I am writing in response to your editorial that was critical of our (HUD Section 108) proposed $15 million business loan pool application. Both the 108 program and the Community Development Block Grant (CDBG) Program have been a success throughout the U.S. since 1975.
We will form a Loan Committee which will include at least one area banker (this was mentioned by your reporter in his story). We will require a shared first position (this was also mentioned by your reporter in his story) as we currently do with our existing business loan program. A nationally known 108 expert such as the National Development Council will assist us in the underwriting.
The editorial states we are going into the commercial lending business when in fact we have had a business loan program for decades. We have made over 200 loans for 136 businesses located in 25 of our communities. In fact, your newspaper has reported on our existing loan program. Those loans 200 loans have totaled over $14.5 million and have leveraged at least 60 percent more in private equity and local bank financing since we only lend 40 percent of a deal or $200,000, whichever is less.
As HUD states: “The Section 108 loan guarantee program allows local governments to transform a small portion of their CDBG funds into federally guaranteed loans large enough to pursue physical and economic revitalization projects capable of renewing entire neighborhoods. Such public investment is often needed to inspire private economic activity, providing the initial resources or simply the confidence that private firms and individuals may need to invest in distressed areas.”
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Rest assured we will comply with both the spirit and the letter of the law regarding the 108 program even if a few of you see no value in helping with quality projects in some areas of the metro-east.
Terry W. Beach is the executive director of the St. Clair County Intergovernmental Grants Dept.