D.C. City Council member Charlene Drew Jarvis today unveiled a proposal for a new economic development corporation, to be funded initially by investments from both the public and private sectors.
The corporation would be a unique concept for the District, but similar organizations have had success in other cities.
The for-profit organization, which would be known as the Neighborhood Economic Development Corp. (NEDC), would be created to stimulate economic development and revitalize designated areas of the District.
The Barry administration has already agreed to invest $10 million in NEDC if the private sector agrees to invest $5 million.
Under Jarvis' plan, NEDC would invest in commercial and industrial projects, real estate ventures and small businesses, including mom and pop operations. The corporation also would make equity investments in eligible businesses by acquiring preferred or common stock or partnership interests in them.
Jarvis, who chairs the council's Committee on Housing and Economic Development, announced plans for the corporation at the D.C. Banker's Association convention, which is being held here. Jarvis used the occasion to enlist the support for the measure from bankers, as well as other members of Washington's business community attending the convention.
The key to the success of NEDC is the concept of a partnership between the public and private sectors. The D.C. government is already committed to investing $10 million in start-up capital in the corporation and would participate through an organization established by legislation a year ago.
The private sector's involvement would come initially from an investment of $5 million, to be raised through a subscription offering of 100 shares of stock at $50,000 each. Subscriptions for shares of Class A stock are to be solicited solely from financial institutions and other business and professional corporations. The offering is expected to begin as soon as a commitment is made by Washington business to invest; it would end no later than Sept. 30.
The public sector would invest $10 million in the NEDC through the District's Economic Development Finance Corp. (EDFC), a nonprofit corporation created last year by legislation passed by the city council. The EDFC will raise the $10 million by purchasing 100 shares of a Class B common stock in NEDC and by buying a 3 percent subordinated debenture.
Holders of Class A stock -- all members of the private sector -- would elect seven of the new corporation's 11 directors, and owners of Class B shares would elect four directors. Following an address by Jarvis and a panel discussion of the proposal today, key business leaders appeared to be strongly supportive of the economic development proposal.
"We think that this is the best opportunity for the bankers association to provide funding for economic development," said Michael F. Ryan, president of the DCBA.
Julia M. Walsh, president of the Greater Washington Board of Trade, said the organization supports the plan and expressed hope that the private sector would invest in the corporation.
Nonetheless, some businessmen attending the bankers' convention expressed some reservations about the concept. Some sought assurances that rigid investment standards would be adopted by the board that oversees the corporation.
Jarvis assured them, however, that the corporation's investment policies would be much the same as those of any well-managed corporation.
"It is a way of getting investment in neighborhoods to revitalize them, but the investment standards will be the same as those with which your companies are familiar," Jarvis responded to a questioner.
Jarvis pushed through legislation last year that created the Economic Development Finance Corp. The original legislation that led to passage of that act called for establishment of a profit-making corporation. The business community had shown considerable reluctance to support the EDFC through loans and investments, however.
"The private sector wasn't comfortable over the [mechanism for] control of its dollars," Jarvis commented in an interview here.
The NEDC, which would be firmly established as a partnership, "puts the clothes on the skeleton," she said. "After three years of jawboning, we have the green light," Jarvis added.