R2021-85 Resolution Authorizing the City of Decatur's Participation in the Revolving Loan Fund Defederalization of the R.L.F. Act

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April 29, 2021 TO: Mayor Julie Moore Wolfe & Members of the Decatur City Council FROM: Scot Wrighton, City Manager RE: Resolution Defederalizing the City's Revolving Loan Fund In 2020 Congress passed and the President signed the"Reinvigorating Lending for the Future Act" which authorized the U.S. Commerce Department and the Economic Development Administration to release Federal interest in, and regular oversight of, local revolving loan funds under certain terms and conditions. The city of Decatur's revolving loan fund qualifies for this release. On March 1, 2021, the City Council adopted a resolution authorizing Mr.lames Seaberg to negotiate with the U.S. Economic Development Administration on the city's behalf to "defederalize" the city's revolving loan fund (RLF). The RLF is administered by the Community Investment Corporation of Decatur(CICD); Mr.Seaberg serves as executive director/president of the CICD. For many years the CICD has administered low-interest RLFs to help local small businesses and new start-ups. Decatur's primary revolving loan fund was first created using money from the U.S. Economic Development Administration (EDA), and as a consequence it has been subject to rules and audits of the Federal Government. The CICD has its own loan review committee and has made 74 small business loans since 1984,totaling approximately$6.4 million. Of these, 11 have failed, with an aggregate value of approximately $400,000. Lately the CICD's RLF has not seen much use of these loan funds because the lower interest rate is not worth the cost of compliance with EDA loan rules; therefore, many prospective loan recipients elect to seek project financing from alternative private sources, or not proceed with their plans.The 2020 Congressional action seeks to address this problem in a unique manner—defederalization of awards and elimination of most federal oversight. In short, this is a permanent delegation and grant of administrative discretion to local government over all existing RLF balances. The current RLF balance is approximately$2.6 million inclusive of cash balances and loans payable. Once approved,the EDA will permit certain long-standing RLFs to"defederalize",meaning as long as the host local government formally agrees to certain general requirements(use the money for economic development, apply Davis-Bacon rules where applicable, etc.), then the Federal government ends its oversight processes and all authority over individual applications, and the Federal government's reversionary interest rights cease. This will end compliance requirements with OMB regulations, most EDA regulations, and several other Federal reporting requirements. I believe this will increase small business access to the RLF in the future. City and CICD staff will submit the application and supporting documentation, but approval of the attached resolution is required for the city to proceed.