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Forming community development corporation could be helpful, supporters say

Laurel, Jones County consider new financing tool

LAUREL — The City of Laurel and Jones County have seen more economic development activity from within than from the outside. Expansion of existing businesses, such as Howard Industries, has brought more growth and new jobs than attracting outside industries to locate in the area.

“Most of Laurel’s success has been from developing industries that are already here. That tells you something,” says Larry Thomas, a pharmacist with Thomas Pharmacy who is spearheading the proposed establishment of a community development corporation (CDC).

Thomas said that CDC could be a useful tool to help provide more opportunity for business growth and expansion to existing people in the community. Those people have strong ties to the community, and want to see it succeed.

“When you find people who love the community, their efforts are greater because they want the community to succeed along with them succeeding personally,” Thomas said.

Thomas said a CDC is a financial tool that would allow financing for minority and women-owned businesses which wouldn’t necessarily meet bank criteria for loans. The funding would allow local entrepreneurs a leg up to compete with big national companies.

Thomas said often economic development efforts change directions every time new administrations come into office, and there can be different approaches from the city and county. But support for the CDC has come from both the City of Laurel and Jones County.

“A lot of times economic development has to adjust to different political agendas,” Thomas said. “Jones County is kind of an unusual community in that the unincorporated population of the county is larger than the population of the incorporated cities. And that makes a difference in how you approach things. The biggest complaint from the business community in the past has been turf battles. Voters in the last couple of years pushed toward politicians who are willing to cooperate more with other entities. This effort to establish a CDC is one thing you see spinning out from that. Right now the county and city are trying to find things they can work on together.”

Instead of haggling over divisions, Thomas said the current county and city leadership are working cooperatively. He said it creates a better chance of success to have both entities supporting projects such as the establishment of a CDC.

Mitch Stennett, president of the Economic Development Authority of Jones County, said the initial CDC meeting had a positive response from not just elected officials, but financial institutions. A planning committee was appointed to look into the possibility of establishing a CDC. The planning committee will look at the history and success of CDCs set up in Meridian and Hattiesburg.

“They will see if there is a specific need for us to go forward at that point,” Stennett said. “Generally speaking CDCs have had positive effects in the communities in which they are organized. What you have to consider is that you are not duplicating programs that are already out there. So this group will need to look at this and see if it will fill a void that is not being addressed by the South Mississippi Planning and Development District, local financial institutions or possibly the CDCs that already exist in the region.”

CDCs are established for high-risk projects that don’t meet the collateral or equity criteria a bank normally has. A CDC can provide, for example, half of the funds needed for a loan at a low interest rate. Then banks that would loan the other half would have less exposure and risk.

“Some folks who come in to start businesses don’t have a lot to put up,” Stennett said. “They may have very little financing. But CDC loans are not a grant program or a give-away program. The loans have to be repaid.”

Stennett said it is a long process to establish a CDC. The organization has to file papers with the IRS and get incorporated, along with other steps. Laurel and Jones County are just starting to explore the need and feasibility of establishing a CDC. But Stennett said it certainly shows potential to be another weapon in the arsenal of economic and community development.

Gray Swoope, president of the Area Development Partnership, said a CDC was started in the Hattiesburg area in September of 1993 with six participating banks. Each of those banks put up money to start a direct loan program, and to also leverage the corporation to obtain funds from the Mississippi Business Finance Corporation and the state’s minority loan program.

“It is a gap financing tool providing loan funds to people who wouldn’t have been able to get traditional financing from a bank,” Swoope said. “We have been able to partner with a bank and reduce the risk for people with a good business plan. I’d say the program has been successful. We’ve made over 50 loans.”

Businesses funded include a day care center in Lumberton, a trucking company, a fabric store, a florist, a golf store, a restaurant and a manufacturing facility, Excell Injection Molding Corp., in the Hattiesburg/Forrest County Industrial Park.

Contact MBJ staff writer Becky Gillette at mullein@datasync.com or (228) 872-3457.

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