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Economic Development

News &Vıews
Published by the Federal Reserve Bank of Chicago Consumer and Community Affairs Division

Volume 3 Number 2
June 1997
Inside this Issue:

FaithCorp Fund
Making Dreams Become Realities
ACCION Chicago
Eighteenth Street Development

SBA Awards

New Development Tool: EQ2
Equity Equivalent Investments
On February 27, 1997, The National Association of Community Development
Loan Funds(NACDLF)accepted a $1 million investment from Citibank to capitalize NACDLF’s Central Fund. In so doing, NACDLF introduced an innovative,
new community development finance tool — “equity equivalent investment.”
The equity equivalent investment(EQ2) allows NACDLF to leverage additional
debt and enables Citibank to receive Community Reinvestment Act (CRA)
credit under the lending and investment tests from its regulator.
The investment has the potential to bring significant amounts of new bank
capital to non-profit Community Development Financial Institutions (CDFIs).

Women in Business
So, What are Brownfields?
Grant Targets Redevelopment
Lender Liability Clarified
Redevelopment Facilitated
in Michigan
Redevelopment Model

The EQ2 model can work for all NACDLF members and non-members, large
and small, urban and rural. In its current form, the equity equivalent investment makes most sense for non-profit CDFIs that are:
• Experiencing insufficient permanent capital.
• Responding to moderate to strong demand for loans.
• Looking for new sources of loan capital.
• Willing to invest time understanding EQ2’s attributes.

Export Program
Capital Access Program

The equity equivalent investment is a new, but not especially complex, financial instrument. Like any new tool, learning how to use it requires practice
and patience.

Rural Development
Small Stores Initiative

Overview of the equity equivalent product
For-profit corporations often raise equity by issuing stock, but non-profit
organizations generally do not have that option.

From Research
Around the District
1997 Calendar

Traditionally, non-profit CDFIs have raised capital to support their lending
and investing activities through grants from philanthropic sources, or in some
instances, through retaining, lending and investing earnings. This permanent
capital is essential because it increases a CDFI’s risk tolerance and lending
continued on page 2


continued from page 1

flexibility, lowers the cost of
borrowing funds, and protects
lenders by providing a cushion
against losses in excess of loan
loss reserves.
In 1992, NACDLF launched a $25
million program to raise equity
for its members and the association’s Central Fund. Early on, the
association realized that a strategy
relying exclusively on grants was
limited by the finite number of
foundations and corporate philanthropies, and that NACDLF
had to cultivate additional
sources of equity. The growing
visibility of CDFIs as effective
community development lenders,
coupled with expected changes
in the Community Reinvestment
Act, made conventional financial
institutions likely partners in garnering additional equity sources.
NACDLF started the Bank Equity
Project in 1995 with support from
the Ford Foundation to create a
new financial instrument that

would function like equity for
non-profit CDFIs. Their intention
was to complete a transaction
that would serve as a model for
replication by their members and
other non-profit CDFIs. They
need an experienced partner.
Citibank’s demonstrated support for NACDLF’s work and
Citibank’s commitment to community development made it a
logical choice.
The result of the collaboration
is EQ2, a long-term deeply subordinated loan with features that
make it function like equity.
These features include the following six attributes which, under
current bank regulations, distinguish this financial instrument
from simple subordinated debt:
1. The equity equivalent is
carried as an investment
on Citibank’s balance sheet
in accordance with Generally Accepted Accounting

Advisor: Alicia Williams
Editor: Harry Pestine
Economic Development News & Views welcomes story ideas, suggestions, and letters from subscribers, lenders, community organizations, and economic development professionals. If you wish to
subscribe or to submit comments, call 312/322-8232 or write to:
Economic Development News & Views
Federal Reserve Bank of Chicago
Consumer & Community Affairs Division
230 S. LaSalle Street
Chicago, Illinois 60604-1413.
The material in News & Views does not necessarily represent
the official policy or views of the Board of Governors of the
Federal Reserve System or the Federal Reserve Bank of Chicago.
Economic Development News & Views – ISSN: #1083-1657


2. It is a general obligation of
NACDLF that is not secured
by any NACDLF assets.
3. It is fully subordinated to the
right of repayment of all other
NACDLF creditors.
4. It does not give Citibank the
right to accelerate payment
unless NACDLF ceases its normal operations or changes its
line of business.
5. It carries an interest rate that
is not tied to any income
received by NACDLF.
6. It has a rolling term and therefore, an indeterminant maturity.
Like permanent capital, the
equity equivalent investment
enhances NACDLF’s lending
flexibility and increases its debt
capacity by protecting senior
lenders from losses. Unlike permanent capital, the investment
must eventually be repaid and
requires interest payments during
its rolling term. However, the rate
is well below market at 2.5 percent below the Treasury rate.
Several of NACDLF members
are already incorporating the
EQ2 in their capitalization strategies — from exploring its potential to capitalize venture funds
and other specialized financing
pools to using it to supplement
permanent capital dedicated to
core lending programs.
EQ2 and CRA
Last year, the Office of the Comptroller of the Currency issued an
opinion jointly with the Federal
Reserve Board, Federal Deposit
Insurance Corporation, and
Office of Thrift Supervision.
The opinion letter stated that
Citibank would receive favorable

consideration under CRA regulations for its investment in
equity equivalents. The letter
further stated that the purchase
of equity equivalents would be a
qualified investment that bank
examiners would consider under
the investment test, or under the
lending test. Furthermore, in
some circumstances Citibank
could receive consideration for
part of the investment under the
lending test and part under the
investment test.
Although financial institutions
have a unique incentive under
the Community Reinvestment
Act regulations to invest in equity
equivalents, other investors can
use the tool. For example, foundations may be willing to structure Program Related Investments with EQ2. ■
The Federal Reserve Bank of
Chicago would like to thank
Allyson Randolph of the National
Association of Community Development Loan Funds for her assistance
with this article.
For information regarding the
Community Reinvestment Act
and equity equivalent investments contact your regulator
or the Federal Reserve Bank
of Chicago, Consumer and
Community Affairs Division,
For additional information on
community development loan
fund programs and equity equivalent investments contact Allyson
Randolph at 215/923-4754.

FaithCorp fund establishes
contractor lending program
and more
In an effort to
expand its lending
activities, FaithCorp
Fund has developed
a new lending program designed to
assist African-American building
The concept is simple: a contractor who needs working capital
to fulfill a contract can borrow
money from FaithCorp against
the value of that contract.
Eligible loan recipients must
either live or have a contract
to construct or rehabilitate a
building in FaithCorp’s service
area. To date, two loans have
been made to contractors under
the new program. One has been
repaid and the other is in good
FaithCorp Fund “hopes to
expand its lending efforts by
hiring an additional loan officer
who can devote his or her time
to this market,” said Director
Guy Stuart.
FaithCorp Fund is a project of
Partners in Community Development (Partners), a collaboration
of Centers for New Horizons,
Hyde Park and Kenwood Interfaith Council, Kenwood Oakland
Community Organization, Jewish
Council on Urban Affairs, St.
Elizabeth Church, and STRIVE
Training and Employment Service. Partners serves Chicago’s
Mid-South Side communities of
Grand Boulevard, Douglas, North
Kenwood, Oakland, Washington
Park, and Woodlawn.

Its Mission
FaithCorp is a community-based
partnership of faith communities, local residents and financial and other institutions on
Chicago’s Mid-South Side.
FaithCorp helps residents and
businesses overcome a variety
of obstacles that prevent them
from gaining access to credit
and pursuing their dreams.
FaithCorp’s innovative lending practices take advantage of
the mutual accountability and
cooperation fostered through
community partnerships.
“FaithCorp attracts and recycles
funds within the community and
stewards human and financial
resources to build a just and sustainable community,” said Stuart.
In 1996, FaithCorp made six
loans or guarantees. The loans
varied in size from $350 to
$7,100. Three of these loans
have been repaid, and the other
three are in good standing.
The loans varied in purpose
and creativity. For example, one
$2,400 down payment assistance
loan helped a moderate-income
family buy a two-flat home in
Woodlawn. The recipients were
clients that had been working
with FaithCorp for nine months.
Technical assistance was also provided that enabled the clients to
identify the right type of loan for
their particular situation.
FaithCorp also provided considerable assistance to a retired
homeowner with a number of
live-in grandchildren. The homeowner needed funds to undertake
a lead abatement project in her
home, and also faced a $350 loan

“FaithCorp attracts and recycles funds within
the community … to build a just and sustainable
– Guy Stuart
application fee that was due to
her financial institution at the
time of applying for the loan.
To help the loan process along,
FaithCorp worked with the institution and guaranteed that it
would pay the loan application
fee if the loan were denied. When
the financial institution actually
approved the loan, it also agreed
to increase the loan amount to
fund the $350 application fee.
That gave her enough cash to
pay for lead abatement work
and the loan application fee.
During 1996, FaithCorp also
provided one-on-one credit education services to 43 prospective
home buyers. These services
involved educating clients so
that they could make sound
financial decisions to put them
in a position to buy a home.

In 1996, eight FaithCorp clients
bought homes — seven of these
benefited from FaithCorp’s
education services and the
other sought FaithCorp
assistance in dealing with
a problem with a lender.
As part of a broader outreach
effort, FaithCorp conducted
or participated in 18 credit
workshops on the Mid-South
Side of Chicago. ■
For information on Partners in
Community Development or the
FaithCorp Fund contact Guy
Stuart, director, 312/674-2333.


Making Dreams Become Realities
A non-profit community development corporation (CDC)
was established in 1987 in
Lake County, Illinois to improve economic conditions in
the communities of Waukegan,
North Chicago and Zion.
Positive Systemic Transformations, Inc.(PST) provides individuals with small loans to
improve their lives and thus the
well-being of their communities.
PST also provides business plans
and counseling to local entrepreneurs. It targets the smallest of
businesses, such as the homebased caterer, part-time word
processor, child care provider,
tailor, messenger or landscaper.
PST’s philosophy is that each
community has an abundance
of prospective micro-entrepreneurs — a potentially vital source

of revenue. Assisting them offers
an alternative to minimum-wage
jobs, fosters self respect and self
reliance, and offers opportunities
for upward mobility.
“The revitalization of neighborhoods is central to a sound America because without them there
would be no America,” said PST’s
Executive Director Thomas E.
Williams. “There is a mistaken
tendency in this country to think
of the economy in global terms
rather than in terms of how
American cities fit in the mix.
But those cities are made up of
neighborhoods. If the neighborhoods fail, so will America.”
PST’s Progress
PST has a working relationship
with Grand National Bank (GNB)
in Waukegan. PST negotiated with
the bank to provide funds for a

Chicago Fed Facts
The Federal Reserve Bank of Chicago is one of 12 regional Reserve
Banks that, together with the Board of Governors in Washington,
D.C., serve as the nation’s central bank, the Federal Reserve System.
The role of the Federal Reserve System is to foster a strong economy
and a stable financial system.
The Chicago Reserve Bank:
• participates in formulating national monetary policy,
• supervises and regulates banks and bank holding companies, and
• provides financial services to banks and the U.S. government.
Employees: 2,150
Assets: $49.5 billion (as of 12/31/96)
Depository Institutions in Seventh District: 3,908
Banks and bank holding companies supervised: 1,340
Financial services volumes (1996):
Checks processed — $1.3 trillion
Automated Clearinghouse transfers — $2.2 trillion
Wire transfers — $33.8 trillion
Currency received and counted — $35.9 billion
Unfit currency destroyed — $9.6 billion


Thomas E. Williams assisting Flor De Maria Luis in the resource library.
revolving loan fund. These funds
are administered through PST’s
Business Development Center.
“PST will never operate primarily
as a lender.” Said Karioki Uhuru,
director of the Business Development Center. “For many small
businesses, that will do more
harm than good and the owners
will continue to struggle. I think
lending has become popular with
economic developers because it’s
quantifiable and visible. Much
neglected are the hundreds of
services that entrepreneurs need
for viability — namely legal and
accounting assistance. Helping
people, not making loans, will
always be our first priority.”
PST has received Small Business
Administration 8(a) and State
of Illinois Certifications for
Minority, Women and Persons
with Disability Owned Businesses.
In January, PST made its first loan
under its new Community Development Micro-Enterprise Loan
Fund. The loan provided an
entrepreneur funds to cover the
cost of utilities while the start-up
small business was awaiting
approval of a larger loan.

PST’s latest accomplishment
is the opening of a 200-volume
business library and the expansion of its technical assistance
program. Materials for the
library cost $10,000. PST was
able to raise $5,500 from public
and private grants, and the Grand
National Bank contributed the
balance. The library will provide
local residents with information
to develop business plans, learn
about business and tax-recordkeeping procedures, and offer
data on the facilities and types
of equipment required to open
a particular business.
Recog nition
In 1995, PST was nominated for
the President’s Award for outstanding community service. Last
year, in recognition of its accomplishments, the non-profit was
awarded a $35,000 community
development block grant from
Lake County. ■
For additional information on PST’s
various assistance programs contact
Thomas Williams, executive director,
at 847/249-0921.

ACCION Chicago
Investing in people and
expanding their reach
In its first two years, ACCION
Chicago has helped over 85 businesses in predominantly Hispanic
neighborhoods obtain more than
$655,000 in business loans.
ACCION Chicago’s three-member staff has made a total of 159
loans to businesses in Chicago’s
“Little Village”, Pilsen and other
surrounding communities —
with a loss rate of less than 2%.
As a banking intermediary,
ACCION Chicago depends
on its banking and foundation
partners to provide the capital
it needs to lend to Chicago’s
micro-entrepreneurs. Each
dollar in ACCION Chicago’s

loan portfolio is recycled at least
twice per year, essentially doubling
its potential to affect the stability
and growth of local businesses.
ACCION Chicago partners Bank
of America, La Salle National
Bank, and The Northern Trust
Company have provided a total
of $150,000 in lines of credit
toward the program’s loan portfolio. Also, First Chicago and the
Wieboldt Foundation have made
investments to help capitalize the
loan portfolio. ACCION Chicago
also received a major $500,000
investment for the loan fund
from the MacArthur Foundation.
ACCION Chicago Clients
Currently, ACCION Chicago
clients come from the following
business sectors: 77 percent

Left to right: F. Leroy Pacheco, Executive Director, ACCION Chicago;
Michael Chu, President, ACCION International; and William Burrus,
Senior Vice President, U.S. Division.

Each dollar in ACCION
Chicago’s loan portfolio
is recycled at least twice
per year, essentially

Creating Income, Opportunity and Jobs
in Chicago’s Neighborhoods

doubling its potential
to affect the stability

Buenavida Immigration and Income Tax Services owner, Olga
Villarreal noticed the immigration services business in Chicago’s
Little Village was becoming increasingly competitive.
At the same time, neighboring Berwyn was experiencing a steady
growth in its Hispanic community, and no immigration services
were operating in the neighborhood.
That prompted Villarreal to make a critical business decision. She
moved her operations to Berwyn and went to ACCION Chicago
for an initial $3,500 loan to cover the first month’s rent and security deposit. Her decision paid off. Villarreal’s business has grown so
much that she has recently hired two new staff members — a tax
preparer and an administrative assistant. Her most recent loan
from ACCION Chicago was $6,000 for a computer workstation.
Olga Villarreal is now a part of the ACCION Chicago family. She
is just one example of how ACCION’s support often increases with
the growth of its client’s businesses. ACCION is there at the beginning, and along the way, to help its clients succeed.

and growth of local
service, 17 percent commerce/
retail, 5 percent artisan/arts &
crafts, and one percent industrial
production. The majority are in
contracting or trades-related
activities, followed by those who
are mechanics or in repair businesses, clothes/jewelry sales/
manufacturing, or businessrelated or consulting services.
Additionally, some clients are
small restaurant owners, photographers or neighborhood
grocery store owners. Nearly
all of ACCION’s clients are
sole proprietors.

