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Mesa eyes federal loan to aid development

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Posted: Tuesday, August 19, 2008 10:40 pm

Mesa is looking to create a multimillion-dollar loan pool using a federal program to boost economic development and job creation in the city.

The City Council is exploring the federal Section 108 loan-guarantee provision to provide guaranteed loan funds up to $17.5 million.

The program is typically used for projects that generate revenue that can be used to repay the loan, according to city officials.

The program is a loan, not a grant, targeted to develop economically challenged areas.

The Section 108 program falls under the Community Development Block Grant program administered by the U.S. Department of Housing and Urban Development.

At Monday's council meeting, Lois Yates, representing the Mesa Chamber of Commerce, spoke in support of the program, saying that with scarce resources for local and state economic development, "it makes sense to take advantage of any federal funds that are out there to our advantage."

The loan program has been used in other parts of the country, including a biotech park built near Johns Hopkins Hospital in Baltimore, Md., which helped generate private investment, Yates said.

Brian Campbell, chairman of Mesa's Economic Development Advisory Board, noted that the program is a means for the city to apply for federal dollars and then re-loan them to eligible participants at no cost to the city.

That's because thus far, there have never been any payment defaults that required HUD payments to be honored by a city.

Mesa economic development director Bill Jabjiniak is banking on that perfect history of no defaults due to stringent loan guidelines to turn this into a win-win program.

Jabjiniak said the city is particularly focusing on areas such as the vacant Fiesta Village shopping center on Alma School Road and Southern Avenue to establish businesses and help revitalize it.

The maximum repayment period for the loan is 20 years.

The loan terms will be evaluated on a case-by-case basis.

The program does not impact the General Fund, nor will it impact the use of current block grant program dollars, Jabjiniak said.

For-profit and nonprofit developers, as well as owners of blighted property, are eligible to benefit from the program.

Jabjiniak pointed to Tempe's use of Section 108 to develop Tempe Marketplace shopping complex.

According to the HUD Web site, that project was estimated to create 2,140 jobs, "at least 51 percent of which would be held by or made available to low- and moderate-income persons."

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