Smiley proposes taking politics out of loan-making decisions through the creation of a new, independent loan program.
Brett Smiley today released the first piece of his economic development plan for Providence: reforming the structure of the Providence Economic Development Partnership by moving its revolving loan functions into a new, independent program. This puts the loan-making decisions in the hands of qualified underwriters while allowing the business and civic leaders who sit on the board to use their expertise to shape our city’s economic policies.
Cronyism and inefficient business practices have squandered the PEDP’s ability to strengthen Providence’s economy, and through the reforms Brett Smiley proposes, the Partnership will be better able to fulfill its mission of growing businesses and industries.
In the plan, Smiley notes, “City Hall still remains a place where you need to ‘know a guy’ in order to get something done, and PEDP is a shining example of this breakdown in fairness. Everybody should have an equal opportunity to gain access to PEDP loans regardless of their personal connections to City Hall.”
Smiley also adds, “Those who serve on the PEDP loan board are political appointees, and while they are often well-respected local leaders, few possess banking or loan underwriting experience. Instead of being asked to advise on broad economic policy, they are asked to rubber stamp staff recommendations on loans. This mismatch of expertise and expectation is the foundation of PEDP’s inefficient business practices.”
According to an October report, of the 136 current PEDP loans that have been granted, over one third are more than 121 days past due, leaving the city on the hook for over one million dollars in expenses. These loans are intended to be an investment in the city, not a gift to city businesses. No city, and especially Providence, can afford to dole out millions of dollars and never get repaid.
Smiley’s solution of separating the policy-making and loan-granting functions of the Partnership has several key advantages:
1. It allows for qualified underwriters to manage the loaning process.
2. It protects the city’s economy from unpaid debts and prevents leniency in missed payments as a result of personal relationships with those in city government.
3. It ensures equal access to loans, particularly for minority- and women-owned businesses that are disadvantaged by the current system.
4. It allows those who sit on the Partnership’s Board of Directors to advise on economic development strategy rather than make loan decisions outside their expertise.
5. It would include expanded offerings, such as a focus on micro-loans accompanied by training and technical assistance.
Smiley’s new approach is based on large measure on the best practices exhibited in Seattle, Washington. Since 1997, a neutral body called Community Capital Development (CCD) has offered loans, as well as technical assistance and training programs, to local small businesses based on business practices rather than political connections.
Smiley concludes, “By taking the politics out of these loan award decisions, we will refocus the Providence Economic Development Partnership on its true mission – helping to set the economic development direction of the City of Providence and making fiscally responsible loans that provide businesses and key industries with job-creating and growth potential with the capital they need to thrive.”
The full text of Brett’s plan can be downloaded here: Brett Smiley’s PEDP Reform Plan
or read below: