To try and make sure all available monies are tapped for economic development, the newly formed Wisconsin Economic Development Corporation (WEDC) is going to eliminate all municipal and county-run revolving loan funds in the state, and push the money towards regional loan funds. That was the word from representatives from the organization formerly known as the Wisconsin Department of Commerce who met with representatives from six counties in Dodgeville last Tuesday morning.
How that transition takes place is up to the communities and counties to decide.
Currently, the cities of Boscobel and Cuba City, as well as villages of Muscoda and Potosi have revolving loan funds totaling approximately $2.1 million, while Grant County has a fund of $1.1 million. According to the officials on hand from the state, those funds will have to be merged with revolving loan funds from Richland, Iowa, Lafayette, and Green counties to create a new fund that will have $11.8 million in assets.
“We want to have a dialogue with you,” said Brenda Hicks-Sorenson, representing WEDC, which was created last year from portions of the Wisconsin Department of Commerce. WEDC held strategic planning sessions in its early inception, and Sorenson noted that one thing the directors of WEDC, who include the governor, legislators, and businesspeople, wanted to make the answer simple to the question “who do you go to?” She said that currently there are a number of loan programs, more than 200, across the state. Sorenson said that this made things sometimes confusing for interested businesses, looking for low-interest loans to create jobs in the state.
Beyond centralizing various funds throughout the state, the regional revolving loan funds would have other benefits. Sorenson touted the fact that in creating a new non-profit to handle the regional fund program, the funds can then be defederalized, meaning that certain requirements from the community development block grant the funds originally came from would disappear. The biggest issue would be that those programs do not allow for loans to be made for building or facility costs.
Under the new regional structure, pilot programs created microloan programs, as well as facade improvement programs. Hearing that ability for different projects made several regional economic development officials optimistic of the program.
“That’s the most intriguing part,” said Ken Harwood from the Lafayette Development Corporation. “For existing businesses, we don’t have much to offer.”
One of the reasons the state is pushing for regional funds is that some communities are not as active in loaning money out as others. “We have communities stockpiling for the next big thing,” Sorenson noted, stating that instead of working with smaller projects right away, the money sits for anticipated larger projects that never come. “$300,000 is not going to make a difference on a really big project.”
The state has had rules in effect that if funds sat dormant for a number of years, they would retake the funds if they sat dormant for five years. The state has not actively enforced those rules, but may do so to expedite the process of creating the new regional loan programs.
One of the supposed ‘sticks’ the state would use to push communities into a regional fund is that regardless of if they joined or not, communities would lose their funds anyway. In addition to taking dormant fund money, the state would also create a process where any payments on loan funds being made would be rerouted to the regional fund, and away from the local fund.
Also indicated was that communities that did not participate would not get any state backing when it came to any community development block grants.
During the meeting, Sorenson talked about the ‘carrots,’ or incentives they would offer for the creation of the programs. One would be that the state would participate in the collection of loans, which many around the table found helpful for defaulting loans. State officials also indicated that there may be some financial help in the creation of the regional loan funds, but no specifics were shared.
In October, the WEDC board voted to move forward with creating regional revolving loan funds, wanting to have two completed and two more in the process of being formed by the end of the fiscal year in July. State officials mentioned they would like to see continued meetings, but knew that each region would go at its own pace.
With new community block grant funding continuing to dwindle, WEDC employee Amy Young said that the existing dollars needed to be maximized.
Brisbois noted that there are no advantages he saw to keep the funds in the federal framework, he added that those rules have not reduced the number of loans that have been given out within the county, noting that on most projects there are plenty of equipment and supply portions to any project that can be covered by the loans.
Brisbois was concerned that throwing the process to a new entity, one that may not have a history in dealing with loan funds, may slow down the process. “We want to make sure that the program responds at the speed of business, not the speed of bureaucracy,” Brisbois said, touting the fast turnaround Grant County Economic Development has on loan projects.
The idea of regional revolving loan funds is not a new one. It actually dates back to Gov. Jim Doyle, who in 2005 made it part of his “Grow Wisconsin” plan, which included a pilot program to help regions make the change. First to sign up were seven of 10 counties in the northwestern corner of the state which formed the Northwest Wisconsin Regional Economic Development Fund. NWREDF is administered by the area’s regional planning commission.
WEDC personnel onhand pointed to the two pilot programs as examples of how the new system worked. Sorenson noted that some concerns, such as communities worrying that their funds would be focused on one central part of the new region, did not happen. They pointed to the Regional Business Fund, the second pilot program, where concerns the city of Hudson would get all the funds, did not occur.
Representatives of Muscoda, which has built up a large revolving loan fund for a community its size - larger than the county’s fund - were concerned that it would seriously hurt its ability to help area companies. The loan fund had made a more recent loan of $450,000 to a local company, and would be apprehensive of a regional program that did not allow it to make such large loans because the state is requiring that 75 percent of the funds be loaned at a given time.
Also touted was that with such a large fund, up to 15 percent of the principle and interest could be tapped for administrative costs, regions would be able to hire full time staff to handle the program.
The state chose to use the boundaries for the regional planning commissions as borders for the new regions. They said that a number of different lines were discussed, but since those boundaries are federally recognized, that was the boundaries these regional funds would need to stay within.
That would mean that Crawford County, which is a member of Prosperity Southwest Wisconsin Economic Development Corporation, an alliance of area economic development groups and headed by Grant County Economic Development Corporation Director Ron Brisbois, would be forced to join the regional fund for the Mississippi River region.
That border issue may also limit a bid by Prosperity Southwest, since Iowa County, within the boundaries, is currently not a member.
Both Prosperity Southwest and the Southwest Wisconsin Regional Planning Commission are expected to create proposals to administrate the program. Both have created 501C organizations - a requirement of the state.
“We would like to be the managing agency,” Ed White, Economic Development manager for Southwest Wisconsin Regional Planning Commission said at the meeting.