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Economic development: small players stiffed in state funding shift



By almost all accounts the Lawrence Avenue Development Corporation has done an outstanding job advising local merchants on how to start, sustain, or expand their companies. Yet earlier this year LADCOR lost $25,000 in funds when the state reorganized its small but effective Illinois Small Business Development Center Network.

In the past the Network disbursed roughly $575,000 a year to a dozen or so community groups to assist small businesses in their areas. Now the state has decided to award larger grants to fewer groups, leaving several well-regarded organizations, including LADCOR, without funding.

"I'm not sure why they did it, and I really don't know if I care about their motives," says Joel Bookman, LADCOR's executive director. "This won't put us out of business, but it will make it harder for us to do what we do best. I'm afraid that small businesses in our area will suffer."

Not so, counter state officials, who contend the changes will improve their program. "I understand that some groups are disappointed and that it will take time for them to appreciate what we have done," says Jeff Mitchell, manager of regional assistance for the Department of Commerce and Community Affairs (DCCA), the state agency that oversees the Network. "But I'm confident that eventually these changes will make the program more accessible to small businesses."

At issue is how best to finance and operate the Network, which recently emerged as a modest success story for the state. The program's purpose is to help small businesses by offering them free or low-cost financial and technical advice. "A businessman may need help getting a loan to expand, or he may want to conduct some kind of market study," says Bookman. "Or maybe he's thinking of moving to a new location in the neighborhood or doing an inventory. Whatever the case, we have the expertise to help him."

The Network was devised in the early 1980s, when it was overseen by business professors at local community colleges. That arrangement didn't work. Many merchants complained that the professors had no head for business or didn't understand the day-to-day rigors of overseeing a small neighborhood operation. "You'd have guys who knew theory but didn't know anything about the real world," says Joe Cicero, executive director of the North River Commission, the community organization that founded LADCOR. "A lot of businesspeople didn't even take advantage of the program. They either didn't know about it or they figured, Why bother?"

About six years ago the Network was put under the control of local community-development organizations, which were each given about $25,000. LADCOR used its money to hire someone to talk to businesspeople throughout the Albany Park area on the city's northwest side. "We sent a person door-to-door to see what businesses needed," says Bookman. "We asked them what was working and what wasn't. If they needed a loan or technical assistance, we could literally take them by the hand and guide them to the appropriate source."

Working in conjunction with LADCOR, at least four businesses were created in the commercial district near the intersection of Kimball and Lawrence avenues. LADCOR's efforts may have been essential to stemming economic blight in the area. "LADCOR is one of those success stories you like to talk about," says Monroe Roth, member of the Network's advisory council and president of the Chicagoland Enterprise Center, a not-for-profit economic-development consulting firm. "They work hard, and they know their community."

But then Governor Jim Edgar was elected, and with him came a new director for DCCA, Jan Grayson. "Jan Grayson had a specific idea for what the program should be," says Roth. "Jan is against spending money for zero-sum gain. And he has a very good point. Why should we spend money to, say, help someone open another neighborhood haberdashery? They might sell me a nice tie, but their presence might also force another haberdashery that's down the street out of business. That would leave you with what Jan would call a zero-sum gain."

Instead, Grayson wants to spend state money in a way that would foster widespread community development. "We want to create new jobs and new economic development that go beyond one or two neighborhoods," says Jeff Mitchell of DCCA. "We want to foster a long-term gain for entire regions."

Grayson decided to take the small-business funds away from local groups, who might have more parochial concerns, and award them to larger organizations. But LADCOR's backers contend that this decision overlooks or minimizes their achievements.

"I think it's simplistic and shortsighted to say we only help Albany Park," says the North River Commission's Joe Cicero. "We have put together shopping-strip deals that mean more property and sales taxes for the city. We've packaged 150 deals which have created an estimated 2,000 jobs. How can that not help but benefit the whole city?"

Despite these protests, DCCA proceeded to divide the city into four small-business regions. Organizations representing these regions were invited to bid on grants worth at least $112,000. LADCOR was one of several community groups that bid as part of a coalition headed by the Chicago Association of Neighborhood Development Organizations. But their bid was rejected, along with bids from other respected groups--Bethel New Life, Greater Southwest Development Corp., and the Leeds Council.

Grants were awarded to the Women's Business Development Center, the Greater North Pulaski Development Corp., the Latin American Chamber of Commerce, the Back of the Yards Neighborhood Council, and the City Colleges of Chicago, who, once again, will oversee a portion of the Network's programs. "I can't believe they're actually going back to the colleges," says Cicero. "It didn't work before. There's no reason to think it would work again."

Worse, the changes planted seeds of distrust between long-standing allies. "I don't begrudge any of the groups that got money," says Bookman. "They do a good job. But so do we. And I have to wonder, why them and not us?"

Groups like the Women's Business Development Center were happy they won their grants, but they also acknowledge that they're a little uncomfortable that others didn't. "I think the people at LADCOR are terrific people and they do a terrific job, and we're sad that their program was not funded," says Hedy Ratner, codirector of the Women's Business Development Center. "But the decision not to fund them or anyone else was not ours. I'm not criticizing others, but we do an excellent job and we got what we deserved."

Some insiders contend that the funding decisions were shaped by clout and political concerns. Others complain that the new program leaves some communities, such as Chicago's black west-side community, underfunded. "The Greater North Pulaski group will oversee the region that includes the west side," says Roth. "They're a good group, but you have to ask yourself if they have the expertise to work with that community. It will be a challenge."

LADCOR and its allies have initiated several meetings with DCCA officials in hopes that some funding will be restored, but so far the results have been discouraging. "They never did give us a reason why we were not funded," reads a memo Chicago Association of Neighborhood Development Organizations officials sent to LADCOR and other disgruntled not-for-profits after an unsuccessful meeting with DCCA. "I'm not optimistic that DCCA's going to cut a check for $125,000 next week. So it may be 'open season' on DCCA real soon. Are you ready for 'DCCA' hunting?"

DCCA officials say they have no plans to change the program. "The funding decisions were not easy, they really weren't," says Jeff Mitchell. "But we believe the process we used was consensus based, and that we looked at job-creation performances in the past. We are willing to sit down with people who weren't funded though and talk about their concerns."

One possibility is that organizations such as LADCOR could solicit subcontracts from their more fortunate not-for-profit counterparts. "There may be some bad feelings for a while," says Monroe Roth. "Some people may think its demeaning to have to come to their friends with hat in hand. But maybe in time they will have to swallow their pride."

Art accompanying story in printed newspaper (not available in this archive): photo/Jon Randolph.

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