• Alex Nitkin
    SEP 28, 2021

    Less than half of money allocated for COVID-era loan program made it to businesses, Conyears-Ervin says

    Ald. David Moore (17) questions Chicago Treasurer Melissa Conyears-Ervin during a City Council budget hearing on Monday.

    Updated Tuesday, 3:20 p.m. Only about 40 percent of the money allocated from a long-dormant city fund to help businesses survive last year’s spring lockdown actually made it to applicants, Chicago Treasurer Melissa Conyears-Ervin told aldermen during a budget hearing on Monday. The rest remains tied up with private intermediary lenders, in part due to a quirk in city rules, she said.

    Mayor Lori Lightfoot last March launched the $100 million Chicago Small Business Resiliency Fund to pump out low-interest loans to businesses that were forced to shut down when the pandemic hit. It was seeded in part with $50 million from the Chicago Community Catalyst Fund, a lending pool launched in 2017 by former Treasurer Kurt Summers that went nearly three years without making a single loan.

    Related: Aldermen set to relaunch $100M Catalyst Fund with new appointments

    The Treasurer’s office boasted in June that more than 700 businesses had secured loans through the program. She said about half the businesses that benefitted from the loans are located on the city’s South or West Side, 44 percent are Black-owned and 30 percent are women-owned.

    But the ordinance (O2017-5550) that launched the Catalyst Fund only allows it to disburse money through “fund-to-fund” investments in other lenders, Conyears-Ervin said. And in order to concentrate the loans in neighborhoods that needed them most, the treasurer’s office restricted its Resiliency Fund loans to Community Development Financial Institutions (CDFIs), local banking institutions that loan more heavily to entrepreneurs of color but “could only take so much money,” she said.

    “Some people may determine that they may be riskier loans that we were providing with the Small Business Resiliency Fund,” the treasurer said. “But at some point…we knew that we had to help people that needed the help.”

    “We still technically have about $30 million left, and the CDFIs — we pushed and pushed and pushed,” Conyears-Ervin added. “They really did us a favor by taking $20 million, to be perfectly honest with you.”

    She added that she was “working closely with the mayor’s office to try and figure out what else we can do,” including by changing the 2017 ordinance to pave the way for “direct investing.”

    Ald. Michael Scott (24) responded that the question of “how to get the money out the door” has dogged city leaders “since the inception of the Catalyst Fund.”

    “Of course we have not been as successful as we would want,” Scott said, offering his help to improve the process.

    A spokesperson for the city's Office of Budget and Management emphasized in a statement on Tuesday that Catalyst Fund dollars only made up about half of the Small Business Resiliency Fund, which was also fueled by a $25 million direct allocation from the city and donations from private sources. The city also launched a litany of other programs last year aimed at helping businesses through the pandemic.

    “The Mayor's Office has deployed the entire $100M of the Chicago Small Business Resiliency Fundalong with an additional $16 million in other small business efforts such as the Hospitality Grant, Microbusiness Recovery Grant, the Together Now Fund, and the Performance Venue Grant," the spokesperson wrote.

    The Twitter account @chicagobars, which represents Illinois bars and restaurants, tweeted in response to the revelation on Monday: “If testimony at #ChicagoBudget2021 hearing just now is correct, the City of Chicago  has somehow failed to spend, during a crushing global pandemic, about $30M of City Hall's highly touted Small Business Resiliency Fund announced over a year ago. UNREAL.”

    Aldermen keep up pressure on city investments

    Conyears-Ervin also fielded questions from aldermen on how her office plans to crack down on lenders with racially discriminatory home lending patterns, picking up a thread from her budget hearing last year. City leaders have been looking for to keep up pressure on banks since WBEZ and City Bureau revealed last year that Chase, which holds a substantial piece of Chicago’s assets, overwhelmingly concentrates its home loans in majority-white neighborhoods.

    Related: Widening city’s investment net could help fight systemic racism in banking, Conyears-Ervin tells aldermen 

    On Monday, Ald. David Moore (17) conceded that Chicago may not be able to fully “pull away from” big banks like Chase, but he asked if Conyears-Ervin could stake out a middle ground to put banks with racist lending records on notice. 

    “What are some things that we could pull back from them until they start investing in these communities?” Moore said.

    Conyears-Ervin responded by touching back on her recurring argument that the city should improve its roster of municipal depositories through addition, not subtraction. She pointed to an ordinance (O2021-2879) she championed in the City Council that will lower barriers for smaller banks to apply as municipal depositories.

    Related: Investing more of city’s money with small banks could help fight racist lending: Conyears-Ervin

    “A number of institutions…don’t want our money because they can’t afford our money,” Conyears-Ervin said. “So we’re left with these larger institutions that will hold our money, but then we’re not pleased with their performance to our residents. So we’re trying to balance this and figure this out.”

    The Treasurer’s office last week convened the inaugural meeting of the Municipal Depository Task Force, a group of aldermen and city finance officials who will work on revamping the city’s annual Request for Proposals that asks banks to apply for the right to hold a piece of the city’s approximately $9 billion in assets. The meeting came weeks after Inspector General Joseph Ferguson issued a report finding that city finance offices are not coordinating to use all the tools at their disposal to crack down on racist lending.

    Related: City has ‘no process’ to stop investing public dollars in banks with racist lending patterns, watchdog says

    The City Council is due to vote on re-certifying its next round of municipal depositories in February, Conyears-Ervin said. The task force will work to make changes to the annual renewal process by the time the city issues its subsequent Request for Proposals next summer.

    Chicago’s existing roster of depositories, approved by aldermen in March (O2020-6251), includes about a dozen mostly big-name national banks like Bank of America, Wells Fargo and JP Morgan Chase.

    Conyears-Ervin warned on Monday that any tinkering with the city’s investment portfolio would have to “be conservative” enough to make sure her office is still fulfilling its obligation to earn as much money for the city as possible.

    “We’re always mindful that we have to protect the dollar and not lose any money,” she said.

    Conyears-Ervin credited her office’s investment strategies for earning the city $100 million in investment income since last year. 

    Erin Hegarty contributed reporting.

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