although any hike in city property values is welcome news for mayors, some residents complain that the movement in of wealthier outsiders - gentrification - pushes up rents and displaces those already living there.

But Thomas Bier, manager of the Housing Research Project at Cleveland State University, says that most recent city home buyers are actually young former renters of modest means from within the city rather than wealthy suburbanites. Although Cleveland property values rose 11 percent during the first six months of last year, the average home sold for $30,000, and only one-third of last year's buyers were from the suburbs.

Donald Reed, former chairman of the task force that set up the Living in Cleveland Center, argues that displacement is largely a trumped-up issue in a city such as Cleveland - ''the vacant-lot capital of the US.'' Any hike in property values from the newcomers, he says, is really well worth the price:

''They can beat the gentrification tom-tom all they want,'' he says, ''but the population of the city has to get wealthier and better educated to improve the tax base.''

Jack Wertz of New Detroit, an urban coalition formed to improve opportunities for minorities in that city, agrees that the pluses often outweigh the minuses. He says, for example, that most of those displaced by the new General Motors plant under construction in his city, a project expected to add 6,000 new jobs, were paid more than their homes were worth, plus a relocation fee.

But syndicated urban columnist Neal Pierce has cautioned that ''the sea of need in housing is immense.'' Speaking to an Neighborhood Housing Service group in Chicago recently, he noted that waiting lists for public housing in many large cities are long, and that Washington spends less than one-fourth as much in rent subsidies for the poor as homeowners reap in ''subsidies'' (tax benefits) from interest on purchases.

Many of the most encouraging examples of progress so far in the fight against urban decay can be seen at the grass-roots level.

For instance, talk in St. Louis with Erma J. Lawrence, executive director of the Northside Preservation Commission, a planning and development agency, about what it was like in her area just north of the city's center a mere seven years ago, when her organization began work. Residents and businesses - from Sears to Woolworth's - were leaving fast. Much of the property they left behind was quickly vandalized. There were no grocery stores. No private development was going on.

If you drive around the neighborhood now with commission accountant Carol Leiver, you will still pass vacant lots and boarded-up buildings. ''Sometimes you feel you haven't even made a dent,'' says Mrs. Leiver. But you'll also pass a new supermarket, a new YMCA. And a number of the agency's recent projects - including the West End Apartments (new subsidized rental units) on a former school site and Minerva Place Apartments, a former school gym.

''We still have an awesome number of vacant lots, and we're without a lot of things that make a community whole, . . . but it is coming back,'' admits Mrs. Lawrence.

And in Indianapolis, Pegg Kennedy, president of the Meridian-Kessler Organization, a neighborhood group, drives a visitor through a variety of neighborhoods that are changing for the better. The six-story Lockerbie Glove Factory on the city's East Side, for instance, is now a thriving complex of 60 fashionable apartments surrounded by town houses. Mrs. Kennedy, who moved to the city in 1973 and stayed inside the city limits - ''I live only 15 minutes from downtown, and it's glorious'' - recalls that rooming houses for derelicts were then prevalent in this racially mixed but previously all-black neighborhood, where refurbished old homes now sell for $50,000 to $70,000. ''This whole area was 'el pitts,' '' she recalls, ''but some people had the courage and vision to decide they were going to stay and take the risk.''