Using CDBG to Bridge Economic Development financing gaps

Georgia Department of Community Affairs

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

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.

SOLVENCY

PROFITABILITY

Solid Credit

High Risk

GREY AREA

GREY AREA

Need to protect, build & conserve capital

Need to increase reserves

Need to lower risks

Lower real estate values (less collateral)

SOLVENCY

PROFITABILIY

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

Loans to for-profit for purchase of fixed assetsAcquisition, 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

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

Source Amount Use Amount

CDBG-EIP $ 500,000 Building Improvement $ 470,000

Grant Administration $ 30,000

City $ 1,000,000 Building Acquisition $ 1,000,000

City RLF $ 255,000 Building Improvement $ 255,000

OneGA EDGE $ 375,000 Building Improvement $ 375,000

CHLS $ 2,500,000 Equipment $ 2,100,000

Working Capital $ 375,000

Inventory $ 25,000

Total $ 4,630,000 Total $ 4,630,000

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

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

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

Source Amount Use Amount

CDBG-RDF $ 308,591 Acquisition $ 7,400

Construction $ 257,000

Architectural $ 25,700

Grant Administration $ 18,491

City of Boston $ 35,000 Architectural $ 35,000

TOTAL $ 343,591 TOTAL $ 343,591

CDBG-EIP GRANTSPUBLIC INFRASTRUCTURE

Public InfrastructureAcquisition, construction and rehabilitation ofWater - lines, tanks, wells, treatment plants, Sewer -

gravity lines, force-mains, pump stations, treatment plants,

Rail spurs - switches, track, track base, derails, stopsOther - wastewater pretreatment plant, gas lines

(“red”)Public FacilitiesWorkforce development centers / Child care facilities

Count your temporary construction jobs !!

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)

Source Amount Use Amount

CDBG-EIP $ 373,422 Sewer Line Construction $ 157,778

Engineering Fees $ 18,933

Grant Administration $ 10,000

County $ 186,344 Sewer Line Construction $ 157,777

Engineering Fees $ 28,567

Zoom $ 2,000,000 Existing Capital Investment $ 2,000,000

St. Mary’s $ 5,500,000 Building, M&E and F&F $ 5,500,000

Total $ 7,873,055 Total $ 7,873,055

Zoom Bait Company, Inc.St. Mary’s Healthcare

Systems Inc.

Program Income! LOCAL REVOLVING LOAN

FUNDS (RLF)

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

Georgia Department of Community Affairs

Community Development Financewww.dca.ga.gov

(404)679-1587