EDD stands to lose its borough funding

Posted: Friday, May 30, 2003

A major funding source for the Kenai Peninsula Economic Development District is in jeopardy and could be wiped out with one vote next Tuesday.

If the Kenai Peninsula Borough Assembly votes to approve the current version of the 2004 fiscal year budget at Tuesday's assembly meeting, it will be without a $90,000 appropriation that makes up about half of the EDD's annual revenue, and all of its grant-leveraging capital.

"A lot of people have felt that we haven't got our money's worth," said Borough Mayor Dale Bagley, who moved to cancel the borough's contract with the EDD and remove funding for the nonprofit from the borough budget.

"I'm not going to pretend that we're getting $90,000 worth from them," he said.

As part of the new budget package, the mayor has recommended transferring $50,000 of the money previously allotted to the EDD to the borough-operated Community and Economic Development Divi-sion. The idea is to save $40,000 and do the same work EDD was doing, Bagley said.

"I don't even think it's going to cost that much," he said, suggesting that upward of $20,000 could accomplish forum programming and reporting now done by the EDD.

The EDD was formed in 1988 to spur economic growth and work force development on the peninsula, specifically in the "cottage" industry or small business sector by assisting with business plan development, preparing business owners for commercial loans, providing access to capital and providing technical support through its Business Incubator Program.

In addition, EDD facilitates community and industry forums, and helps rural communities develop strategic action plans to bridge gaps to economic opportunities.

Bagley said EDD was originally funded at $350,000 annually until the borough's economic development division was formed in 2000, at which point $240,000 of EDD's money was redirected to the borough office.

EDD director James Carter said his organization has earned its keep by generating employment and responding to the planning needs of the peninsula's unincorporated communities and deserves to continue to be funded by the borough.

"There is no EDD to help these under-served communities," he said. "The Kenais and Soldotnas of the world, they have city councils and mayors. They have relations with the borough that the Tyoneks, Anchor Points and Ninilchiks don't have."

Mike Schuster, vice president of the Ninilchik Chamber of Com-merce, said Carter was instrumental in helping the community of Ninilchik formulate a comprehensive community plan to present to agencies that could offer grants to fund needed things like water wells or a fire engine.

"They know our needs more than anybody else," Schuster said.

Mike Chihuly, a Ninilchik business owner, said the planning assistance was welcomed from EDD because the organization did not represent state or borough government.

"Everybody was trying to do things unilaterally," Chihuly said. "They helped us come together. I thought it would be a good thing for our community not to bring more taxes or more government to work with us."

In a presentation given to the borough assembly earlier this month, Carter showed where EDD used $67,000 of the annual borough money to leverage state and federal dollars through matching grants. Along with borough funding, the EDD receives $47,000 in state funding for its status as an Alaska Regional Development Organiza-tion through a 100 percent matching grant and must show 33 percent of $59,000 roughly $20,000 to receive that amount from the federal Economic Development Administration. This makes the total annual revenue $196,000.

"The importance of leveraging can't be overlooked," he said.

In 1995, the EDD received a federal grant to start the Business Incubator Center, where the agency is currently located in North Kenai. The center opened in 2000 and Carter said in the two years since he became director, it has helped create 87 businesses.

"Since I started with EDD, the borough has invested $180,000. We have indirectly and directly contributed to creating and retaining 45 full-time jobs," he said, and referred to the EDD's full annual revenue in the next statement. "This is $4,235 per job. The national average is $4,500 and the Alaskan average is $15,000."

The borough assembly will have the final say as to EDD's fate, and Bagley conceded that he will conform to the assembly's will.

"If the assembly wants to still fund them, that's fine," he said.

Pete Sprague, assembly president, is one of two assembly members appointed as EDD board members.

He said he thinks the nonprofit is worth funding, but said he realizes that some issues of overlap need to be sorted out during assembly budget work sessions on Monday and Tuesday and at Tuesday's assembly meeting.

"My view is that the borough has gotten a return for its investment," he said. "I see the money helping us leverage federal money and grants. It's important that EDD continue to be a viable part of the borough.

"There will be some discussion on how we manage the overlap. Do we need two different entities that support economic development?"

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