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BGR pushes city to change economic development fund policy

BGR pushes city to change economic development fund policy
by CityBusiness staff report

NEW ORLEANS — A government watchdog group wants the City Council to change the law dealing with the way money from an economic development fund is allocated. It’s this money that is being used to pay for enhanced street cleaning services in the French Quarter and downtown.

The Bureau of Governmental Research has sent a letter to Council Vice President Arnie Fielkow, who chairs the council’s Special Projects and Economic Development Committee. BGR President and CEO Janet Howard suggests the city abandon its practice of disbursing the fund to individual businesses and nonprofits and instead use it to pay for initiatives that benefit multiple businesses.

“The absence of clear strategic focus has led to vague, conflicting views among City Council members, interested applicants and members of the public of how the money should be spent,” Howard’s letter to Fielkow reads.

In December, its most recent allocation, the city allocated $2.34 million to 19 recipients, the bulk of which were individual businesses. The BGR letter, available at www.bgr.org, details which entities received the grant money.

In 1991, New Orleans voters approved a 2.5-mill property tax for economic development purposes and a 2.5-mill tax for a neighborhood housing improvement program. In 1995, voters rededicated half of each tax to a fund for capital improvements. The remaining 2.5 mills were rededicated to the Housing and Economic Development Trust Fund. That trust fund is available for economic development projects, neighborhood housing improvement and blight alleviation.

In 2008, the trust fund millage of 1.82 mills generated approximately $4.2 million. The city’s 2009 budget has $9.9 million for the EDF program, including unspent revenues from prior years, approximately $2.3 million to fund EDF grants approved in December 2008 and $2 million to establish a new public-private economic development partnership.

Parities involved on the business side of the private-public partnership proposal first feared the diversion of money from the EDF to French Quarter sanitation would jeopardize their initiative, but City Council members said there was still money in the fund to move forward with the effort. Mayor C. Ray Nagin has asked the private sector to contribute $400,000 toward the partnership.

Howard’s letter also covers reforming the grant program if the City Council decides against changing the law. Her suggestions include applying funds with a focus on business development and job creation, rather than community development, and avoiding excessively risky investments and grants that confer an unfair competitive advantage to businesses in industries such as hotels and restaurants.

The process should give preference to businesses that invest the money in public infrastructure, according to BGR, and expand the city’s economic base.

BGR also suggests applicants create a minimum number of new jobs in order to receive grant money.

Howard also recommends caps be set on individual awards. Jefferson Parish has set caps on its economic development fund of $500,000 per year, $3 million total per project and $5,000 per job created or retained. Smaller caps are probably needed in New Orleans given the size of its fund, she said.

BGR also questions the city’s authority to disburse the fund in a manner different than prescribed in ordinances voters approved in 1991 and 1995 that call for a five-year master plan for EDF expenditures. The City Council eliminated the master plan requirement in 1994, a move BGR criticized.•

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