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February 25, 2021 <br /> TO: Mayor Julie Moore Wolfe & Members of the Decatur City Council <br /> FROM: Scot Wrighton, City Manager <br /> RE: Revolving Loan Fund Defederalization <br /> For many years the Community Development Corporation of Decatur (CICD) has administered <br /> low-interest revolving loan funds(RLFs)to help small businesses and new start-ups.The revolving <br /> fund was first created using money from the U.S. Economic Development Administration (EDA), <br /> and as a consequence is subject to rules and audits of the Federal Government.The CICD has its <br /> own loan review committee and has made numerous loans over the years. Lately the CICD's RLF <br /> has not seen as much use of these loan funds because the low interest rate is not worth the cost <br /> of compliance with EDA loan rules, so some prospective loan recipients elect to seek project <br /> financing from alternative sources. <br /> Recently the EDA elected to permit certain long-standing RLFs to"defederalize", meaning as long <br /> as the host local government agrees to certain general requirements,* the Federal Government <br /> will end its traditional oversight.Theoretically,this could mean that the RLFs resources are more <br /> widely used and accessed in the future. <br /> The city and the CICD are still researching the process for defederalizing the local RLF and how <br /> this change could enhance the support provided by the city and the CICD to local small businesses <br /> and start-up ventures, and to what extent the city can develop its own rules for issuance of RLF <br /> borrowing. Any change will require a formal agreement and resolution of participation between <br /> the city and the EDA, which must be subsequently approved by the City Council later in 2021. In <br /> the meantime, since the CICD has long served as the administrator of the RLF, I recommend that <br /> their executive director be designated as the city's authorized agent for purposes of developing <br /> and negotiating a "defederalization" agreement. The EDA requires that this designation be <br /> formalized by City Council resolution for this process to continue.The CICD Executive Director is <br /> Jim Seaberg. <br />