Borough's gain could be EDD's loss

Posted: Monday, May 22, 2000

The Kenai Peninsula Borough soon could absorb a big slice of the work now done at the Kenai Peninsula Economic Development District. That could mean big cuts to the EDD.

In the draft budget now before the assembly, Mayor Dale Bagley proposes slashing $200,000 from the borough's annual subsidy to the EDD, a nonprofit corporation independent of the borough government. If the assembly agrees, the borough subsidy for fiscal 2001 would be just $90,000.

"The EDD hasn't been able to get its house in order or get a director online," said assembly president Bill Popp of Kenai. "It's been kind of rudderless. It's lost the confidence of the assembly, and I think of the mayor, too. I think the assembly is going to look favorably on this proposal just because what we have now hasn't worked."

The borough would open a new Department of Economic and Community Development and open a new high-profile economic development office, probably in Soldotna. Popp said that would create a better opportunity to recruit new businesses to the peninsula.

The EDD budget would fall from $450,000 this fiscal year to $210,000 next, said EDD president Tom Boedeker and James Elson, acting EDD director.

Its revenues would be just $197,000. The $13,000 deficit would consume more than a fifth of the EDD's savings.

The EDD now funds its Small Business Development Center largely using $50,000 from the borough and $50,000 from the SBDC of the University of Alaska Anchorage. Under the borough proposal, the local SBDC would move to the new borough office in Soldotna. It would receive the same borough and university funding, said Jeff Sinz, borough finance director. However, the local small business development planner would work for the university SBDC.

Popp said the local SBDC has been successful under EDD management.

"But that's only one function," he said. "The key issue was industry recruitment at the large level and at the small level. Industry recruitment has been largely rudderless."

Elson said it has been difficult to hire a permanent director since the last one resigned in June 1999.

"With the economy booming in the Lower 48, everyone there is excited about what they're doing and not willing to change jobs -- particularly to an area where the economy is just staying level," he said.

Several assembly members recently have disparaged the EDD. During debate last week on selling land to North Pacific Volcano Learning Center Inc., Homer assembly member Drew Scalzi hinted that the volcano center could provide a bigger boost to the economy.

"I've sat here and watched the Economic Development District spend $300,000-plus every year on something I have yet to see (produce) a tangible asset," he said.

Elson said the EDD has had notable successes.

Its tourism committee became the Kenai Peninsula Tourism Marketing Council, he said. The EDD helped Kachemak Bay shellfish growers to form a cooperative, pool their efforts and expand their markets. It talked the Legislature into building an oyster hatchery in Seward.

The EDD's revolving loan fund has more than $200,000 in loans on the books and $96,000 available to lend, he said. The loan program lately has been stagnant, he said, but the board is trying to revive it.

Elson said the EDD just wrote a grant application that landed $300,000 to build the new Homer Chamber of Commerce visitor center. The federal Economic Development Administration recently agreed to entertain a $1 million grant application to help build Homer's new $12 million dock. Because the EDD is a federally certified economic development district and the dock fits its regional development plan, the city will not have to provide as much matching money.

The EDD's Small Business Development Center has taught numerous seminars and provided free advice to help entrepreneurs open and expand area businesses.

A noticeable weak spot has been the EDD's small business incubator. Elson said a few fledgling businesses have rented space in the main EDD office building, where the cost is less. But it has been difficult to attract tenants to the new incubator building.

"It's just very clear right now that no one is coming," Boedeker said. "Despite some efforts, they're not going to come."

With the proposed cuts to borough funding, he said, the board may have to consider leasing or selling the incubator building. If it sells that, though, he said, it will have to sell the entire property, including the main EDD office. If it quits using the incubator to hatch new businesses, it will have to return the $1 million federal grant that helped fund its construction.

The loss of the SBDC would trim two positions from the EDD's staff of four, leaving only the director and the business manager. Elson said the EDD could reorganize and employ a half-time director, a business manager and a loan manager to revive the revolving loan program. However, that would add half a position to the staff and consume savings faster.

The remaining $90,000 in borough funding would provide the local match for a $59,000 grant from the Economic Development Administration and a $47,000 grant from the state's Alaska Regional Development Organization.

Under the EDA grant, Elson said, the corporation would continue helping communities to formulate economic development plans and pick projects. Under the ARDO grant, it would continue to help communities implement their plans.

The new borough office would absorb an economic analyst from the Planning Department and house two other Economic and Com-munity Development Department workers. It would share a receptionist with the university SBDC and house the SBDC business planner. The combined borough and university budgets would total $335,000.

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