Providence Loan Fund Created Few Jobs Under Cicilline
Friday, July 27, 2012
The Providence loan fund cited by the Department of Housing and Urban Development (HUD) as having an “approximately 60 percent” default rate over the last decade also struggled to maintain records of the number of jobs loan recipients created, according to a report issued by HUD last week.
In its findings, HUD suggested that 17 Providence Economic Development Partnership (PEDP) loans that were provided specifically for job creation failed to create any jobs for “low and moderate income people,” which was required for businesses receiving federal Community Development Block Grant (CDBG) funds.
“Of the tiles reviewed, documentation of job creation or retention was either lacking or missing,” the report stated. “As a result, these loans were used to benefit businesses without demonstrating that they also provided the intended benefits to low and moderate-income people.”
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTBut a closer look at loans provided between 2003 and 2010 under former Mayor and now Congressman David Cicilline paints an even gloomier picture. According to a loan report provided to GoLocalProv last fall, less than three dozen businesses reported creating new jobs under Cicilline. During that time span, approximately 100 loans were distributed, although not all were intended for job creation.
Some of the top job creators have already gone under.
The Hi-Hat, a downtown jazz club that often hosted political fundraisers, received a $250,660 loan a few months after Cicilline became Mayor in 2003. The club reported creating 39 new jobs after receiving city funding, but it closed last year.
Stanley’s Famous Hamburgers reported creating 18 jobs after receiving $100,000 in 2008, but the restaurant has also closed its doors and last month, the PEDP’s board of directors voted to write off the $84,079 the business still owed the city.
Cleanscape, a South Side recycling company that defaulted on its $410,000 loan reported creating 15 jobs before going into receivership.
“Terribly Mismanaged”
In addition to raising questions about job creation, HUD’s report found that the PEDP had little oversight over funding recipients, failed to meet requirements for financial management standards and displayed questionable use of federal funds.
Last month, more than two dozen loans were written off just over eight months after GoLocalProv first reported that a quarter of all loans issued by the PEDP were at least 90 days past due and that the city would be out over 3 million if the funds couldn’t be recovered.
“The message I'm getting is that PEDP was terribly mismanaged during the Cicilline administration,” said activist Judith Reilly, who has been raising questions about the city’s revolving fund for several years. “Basically, I would not trust any job creation or retention reports provided by the City for that period. As far as I'm concerned, zero jobs were created or retained unless sufficient documentation is provided to and vetted by an objective examiner.”
Politics Getting in the Way
But advocates for the loan program maintain that its risky nature (a borrower is supposed to be turned down by two banks before applying) and the economic recession are to blame for the loans struggling to create jobs.
“Many small businesses and new business ventures struggled when the recession hit and continue to face really difficult times,” said Cicilline spokesperson Nicole Kayner. “David Cicilline, as Mayor, was very aggressive in promoting economic development and bringing new investment to the city.”
As chairman of the PEDP, Kayner said Cicilline implemented reforms within the agency when he took office, including establishing a loan committee of bankers and business experts who reviewed loan applications based on board-approved criteria and made loan recommendations to the full board.
Kayner accused Congressman’s opponents of politicizing the issue.
“The PEDP loan program is only available to borrowers that were denied credit by traditional banks and was always intended to be a lender of last resort and during a difficult recession many businesses were not able to weather the challenging economic climate,” she said. “David's opponents know that this is going to be a tough race and are trying to score political points by launching reckless and irresponsible accusations.”
Doherty: More of the Same
But Cicilline’s critics say the PEDP is another blemish on the Congressman’s record during his eight-year tenure as Mayor. Republican Congressional candidate Brendan Doherty’s campaign manager Ian Prior accused Cicilline of “pushing the same unsuccessful economic agenda that has left the City of Providence in so much turmoil and is now dragging the rest of Rhode Island's economy down as a result.”
"This clearly shows that David Cicilline's economic policies simply do not work,” Prior said. “Whether we are talking about CAPCO Steel, PEDP, or mismanaging the City of Providence overall, the result is always the same: Taxpayers are left on the hook for Cicilline's failures while he moves on to his next job.”
Prior said Doherty is the only candidate in the race that realizes that the best way for the government to encourage job growth is to “level the playing field so that small businesses with no political connections can grow on the basis of their own merits, efforts, and ideas.”
“Brendan is committed to the free market ideals that allowed Rhode Island to become the birthplace of the American Industrial Revolution and will work tirelessly in Washington to put an end to the misguided political decisions that have led to the likes of Solyndra, PEDP, and CAPCO Steel,” Prior said.
Dan McGowan can be reached at [email protected]. Follow him on Twitter: @danmcgowan.
