Public-Sector Loans to Private-Sector Businesses:
An Assessment of HUD-Supported Local Economic Development
Lending Activities (July 2003, 238p.)
This report assesses the performance of the third party
loans under principal programs that the Office of Community
Planning and Development (CPD) of the Department of Housing
and Urban Development (HUD) directs toward economic development:
the Community Development Block Grant (CDBG) Program; the
Section 108 Program; and the Economic Development Initiative
(EDI). The research describes the CDBG, Section 108, and EDI
programs, how they work, and what types of economic development
they fund; estimates the size and quality of the loan portfolio;
and appraises the success of these programs in terms of job
creation, business success, loan pay back, leveraging, and
cost per job created. Additionally, the study examines the
reasons why communities have used Section 108, their experiences
using Section 108, the effect of EDI money on that use, and
the results of Section 108 projects. The concluding chapter
assesses the feasibility of developing a secondary market
for the economic development loans originating under the CPD
programs.
The findings of this report demonstrate the scope and variety
in the CPD programs and the range of locally- determined objectives
served by third party loans. The more than $2.2 billion of
HUD funds used for this purpose in the later half of the 1990s
were examined. The nation’s most populated and most
distressed cities and urban counties account for the preponderance
of this spending. Examination of nearly 1,000 loan files maintained
by the 51 most active community users of CDBG and Section
108 funds for third-party lending indicates that local loan
programs create jobs and leverage investment at costs that
are comparable to those of other federal government programs.
The report merits the attention of all those concerned with
the economic development of distressed urban areas and potential
innovative developments in its funding, such as the establishment
of secondary markets for third-party economic development
loans.
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