Seattle’s CDBG
Economic Development
Activities
NCDA Annual Conference
Cincinnati, Ohio
June 2011
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
Economic Development Activities
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Entrepreneurial / Microenterprise Training
Business Assistance Loans
Access to Capital
Neighborhood Business District Assistance
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”
Seattle’s Program
• Classroom training provided by a communitybased 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
The Details
• LMC
• $150,000 CDBG
– $70,000 match
• 100 participants
• Minimum 40 businesses started, formalized,
or expanded
Business Assistance Loans
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24 CFR 570.203(b) or 570.204
LMJ, LMA
Public Benefit standards at 570.209
Your own “headline” test
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
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
Example: Tire & Auto Service
• $50,000 Direct Financial Assistance to ForProfits (570.204)
• LMA
– Provides service to local area residents
• Equipment plus working capital
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
Example - continued
• “with new equipment and a mobile diagnostic
tester, revenues are up and the business has
stabilized”
Access to Capital
• 570.203(b); 570.204
• LMA, LMJ
• Public Benefit Standards at 570.209
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
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
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
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
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
Economic Development Activities
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Entrepreneurial / Microenterprise Training
Business Assistance Loans
Access to Capital
Neighborhood Business District Assistance