The Department of Housing and Urban Development approved the St. Clair County’s application to run a gap financing program for businesses looking to carry out projects within certain areas of the county to help prevent or eliminate blight and benefit low and moderate income people.
Under the program, the county would borrow money through the Department of Housing and Urban Development’s Section 108 Program against its annual allotment for community block grant dollars, which is about $3.2 million a year, when including the allotments for East St. Louis and Belleville. The county’s line of credit limit for the program is $15 million.
In October, the county board approved submitting an application to have the gap financing program. The county received its approval notification Tuesday.
Terry Beach, the director of the county’s economic development department and the intergovernmental grants department said the county has identified two to three businesses that might benefit from the program, but could not disclose who they were.
Beach reiterated this program is for major projects that are “game changers.”
Previously, Beach has said projects would have to be large for the county to provide the gap financing. For example, if a project was $10 million to $30 million, the county might be willing to invest 10 percent, or $1 million to $3 million.
It’s been a long time coming. We’re now anxious to find some quality projects to invest in.
Terry Beach, executive director of the St. Clair County Intergovernmental Grants Department
The rest of the money for a project would come from developers or other lenders financing the project, among other sources.
The county would have an inter-creditor agreement where the main lenders, including the county, would each be paid first on a pro-rata basis, Beach said. Monthly payments would then be due to the county, for the county to pay back HUD.
“We have to pay them back with interest,” Beach said.
The county has to pay about 2 percent interest, but can charge businesses a little more than that rate, Beach said.
However if there is a default on the loan, the money borrowed from HUD would be taken out of the county’s annual community block grant allocation.
Beach emphasized this is not a grant. The program is a line of credit and has to serve as gap-financing.
“(Chairman Mark Kern) and I are both excited to finally join the ranks of hundreds of urban counties and metropolitan cities,” Beach said. “It’s been a long time coming. We’re now anxious to find some quality projects to invest in.”
Projects would have to be in areas that show some distress. For example, money can be loaned to a developer who may want to take over an abandoned industrial plant, with environmental concerns involved.
Projects would have to benefit low and moderate income people and help prevent or eliminate blight, or meet an urgent need in the community, under program guidelines.