1

Economic Development Presentation – NCDA 2013 Annual Meeting

By James BarnesCommunity Development Director

Lawrence, MA

2

My Background

• HUD 36 years– UDAG’s– 108’s – CDBG Economic Development Training and

Monitoring• City CD Director last five years– 108 – CDBG Small Business Loan Fund– Commercial Façade Program

3

Currently Working On

• Restarting Small Business Revolving Loan Fund– On hiatus for 7 years– Our loan portfolio either repaid or defaulted – no

more income– We have $500,000 to work with– Re-started in 2012– First wave of applicants not qualified

4

Currently Working On - 2

• Starting a Micro Enterprise Lending Program– Taking half of the fund– Fewer compliance issues – Hired a Technical Assistance Contractor with a

financial “boot camp” program– Establishing a relationship with new CDC financial

stability center– Most of our “applicants” last year were micro

anyway

5

Six Challenges to Doing Economic Development with CDBG

From both a HUD and City perspective

6

1. The Promoters vs The Realists

• Promoter's proposal: 108 loan to cut through two floors of an historic mill to accommodate a battery manufacturer’s cranes.

• Realist’s proposal: small loan to buy 4 computerized sewing machines to increase growing company’s output. Located in old mill with high vacancies

7

2. Markets Change

• A lot of time goes into developing a city business loan program

• Big projects (such as one funded with 108) take time

Our Gateway example •Mill occupancy dropped instead of

increasing• No longer demand for parking, no parking

revenues to pay 108 loan

8

3. A Program Without Focus

• Little Impact• Susceptible to political

interference• Difficult to market – audience too

broad

9

4. Staff Competencies

• HUD Regulations• The lending culture and language• Internal processes and controls• Documents• The local business environment

10

5. Working with New Type of Borrower

• New Immigrant Small Business Owner• Social Enterprise• New Young Entrepreneur

11

6. Borrower Capacities

• New Immigrant entrepreneurs– No banking relationships– Cash basis– Grey economy participants– Borrowing at high rates– Language and cultural barriers

12

Borrower Capacities (2)

• Recent college grads and social entrepreneurs– Large student loans– Lots of energy & enthusiasm– Impatient with city processes– Pitch contests and instant

gratification

13

Recommendations

14

Build/Hire Expertise or Contract for Expertise You Don’t

Have

• Underwriting• Technical assistance and training• Closings• Servicing• Collections

15

Understand the Market

16

The Importance of Underwriting

• In house or consultant• Double check the assumptions and

the market analysis• Do it even if not required (for

instance with micro enterprises) – OMB Circulars do apply

17

Avoid 570.203 Special Economic Development Activities

If You Can Do It Another Way

18

Borrow from Best Practices

• Lowell, Massachusetts• Davenport, Iowa• Madison Development

Corporation, Wisconsin

19

Lowell, MA• Small Business Loan• Best Retail Practices (Matching

Grants)• Downtown Venture Fund–Start Up Retail in Downtown

• Contact Theresa Park Tpark@lowellma.gov

20

DDJ - The Genesis and Program Details

Why the Program Was Created The City of Davenport sought to create an

extraordinary incentive in order to encourage business creation and expansion in our downtown.

Program Details Businesses creating jobs in the DDJ can opt for

either:

A $3,000 per job created 0% interest loan for 60 months

OR

A $1,000 per job cash grant (set up in the City’s system as a forgivable loan pending the actual job creation)

All businesses have two years to create the jobs pledged and then must maintain them for three additional years.

21

City of Davenport, Iowa

Please contact Bruce Berger at (563) 328-6706 or beb@ci.davenport.ia.us

for additional information.

22

Madison Development Corporation

• Funding “hard to finance” local businesses and creating jobs since 1977

• CDBG supported Revolving Loan Fund of $3.6 million• Originated over 400 loans• Helped create over 4,000 jobs• Self-sustainable, receiving no operating grants, since

1980’s: Operations funded entirely from interest earned and fees

• Meeting Madison’s changing credit needs• Evolving to be a leader in financing Madison’s high-

technology sector

23

Frank Staniszewski, PresidentFrank@mdcorp.org

24

Use Available Training Resources

• Paul Webster, Mark Tigan Presentations to NCDA

• National Community Development Council• HUD’s Economic Development Toolbox• HUD’s “One CPD” Technical Assistance

25

Final Thoughts

26

Complex Projects Take Time

27

New vehicle/ pedestrian Bridge over the North Canal

Brownfield remediation, new storm water system, and improved parking

Streetscape improvements and utility upgrades

Riverfront playground and community gardens

28

Non “Economic Development” Projects are Economic Drivers

29

50 Island Street/ One Union Street

Union Crossing Phase One