Denver business loan program isn’t generating jobs
By Tillie Fong 
| July 29, 2009 | 7:29 AM
How many jobs does $5.3 million create?
Thirty-eight, if it’s through Denver’s business loan program offered by Seedco Financial Services.
“Under the terms of the contract, they’re supposed to create jobs,” said Jeff Romine, chief economist for the Denver Office of Economic Development. “That’s one of the metrics for their performance, and we don’t think we’re getting results.”
The dismaying data came during a briefing that Romine gave Tuesday to the City Council’s Neighborhood, Community and Business Revitalization Committee.
Two years ago, Denver contracted with Seedco, a community-development financial institution based in New York, to create and administer an innovative loan program to boost economic development.
Seedco matches and leverages the $3 million a year that it gets from Denver through federal block grants. Aside from making loans to start or expand small businesses and nonprofit organizations, the program also was expected to create a certain number of jobs.
“We get CDBG (community development block grants) and we select them (Seedco) to implement this particular program,” Romine said. “We have to follow the rules and regulations for federal programs.”
The federal requirement is that one new job be created for every $35,000 loaned out, and the city extended that rule to Seedco.
Since July 2007, Seedco has made 17 loans totaling $5.3 million. For that amount of money, 153 jobs should have been created, but Romine said he could verify only 38.
Seedco figures are slightly different. It reports that it closed 16 loans worth $5.6 million between 2007 and 2009, and created 39 jobs out of the 236 expected.
Lesia Bates Moss, president of Seedco, admitted Tuesday that “we have fallen short of expectations in meeting performance metrics relating to job creation.”
She said it is difficult to meet the requirement because it is up to the individual businesses or community groups that borrow the money to follow through.
“The businesses tell us their intention to add jobs, and we follow up,” she said. “We can’t force them to generate new jobs.”
However, Bates Moss said that the company will try to identify projects that would have a multiplier effect on job creation.
One example is building a movie theater in an area that doesn’t have one. Aside from the people hired at the theater, other businesses such as restaurants may move into the area, creating more jobs.
But, she noted, “it is impossible to estimate the exact number of jobs that will be added.”
She also said that the recession has had an impact, since some businesses may have planned to add jobs when they took out the loan but then decided to hold off on hiring when the economy went south.
Romine noted that organizations that borrowed money from Seedco had two years from the date the loan closed to create the jobs. So, for most of the loans, the businesses still have time to meet the requirements before the deadline.
In the meantime, city officials and Seedco representatives will hash out the details for a new 2010 contract, which will be presented to the City Council in November.
Romine said that the Seedco loan program does benefit Denver because it complements an existing program with the Office of Economic Development.
“We tend to do smaller loans and for different things,” Romine said. “Our loans tend to max out at $350,000.”
In contrast, the Seedco loans range from $500,000 to $2 million.
“They stretch the dollars that we have and they push the money out,” he said. “There is a lot more capital available for small businesses and developers, and access to capital is critical for a community for economic development.”
denver, economy, Jeff Romine, jobs, Lesia Bates Moss, office of economic development, Seedco Financial Services
