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Southwest Key Program seeks to change city loan to grant

Friday, May 2, 2014 by Michael Kanin

Austin City Council members Thursday postponed consideration of a change in the structure of a city loan to the Southwest Key Program that could, ultimately, result in the forgiveness of $512,000 worth of that debt. The postponement came as Council members expressed concerns that the organization had not provided the city with enough information to warrant approval of what Council Member Bill Spelman cast as a grant to Southwest Key.


Southwest Key and city officials agreed to provide Spelman and his colleagues with data supporting their request. If it’s all approved, Southwest Key would use the funds to help finance the mixed development of 30 acres of land at the intersection of US 183 and Martin Luther King Jr. Boulevard.


Austin Neighborhood Housing and Urban Development Director Betsy Spencer appeared to welcome the pitch. “This is an area that is of particular interest to us as an organization because of our initiative at Colony Park and the needs that we have in that particular area,” she told Council members. “I see this as an opportunity to…reinvest these funds back into an organization that is expanding its mission in area that we are very interested in investing in.”


The original loan to Southwest Key came out of the City of Austin’s Neighborhood Commercial Management Program in 2005. The funds, pulled from federal Community Development Block Grants were used by the organization to construct its headquarters and a school. The original loan covered $624,000 at a zero percent interest rate.


To date, Southwest Key has paid back $109,200 of the loan. $512,000 represents the balance.


Key officials will return to Council June 12. When they do, they are expected to bring more detailed information. Spencer rattled off the standards she expected to employ in asking for the data. “Since they got CDBG program income…it has to meet all of the eligibility of CDBG. I’m going to offer that we’ll just take a look.”


She noted one metric could be job creation, but hinted that others could apply as well.


Though he voted with the rest of the Council to postpone the item, Council Member Mike Martinez also wondered about the fairness of Spelman’s questions. “I do have to point out that this is a minority-run nonprofit serving specifically minorities,” he said, “and if staff is making the recommendation to award this grant, I just want to point out the fact that we’re probably going to hear from some community folks about putting them under a microscope that we probably wouldn’t have done (with) any other organization if staff had come forward with that proposal.”


Spelman noted that he would apply the same standard to any other similar requests. He cast that rebuttal in terms of the $10 million in outstanding loans to other entities. “I’m very supportive of what Southwest Key has done in the past and what I presume that will continue to do in the future,” he said. “I would ask this level of documentation for anybody who has a deferred forgivable loan; this is not aimed at Southwest Key particularly, this is aimed at the form of taking a loan which is one transaction, and turning it into a grant, which is a very different transaction with very different requirements.”


Spelman continued: “One of the reasons…is that we’ve got $10 million of loans outstanding. If we make one of these loans forgivable, I’m a little concerned that some of the other people on that list are going to say, ‘well (I want a forgivable) loan too.’ And we should be sure that we’re going to hold everybody’s feet to the fire in the same way.”

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