Flynn's Harp: Non-profit feeds development dollars into economy (2-10-10)

As local governments across Washington State and elsewhere go looking for funds for development projects or small-business assistance in this critical economic environment, many are finding the funding source of last resort isn’t federal stimulus dollars but a non-profit entity called the National Development Council (NDC).

New York-based NDC is a 40 year old organization little known to the general public but a key source of federal funds for state and municipal governments seeking capital. It’s an organization that prides itself on functioning as would private investment bankers, private developers or private lenders.

Except that the pockets of financing that NDC taps are an array of federal assistance sources like SBA guarantees or tax credits that it has either learned how to employ by negotiating through the federal maze of instruments and requirements or, in some cases, it has helped counsel Congress to create.

I only recently became aware of the NDC and found it intriguing because the 501c3’s role is to bring private-sector practices and efficiencies to the use of federal funds of various kinds to state and local projects as well as programs to assist small business.

Readers of this e-mail who are already familiar with the organization need read no further. Those who aren’t might find the way it operates to represent an interesting bridge between the polar-opposite views of government, between those whose view is that only government can resolve key issues and those whose view is that if government is involved, only waste and mismanagement will follow.

NDC, which operates with an annual budget of  $15 million to $16 million, has been instrumental in helping Washington State municipalities find funding for, manage and complete a variety of community and economic development projects. Along the way, has become a major owner of Washington real estate.

NDC’s holdings in Washington State are estimated at $1.36 billion with most of that in the Puget Sound area and $825.9 million in Seattle. Its $850 million worth of LEED-certified buildings gives it perhaps the state’s largest portfolio of such real estate.

 In reality, it only “owns” the real estate on behalf of the communities who will receive the properties without cost once the loans are paid off.

But owning real estate on behalf of eventual municipal owners is a relatively small part of what NDC does, according to John Finke the Seattle-based Senior Director for the Western United States. It also helps funnel SBA-guaranteed funds to certain types of small business, including most recently the Recovery Café, which is a non-profit that provides recovery services in Downtown Seattle.

In fact, Recovery Cafés grand opening of its new facility, secured with $9.75m NDC helped garner for land acquisition and to help renovate a historic building with a special round of New Market Tax Credits, is this week.

“As a nonprofit organization, NDC is able to offer tremendous benefits to municipalities, small businesses and other partners,” said Finke. “Through our diverse range of funding mechanisms, spanning government loans, New Market Tax Credits and bond issuances, we are able to deliver the best expertise, talent and cost to enable public projects to move forward with substantial cost savings.”

In the four decades since its founding in 1969 by one-time Sen. Robert Kennedy aide Sam Beard, who still serves as chair of the organization, NDC hasn’t sought publicity.

But as it becomes increasingly active in the Northwest, guided by Finke as well as Chuck Depew, who oversaw the Recovery Café investment and who provides technical assistance in project finance, housing finance and other assistance to communities throughout the Northwest, explaining what it does may become increasingly important.

For one thing, it’s frequently employing what’s called the 63-20 bonding process that allows a private, not-for-profit entity to issue tax-exempt bonds to develop facilities for use by local governments, which become owners of the buildings at little or no cost when the debts are paid off.

That seems like a win-win, except state entities that traditionally sell bonds for such new facilities may not be happy with what they view as a new competitor.

Some proponents of what the NDC does also express frustration that segments of the public inevitably view things like SBA loan guarantees as grants that are somehow squandering tax dollars rather than being dollars that will eventually be paid back.

One NDC partner that viewed participating with NDC’s Northwest office as “an inviting investment opportunity” is the Seattle Foundation. It put $1 million into an NDC and City of Seattle partnership for what’s called the Grow Seattle Fund that offers financing for growing small businesses, those with annual revenues under $10 million.

In explaining the innovative involvement by the community foundation, Seattle foundation’s Michael brown said it was a reaction to “what we knew to be a challenging environment for small business to access capital and credit and a way to do our part in addressing that community need.”