January 24, 2011

Micro-Loan Letter to the editor

There was a letter to the Editor from the President of Biomedical Research Models explaining how much the Micro-loan helped him and how beneficial it has been to the City of Worcester.   I agree 100% with him that the Micro-loan can be a valuable tool for Economic Development and applaud his accomplishments, but I don't think that Sutner's article said that the Micro-loan program could not produces successes like this.      

The point of the article was that there have been alot of problems and some questionable loans,  can you say Hooka Bar and has anyone found out anything about Augusta-Coleman Furniture??     Since the article, the City Manager has taken the appropriate steps to clean up this program.   Lets hope the Micro-loan program produces more loans to companies like Biomedical Research.

I am confused, however, by the clarification in the newspaper on on January 16th:

Martin Luther King Jr. Business Empowerment Center and Main South Community Development Corporation were issued in the form of grants and were not expected to be paid back. The chart stated that the loans were deferred. The business center received $50,000 in 1998 under the micro-loan program for HUD-eligible economic development activities under the Community Development Block Grant program. The CDC received $5,000 in 1994 under the same program.


Okay, I am fine with that, but why weren't all the other loans then grants also??   All of these Micro-loans were "HUD-eligible economic development activities under the CDBG program"??      If I was any of these other applicants who owed money, I would not pay back another penny and claim the the same treatment.  What made these two Micro-loans any different from the rest of the other loans? 

6 comments:

Anonymous said...

I think the difference is for-profit vs. non-profit.

In my experience it is common for non-profits to have different requirements for repayment (read: grant) as compared to for profits (read: subsidized, subordinated loan) under the same or similar state or federal program.

I'll make no judgement as to whether this practice is good or bad, but I will say that if these businesses made a deal to repay the City, then they should do just that. Refusing to live up to their end of the bargin becuase a non-profit got a different (and some would feel, better) deal under the same program is not grounds for refusing to live up to the deal you struck in my book.

Eric K.
Worcester, MA

jahn said...

Bill the letter to the editor also said the company in question got another $17M in gov't grants. That's $17,000,000. Not a bad haul if u can pull it off

The writer than goes on to talk about a sucessful Micro loan........HUH???? How can you NOT BE SUCCESSFUL when your paltry mirco loan is followed up by $17,000,000 from Washington.

Wonder what really made this so called success, the chump change micro loan or $17,000,000 from DC...a.k.a. Direct Cash or Direct Capital?

Lastly Mike Obrien says we have a 70% success rate with micro loans. I say show me the data to back that up? 70% of what? 70% succeess basically says sit all as to why the city should not be in the subprime small business start up loan arena.

Jahn said...

ANd BTW, speaking of Main Suth CDC and faliure to build out. MSCDC bot a lot on gardner or Kilby or Ripley st back in Sept ,2005 for purposes of a commuinty garden or tot lot or something lke that.

I am not so sure they ever built what they were supposed to do with that lot. FWIW, it was part of tha same bid package that yielded the Mess on Mason.

Bill Randell said...

Let me clarify I dont blame MLK or Main South CDC for getting their loans turned into grants. Hey if my loans got turned into grants, I would not complain.

My question is on what basis did the city determine why to turn these two loans into grants?

Bill

Anonymous said...

My guess is that the CDC loans were structured as forgiveable loans from the start, similar to how the facade loans are structured today - as long as you follow the rules the loan automatically becomes a grant after a certain time.

So technically the CDC loans were probably closed as loans with $0 payments for a few years and once they satisfied whatever requirements they were automatically converted to grants.

Eric K.
Worcester, MA

Jahn said...

Bill asked;

"My question is on what basis did the city determine why to turn these two loans into grants?"


As re the CDC's anyway The same basis that they get:

a. free water hookups,

b. free sewer hook ups,

c. free sewer line repalcement in the street to alleviate the raw sewerage back up into their ill conceived basement apts,

d. Free/reduced building permit fees


e. free/short money land from the city.


Did I miss anything?

I cannot speak for why MLK gets loans converted to grants.....maybe similar to the CDC's..... basically ask and you shall receive.

Meanwhile the taxpaying private business interests in this city get nothing but the shaft, unless you're new player on teh scene in which case you get TIF's

Bill do you know if Tufts Harvard Pilgrim are for profit companies? I only ask b/c Tufts & Harvard are colleges which i believe are non profits...so i was making the leap that their health insand/or health care offshoots may also be non profits.

So I guess(?) that leaves only Fallon & BCBS as the remaining large players on the Mass health care scene. Now does Fallon HC rent space from the Worc Medical Center which center is owned by a for profit company. If after the dust settles, I am beginning to wonder what happens if Worc Med center ends back in the hands of a non profit owner.........given that it currently pays $1.4M in RE taxes.

Or maybe I am conjecturing too much?

No one answered my question yesterday, so I shall posit it again....Jan. 31st fast approaches.........have their been any exterior demolition sightings on the parking garage yet. Didnt they say we'd see it happening by the end of January. 4 works days left until Jan 31, assumning they dont get snowed out thsi week???????