City considers whether federal grant money can fund loans

The city of Elgin is considering a loan program for nonprofit agencies being hit hard by the state's budget impasse.

Mayor David Kaptain proposed looking into using community development block grant money from the U.S. Department of Housing and Urban Development - which funds projects designed to improve living conditions in low and moderate income areas - to provide "emergency loans" to social service organizations.

If that's not allowed, the city can fund the loan program with money that otherwise could have funded city projects eligible for reimbursement by CDBG money, City Manager Sean Stegall said.

Elgin's CDBG allocation, which varies year to year, was nearly $800,000 for 2015, Community Development Director Marc Mylott said.

Council members voted 8-1 Wednesday to direct staff members to look into how to fund a potential loan program and start figuring out criteria for how to disburse the money. The council will have to approve the program before it's implemented.

Kaptain has convened a human services summit Tuesday to look at how local nonprofits are being affected by the state's budget crisis, and see what the city can do to help.

Figuring out which agencies are in most critical financial need due to the state's inaction would be a key factor in deciding who would get funds from the new loan program, Stegall and Kaptain said.

Kaptain said it makes sense to use federal money because social service agencies serve not just Elgin residents, but residents from other communities. Councilman John Prigge questioned whether federal funds should be used to solve a problem created by the state of Illinois.

Councilwoman Tish Powell said she had concerns about the idea, and didn't want to build "unrealistic expectations" for social service agencies.

Councilman Toby Shaw, who cast the dissenting vote, said he'd rather stick to using CDBG funds for traditional purposes. Social service agencies should primarily rely on individual donors, he added.

Due to the uncertainty, Kaptain also proposed halting Riverboat grants disbursed to local entities as part of the city's 2016 budget. Elgin's fiscal year starts Jan. 1.

By the end of the year, the state will owe the city nearly $10 million, mostly in Riverboat money and motor fuel tax revenues, Stegall said.

Kaptain also said Elgin could look at providing assistance to nonprofits in the form of help with operations such as human resources, accounting and communications, rather than disbursing individual grants through the Riverboat fund. "Those things could be combined and offer efficiencies of scale," he said.

The Riverboat fund supports a variety of grant programs, including $200,000 to social service agencies, $50,000 to arts organizations, $100,000 for historic architectural rehabilitation, $50,000 for neighborhood improvement grants and $100,000 for property improvement grants, Assistant City Manager Rick Kozal said.