Eighty-four percent of ACCION
Chicago clients are Hispanic,
followed by approximately five
percent Caucasian, five percent
African-American, one percent
Asian and five percent other.
Thirty percent of the clients are
women and 70 percent are men.
The average monthly take-home
pay for ACCION Chicago clients
is just over $1,600.
In Partnership with the Community
In partnership with business and
foundation leaders, ACCION
Chicago’s board and staff are
fulfilling a promise to their
community — to foster financial independence for those
striving to support themselves
and their families through
small entrepreneurial initiatives. Chicago’s small business
owners need working capital,
and ACCION Chicago helps
make it accessible. ■
For additional information, contact
F. Leroy Pacheco, executive director,
ACCION Chicago, 773/522-0272.


Successful Development Corporation
Meeting Pilsen-Area Needs
The Eighteenth Street Development Corporation (ESDC) is a
full-service economic development agency offering interactive
industrial development, retail
development, small business
development and entrepreneurial training programs.
Its primary service area is the
Pilsen and Little Village communities on Chicago’s Lower
West Side. ESDC is also a leader
in economic planning and
advocacy and is committed
to development that benefits
community residents.
ESDC builds Pilsen’s income
base through employment and
business development. It has
maintained jobs in the community by ensuring that local industrial corridors meet employer
needs. This is accomplished by
retaining growing businesses
and attracting new ones.

ESDC has supported retail development through beautification
programs and by marketing the
attributes of the area’s retail
stores, thereby generating business and employment opportunities. Counseling services and
entrepreneurial training has supported business growth in the
local Latino and neighboring
ESDC’s Industrial Development
Program helps 200 manufacturing and distribution firms annually through the City of Chicago’s
Local Industrial Retention Initiative (LIRI). ESDC also helps carry
out strategic plans developed by
community leaders in Pilsen, and
in the Pilsen and Western/Ogden
Model Industrial Corridors. The
value of industrial development
projects in both corridors is more
than $2 million. Through the
Empowerment Zone Program,
ESDC is placing Empowerment

Zone residents into
employment opportunities.
In terms of business
development, ESDC
has been designated
as a Small Business
James Isaacs, Executive Director, ESDC
Development Center
In the retail area, ESDC orga(SBDC) by the State of Illinois.
nized a decorative street banner
Last year, ESDC provided 568
program and a sidewalk sale to
one-on-one business counselcoincide with the Fiesta Del Sol
ing sessions to its SBDC clients.
festival. In 1996, ESDC received
These sessions covered starting
approval for $521,000 in Ema business, financial planning,
powerment Zone funding for
marketing research, and loanits Model Commercial Area
packaging issues.
Program. Funds will be used to
subsidize programs such as facade
ESDC secured $631,250 in
rehabilitation and streetscape
loans for its clients resulting
improvements, which lead to the
in the creation and expansion
increased marketability of Pilsen’s
of 21 businesses. They also
commercial district. ■
conducted an 11-week business literacy training program.
For information on the ESDC proIts program graduated 25 particigrams contact Maria Munoz,
pants, eight of whom established
associate director, 312/733-2287.
new businesses.

Banker + SBA Guaranty + Customer Service = Succe$$
President of Medical Equipment Company wins SBA’s
1997 Illinois Entrepreneur
of the Year Award
Obed Pena, Jr. has won the 1997
U.S. Small Business Administration (SBA) Award as Small-Business Young Entrepreneur of the
Year for Illinois.
Pena, 27, is president of Chicagobased Hope Medical Equipment,
Inc., a full-service durable medical equipment company that sells
and leases home medical equipment to Medicare patients.


He was nominated by Eva Aquino
of the Pioneer Bank in Chicago.

$180,000 to $389,000, and the
firm has hired five employees.

While living in Miami, Pena
dreamed of owning his own
business — a restaurant. But
instead he turned to health care
and in 1990 became a consultant
with a medical firm. Realizing the
potential of the medical industry,
he started a medical systems company in 1992.

The revenue growth allowed
Hope Medical to use an SBA
guaranteed loan of $120,000
from Pioneer Bank to buy
the building it is operating in.
The firm now has the financial
foundation to add new clients.

Interested in moving to Chicago,
Pena sold the company and founded Hope Medical in October
1993. Revenue has grown from

Pena’s knowledge of Spanish
allows his firm to provide
medical services to the underserved Hispanic community. Hope
Medical’s personal service ensures
that its clients know how to operate the medical equipment.

“Mr. Pena is a dedicated entrepreneur who is providing a valuable
community service,” said Aquino.
“He develops a personal relationship with his clients so they know
how to properly use the medical
equipment vital to their recovery.
In addition, Mr. Pena uses his
management and leadership
skills so that his five employees
are able to provide the same
level of service.” ■
For information on Small Business
Administration loan guaranty
programs call 1-800-827-5722.

Ten from Illinois Receive
Small Business Awards
Ten people representing various
Illinois businesses and organizations received statewide awards
for their contributions to the
small business community as
part of a week-long national
salute to America’s independent
entrepreneurs and advocates.
The awards were presented by
the U.S. Small Business Administration (SBA) at a luncheon ceremony at Navy Pier in Chicago as
part of Small Business Week.
The luncheon was sponsored
by the SBA and the Chicagoland
Chamber of Commerce, in partnership with Crain’s Small Business, and was held in conjunction with the Chicagoland Small
Business Expo. This year’s theme
was “Small Business: Building
Tomorrow’s Economy Today.”
The awards program included
a video tribute to the winners,

a presentation ceremony, and
guest speakers. Along with
similar tributes and celebrations
across the country, the awards are
part of a tradition that began in
1963 when Small Business Week
was first designated.
“These individuals and companies
are excellent examples of how a
well-managed, innovative small
business can beat the odds and
continue to increase profitability
in a very competitive market,”
said John L. Smith, the SBA’s
Illinois District Director. “And
the advocates show true commitment and dedication to the smallbusiness community.”
The 1997 SBA Illinois award
winners were:
• Small Business Person of
the Year — Lauren R. Leifer,
President, IAFS, Inc., Morton

• Minority Small Business
Advocate of the Year —
Mary F. Morten, Executive
Vice President, Women’s SelfEmployment Project, Chicago.

• Small Business Exporter of
the Year — The team of T.
Bruce Slamans, President, and
Anthony Beyer, Vice President,
Tek Pak, Inc., Batavia.

• Women in Business Advocate
of the Year — Diana Conley,
President, Computerland,
Downers Grove.

• Young Entrepreneur of the
Year — Obed Pena, Jr., President, Hope Medical Equipment, Inc., Chicago.

• Accountant Advocate of
the Year — Linda Forman,
CPA, Partner, Gleeson, Sklar,
Sawyers & Cumpata LLP,

• Entrepreneurial Success Award
— Kathleen M. Buck Holst,
President, Alternate Construction Controls, Inc., Romeoville.

• Financial-services Advocate
of the Year — Robert D. Doty,
Senior Vice President, First
National Bank, Harrisburg.
• Media Advocate of the Year —
Bruce Q. Mackey, Editor and
Publisher, Springfield Business

Forman, Morten and the team
of Slamans and Beyer also won
the Midwest Regional awards in
their categories and will go on to
compete at the national level. ■
For information on Small Business
Administration programs and services, please call 1-800-827-5722.

Banker + LowDoc + SBDC = Succe$$
Doty wins SBA’s 1997 Illinois
Financial Services Advocate
of the Year Award
Robert D. Doty has won the 1997
U.S. Small Business Administration (SBA) Award as Financial
Services Small-Business Advocate
of the Year for Illinois.
He is chief credit officer and senior
vice president at First National
Bank of Harrisburg. He was nominated by Becky Williams of the
Small Business Development
Center (SBDC) at Southeastern
Illinois College, Harrisburg. For
eight years, Doty has volunteered
his services to the SBDC as a

private consultant and instructor
on the credit process for small
business owners. Doty is a strong
supporter of small business development and teaches classes at the
SBDC to would-be entrepreneurs.
He volunteers more than 100
hours a year.
Due to Doty’s efforts, First
National Bank has been very
active in SBA’s successful low
documentation (LowDoc) program. The bank is using LowDoc
to originate more than half of
the SBA-guaranteed loans in
Saline County. Doty heads a team
of nine loan officers with a total
loan portfolio of $91 million and

plans to increase the loan portfolio by 10 percent this year.
“Through his leadership and
direction, Doty is making a significant contribution to advance
small business interests,” said
Williams who nominated him.
“Under his leadership, the First
National Bank of Harrisburg is
making every effort to encourage
the flow of investment capital to
small business ventures.” ■
For information on Small Business
Development Centers and the programs they offer, contact Becky
Williams, Southeastern Illinois
College SBDC, at 618/252-5001.

