This summer, the Department of Commerce (Commerce) launched a new initiative as a pilot program to encourage the voluntary consolidation of local revolving loan funds (RLFs) into Regional Non-Profits (RNPs). Governor Doyle's Grow Wisconsin Plan charges Commerce with developing regional strategies to catalyze more effective economic growth and vitality. In addition, with ever-shrinking resources, Commerce as well as local governments must find creative and cooperative ways to work smarter and better.

Over time, Commerce has capitalized RLFs in non-entitlement areas by directing the repayment of block grant loans to these funds. Such RLFs, administered primarily by counties or local municipalities, use the repayments to make other small loans to local businesses. The funds in these local RLFs currently retain their federal character, and the strings that come with it. More than 200 of these RLFs now exist.

There is no doubt that the RLFs have dramatically increased local economic development capacity in the Wisconsin. However, a significant amount of RLF funds is underused (approximately $35 million statewide). In addition, the average balance of many RLFs greatly exceeds the average level of activity - only 30% of the available RLF dollars are actively working in Wisconsin communities.

If the pilots are successful, Commerce could recognize 8-12 regions. Following are some broad guidelines developed for the initiative:

• The RNPs should be self-identifying - but must be multi-county, and large enough to achieve critical mass.
• By directing both federal and local loan repayments to Commerce-recognized RNPs, these funds could be defederalized.
• The regions should utilize existing non-profit ED service providers to organize and administer the RNP.
• Participants in the RNP must commit the entire RLF fund to the RNP.
• Entitlements are encouraged to join with acceptable funding contribution.
• RNPs must ensure fair representation with strong private sector involvement.
• Commerce will retain oversight, approve administrative structure, monitor activity to ensure fair distribution geographically and by activity, provide technical assistance and possibly help to accelerate the defederalization of the RNP funds.

There are many benefits for Wisconsin businesses and communities. The initiative will:

• free the bulk of the monies now in RLFs of their federal character, allowing regions broader and more flexible use of them.
• reduce the amount of funds continuing to be un- or under-utilized;
• encourage local governments to work together at a regional level;
• leverage other ED resources;
• increase and streamline management capacity of the RLF funds;
• reduce onerous administrative burdens and spread the risk.

For more information, please contact Amy Cumblad at (608)266-2688.

- Amy Cumblad

The newsletter is issued electronically every other month.

Please send comments or questions to Barbro McGinn, editor.