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After the collapse of plans to use a $10.2 million federal loan to fix up Toledo's downtown Berdan Building, city officials are now seeking to quadruple that money through a novel procedure that would put it toward a slew of other development projects.
As part of the proposal to be considered by city council, the Bell administration would apply to the U.S. Department of Housing and Urban Development for permission to use the $10.2 million loan capacity as a guarantee for other economic development loans issued through the Toledo-Lucas County Port Authority. Officials say the money could be leveraged using the port authority's own reserves and bonding capacity to enable the creation of up to $40 million in total loans.
If approved by HUD, the initiative would be the first of its kind in Ohio, and possibly the country, said councilman Adam Martinez who is leading the effort with the input of multiple agencies and community stakeholders.
"This is kind of a pilot project. If it works, I will intend to [pursue] more," the councilman said. "This opens a whole new flood gate of opportunity."
Thomas Winston, chief financial officer with the port authority, said using the federal funds as proposed would provide a secure way for the city to make more of an impact in its economic development efforts. The port authority has issued debt for 24 years and never had a default, he said, and it's unlikely the agency would ever need to actually draw on the federal dollars. The port authority insists on strict underwriting criteria when it lends money to projects, further protecting the funds, Mr. Winston added.
The federal loan, known as HUD Section 108, is backed by annual grants made to the city for community development. If a default occurred, the city would have to use some of those grant funds to pay back the debt.
The initial reaction from HUD to the proposal has been positive, Kathleen Kovacs, deputy director of the Department of Neighborhoods, said Wednesday. She said her department is also supportive of the plan. "We really need to have this opportunity for Toledo," she said. "We really feel that using this as a guarantee with the Lucas County Port Authority, … these funds would be protected."
Mr. Martinez said the loan money would go toward a range of economic development projects focused on job creation. This would include renewable energy, construction, manufacturing, and microlending for small businesses.
The Berdan Building would not receive any funding under the proposed program because it is seen as a housing project, the councilman said.
"It's huge. First of all, we don't have a microlending agency in northwest Ohio that I know of," the councilman said. "Number two, this provides an opportunity to really jump-start our economy."
Councilman Rob Ludeman also championed the idea. "We have a tremendous opportunity for development here," he said. "This, I think, as I've said before, should be a model for communities that have a port authority."
Contact Claudia Boyd-Barrett at email@example.com or 419-724-6272.