Biparty bill aims to provide equitable access to credit for rural and underserved communities

A bipartisan group of lawmakers led by Rep. Jacquelin Maycumber (R – Republic) presented a bill to the House finance committee that would create a program within the Commerce Department to boost economic development in underprivileged communities that do not ‘have historically no access to capital.

The Equitable Access to Credit program would provide grants to Qualified Credit Institutions (QLIs) to provide access to credit to these underserved, largely rural communities.

Most of those rural areas that have the highest unemployment and lowest wages in the state are really struggling with businesses and getting people to get loans, ”Maycumber said. “There are good ideas, but it’s a real challenge to say, ‘I’m going to start a business in one of the most rural and economically depressed areas of Washington state.

This bill is the culmination of work over three biennia.

To be eligible for the program, QLIs would need to be recognized by the U.S. Department of the Treasury as an Emerging or Certified Community Development Financial Institution (CDFI) – funds that use federal dollars alongside private sector capital to generate income. growth in economically disadvantaged communities. .

Washington State has limited economic development tools, mainly because of its narrow constitutional language of credit, ”said Chuck Depew, Western Team Leader at the National Development Council. “Like most states, Washington uses its tax policy to steer economic benefits in a number of ways. We are constitutionally challenged to collect tax revenue and then direct it to private efforts. Instead, we choose not to collect tax revenue to achieve this goal. ”

Instead, Depew notes, Washington is boosting economic development with various business loans for different sectors. For example, the Production incentive program is used to support the state’s film industry.

The state is also deferring the collection of property taxes that support the development of affordable housing and the redevelopment of historic properties. HB 1015 is modeled on this tax credit. But instead of just cutting business costs, the funds would go to support CDFIs.

CDFIs generate growth by providing access to basic financial services, affordable credit and investment capital. These could be banks, credit unions, loan funds, microcredit funds, or venture capital providers.

Momentum to support CDFIs follows release of Payroll Protection Program (PPP) data showing that many minority-owned businesses did not receive relief loans until the final weeks of the PPP, while many other white-owned businesses were able to obtain loans earlier in the program.

There are currently 26 CDFI in Washington State. While several are headquartered in the Seattle area, Depew says CDFIs operate in multiple areas of the state. Having a flexible source of capital would allow them to support programs in areas of the state where CDFIs are not headquartered.

The grants would be funded by taxpayers, who would be eligible for a B&O tax credit for contributions to the program. No taxpayer could claim more than $ 1 million in credit in a calendar year, including a credit carried over from a previous calendar year. The maximum B&O tax credit for the entire program would be $ 8 million per year.

At least 75 percent of grant funds would be earmarked for rural communities, defined by the bill as counties with fewer than 100 people per square mile or less than 225 square miles.

When you see death on the main street, death in small businesses, you see this struggle from schools to families down there. Therefore [this bill] is really to continue to build that framework that enables people to achieve the American Dream, ”Maycumber said.

Maycumber says the Colville tribes in his district have been pushing for this policy for years.

A 2016 study on Access to Capital and Credit in Indigenous Communities, published by the University of Arizona and funded by the CDFI Fund, found that economic development in Indigenous communities has been constrained by a lack of capital.

According to Amber Schultz-Oliver, Executive Director of Affiliate Tribes at NW Indians Economic Development Corp., Native CDFIs have made strides in overcoming challenges to provide capital to Indians.

The challenges identified by the report include an increased number of borrowers when CDFIs are better known in tribal communities; increased demand for long-term loans after borrowers have strengthened their credit histories; and increased demand for larger loans.

These are good problems to have. But many of us are small with only a handful of employees and less than $ 5 million in assets. It is difficult and expensive to attract low cost capital. The adoption of HB 1015 would be a tool to facilitate equitable access to credit to indigenous CDFIs, which in turn directly supports access to capital and economic development in tribal communities, ”said Schultz-Oliver.

Commerce would be required to staff a review committee to award program grants. The committee would have a good geographical balance of committee members with experience in rural development.

Beginning in 2021, the Department of Commerce would also be required to submit an annual report to the Legislature that includes the list of grant recipients, the total amount of scholarships and the required matching amounts. and aggregate information on loans and investments provided by QLIs receiving grants

Keith Swenson, deputy deputy director of the Commerce Department’s Office of Economic Development and Competitiveness, said that while the agency is neutral on the bill, it would complement other efforts to bring resources to small businesses and hard-hit communities.

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