Sunday, March 11, 2001

City loan program criticized

Five loans made last year; program cost $100K

By Robert Anglen
The Cincinnati Enquirer

        Taxpayers paid about $100,000 last year for a Cincinnati small business loan program that made five loans for a total of $470,000.

        But officials with the nonprofit Cincinnati Local Development Co. say their record is better than ever and they are now asking for a two-year contract extension.

        “This year we've already closed two loans. We will close two more in March and two more in April,” said Glenn Clevenger, company president. “Frankly, I'm pretty proud. I think I've done a good job.”

        City council members, however, say they had no idea the city was paying nearly $1 for every $4 loaned last year. They also didn't know that 95 percent of contacts made by the company last year did not close a loan.

        “It upsets me that we spent almost $100,000 to make five loans,” Councilman Pat DeWine said last week. “And it upsets me more that no one in the administration seems upset by it.”

        City Manager John Shirey did not return interview requests about the program. But economic development officials are recommending that the city approve the funds, saying the program is one of the most successful in the country.

        “To my knowledge, we have done quite a few loans,” said Eric Denson, economic development spokesman. “We are in the process of putting that information together for the council.”

        Mr. Clevenger said the number of loans closed does not represent the entire picture. Many more loans were approved last year than were funded because of high commercial interest rates, but he said now that the rates have softened, some of those past loans are being processed.

        “Last year was a bad year for funding, but I consider it a record year,” he said.

        Records show that CLDC made five loans in 2000, seven loans in 1999 and 14 loans in 1998. But Mr. Clevenger said he actually approved 19 loans last year, 11 in 1999 and 15 in 1998.

        “CLDC is the single largest (loan program) of any city in the nation,” he said. “There are 15 other city programs, and we made more loans than any other city.”

        The city gives $136,000 every two years to pay Mr. Clevenger's salary in addition to providing office space, phones and other office equipment, which officials say cost about $40,000 a year.

        Mr. Clevenger, who is overseen by a 10-member board of trustees made up of local banking officials and the city's economic development director, administers two primary loan programs.

        The first involves the Cincinnati Small Business Loan Fund, which provides city money to low-income residents. The other program involves federal Small Business Administration loans.

        Mr. Clevenger said that the SBA loans come attached with a 20-year fixed rate, which is why many who were approved for loans chose to hold off funding them until interest rates came down.

        He says he talked with about 100 people last year and says if you consider all loans approved his record is closer to a 20 percent success rate than 5 percent.

        Small-business loan programs are normally handled by county agencies. But Cincinnati officials for years have resisted consolidation with Hamilton County, which operates a similar program.

        “That makes no sense,” said Dave Phillips, former chief executive officer of Downtown Cincinnati Inc. “I tried to get them to consolidate. My concern was efficiency.”

        Mr. Phillips said the issue for him was the confusion generated by having both agencies providing the same services.

        “I thought there was a potential for people to get disgusted with the bureaucratic red tape,” he said, adding that in 1997 he tried hard to merge the two departments. “It didn't go anyplace.”

        Mr. Phillips said he had serious concerns about the lack of small business growth.

        Since he was hired in 1996, Mr. Clevenger said the number of loans has jumped considerably.

        “That's the reason they hired me,” he said, adding that the city did not want to consolidate. “Most of the (small business) growth was in the county, now it is in the city.”

        He also said the county wants to focus its attention outside the city.

        “That's the story I'm trying to get across to council,” he said.

        But it could be a tough sell for council members such as Phil Heimlich and Mr. DeWine, who now say the program should be reviewed.

        “This ought to be looked at very closely,” Mr. DeWine said. “They can't possibly tell us that we have to continue the city program because we're doing such a good job.”


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