Auditor: Stop funding CDC program

It really depends on who you ask.

Locally, three CDCs are going strong. The Springfield Finance and Development Corp. has made 28 loans worth $1.6 million since it began in 1998.

Ann Peck, Springfield community loan officer, said the SFDC program is beneficial as affordable gap financing, especially for projects that wouldn’t normally be able to get money through other city loan programs.

“The city loan program – the 5 percent fixed rate program – can’t cover business startup costs or working capital,” Peck said. “It’s all about real estate.”

Great Southern CDC has financed two projects since it began in July 2004: the new headquarters for the Community Foundation of the Ozarks and a house remodel at 1510 N. Grant, a joint venture with Urban Neighborhoods Alliance.

UNA also has financed a home remodel at 801 N. Main that’s currently in progress.

But the state auditor says the program, at least on the state level, is not worth the investment.

An audit completed in the fall – standard protocol for all state tax credit programs – recommended that the Missouri state legislature allocate no new funds for the program. Since the state CDC began in 1994, the program has provided $6 million in tax credits for 12 projects across the state, including one $750,000 tax credit in Greene County.

The report, which is purely a cost-benefit analysis, says that the state program is not getting enough return on its investment, both in revenue and in new jobs created.

Findings also say that the program is not adequately supervised.

“Program guidelines required CDCs to submit annual reports, job creation reports and a listing of all investors in the CDC, as well as the state to perform random audits of the job creation reports,” the audit says. “But state officials have not enforced reporting requirements and random audits have not occurred.”

While the local operations operate independently of the state program, local CDCs that are not-for-profit are eligible to receive the tax credits from the state’s CDC program. It’s unclear whether the state legislature will follow the auditor’s recommendations; no bill has been introduced to that effect at this point.

Brian Fogle, head of the Great Southern CDC, said he was not aware of the audit – but he was not terribly surprised by the recommendation.

“There was a statewide association – that program started several years ago, and it sort of fizzled out,” Fogle said. “The association was dominated by St. Louis and Kansas City CDCs, which is not surprising because that’s where the bulk of the CDCs were.”

The CDC idea, though, is still a viable concept, according to a written response to the report sent to the auditor’s office by the Missouri Department of Economic Development. DED says the program is about more than strictly dollars and cents.

“The methodology and audit review represent a snapshot of the CDC Tax Credit program results,” said DED Director Greg Steinhoff in the letter. “As such, the long-term impact of the projects – social benefits, neighborhood revitalization, future job creation and local economic returns such as property taxes – may not be depicted.”

Great Southern’s Fogle says one need look no further than the success of other CDC programs across the country.

“Years ago I was part of a Local Initiative Support Corp. that was set up to support CDCs, and they had affiliates that worked to help each other develop capacity and expertise, and it was just eye opening to me to see the great things that these CDCs are doing throughout the country,” he said. “

(They’re) becoming very sophisticated in addressing economic community development and social issues. We’ve never had that strong organizational network here in Missouri.”

He added that the strongest CDC networks tend to be in places that have experienced extreme poverty for extended periods of time – the Mississippi River delta, the Appalachian Mountains and the U.S.-Mexico border, for example.

“There’s probably a cause and effect – those programs are better and stronger because they needed to be,” Fogle said. “That was the hope for what that program was going to do here in Missouri, and it never met the promise. But the concept is still good, and the need is still there.”[[In-content Ad]]