The Boston City Council is preparing to look into the activities of the small-business lending unit of the Boston Redevelopment Authority, after the Globe reported the agency was slow to collect repayments on hundreds of thousands of dollars in loans.
Councilor Charles Yancey, chairman of the Post Audit and Oversight Committee, said that he plans to ask officials from the loan agency, the Boston Local Development Corporation, to appear before his investigative panel later this year.
“I’m very concerned if businesses are not repaying their loans,” Yancey told the Globe. “They should repay their debt.”
Meanwhile, Ways and Means chairman Mark Ciommo called the delinquency rate — more than half of nearly $4 million in outstanding loans — “extremely high.” He said he wants to see if a broader review of the Boston Redevelopment Authority authorized by Mayor Martin J. Walsh will examine the loan fund before calling for council hearings.
“I see a significant failure rate of repayment, and that’s concerning,” said Ciommo, of Allston-Brighton. “We need an accounting of who is in arrearage and why.”
The Globe reported Monday that 51 percent of the total amount borrowed from the Boston Local Development was delinquent for 90 days or longer, according to an audit for the year ended June 30, 2013. The rate was more than 50 times greater that of banks with similar loans, according to the Federal Deposit Insurance Corp.
The delinquent loans averaged more than $100,000 each.
The agency’s delinquent loans averaged more than $100,000 each.
The loan program by the private, nonprofit BRA unit is funded through local and federal grants.
The agency was created in 1979 to make loans to small businesses. Yancey called the program “laudable,” but said he wants to know why borrowers fell behind and became delinquent, and why some loans “didn’t pan out.”
Yancey has not yet scheduled the hearing. But he said he plans to examine whether the agency’s lending activities are distributed across the city’s neighborhoods, how many jobs borrowers are creating, and who is getting those jobs — and whether they’re going to Bostonians. “There has to be transparency,” said Yancey, whose district includes Dorchester and Mattapan.
Ciommo said he is sympathetic to the needs of small businesses, but also expressed concern over borrowed money not repaid on time. “If borrowers don’t repay on time, the agency’s revolving fund can’t make new loans to other worthy small businesses, he said.
“If I don’t pay my mortgage, they take my house,” Ciommo said.
The US Economic Development Agency, which provided $1.5 million in 1982 to help seed the loan fund, is working with the Boston loan fund to “address its high default rate,” a spokeswoman said.
Economic development chief John Barros said the city plans to curb delinquencies by pairing borrowers with city programs and may infuse the program with new capital. The agency has restructured or is close to restructuring nearly $1 million loans.
William Nickerson, chief financial manager, said in a statement that he welcomes the opportunity to discuss his agency’s track record with the City Council.
He said the loan agency seeks timely repayments, but noted that its mission to spur economic development and job growth leads it to take on riskier borrowers than many banks would.
“Our loans have supported investments in neighborhoods across the city and created thousands of jobs,” Nickerson said. “We strive to be a patient lender, and we are now seeing an encouraging trend in loan repayment rates as small businesses get back on track in the wake of the recession.”
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