Seattle’s CDBG Economic Development Activities

1. Seattle’s CDBG Economic DevelopmentActivities NCDA Annual Conference Cincinnati, Ohio June 2011

2. Background – 2011 initial allocation • $14 million annual program • $4.6 million for public services • $3.1 million affordable housing • $5 million economic development • $1.2 million planning & administration

3. Economic Development Activities • Entrepreneurial / Microenterprise Training • Business Assistance Loans • Access to Capital • Neighborhood Business District Assistance

4. Entrepreneurial / Microenterprise Training • 24 CFR 570.201(o) • LMC, LMJ, LMA national objectives • Microenterprise • “a commercial enterprise that has 5 or fewer employees, 1 or more of whom owns the enterprise”

5. Seattle’s Program • Classroom training provided by a community-based non-profit organization • Target low-income, immigrant and refugee communities • Business practices and skills: • Licensing, tax filing, health dept. compliance • Effective communication, financial planning, business technology

6. The Details • LMC • $150,000 CDBG • $70,000 match • 100 participants • Minimum 40 businesses started, formalized, or expanded

7. Business Assistance Loans • 24 CFR 570.203(b) or 570.204 • LMJ, LMA • Public Benefit standards at 570.209 • Your own “headline” test

8. Business Asst. Loans (continued) • If LMJ • Jobs creation agreement identifying jobs by title and full- or part-time • What actions will be undertaking to ensure LMI clients have access to jobs • What jobs were made available to or filled with LMI persons • Income information on person taking the job • See Guide to National Objectives for more details

9. Seattle’s Program • Solicited participation of CBDOs • LMA and LMJ national objective • Loans amortized with monthly repayments • For CBDO, not CDBG program income • Understand that these are more risky loans • $50,000 - $200,000

10. Example: Tire & Auto Service • $50,000 Direct Financial Assistance to For-Profits (570.204) • LMA • Provides service to local area residents • Equipment plus working capital

11. Example - continued • Loan terms: • 5% • Amortized over 72 months • Secured by promissory note • UCC filing, securing against personal property • “secured by the business assets of the borrower” • Caution re: DBA enforcement

12. Example - continued • “with new equipment and a mobile diagnostic tester, revenues are up and the business has stabilized”

13. Access to Capital • 570.203(b); 570.204 • LMA, LMJ • Public Benefit Standards at 570.209

14. Access to Capital – Seattle’s Program • Credit enhancement • Mitigate collateral risk for qualifying loan projects • Use CDBG funds to provide for loan loss reserves • Percentage of loan loss must be carefully calculated, defended • Is it required by third party lender? • Cannot be used in conjunction with another federal source

15. Access to Capital – continued • $150,000 pool of funds • Contracts with three economic development agencies (CBDO) • Assume 15% loan loss reserve • Estimate 50 loans • Average loan size $20,000 = $3,000 loss reserve

16. Access to Capital - continued • Reserves revert to CBDO upon attainment of national objective • Expect losses • But this is a concern of CBDO, not City • Work carefully with your HUD rep

17. Business District TA • 570.204(a)(1) Neighborhood revitalization project • LMA • “activities of sufficient size and scope . . .” • Write contracts broadly to encompass a specific plan so discrete activities are all covered under the implementation of the plan

18. Seattle’s Program • A package of activities to revitalize a neighborhood • Clean up, graffiti, crime • Branding • Community events • Marketing • Building capacity of neighborhood business district councils

19. Economic Development Activities • Entrepreneurial / Microenterprise Training • Business Assistance Loans • Access to Capital • Neighborhood Business District Assistance