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Centralia Opportunity Fund

International City/County Management Association - 2008 - Program Excellence Award: Community Sustainability (10,000 - 49,999)

Summary

In the past, the city of Centralia, IL was unable to meet the needs of many of its existing or potential businesses because those businesses did not meet certain criteria of existing incentive programs. The Centralia Opportunity Fund has eliminated this problem, successfully retaining, attracting, and revitalizing business in Centralia. Under the terms of the fund, a developer, investor, or business may receive funds in the form of a grant, a forgivable loan, or a low-interest loan for a specific project within the city’s corporate limits. The amount and type of funding provided depends on the scope or scale of a project, and the project’s economic impact on the community in terms of jobs, investment, and tax-revenue generation.

Description

For years the city of Centralia, incorporated in 1859 as a railroad community in the heart of rural South-Central Illinois, benefited from coal mining, oil exploration, and small manufacturing. But in 1947, a coal mine explosion killed 111 miners, heralding the end of the mining era in the city. Soon after, the oil supply depleted, and Centralia faced some difficult economic times. Fortunately, it was able to attract some light manufacturing, which led to a stable population increase until the 1970s. But when globalization hit the area, many manufacturing jobs were outsourced. Between 1990 and 2004, Centralia documented a population decline of 6 percent and lost thousands of jobs.

Scrambling to retain the industries that remained but were in jeopardy of closing, the city also had to address its many vacant buildings, which created blight and added nothing to the tax rolls. Reevaluating its strategy for business retention and attraction, the city found that it was using the same incentives that it had been using for years, many of which did not address the needs of those industries that were leaving (or had left). While various economic programs existed in the form of loans, grants, tax credits, and technical assistance, each had its limitations. Tax increment financing (TIF) districts and enterprise zones had district boundaries; Community Development Assistance Program loans and grants had low- to moderate- income requirements; and each had its own project eligibility costs and scheduling restrictions. City staff needed to design a flexible program that could be used either with other programs or on its own.

In November 2006, the city council unanimously adopted the Centralia Opportunity Fund. Established as part of the 2007 budget process to promote, complement, and enhance economic and business development opportunities throughout the city for industrial, commercial, and residential projects, the fund began with a start-up injection of $100,000 from the general fund reserve, and added 70 percent of all unexpended, unencumbered contingency fund line items at the end of fiscal year 2006; each year thereafter, this same percentage of unexpended, unencumbered contingency fund line items would be transferred into the Opportunity Fund.

Under the terms of the fund, a developer, investor, or business may receive funds in the form of a grant, a forgivable loan, or a low-interest loan for a specific project within the city’s corporate limits. The amount and type of funding provided depends on the scope or scale of a project, and the project’s economic impact on the community in terms of jobs, investment, and tax-revenue generation. Funds may be used for a variety of purposes, including land acquisition; building demolition, construction, and/or rehabilitation; site preparation; extension of utilities; machinery and equipment; inventory; and working capital. Funds are not to be used for refinancing, for projects having an overall negative impact on the community, or for projects outside the city limits. The funding conditions include evidence of need and project feasibility, evidence of project financing, project schedule, operational/ agency approval, and applicant clearance.

The Opportunity Fund is a new instrument in Centralia’s economic development “toolbox,” greatly enhancing the city’s ability to attract development. It has been used nine times since its inception—for façade improvements to accommodate new businesses, for building renovations, for loans to facilitate business expansion or renovation, and in all cases for the concomitant creation of new jobs. One loan was for $56,000, another was for $25,000, and in four cases staff proposed using $5,000 for projects located outside the boundaries of the TIF district. These funds are attractive because they are more flexible to use and can be applied up-front for a given project. The rules and provisions governing their use ensure that they will be used judiciously and in conjunction with other programs.

In the past, the city was unable to meet the needs of many of its existing or potential businesses because those businesses did not meet certain criteria of existing incentive programs. The Centralia Opportunity Fund has eliminated this problem, successfully retaining, attracting, and revitalizing business in Centralia. Now, instead of being considered hostile to business, Centralia is receiving praise from the local business community for its proactive approach to economic development. The program will be used successfully for many years to come, and is sure to be replicated by other communities that are engaged in economic development.

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Tags: Economic and Community Development, Finance, Government and Politics





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