Lessons Learned from Implementing Regional and Local Disaster ...

Lessons Learned from Implementing Regional and Local Disaster Recovery Loan Programs

CHUCK WEMPLE

Th e H- G A C R e g i on    

6.6 m illion people 12,500 square m iles 13 count ies 120 cit ies

Hu r r i c an e I k e

Hu r r i c an e I k e I m pac t A r ea

I k e Dam ag e

I k e St or m Dam ag e  Over $7 billion dam age -region  Over 200,000 hom es dam aged or dest royed – $2.7 billion  $2.5 billion in crit ical inf rast ruct ure  Roughly $4 billion in aid

W h y H- G A C ?  Responsible f or allocat ing CDBG Disast er Recovery Funds  EDA Econom ic Developm ent Dist rict  Experience w it h SBA504 loans and m icro-f inancing

Ou t r eac h an d A c t i on  Out reach t o SBA Borrow ers • Deferrals – breathing room • Referrals – disaster assistance

 Convened Econom ic Developm ent Dist rict • Revised CEDS • Applied for EDA Loan Fund

 Part nered w it h Local Developm ent Corporat ion • Provided local funds to most impacted city • Enhanced private loan fund

 Provided 501c(3) m echanism  Collaborat ed w it h St at e on CDBG Eligibilit y

Key Par t n er s  Econom ic Developm ent Dist rict  Local Econom ic Developm ent St af f  Com m unit y Banks  Sm all Business Developm ent Cent ers

Var i et y of Pr od u c t s  Bridge Loans • • • • • •

banks cover gap - insurance short-term fixed rate existing customers default < 1% $40 million

 Sm all loans • • • • •

Local/donations unsecured 5-10 year term fixed rate default 43% $220 thousand

 Forgivable loans • • • • • • •

CDBG-DR 1 year term, zero interest performance based zero payment zero interest Default 2% $2 million

 M edium loans • • • • • •

EDA secured 10-15 year term fixed rate Lender of last resort Default 27% $3 million

Ch al l en g es  Financially st rong applicant s served by banks  Less experienced applicant s uncom f ort able w it h requirem ent s of f ederal loans  Lack of collat eral f or secured loans  Large service area dif f icult t o cover  Case m anagem ent int ensive

Ch al l en g es  CDBG Disast er Recovery Funding • Prevent duplication of benefits • Meet at least one national objective

 EDA Funding • Pre-pays – watch the fund balance

 Unexpect ed com pet it ion  M anaging expect at ions

Ob s er v at i on s  Sm all loans quickly af t er t he st orm have t he m ost im pact  Easy t o becom e t he “ bad deal” clearinghouse  Three t ypes of perf orm ance • Outperformed and paid off early • Underperformed and defaulted • Doing fine and on time

Fu t u r e Con s i d er at i on s  Build Capacit y • Regional standards and guidelines • Local marketing and disbursement

 Share Account abilit y  St rive f or sm all f orgivable-loans • Partial v. full • 1-3 year • simple security agreement