title
Recommendation to delegate CDBG Loan underwriting to the Wauwatosa Revolving Loan Fund
body
Submitted by:
John Ruggini
Department:
Finance
A. Issue
The City administers two separate loan programs. Community Development Block Grants are lent by the Community Development Authority while the Wauwatosa Revolving Loan Fund as a separate non-profit entity but supported by City staff also administers its own program. This creates duplicate work for City staff and borrowers and confusion.
B. Background/Options
The Wauwatosa Revolving Loan Fund (WRLF) was created in the early 1990’s and originally capitalized with funds from the closure of Tax Increment District 1. It is a separate non-profit entity; however, City staff provide accounting, loan intake and loan administration support. In addition, the Finance Director and Chair of the Financial Affairs Committee serve ex officio as voting members. In 2012, responsibility for lending Community Development Block grants (federal funds) were moved from the Revolving Loan Fund to the Community Development Authority as a result of an adverse federal audit.
The WRLF currently has $962,489 in net assets, of which $304,042 is currently lent to 15 borrowers. The Community Development Authority has $481,482 in net assets for lending of which $171,597 is currently lent to 3 borrowers. Of those 3 loans, 1 borrower also has a loan with the Revolving Loan Fund and a two more loans were recently approved.
Through the most recent approval process the duplication of efforts became clear. Borrowers have to appear before the CDA and interview with a member of the Revolving Loan Fund. The Milwaukee Economic Development Corporation does the underwriting analysis for both entities and presents twice. City staff are involved in two meetings and two members of the CDA serve on the WRLF. However, the WRLF then administers the combined loan as a single loan so the borrower only has to make a single payment.
To eliminate duplicate efforts among staff, volunteers, contractors and borrowers, and eliminate confusion and undue bureaucracy, staff recommend that the Community Development Authority delegate the loan review process to the WRLF for the Community Development Block Grant revolving funds when a combined loan is being requested. In effect, the WRLF would serve as the Loan Committee under these circumstances and make a recommendation for lending which would then go to the CDA. The MEDC report would be provided to the CDA along with the WRLF recommendation and City staff would be available to enter any questions.
While not included in this recommendation, the Community Development Authority could also delegate the loan recommendation authority to the WRLF when only a CDBG loan is requested.
This not only increases efficiency and reduces bureaucracy but also targets the strengths of both entities. Since the 2012 audit, the Revolving Loan Fund has done an excellent job of recruiting Board members with small business lending and operations backgrounds while the Community Development Authority members have backgrounds in real estate and commercial development.
C. Strategic Plan (Area of Focus)
NA
D. Fiscal Impact
There is no fiscal impact although there would be staff time savings.
E. Recommendation
I recommend the Community Development Authority delegate the loan review process for combined CDBG and Revolving Loan funds to the Wauwatosa Revolving Loan Fund.