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 Entrepreneurial / Microenterprise Training Business Assistance Loans Access to Capital Neighborhood Business District Assistance

Entrepreneurial / Microenterprise Training 24 CFR (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 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

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

Business Assistance Loans 24 CFR (b) or LMJ, LMA Public Benefit standards at 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 For- Profits ( ) 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 (b); LMA, LMJ Public Benefit Standards at

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 (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 Entrepreneurial / Microenterprise Training Business Assistance Loans Access to Capital Neighborhood Business District Assistance