Robert D. Doty


Women in Business
Leifer overcomes adversity
and wins award as small
business person of the year
When ill health
forced Lauren R.
Leifer’s father to
hand her the reins
of his company in
1981, she was unprepared for the responsibility.
But Leifer persevered, and her
efforts have fostered a very successful business and brought her
the 1997 U.S. Small Business
Administration (SBA) Award
for Small Business Person of the
Year in Illinois.
Leifer is president of IAFS, Inc.,
a Morton Grove manufacturer
providing audio and disk duplication, CD-ROM mastering and
replication, and audio-recording
studio facilities.

She was nominated for the prestigious SBA award by Deborah
Sawyer of the National Association of Women Business Owners
Leifer took over the business
without the benefit of any mentoring or succession planning.
She discovered that she had not
been privy to the company’s full
financial picture or to the extent
of the firm’s indebtedness — and
finance was not her strong point.
While ambivalent about continuing with the firm, Lauren was driven by a deep love for her family.
The business was all her parents
had financially. They were nearing retirement, were inadequately
insured, and were deeply in debt
because of the business. Leifer
felt increasingly responsible for
ensuring that the business continue to provide for both her
parents and for her extended
family of loyal employees.

She set out to acquire the expertise to deal with IAFS’ finances.
At the same time, she needed to
keep an eye on the marketplace,
which was in constant flux due to
advancing technology. She determined that diversifying offered
the best promise for revitalizing
the company and ensuring a
future for its employees.
Leifer identified the emerging
floppy-disk market as the best way
to expand the business. But that
strategy required significant capital for equipment, staff retraining,
and other expenses involved in
entering a new market.
Therefore in 1983 she turned to
the U.S. SBA and its 7(a) loan
program. The process was not
easy, but Leifer prevailed thanks
to support and guidance from
her NAWBO colleagues. Thanks
to the SBA-guaranteed loan, a
new division called COMPDISK
was created. The strategy paid off,

and sales skyrocketed. That
allowed Leifer to pay back the
SBA loan early, release her parents from debt, and provide them
with a secure retirement.
Her creative and dynamic leadership is shown in IAFS’ continued
growth. When the firm was founded 30 years ago, it was housed in
a 500-square-foot facility and had
two employees. When Leifer
assumed control, sales were
around $750,000. Sales are now
roughly $3 million, the firm has
50 employees, and it occupies
25,000 square feet.
Leifer was recently honored by
Abbott Laboratories as its Woman
Vendor of the Year. She was cited
in a Forbes magazine story on successful business women and was
listed by Crain’s Chicago Business
as one of the area’s top women
business owners. ■

Holst Wins Entrepreneurial Success Award
Kathleen M. Buck Holst has
won the 1997 U.S. Small Business
Administration (SBA) Entrepreneurial Success Award for Illinois.
Holst is president of Alternate
Construction Controls, Inc.,
(ACCI) of Romeoville, a service company which provides
traffic control and safety protection on Illinois roadways.
ACCI is also a distributor of
safety products including traffic
control devices. Holst was nominated by Leslie N. Matteson,
First National Bank of Chicago.


To win the Entrepreneurial
Success Award, a business must
be launched as a small business,
receive SBA assistance, and then
grow into a large business.
When Holst founded the firm
in 1988 it had two employees,
occupied 600 square feet of
office space, and had annual
revenue of $700,000. This year
has proven to be the largest
growth year in the company’s
history with revenue projections
of $5.2 million and a season-high
of 60 employees.

ACCI’s success and rapid growth
were helped by SBA guaranteed
loans of $500,000 in 1995 and
$350,000 in 1996.
“In winning this honor Kathleen
has proven that when you communicate effectively, understand
what your expectations are, and
not only meet but exceed those
expectations, you become the
preferred provider of service,”
said her nominator, Leslie

Additionally, Holst has worked
with highway agencies to institute standards and specifications
requiring certification for traffic
safety workers on construction
projects, thereby improving
safety in the work zone. ■

Morten Wins Minority Advocate of the Year Award
The executive vice president of
the Women’s Self Employment
Project (WSEP) in Chicago, Mary
F. Morten, has won the 1997 U.S.
Small Business Administration
Award as Illinois Minority Small
Business Advocate of the Year.
Morten also won the Midwest
Region award in her category
and will go on to compete at the
national level. She was nominated
by Hedy M. Ratner of the Women’s
Business Development Center.
Founded in the mid-1980s, WSEP
is a non-profit organization concerned with economic self-sufficiency for women. It has been
nationally recognized for its pioneering programs, which include
financial services and entrepreneurial training.

As director of policy for WSEP,
Morten has been instrumental in
developing programs, initiatives
and legislative activities designed
to increase economic self-sufficiency for minorities through
business ownership. WSEP’s primary focus is to help low- to moderate-income women obtain economic self-sufficiency through
micro-entrepreneurial activities.
Morten helps ensure that these
new business owners are not overlooked by policy-makers and that
the special barriers they face are
She is a leader in the HomeBased Business Coalition, which
helped pass legislation in Chicago
permitting home businesses. The
ordinance reflects Morten’s con-

cern that minorities, low-income
people, and women are afforded
equal access to financial and
income-generating services by
repealing old laws prohibiting
home-based businesses.
Morten is also active in the
statewide development of the
Micro-Enterprise Coalition,
which educates and supports
micro-entrepreneurs, the majority of which are founded by
minorities. ■
Mary F. Morten
For information on the Women’s SelfEmployment Project and other small
business information contact Mary
Morten, executive vice president, at

Conley Wins Business Advocate of the Year Award
Diana Conley has won the 1997
U.S. Small Business Administration Award as Women’s Small
Business Advocate of the Year
for Illinois.
Conley, president of Computerland Downers Grove, was nominated by Hedy M. Ratner of the
Women’s Business Development
Center (WBDC) and E. Rachel
Hubka of the National Association of Women Business Owners
Conley’s firm is a consulting and
service center focusing on the
needs of business customers. She
serves in a variety of capacities as
advocate for women-owned businesses and serves as chair of the
Illinois Women’s Business Ownership Council and the Illinois
Small Business Council of l00.

A past president NAWBO’s
Chicago Chapter, Conley was
named 1996 Advocate of the
Year by the WBDC, in addition
to being listed by Crain’s Chicago
Business as one of the area’s top
25 women business owners.
Conley generated support for
women-owned businesses within
the established corporate business world, “a critical element
in ensuring continued opportunities” for women, said Ratner
and Hubka.
She is committed to furthering
programs that expand the opportunities for women and preserve
affirmative action programs for
women. Conley advocates certification for women’s business
enterprises and is a nationally
acknowledged and published

spokesman for public and private
procurement programs. These
programs encourage procurement officials to purchase goods
and services from women-owned
According to her nomination,
“Conley’s creativity and commitment is exhibited not only in
her business acumen but in the
efforts she has made to ensure
that women and minority business owners are furthered in
their efforts to access procurement opportunities and to preserve and expand affirmative
action programs for women.” ■

Diana Conley

For information regarding women’s
business enterprise certification and
other programs contact the Women’s
Business Development Center at


So, What are brownfields?
Brownfields are
vacant, abandoned,
or under-utilized
commercial and
industrial properties where
the fear of real or perceived
environmental contamination
and/or liability is a serious obstacle to their successful redevelopment or improvement.
Nationwide, people are realizing
that brownfields represent a huge
waste of resources. Urban areas
are paying an economic and
social price as tax revenues
dwindle, people and jobs leave
for the suburbs, and vacant
properties create unacceptable
hazards and eyesores.

