HOUSE BILL REPORT

HB 1844

BYRepresentatives Rasmussen, Schoon, Vekich, Hargrove, B. Williams, Doty, Holm, Moyer, Wineberry, Heavey, Grant, Dorn, Sayan, Cooper, Rayburn, Sutherland, Silver and P. King 

Providing additional funds to the development loan fund.

House Committe on Trade & Economic Development

Majority Report:  Do pass. (14)

      Signed by Representatives Vekich, Chair; Wineberry, Vice Chair; Beck, Cantwell, Doty, Fox, Heavey, Holm, Kremen, McLean, Moyer, Rasmussen, Schoon and J. Williams.

Minority Report:  Do not pass. (1)

      Signed by Representative Braddock.

House Staff:Stephen Hodes (786-7092)

AS REPORTED BY COMMITTEE ON TRADE & ECONOMIC DEVELOPMENT

FEBRUARY 3, 1988

BACKGROUND:

The Legislature established the Development Loan Fund program in the Department of Community Development in 1985 to assist communities in their responses to economic dislocation, and additional changes were enacted in the 1987 legislative session.  The program utilizes federal Community Development Block Grant funds administered by the state to make grants to local governments for loans to businesses, primarily in economically distressed areas of the state.  The principal and interest on loans made by local governments to businesses are repaid to the Development Loan Fund to be utilized to make further loans.  A seven-member loan committee appointed by the governor reviews and approves applications for loans.

The program requires that projects proposed for financing must be in a distressed area, be expected to increase or maintain employment, and have benefits accruing to residents of the distressed area.  Changes enacted in 1987 allow the program to utilize up to 20 percent of the funds available in the Fund to retain or create employment in areas of the state which are not economically distressed.  They also provide that if monies are not fully expended in a biennium, up to 20 percent of the funds reserved for distressed areas be made available to local governments in distressed areas that operate existing economic development revolving loan funds.  The Loan Committee was also directed to develop performance standards for judging the effectiveness of the loans made by local governments.

The Development Loan Fund has financed 23 loans to date, committing $5.5 million of the capital in the Fund.  An additional $69 million in private funds has been leveraged from private sector lenders participating in financings with the Fund.  All but one of the loans made by the Fund to date have been made in economically distressed areas, and financings have included new firms, expansions, and reopening of closed facilities or intervention prevent threatened facility closures.  There is currently $2.5 in funds remaining in the Fund, and these are expected to be committed to financings as early as April of this year.

SUMMARY:

The sum of $8 million is appropriated to the Department of Community Development from the State Building Construction Account for the purpose of recapitalizing the Development Loan Fund established under Chapter 43.168 RCW.

Appropriation:    $8 million to the Department of Community Development.

Fiscal Note:      Requested February 1, 1988.

House Committee ‑ Testified For:    Gregg Dohrn, Department of Community Development; Joan Machlis, Department of Community Development; Mary Jean Ryan, Evergreen Community Development Association; Pat Dunn, Washington Jobs Coalition.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    Development Loan Fund considers whether loans are in distressed areas, whether they would assist in the diversification of the local economy, and whether they would maximize the availability of private funds in loan financings.  The Fund has leveraged $26 million in private financing to date, including two major employee-owned projects.  Program has been extremely effective.

House Committee - Testimony Against:      None Presented.