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Using CDBG to Bridge Economic Development financing gaps

Georgia Department of Community Affairs. Using CDBG to Bridge Economic Development financing gaps. States have programs to: Recruit (usually state funded) Market (federal and state mix) Develop Products (federal and state mix) Existing Business Expansion New Business Development

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Using CDBG to Bridge Economic Development financing gaps

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  1. Georgia Department of Community Affairs Using CDBG to Bridge Economic Development financing gaps

  2. States have programs to: • Recruit (usually state funded) • Market (federal and state mix) • Develop Products (federal and state mix) • Existing Business Expansion • New Business Development • Entrepreneur and Micro-Enterprises • CDBG can be used in ALL Product Development to Bridge the Financing Gaps States are About Economic Development – Jobs !!

  3. Financing Gaps Have Grown SINCE 2008 • Some Businesses are prepared to move forward with investments; however, • Bank’s are reluctant to provide traditional business financing because of perceived credit and collateral risks. • These “grey areas” of perceived risks are more extensive than any time in the past 30 years. • Great projects exists in these “grey areas” of perceived risks that can be stimulated through public-private partnerships and… • Utilization of “gap financing” programs such as CDBG-Employment Incentive Program, Downtown Development RLF, Life Sciences Fund, etc.

  4. CDBG can make job creation Doable now !! SOLVENCY Solid Credit GREY AREA PROFITABILITY GREY AREA High Risk

  5. The Banking Challenges which can be Addressed Through Gap Financing • Need to protect, build & conserve capital • Need to increase reserves • Need to lower risks • Lower real estate values (less collateral)

  6. LoanS For Creditworthy Businesses SOLVENCY PROFITABILIY

  7. STRUCTURING a CDBG GRANT–LOAN TO PRIVATE FOR-PROFIT BUSINESS

  8. Loans to for-profit for purchase of fixed assets Acquisition, construction and rehabilitation of commercial or industrial land, building(s), machinery and equipment and other real property improvements * Loan repayments may capitalize or be placed into a Local, Regional or State RLF Cdbg Grant-Loans – Eligible Activities

  9. City of Quitman – Crown Health Care Laundry Services, Inc. • Recipient – City of Quitman • Sub-Recipient – Crown Health Care Laundry Services, Inc. • Grant/Loan Amount - $500,000 • Project – Building Improvements • Private Investment - $500,000 • Jobs – 140

  10. Source and Use – City of Quitman

  11. Eligible Activities: • Projects must alleviate a “slum or blighted” condition • Public infrastructure, public facilities • Loans to acquire and alleviate blighted buildings/facilities • Loan/lease payments may be capitalized into a local RLF • Any new jobs must be available to low- and moderate-income persons CDBG - REDEVELOPMENT FUND

  12. Acquisition and clearance of blighted property • Renovation and reuse of abandoned historical buildings • Commercial revitalization through façade improvements • Removal of environmental contaminants on property to enable it to be redeveloped for a specific use Samples of CDBG-RDF Eligible Activities

  13. City of Boston • Recipient – City of Boston • Grant Amount - $343,591 • Project – Renovate a blighted storefront alleviated deteriorated building conditions and stabilize the structure of the adjoining businesses. • Private Investment - $35,000

  14. City of BostonBefore and After

  15. Source and Use – City of Boston

  16. CDBG-EIP GRANTS PUBLIC INFRASTRUCTURE

  17. Public Infrastructure Acquisition, construction and rehabilitation of Water - lines, tanks, wells, treatment plants, Sewer - gravity lines, force-mains, pump stations, treatment plants, Rail spurs - switches, track, track base, derails, stops Other - wastewater pretreatment plant, gas lines (“red”) Public Facilities Workforce development centers / Child care facilities Count your temporary construction jobs !! Infrastructure Grants- Eligible Activities

  18. Oconee County – Zoom Bait Company, Inc. & St. Mary’s Healthcare Systems Inc. • Recipient – Oconee County • Sub-Recipient – Zoom Bait Company, Inc. & St. Mary’s Healthcare Systems, Inc. • Grant Amount - $373,422 • Project – sewer line extension • Private Investment - $7.5 Million • Jobs – Create 12, Retain 127 (172 existing jobs)

  19. Source and Use – Oconee County

  20. Oconee County Photos Zoom Bait Company, Inc. St. Mary’s Healthcare Systems Inc.

  21. Program Income! LOCAL REVOLVING LOAN FUNDS (RLF)

  22. EIP/RDF loan payments capitalize local RLF • RLFs can be used for local economic development needs • Opportunities available to partner with local banks to finance eligible activities (same as EIP&RD) that create employment for L/M persons, eliminate blight, etc. • Unused funds can be recaptured or returned to regional RLF fund or state Local Revolving Loan Funds

  23. Georgia Department of Community Affairs Community Development Finance www.dca.ga.gov (404)679-1587 Using CDBG fOR Gap Financing

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