The question is how to encourage
developers to take a serious new
look at the vast acres of prime,
buildable land in our inner cities?
The answers have been coming
so fast and furious that it’s almost
impossible to keep up with all the
good news.
Some of the proposed solutions:
• Absolute protection from environmental liability for owners,
developers, and lenders.
• Sweeping changes to federal
and state regulations designed
specifically to foster the redevelopment of brownfields.
• Faster, less costly investigation
and cleanup standards without
sacrificing safety and environmental protection.

• More flexibility in cleanup
standards without sacrificing
safety and environmental
• Creative business incentive
programs designed to “jumpstart” downtown redevelopment projects.
• Special outreach programs
designed to generate longterm community support,
involvement, and investment.
Clearly, brownfields are no longer
just perceived as liabilities — but
lands of opportunity, limited only
by our vision and our desire to take
full advantage of the new redevelopment climate. Believe it!

If you do, share your experiences. If not, read on and watch
for future issues of Economic
Development News & Views. ■

Do you have a brownfields
program that is working
in your community? If so,
contact us and let us share
your program with our
subscribers. Contact Harry
Pestine, editor, Economic
Development News & Views,
Federal Reserve Bank of
Chicago, 230 South LaSalle
Street, Chicago, Illinois
60604, 312/322-5877.

Grant Targets Redevelopment of Brownfield Sites
An association of Chicago neighborhood development organizations has been awarded a
$539,000 grant to help identify brownfield sites that can be
cleaned up and redeveloped in
Chicago’s Empowerment Zone.
The Chicago Association of
Neighborhood Development
Organizations (CANDO), will
use the Federal Empowerment
Zone Grant to host a two-year
Brownfield Redevelopment
Institute and a Predevelopment
The Brownfield Redevelopment
Institute is an eight-session course
with topics ranging from Real
Estate Market Analysis to


Interpreting Environmental
Reports. The institute will
begin operation this month.
It is designed to foster community-based partnerships that help
neighborhoods create strategic
plans for redevelopment and
economic opportunities for
low-income residents.
CANDO’s Predevelopment
Initiative will help members of
non-profit organizations identify
brownfields in their communities
and provide redevelopment
A team of consultants will help
create a market analysis for up to
24 sites, conducting Phase I environmental assessments for 15 of

those sites and Phase II testing for
nine sites. CANDO will also work
with the community-based partnerships to identify appropriate
ways to fund their redevelopment
projects. ■
For more information about this
and other brownfield efforts in
Chicago, contact Rob May,
CANDO’s associate
director of industrial
development at

Clarified Lender Liability Rules May
Encourage Brownfields Redevelopment
by Andrew Warren, United States
Environmental Protection Agency
In the closing hours of the 104th
Congress last fall, President
Clinton signed into law the
Asset Conservation, Lender
Liability and Deposit Insurance
Act of 1996 (the Act), which
clarifies lender liability under
the Comprehensive Environmental, Response, Compensation
and Liability Act (CERCLA or
“Superfund”). The Act strengthens the liability exemption available for lenders under CERCLA
and describes what action lenders
may take with respect to a loan
and still take advantage of the
liability exemption. Clarification
of CERCLA’s lender liability
provisions significantly reduces
a major barrier to the successful
redevelopment of contaminated
Why is clarification of the lender
liability rules relevant to redevelopment of contaminated property? In recent years, the Environmental Protection Agency has
identified as a major national
priority the redevelopment of
“brownfields.” Brownfields are
abandoned or underutilized sites
where real or perceived environmental contamination restricts
redevelopment. The U.S. Government Accounting Office estimates
there may be as many as 450,000
brownfields nationwide.
Redeveloping of brownfields
brings significant environmental
and economic benefits. Returning
brownfields to productive use can
reduce the exposure of urban residents to environmental hazards
and help rectify urban blight.
Brownfields redevelopment takes

advantage of existing industrial
infrastructures and reduces the
need for developing pristine suburban areas. Thus, brownfields
redevelopment may help reduce
urban sprawl. Finally, developing
brownfields can return property
to community tax rolls and provide needed urban employment
Historically, concern about CERCLA liability inhibited lenders’
participation in transactions
secured by property with contamination. CERCLA originally provided lenders with the
“secured creditor exemption”
to liability by excluding from its
definition of “owner or operator”
a person “who, without participating in the management” of the
facility, “holds indicia of ownership primarily to protect his security interest.” Problems arose,
however, with judicial interpretation of the phrase “participating
in management.” Some courts
found that if a lender merely possessed the capacity to control a
facility’s operation, such capacity
could trigger loss of the secured
creditor exemption and lead to
a finding of CERCLA liability as
an “operator.”
The Act addresses a significant
barrier to brownfields redevelopment by increasing the
strength of CERCLA’s lender
liability exemption. The Act
effectively refutes earlier judicial
interpretation of the exemption
by amending CERCLA to allow
a lender to take advantage of the
secured creditor exemption so
long as it does not actually participate in the operational affairs
of the facility. Specific examples
in the Act of activities which do

not trigger loss of the liability
exemption include:
• Holding, abandoning, or
releasing a security interest.
• Including a condition relating
to environmental compliance
in a loan instrument.
• Monitoring or enforcing the
terms and conditions of the
loan or security interest.
• Monitoring or inspecting
the facility.
• Requiring the borrower to
address a release of a hazardous substance prior to,
during, or after the loan.
• Providing financial advice to
the borrower to cure a default
or prevent diminution in the
value of collateral.
• Restructuring or renegotiating
the terms of a loan or exercising forbearance.
• Exercising available remedies
for breach of a loan condition.
• Conducting a response action
under the direction of state or
federal officials.
The Act defines “participation in
management,” which can lead to
a loss of the secured creditor
exemption, as either:
• Exercising decision-making
control over the borrower’s
environmental matters such
that the lender is responsible
for hazardous waste practices;

• Exercising control comparable
to a manager at the facility,
such as day-to-day environmental decision-making or all other
operational functions.
The Act also preserves the secured
creditor exemption for lenders
who take title to, or possession of,
collateral property through foreclosure. Such lenders remain protected by the exemption so long
as they seek to sell or divest the
property in a commercially reasonable manner. Moreover,
lenders may take steps to wind
up operations, re-lease the property, and take other post-foreclosure measures without losing the
exemption. Finally, the Act provides protection from CERCLA
liability for fiduciaries by limiting
such liability to the assets held in
a fiduciary capacity.
The Act does not resolve all concerns a lender may have regarding loans secured by contaminated property. The Act succeeds,
however, by significantly clarifying the scope of CERCLA’s
secured creditor exemption.
This improvement should
encourage lenders to become
less adverse to transactions
involving contaminated property, thus reducing a significant
barrier to the redevelopment of
brownfields. ■
Andrew Warren is an Assistant
Regional Counsel with the U.S.
Environmental Protection Agency,
Region 5. The views expressed in this
article are solely those of the author.


Facilitating the Redevelopment of Brownfields in Michigan
A survey conducted by Michigan’s
Department of Environmental
Quality (DEQ), shows that
sweeping changes in environmental clean-up laws have
spurred redevelopment of

New flexible and clear cleanup
standards, based on reasonable
risk assumptions, give developers
and others performing remediation the option to propose solutions to contamination based on
future use of the property.

Of 33 municipalities responding
to the 1996 survey, representatives
of 29 indicated there had been an
increase in interest in redeveloping brownfields. Twenty had
actually seen an increase in
brownfield redevelopment and
provided specific examples.

