xml:space="preserve">
xml:space="preserve">
Advertisement
Advertisement

County funding for James Rouse Entrepreneurial Fund in question

A nonprofit that helps procure financing for Howard County small businesses is facing its second straight year without county government funding — a loss board members say would essentially end the organization.

"If we don't get the funding, we're for all intents and purposes done," said Anthony Tangires, a member of the James Rouse Entrepreneurial Fund Board of Directors.

Advertisement

Tangires, board member Timothy Lewis and JREF portfolio manager Martin Madera asked the County Council at a public hearing last week to restore funding to their organization. Their request for a $100,000 county grant spiraled into a nearly hour-long discussion about JREF that left all parties with more questions than answers.

JREF helps small businesses, mostly start-ups, that do not qualify for traditional commercial lending get financing.

Advertisement
Advertisement

Since its inception in 1992, JREF has received between $50,000 and $100,000 annually through the county's community services grant program, to help pay for its operational costs. Previously, much of that money went to the executive director's salary, Tangires said.

Last year, County Executive Ken Ulman, decided to move JREF to the Economic Development Authority's budget to centralize economic development efforts through the EDA. That move ultimately left JREF without county funding.

Lewis said the organization has not been able to take on new clients and has had to tap into reserve funds to pay for the staff and resources necessary to wind down its existing portfolio.

Now, JREF is hoping to start a new loan fund, Lewis said, and would like county funding for staff and resources needed to raise capital and develop that fund. Not having county funding this past year, he said has "stymied" that effort.

Tangires told the council that JREF board members "spent the better part of a year trying to figure out what transpired" last year.

The council, too, seemed confused about what happened to the $72,000 JREF requested in fiscal 2012.

'Year of transition'

County budget administrator Ray Wacks said the council, in last-minute budget moves, cut some funds to the EDA, and when the EDA crafted its final budget, they chose not to use any of the remaining funding for JREF.

"This was a year of transition for EDA, and they had to re-evaluate their priorities," he said.

Much of the transition came with Laura Neuman taking over as chief executive officer just before Ulman released his fiscal 2012 budget plan in April 2011.

Asked why JREF did not end up with funding in fiscal 2012, Neuman responded in an e-mail: "There was discussion of putting $72,000 into our budget last year (that had previously been provided directly to JREF) with the intention that the EDA would make an informed decision on whether or not to use those funds for JREF. ... Ultimately, we did not receive those funds and thus, did not render a conclusion on allocation."

Council members, meanwhile, had different recollections. Most seemed to believe the money they cut from EDA was for vacant positions and that JREF would still be funded. Ellicott City Democrat Courtney Watson said she thought the EDA, a quasi-government agency, has the autonomy to choose how to use the funds the council approved for the EDA.

Whatever happened with the JREF funding, Watson said after the council meeting, "it should not (still) be a mystery."

Funding unlikely

Solving the mystery would likely be a moot point if there were funding for JREF in the proposed fiscal 2013 budget, but it appears there is not.

"It's our understanding that EDA is considering whether to provide any funding or not," Lewis said.

Tangires said JREF sent a letter to the county executive asking him to restore their funding. The administration's response, he said, was that the nonprofit needed to ask the EDA. JREF responded again, asking for funding independent of the authority, Tangires said.

"We were redirected to EDA again, (but) did not necessarily see a positive response" Tangires said.

The nonprofit should be independent of the authority, Lewis added, because the EDA typically is seeking to attract larger businesses.

"We feel that the market that we serve is underserved by EDA presently," he said.

But as Watson pointed out, the council does not have the capacity to add funding to the budget without the county executive's assistance.

"We don't hold the purse strings in this situation," she said.

Asked if Ulman would consider funding the Rouse fund under the community services budget in fiscal year 2013, county spokesman Kevin Enright said in an email: "No because we believe it's a matter best handled by EDA."

Neuman in her email said: "The EDA has not made any specific appropriation for JREF in FY 2013 from the EDA, nor has a request been made to the EDA."

Changes wanted

Council member Greg Fox said "the one push back I get from the EDA ... is we're concerned about providing the money to (the Rouse fund) based on the recent losses" and asked what changes JREF has made.

"We've changed management and oversight," Lewis said.

The nonprofit brought in Madera, who had 38 years experience working in the banking industry, to serve as its portfolio manager and help it recover from the hits it took under the recession.

"As the recession started in 2008, we found that many of the people that we had loaned money to were finding that their profits weren't what they were before," Madera told the council.

Funding for the loans JREF doles outs to small businesses comes from a general fund its eight member banks participate in, Madera said. If a business defaults on a loan, the banks would be on the hook for the losses.

After the recession started and more businesses starting defaulting on their loans, banks decided they no longer want to share that kind of risk, Madera said.

"As we move forward, our intention is to fund the loans through the individual banks," he said.

Whether those changes will be enough to impress the EDA remains to be seen.

Asked if there is something the Rouse fund can do to convince the her agency to fund their organization, Neuman said in the email: "The EDA previously made a request of JREF to provide detailed history on the organization, including past performance and use of funds. To date, we have received some information requested but there are several gaps in the information provided as a result of our request."

Advertisement
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement