HOUSE BILL REPORT

HB 851

BYRepresentatives Vekich, Nelson, Lux, P. King and Wineberry

Increasing amounts available for loans to business in entitlement community grants.

House Committe on Trade & Economic Development

Majority Report:     The substitute bill be substituted therefor and the substitute bill do pass.  (17)

     Signed by Representatives Wineberry, Vice Chair; Amondson, Beck, Belcher, Cantwell, Doty, Grant, Hargrove, Holm, Kremen, McLean, McMullen, Moyer, Rasmussen, Schoon, B. Williams and J. Williams.

Minority Report:     Do not pass.  (1)

     Signed by Representative Vekich, Chair.

House Staff:Stephen Hodes (786-7092)

AS REPORTED BY COMMITTEE ON TRADE & ECONOMIC DEVELOPMENT

MARCH 5, 1987

BACKGROUND:

The legislature established the Development Loan Fund program in the Department of Community Development in the 1985 session. The program utilizes federal Community Development Block Grant funds in the state-administered program in order to make grants to local governments for loans to businesses in distressed areas of the state.  The repayments of the principal and interest on loans made by local governments to businesses are repaid to the Development Loan Fund to be utilized again.  These grants may be made in distressed areas in the state eligible to compete for community development block grant funds in the program administered by the state.

A seven-member committee reviews and approves applications to the program.  Projects must: be in a distressed area; be expected to increase or maintain employment; conform to applicable federal requirements; have a public purpose with benefits accruing to residents of the distressed area; and be expected to be successful.

The Development Loan Fund committee is also authorized to make grants to areas which qualify as "entitlement communities" under the federal law authorizing community development block grants to be used for loans to businesses in distressed areas located in such communities.  Such grants may only be made on condition that the entitlement community provide the loan committee with assurances that it will spend the funds for purposes and in a manner which would satisfy federal requirements dealing with the entitlement community's spending of federal community block grant funds, as if the monies were block grant funds received from the federal government and the entitlement community must spend double the amount of the grant for loans to businesses from the federal funds received by the community as community development block grant funds.

When the Development Loan Fund program was established, funds were appropriated to the Community Economic Revitalization Board to be granted to communities in the state in conjunction with the state-administered Community Development Block Grant program. This permitted the establishment of the Development Loan Fund program with no net fiscal impact on the state Block Grant program.

Entitlement communities have expressed the opinion that the Development Loan Fund matching requirement for entitlement communities is too large.  Given the absence of a net fiscal impact on the state-administered Block Grant program, the matching requirement differs from the requirements applying to grants to other distressed areas.

SUMMARY:

SUBSTITUTE BILL:  The monies required to be provided by local "entitlement communities" (as defined by the regulations of the Community Development Block Grant program) in order to receive grants of funds in the Development Loan Fund program are reduced. The amount of funds an entitlement community must provide from the federal funds received by the community as community development block grant funds is reduced from double the amount of the grant from the Development Loan Fund to an amount equal to 150 percent of the grant from the Development Loan Fund.  A requirement is added that the principal and interest on loans made by entitlement communities with funds granted from the Development Loan Fund should be repaid to the fund consistent with the requirements of federal law.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  The matching requirement is increased from 133 percent of the grant made by the Development Loan Fund to an entitlement community to one hundred and fifty percent.  A requirement is added that the principal and interest on loans made by entitlement communities with funds granted from the Development Loan Fund should be repaid to the fund consistent with the requirements of federal law.

Fiscal Note:    Attached.

House Committee ‑ Testified For:     David Moseley, City of Seattle Department of Community Development;  Gregg Dohrn, Washington State Department of Community Development.

House Committee - Testified Against: None Presented.

House Committee - Testimony For:     The existing match requirements are inconsistent with the requirements of the program for other communities.  Block grant funds for Seattle are fully committed to providing basic survival services for low-income citizens.  The program will be more effectively utilized by entitlement communities with a reduced matching requirement.

House Committee - Testimony Against: None Presented.