The new law also requires current
owners and operators of brownfield sites, who caused contamination on their property and are
aware of the problem, to pursue
activities necessary to cleanup the
site. While no data is currently
available on the impact of this
provision, it is expected that it
will result in more expeditious

The examples show that the
change in the law had facilitated
$221.6 million in private investment in brownfield redevelopment and the creation of 2,379
jobs. As of February, new private
investment had increased to $285
million and job creation jumped
to 4,800.
The amendments to Michigan’s
Natural Resources and Environmental Protection Act (Part 201)
were enacted in June, 1995. The
main objectives were to:
• Hold only persons who caused
the contamination responsible
for the cleanup.
• Base the cleanup standards on
future land use.
• Assist in returning brownfields
to productive use.
Key benefits to amendments
The most important factor in
facilitating redevelopment was
liability protection given new buyers through the Baseline Environmental Assessment (BEA) provisions. Lender liability protection,
reduced cleanup costs attributed
to land-use based cleanup criteria,
and due care provisions were also
cited as very important factors.

In addition, under the “due care”
changes, new owners do not need
to completely cleanup or remedy
all on-site contamination. They
are only required to take those
steps that are necessary to allow
safe use of the property. Such
steps could include actions
necessary to ensure that their
employees and customers can
use the property safely, ensure
that their activities do not
make the contamination worse,
and protect against the foreseeable actions of third parties —
generally trespassers.
Baseline Environmental Assessment
New owners or operators of property, and lenders who foreclose
on delinquent loans now have
the ability to obtain an exemption
from liability for existing contamination through performance and
submittal of a Baseline Environmental Assessment .
The BEA distinguishes existing
contamination from any that
might occur in the future. In
order to make the BEA process
as simple and inexpensive as
possible, the DEQ has tied the
amount of data required for a

BEA to the amount and type of
hazardous substances the new
owner is going to use.
In cases where the new owner
will not use hazardous substances,
or the use will be different from
that which previously occurred
on the property, BEAs are simple
to perform. As of February, 1997,
844 BEAs had been received by
the DEQ.
They’re cleaning-up around the
State of Michigan
A few examples:
• In Dearborn, the vacant former
Sarah-Lil industrial site is now
being redeveloped as a new
steel plant by Kenwal Products
Company. The BEA and due
care provisions, land-use based
cleanup criteria, lower cost of
necessary response action and
a covenant not to sue are credited with facilitating this redevelopment. $32 million will be
invested in the redevelopment,
which will result in the creation
of between 100 and 150 jobs.
• In Ionia, five previously vacant
properties formerly used for
industrial and waste disposal
purposes are being redeveloped for a bank, a credit
union, medical offices and
either a hotel/conference
center or shopping mall. The
purchaser and lender liability
protections, due care provisions, land-use based cleanup
criteria, and the associated
reduction in cleanup costs
provided by the changes to
Part 201 are credited with facilitating this redevelopment,
which will result in a private
investment of $11 million and
creation of over 100 jobs.
• In Muskegon, the previously
vacant SPX-Terrace Pointe
industrial site is now being

redeveloped into an office/
hotel complex. The purchaser
and lender protections and
due care provisions of Part
201 are credited with facilitating this redevelopment, which
will result in a private investment of $5 million and creation of 200 jobs.
• In Vicksburg, a Prairie Street
vacant site previously used
for industrial, commercial
and residential activities has
been redeveloped commercially as the Village Marketplace shopping center. The
due care provisions and
reduced cost of cleanup
resulting from the Part 201
amendments are credited
with facilitating this redevelopment, which will result
in a private investment of $3
million and creation of 75 jobs.
• In Taylor, vacant property on
he corner of Corse and Monroe Street, previously the site
of a small manufacturing
plant, is now being redeveloped into a Kroger shopping
center. The BEA and due care
provisions of Part 201 are credited with facilitating this redevelopment, which will result
in a private investment of $7
million and creation of 50 to
100 jobs. ■
For additional information regarding the State of Michigan’s brownfields and environmental laws,
contact Alan Howard, chief of
DEQ, Environmental Response
Division, 517/335-1104 or Jim
Linton, chief of Site Reclamation
& List Unit, 517/373-8450.
For information regarding the
survey and other programs,
contact Ken Silfven, press
secretary, 517/241-7397.

Argonne National Lab and Bethel New Life:
A model for brownfield
by Norm Peterson, Argonne
National Laboratory
Bethel New Life is a community
development corporation serving
Chicago’s West Garfield Park
neighborhood. It has been
involved in industrial development efforts since the 1980s.
In 1992, Bethel formed a partnership with Argonne National
Laboratory to explore ways to
apply technology to help distressed urban communities.
One area of focus of the
Argonne-Bethel partnership is
the redevelopment of environmentally questionable industrial
sites, known as “brownfields.”

Their first brownfields venture
was in 1994. Bethel received
a partial donation of a six-acre
site in the Northwest Center of
Industry industrial park in West
Garfield Park. The park is part of
Chicago’s Model Industrial Corridors program and is also located
in Chicago’s Empowerment Zone.
Argonne National Laboratory
applied its analytical and Expedited
Site Characterization programs to
test and assess the property for
environmental contamination.
In addition, Argonne provided
technical advice to a minorityowned environmental business
that was contracted to evaluate
the six-acre site.
The experience gained from
their initial efforts have led
Bethel and Argonne to further

refine the methods used to assess,
characterize, and classify urban
industrial sites. These methods
are being applied in the development of a model to serve as an
easy-to-use tool that will enable
community organizations to classify brownfield sites for redevelopment. The outcomes will be
revitalized industrial corridors
and livable-wage jobs for low
income community residents.
The model will be developed
in 1997 and use a three step
approach. First, there will be
an initial screen of the neighborhood’s existing inventory
of industrial sites to narrow the
list to those that have redevelopment potential. Information on
ownership, present condition,
past uses, and tax liabilities will
be entered into a specialized data

base, a geographic information
system. Geographic information
systems reference data bases geographically for future analysis.
Second, environmental audits will
be performed on selected sites. A
major focus of the environmental
audit will be to determine the
economic potential of the site
for redevelopment.
Third, following the audits,
plans will be developed for specific sites. A development team
will be formed to produce a plan
including marketing, physical
layout, financing, and priority
of development within the total
number of sites. ■
For additional information contact
Norm Peterson at 630/252-2000.

Export Program
Export working capital program continues to work —
Slamans and Beyer win SBA’s
1997 Illinois Small Business
Exporter of the Year Award
The top executives
of a leading manufacturer of plastic
carrier tape have
won the 1997 U.S.
Small Business
Administration (SBA) Award
for Small Business Exporter of
the Year in Illinois.
T. Bruce Slamans and Anthony
Beyer also won the Midwest
Region award and will go on
to compete at the national level
in the exporter category.
Slamans is president and Beyer
vice president of Tek Pak, Inc.,

in Batavia, Illinois, a leading
manufacturer of precision plastic
carrier tape used in the electronic
surface-mount industry.
T. Bruce

They were nominated by Yianna
Xenakis of the U.S. Commerce
Tek Pak has been a client of the
SBA’s U.S. Export Assistance
Center since 1994 and has
increased sales, profits and
employment through creative
marketing and hard work.
The company’s success is due in
part to a loan obtained through
the SBA’s Export Working Capital
Program, which guarantees 90
percent of a loan from a private
lender. The loan gave Tek Pak
financing to fill export orders
to Taiwan.

Tek Pak was founded in 1992 in
Slamans’ garage and has grown
from two to 40 employees, while
sales have increased 700 percent.
Because of its success, the company is expanding its Batavia facility.
Dedicated to the packaging
requirements of electronics
manufacturers, Tek Pak offers
engineering services such as prototype carrier-mold design and
fabrication, which it believes to
be the fastest in the industry.

The firm has expanded into new
markets including Singapore,
Hong Kong, Malaysia and Europe.
According to Slamans, “the SBA’s
Export Working Capital Program
has played a significant part in
the success of Tek Pak.” ■
For information on export finance or
export assistance programs, contact
Mary Joyce or Paul Kirwin at the
U.S. Export Assistance Center at
312/353-8065 or 312/353-8059.


State of Illinois Launches Capital Access Program
In February, the State of Illinois
announced the establishment
of the Illinois Capital Access
Program (CAP), a new loan
program initiated by the Illinois
Department of Commerce and
Community Affairs (DCCA).

