GEORGIA Department of Community Affairs Appalachian Regional Commission Office

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GEORGIA Department of Community
AffairsAppalachian Regional Commission Office
October 18, 2007
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The Creation of the ARC

• By the mid-20th Century, Appalachia had become a
  region apartgeographically and statistically.
• One in three Appalachians lived in poverty50
  percent higher than the national average
• Unemployment was 40 higher than national average
• The high school drop-out rate exceeded 50
• Between 1950 and 1960, net migration data showed
  a population loss in the region of more than two
  million people

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Appalachian Region

• 13 states
• 410 counties
• 200,741 sq. miles
• 23 million people
• 72 local development districts

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Challenges Facing the Region

• Job loss in non-durable manufacturing sector,
  including apparel/textiles
• Decreases in tobacco farms and coal mining
• Death rates higher in heart disease, lung cancer
  and diabetes
• -6.7 gap in those attaining a college education

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ARC Progress

• Poverty rates cut in half
• High school graduation rates on par with national
  average Georgia still lags
• Infant mortality rate now below the national
  average
• Thousands of jobs have been created

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Current ARC Goals

• Increase job opportunities
• Entrepreneurship
• Homegrown businesses
• Compete in Global Economy
• Advanced telecommunications and broadband
• Develop and improve infrastructure
• 30,100 households with water/sewer
• Build Appalachian Development Highway System

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Bolstering Physical Infrastructure Water and
Sewer Projects
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GEORGIA ARC PROGRAM
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ARC REGION OF GEORGIA
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ARC Application Review Process

• Pre-applications due to State office by August 15
• August-October applications are reviewed by ARC
  State Office including site visits, meetings with
  RDCs and project owners
• Approved pre-applicants are invited to submit
  full applications by March 1, 2008

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ARC Available Grant Funds

• Maximum construction grant 300,000
• Maximum operational grant 100,000
• Total annual ARC funding 2,700,000

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ARC Areas of Investment

• Education and Workforce Training
• Developing a knowledgeable and skilled
  population
• Physical Infrastructure
• Strengthening the Regions physical
  infrastructure
• Leadership and Civic Capacity
• Building local and regional capacity
• Dynamic Local Economies
• Creating a dynamic economic base
• Health Care
• Fostering healthy people

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Infrastructure Project Eligibility

• Project must show need for ARC funds
• Projects that generate direct jobs and leverage
  other investment sources including private
  sources
• Project readiness projects must ready to
  commence

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Project Ineligibility

• Projects that serve private homes and residences
• Projects that serve schools
• Projects that serve private development with no
  public benefit

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ARC Energy Blueprint, Oct. 2006

• Energy Goal Develop the Appalachian Regions
  energy potential to increase the supply of
  locally produced, clean, affordable energy, and
  to create and retain jobs.
• Appalachia provides
• 1/3 of the Nations Coal
• 15 of Nations electrical output
• Biomass trees and perennials for cellulosic
  biomass biofuel feedstocks corn, soybeans
  sorghum, switchgrass, etc.
• Wind and solar energy resources

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ARC Energy Activities

• Expanding pilot efforts to boost energy
  efficiency
• Sponsored a matching-grants competition that
  promotes efficiency and renewable energies
• Held a conference to promote collaboration on
  clean coal technologies and expanded uses of coal
  resources
• Organizing Regional Energy Workshop in Rome,
  Georgia - January 23-25, 2008

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James Thompson ARC Office Director 404-679-1584
or jthompso_at_dca.state.ga.us
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DCAs Appalachian Regional Commission Revolving
Loan Fund

• ARC Business Development Revolving Loan Fund
  (ARC RLF)

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ARC RLF Program Basics

• DCAs ARC Business Development Revolving Loan
  Fund (ARC RLF) is a loan fund that can be used in
  the Appalachian region for loans to assist
  projects that promote industrial locations or
  expansions that are creating or saving jobs.
• Funds for the ARC RLF were granted to DCA by the
  Appalachian Regional Commission. DCA administers
  the RLF but loans are made through local
  development authorities.
• The DCA ARC Loan Committee reviews all loan
  requests and sets terms for each approved loan
  application depending on project needs.

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ARC RLF Program Considerations

• Job creation
• One job created or retained per 20,000 of ARC
  RLF funds
• Need
• Gap financing ARC RLF funds should not displace
  available bank financing.
• Program requirements
• Davis-Bacon
• Environmental review, as applicable

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ARC RLF Credit Considerations

• Credit Analysis
• historical financial information -- three years
  of audited financial statements or tax returns
• business plan and pro-forma financial statements
• current financial information
• Collateral
• usually a 2nd mortgage on project or other assets

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ARC RLF Loan Terms

• Interest Rates
• Below-market rates
• Currently 3 fixed
• Repayment period
• Loan amortized for up to 15 years, with a 10-year
  balloon payment, depending on project and assets
  financed

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ARC RLF Ineligible Uses

• Speculative projects
• Assistance to relocating businesses
• Projects appropriate for 100 private sector
  financing
• Refinancing usually ineligible

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ARC RLF Typical Project

• Source
• RLF 50
• Bank 40
• Equity 10

• Use
• Building, Land, Equipment, and Working Capital

Maximum Loan 200,000 or 50 of project cost,
whichever is less.
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ARC RLF Carry-On Trailer, Inc.

• Expansion of existing cargo and utility trailer
  manufacturer in Lavonia, Stephens Co.
• Lavonia location is company HQ company was
  started in 1996
• 80,000 SF addition
• Retained 41 jobs and created 75 new jobs
• Other plants in Virginia, Iowa, Texas and Nevada
• National annual industry sales are over 1B

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ARC RLF Carry-On Trailer, Inc.
Sources ARC RLF 200,000 EIP 500,000 Carolina
1st 900,000 City of Lavonia 144,300 Carry-On
1,168,000 Total 2,912,300
Uses Building Constr. Building
Constr. Building Constr. Land ME Site
prep
Bank had first mortgage ARC RLF had second lien
and City had third lien with its EIP loan.
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ARC RLF Carry-On Trailer, Inc.

• Strengths
• 9-year operating history
• Management experience
• Double-digit sales increases
• Profitable
• Solid balance sheet equity
• Bank participation
• Job creation

• Weaknesses
• Heavy account concentration with two customers
  generating over 70 of sales
• Slight collateral shortfall for City of Lavonia

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DCAs ARC RLF
Russell Morrison ARC RLF Program Manager
404-679-4825 or rmorriso_at_dca.state.ga.us