SENATE BILL REPORT

SHB 1156

BYHouse Committee on Trade & Economic Development (originally sponsored by Representatives Vekich, Schoon and Cantwell)

Revising distressed area requirements in the community revitalization team program and the development loan fund program.

House Committe on Trade & Economic Development

Senate Committee on Commerce & Labor

Senate Hearing Date(s):April 2, 1987

Majority Report:  Do pass as amended.

      Signed by Senators Warnke, Chairman; Smitherman, Vice Chairman; Anderson, Cantu, Sellar, Vognild, West, Williams, Wojahn.

Senate Staff:Jack Brummel (786-7428)

                  April 2, 1987

AS REPORTED BY COMMITTEE ON COMMERCE & LABOR, APRIL 2, 1987

BACKGROUND:

The Legislature established the Community Revitalization Team program and the Development Loan Fund program in the Department of Community Development in 1985 to assist communities in their responses to economic dislocation.  The Community Revitalization Team provides a coordinated state response to the problems of economically distressed communities by the Departments of Community Development, Trade and Economic Development, Employment Security, and the Commission for Vocational Education.  The program assists communities in developing strategies for economic renewal and helps to mobilize state resources to assist communities in responding to the consequences of economic distress.

The Development Loan Fund uses federal Community Development Block Grant money 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.  Projects must be in a distressed area, be expected to increase or maintain employment, and have benefits accruing to residents of the distressed area.

SUMMARY:

The definition of distressed area regarding the Community Revitalization Team is expanded to include communities or areas which have experienced long-term and severe loss of employment or the erosion of their economic base due to the decline of dominant industries.

As least 80 percent of Development Loan Fund monies must be made available to projects in distressed areas. Funds shall not be made available in non-distressed areas if less than $7.1 million is in the Development Loan Fund.

If objections are raised on the basis of unfair business competition, the potential impact of a project on similar businesses located in the local market area will be evaluated.  A grant may be denied if a project is not likely to result in a net increase in employment within a local market area.

If Development Loan Fund monies in a biennium are not fully expended, up to 20 percent of the funds reserved for distressed areas are available to local governments that operate existing economic development revolving loan funds in distressed areas.  Loans to businesses by development fund monies must meet the specifications for loans under the Development Loan Fund enabling legislation.  To the extent possible under federal law, the local government will convey the principal and interest on payments from outstanding loans made by the economic development revolving loan funds to the Development Loan Fund in order to make additional grants to local governments.

The Development Loan Committee is directed to develop performance standards for judging the effectiveness of the loans made by local governments.  Standards will include: job creation for low income individuals, job retention, local economic diversification, assistance in cases of employee buy-outs, and loans made which did not receive financing from commercial lenders.

SUMMARY OF PROPOSED SENATE AMENDMENT:

The amendment clarifies the Loan Committee's responsibilities and specifies that loans in non-distressed areas shall not be made if the net worth of the fund is less than $7.1 million.

Fiscal Note:      available

Effective Date:The bill contains an emergency clause and takes effect immediately.

Senate Committee - Testified: Greg Dohrn, Joan Mashlis, Department of Community Development