“It’s a fantastic
program, because
there’s no bureaucracy
— Thomas Carter
CAP has the potential to foster
local economic growth by providing access to capital to small businesses that are unable to secure
loans because they fall outside
conventional lending parameters.
This capital could help them
grow their companies, expand
their markets and create jobs.
As an added benefit, CAP also
gives lenders an opportunity to
expand their customer base and
increase commercial loan volume. It’s anticipated that the
Capital Access Program will
be a valuable and non-bureaucratic tool to help strengthen the
Illinois economy. DCCA has committed sufficient capital to generate $30 million in private loans
anticipating this will be their most
successful financing program.
In Michigan
More than 25 states have these
types of programs. Illinois’ program is modeled after a highly
successful initiative established
in Michigan in 1986.


To date, over 70 Michigan
banks have participated in
over 5,300 loans with more than
$284 million to new and small
businesses — an impressive level
of performance by any standard.
Since the formal announcement
of the Illinois CAP, 14 banks with
over 300 branches statewide
have agreed to participate, and
11 loans have been made. A total
of $610,013 in private loan activity
has already been generated.
Portfolio Insurance
The Illinois CAP program is
based on a unique portfolio
insurance concept in which
the borrower and DCCA each
contribute a percentage of the
total loan amount into a reserve
fund located at the lender bank.
The borrower’s portion must be
between three and seven percent
of the total loan amount. DCCA
matches the borrower’s portion.
This reserve fund provides the
bank with funds for reimbursement should they experience a
loss on one of their CAP loans.
To ensure that the bank’s loan
loss reserve grows faster during
the initial stages of the program,
DCCA will provide a 133 percent
match on all early loans. An early
loan is defined as any loan made
where the aggregate amount of
the bank’s total CAP portfolio
is less that $2 million. Additionally, DCCA will provide a higher
matching of funds for loans that
the bank provides to minority,
female and disabled business
owners (150 percent) and to
businesses located in federally
designated Empowerment Zones
or Enterprise Communities
(200 percent).

Historically, most government
lending programs have required
extensive paperwork, and the
associated transaction costs have
made small loans unattractive
from the lender’s point of view.
Not so with the Capital Access
Program. The institution has total
flexibility in the decision-making
and loan approval process. The
non-bureaucratic nature of the
program lowers the transaction
costs and acts as an encouragement for the lending institution.
“It’s a fantastic program, because
there’s no bureaucracy involved,”
said Thomas Carter, vice president of lending at Park Ridge
Community Bank.

under the Illinois CAP. Murphy,
34, had been a stock broker.
Normally, Murphy’s age and lack
of experience might prevent him
from getting a loan, but Carter
said the loan was handled like
any other because of the CAP.
Murphy confirmed that getting
the loan “was not a big deal
at all.”
The program is as big a plus
for the borrower as it is for the
bank, Carter confirmed. “We
processed his loan in a matter
of days,” he said. ■
For more information about participating in the Capital Access
Program, contact Gregg Fahey at
312/814-7168 or 217/782-3891.

As an example, Mr. Carter
referred to a loan that went to
David Murphy, president of a
new independent ambulance
service. The loan to this small
start-up business was the first

Participants in the Illinois CAP Program:

Bank of Bellwood

Mutual Bank, Harvey

Bank of Waukegan

Park Ridge Community Bank

Banterra Bank of West

The First National Bank of

Banterra Bank, N.A., Vienna

The Northern Trust Company,

Downers Grove National Bank
First of America Bank-Illinois,
Mercantile Trust & Savings
Bank, Quincy

The South Shore Bank of
Uptown National Bank of

Rural Development Guarantee Program Streamlined
The U.S. Department of Agriculture’s (USDA) Business
and Industry Loan Guarantee
Program has been revised to
make it more usable by lenders
and borrowers.

Also, recent revisions authorize
the State Directors of Rural
Development to approve exceptions so that up to a 90 percent
guarantee may be approved for
loans up to $2 million.

It is anticipated that the revisions
will make the program more
effective in creating jobs and
stimulating economic activity.

Other revisions include:
• Guarantees for agricultural
production if the business
integrates both production
and processing.

The program is administered by
the USDA’s office of Rural Development, and typically guarantees
losses on up to 80 percent of the
original loan amount.
The program is now revised
to give the Rural Development
Administrator authority to grant
various exceptions. For example,
for high priority projects, the
administrator can authorize 90
percent guarantees on loans up
to $10 million.

• Eligible loan purposes
are expanded to include
hotels, motels and other
tourism and recreational
facilities — excluding racetracks, golf courses and
gambling facilities.

• Certain experienced lenders
can apply for status as certified
• A lender’s credit analysis will
now be relied upon rather
than the Agency’s own
complete analysis.
• Loan servicing is simplified. ■
Lenders, economic development
professionals, business and community leaders are encouraged

to contact their local Rural Development office for additional information on the Business and Industry
Loan Guarantee and other rural
— Illinois 217/398-5412
ext. 244, Charles Specht
— Indiana 317/290-3109
— Iowa 515/284-4152
— Michigan 517/337-6635
ext. 1602
— Wisconsin 715/345-7610

• A new application form now
serves the function of TEN
forms previously in use.

Small Stores Initiative
A National Small Stores Institute
(NSSI) team has been established
to address the various issues that
small retailers throughout the
country are facing.
The team is part of the United
States Department of Agriculture’s initiative “Communities
in Economic Transition.”
The team is composed of educators from land grant universities
and the Cooperative Extension
Service, as well as professionals

from Small Business Development Centers, the Federal
Reserve Bank of Chicago and
private businesses. They are
working together to focus on
retail trade development.

The initiative also is forming
partnerships between University
Retail Centers, the National
Retail Federation, the Extension
System, retailers and other
professionals. ■

The mission of NSSI is to
strengthen, through educational processes, the knowledge,
perspectives, and skills of field
professionals who provide assistance to people who own and
operate small retail businesses
across the United States.

For additional information regarding the NSSI team, its mission
and other rural programs contact
Norma Turok, University of Illinois
Extension Services, 618/453-5561.

… working together
to focus on retail
trade development.


Seventh District Labor Markets
Unemployment conditions for April 1997

Green Bay
Grand Rapids




Cedar Falls/Waterloo





Sioux City
Cedar Rapids

Benton Harbor





Iowa City
Des Moines



Bloomington Lafayette





Fort Wayne



April Unemployment Rates 1997
Seventh District (MSAs), seasonally adjusted
over 5.5%
4.5 to 5.5
3.5 to 4.5
under 3.5

NOTE: All rates are subject to revision.



Ann Arbor

From Our Research Department
The Federal Reserve Bank of
Chicago serves the Seventh
Federal Reserve District, which
includes the entire state of
Iowa along with large portions
of Illinois, Indiana, Michigan,
and Wisconsin. At the present
time, there are 43 Metropolitan
Statistical Areas (MSAs) in the
Seventh District. The geographic
boundaries of MSAs are defined
by the U.S. Office of Management and Budget (OMB) as
economic areas encompassing
communities that are tightly
linked by a flow of commuters,
migrants, goods and services,
and payments.
Unemployment rates are useful
indicators of the labor market
conditions in local areas. The
unemployment rate is defined
as the percentage of adults in
the work force who are not
currently employed but are
actively seeking employment.
Importantly, the work force, and
hence the unemployment rate,
does not include workers who
are not actively looking for work.
This means that workers who
have given up looking for work
are not counted as unemployed.
Unemployment rates for Seventh
District MSAs are derived from
data provided by the United
States Department of Labor
(USDL). Using definitions
and guidelines established by
the USDL to ensure consistency
across state lines, state agencies
calculate MSA unemployment
rates on the basis of a monthly
payroll survey and unemployment insurance records. The
rates used here have been
adjusted to account for normal
seasonal variations.

down the backlog of over-built real
estate from the middle 1980s — a
market boom in which many parts
of the Seventh District did not participate as heavily. As a result of the
District’s economic vitality, many
local areas are reporting difficulties in hiring workers — especially
skilled workers.

Currently, labor market conditions are very good in most
although not all areas of the
Seventh District. The Seventh
District makes up a large part
of Middle America, which is
experiencing a vigorous economic turnaround in comparison to the early 1980s. In contrast
to that period, a more favorable
position of the dollar on foreign
exchange markets along with
growing demand abroad has
enhanced the region’s exports
of agricultural products, consumer goods, machinery, and
equipment. The machinery and
equipment sectors, along with
the regionally important automotive sector, also have gathered
momentum due to the generally
buoyant national economy. In
addition, defense cutbacks and
base closings have bypassed most
of the region, or the effects are
not so severe in comparison to
California, New England, and
other coastal areas. Similarly,
other regions continue to work

Labor Market highlights
The Seventh District’s labor markets continued a relatively steady
trend of tightening in the first
quarter with the average seasonally adjusted unemployment rate
falling to 4.1 percent in February
and March. This is 0.4 percentage
points below the March 1996 rate
and the District has not seen a
monthly increase in its unemployment rate since November 1995.
The national rate for March was
5.2 percent, 0.1 percentage points
lower than February’s and a 0.3
percentage points change from
the March 1996 rate of 5.5 percent. Unemployment rates in the
District’s metropolitan areas

ranged from a low of 1.7 percent
in Madison Wisconsin to a high of
7.8 percent in Decatur Illinois.
District highlights:
Shortages of qualified workers
persisted through most of the
District and upward pressure on
wages appeared to intensify
slightly heading into the second
quarter. While national surveys
showed that employers in the
Midwest had the highest hiring
plans of any region in the country, employment growth in District states continued to lag the
nation—due in large part to the
very tight labor markets. The
impact of scattered strikes against
auto makers and their parts suppliers had been minimal in most
affected labor markets and some
of these strikes have been settled.
• Indiana had the lowest unemployment rate of District states
in March at 3.2 percent and is
continued on page 18

Midwest Unemployment Rate
Percent thru April 1997

Seventh District










Looking Back for the Future
The Federal Reserve Bank of
Chicago has released a report
Assessing the Midwest Economy:
Looking Back for the Future. The
report examines the dramatic
comeback of the Midwest economy since the early 1980s and the
outlook for the region’s future.
The Federal Reserve Bank of
Chicago is holding a series of
high-level summit meetings
throughout the Midwest to
discuss the study and its implications for regional policy.
The meetings provide a unique
opportunity for researchers,
policymakers, and business,
community, and labor leaders
to discuss the important public
policy questions facing the

region and their state. The first of
the summit meetings was recently
held in Chicago. If you would like
to be added to the invitation list
for a meeting in your state, please
call 312/322-2389. ■
If you would like a copy of the report
or additional information on the
study, including workshop summaries and working papers, call
our Public Information Center at
312/322-5111 or access the Chicago
Fed’s Web site at






Research continued
experiencing the lowest rates
in the last two decades. Gary’s
very low 3.8 percent was relatively high compared to those
rates in Indianapolis, Bloomington, and Lafayette, each of
which was below 2.5 percent.
• The unemployment rate in
Illinois remained at 5.0 percent for the third consecutive
month. It is the only state in
the District where manufacturing payrolls increased at
roughly the same rate as overall employment growth in yearover-year comparisons.
• Total payrolls in Michigan
and Wisconsin increased 1.8
percent since last March, the

largest increases of District
states. Robust housing and
construction markets led to
very strong increases in construction payrolls in both
states. Michigan’s payrolls
increased by 9.4 percent from
last March while Wisconsin
showed an 8.1 percent
increase. ■
Richard E. Kaglic

Federal Reserve Bank of Chicago
is on the World Wide Web

Visit our Web site at for:
• consumer and community information
• foreign exchange rates
• selected interest rates
• banking data
• employment and unemployment statistics
• regional economic data
• Chicago Fed publications, including the annual report
and Economic Development News & Views
• speeches by Federal Reserve officials
For further information call the Public Affairs
Department at 312/322-2378.


Around the District
Export Working Capital
In fiscal year 1997, Small Business Administration staff at the
U.S. Export Assistance Center in
Chicago have approved 19 export
working capital loans totaling $7.2
million. According to the Export
Assistance Center, over 20 financial institutions have participated
in the Export Working Capital
Program in the last two years.
For information on export
finance or export assistance
programs, contact Paul Kirwin
at the U.S. Export Assistance
Center, 312/353-8059.
Kankakee County Ranks #1
In a recently released study
of metropolitan areas with less
than 10,000 manufacturing
jobs, Industry Week magazine

rated Kankakee County the
best manufacturing climate
in the nation. For information
on Kankakee County and its
programs, contact Dick Durkin,
president of the Kankakee
County Economic Development
Council at 815/935-1177.
Bank Enterprise Award
Household Bank, Wood Dale, has
received a Bank Enterprise Award
from the Community Development Financial Institutions Fund.
The award was in recognition of
Household’s investment in a community bank that will serve the
financial needs of a distressed
neighborhood in Chicago.
For more information about
the Bank Enterprise Award or
the Community Development
Financial Institutions Fund contact Bill Luecht at 202/622-8662.

WHEDA Update
Wisconsin Housing and Economic
Development Authority (WHEDA)
recently created a new division,
Emerging Markets and New
Products Group, to assist the
Authority in developing new
products and services that will
help WHEDA position itself as
a leader in fostering community
and economic development
throughout Wisconsin.
The new group’s mission and
strategy are simple: With the
reconfiguring of federal-level
programs and initiatives, WHEDA
believes it necessary to enhance
its ability to bring new products
to its customers. Emerging
Markets and New Products
Group will research, design,
test, and package new products
to offer to its customers. WHEDA

is an independent authority
created by the Wisconsin state
legislature to sell bonds for the
purpose of financing housing
and economic development
initiatives — principally by offering guarantees through participating lenders. Emerging Markets and New Products Group is
headed by Wyman B. Winston,
who has had several years experience working within WHEDA,
most recently as director of the
Authority’s Multi-family Group.
For more information, contact
WHEDA at 800/334-6873.

1997 Calendar
June 20
Hammond, Indiana
“Export Finance Conference for
Lenders and Small Businesses.”
Cosponsored by the U.S. Export
Assistance Center, N.W. Indiana
World Trade Council, et al. Contact: Paul Kirwin at 312/353-8059.
June 22-25
Toronto, Ontario
“The Retail Industry and Economic
Development.” Sponsored by
the National Council for Urban
Economic Development. Contact:

July 9
Chicago, Illinois
“SBA LowDoc Training Workshop
for Bankers.” Cosponsored by the
SBA and Illinois Small Business
Development Network. Contact:
Carson Gallagher at 312/814-6111.
July 21-25
Chicago, Illinois
Neighborhood Reinvestment
Training Institute. Sponsored
by Neighborhood Reinvestment Corporation. Contact:

September 11-13
St. Louis, Missouri
National Small Stores Institute
“Communities in Economic
Transition.” Cosponsored by
U.S. Department of Agriculture
Extension Services, Federal
Reserve Bank of Chicago,
et al. Contact: Norma Turok
September 12-13
Chicago, Illinois
Midwest African/Americas Business Development Conference
and Trade Expo “Establishing
Successful Global Partnerships.”
Cosponsored by the City of
Chicago, World Trade Center,
et al. Contact: 312/322-5877.

September 20-24
Washington, D.C.
“Community Investment
Institute.” Sponsored by
Neighborhood Reinvestment
Corp. Contact: 800/438-5547.
October 30-31
Chicago, Illinois
New Mosaic: New Partners,
New Ventures.” Sponsored by
Federal Reserve Bank of Chicago.
Contact: 312/322-8232.


Recycled Paper

Consumer and Community
Affairs Division
Federal Reserve Bank
of Chicago
230 S. LaSalle Street
Chicago, IL 60604-1413

Economic Development
News &Vıews is published
three times a year by the
Federal Reserve Bank of
Chicago, Consumer and
Community Affairs Division.
Please address all
correspondence to:

Volume 3 Number 2
June 1997

News &Vıews

Economic Development