===== PDF PAGE 4 ===== CITY OF WEST CHICAGO ECONOMIC DEVELOPMENT COMMISSION AGENDA ITEM SUMMARY ITEM TITLE: Consideration of a Revolving Loan Fund (RLF) AGENDA ITEM NUMBER: 5 MEETING DATE: 07/28/2026 STAFF REVIEW: Kelley Chrisse, AICP, CEcD SIGNATURE __________________________ ITEM SUMMARY: With growing interest in the City creating a Revolving Loan Fund (RLF), this memo summarizes prior Commission discussions related to the City serving in a financial role and outlines requirements for establishing an RLF, including key challenges and opportunities, and alignment with the City’s adopted economic development strategy. Prior Related EDC Discussions While the Commission has not officially considered a revolving loan fund, several related discus- sions provide important context: • Preference for Grants Over Loans: In discussions related to façade and investment programs, the Commission generally favored grant-based incentives and expressed that a forgivable loan structure was not necessary for those programs. • Concern About Evaluating Business Viability: During the Retail & Restaurant Grant Program discussion, Commissioners raised concerns about the City being placed in a position to evaluate business plans or financial viability, noting that businesses can still fail despite strong planning. • Interest in Accountability Mechanisms: Conversations around façade improvements included discussion of clawbacks and forgivable loan structures as tools for accountability, though not strongly supported for grants. • Focus on Public Benefit: The Commission has previously acknowledged that public funding should produce lasting community value and expressed concern about funding uses (e.g., marketing) that do not cre- ate long-term benefit. • Exploration of External Financing Tools: The Commission reviewed programs like C-PACE financing, indicating an interest in leverag- ing external financing tools rather than directly administering loans. The Commission has historically been cautious about the City acting as a lender, with concerns cen- tered on administrative burden, risk, and the appropriateness of evaluating private business viability. What Is a Revolving Loan Fund (RLF)? A Revolving Loan Fund is a pool of capital used to provide loans to businesses or developers. As loans are repaid (with interest), the funds are “revolved” back into the pool to support future projects. Typical uses include: • Gap financing for redevelopment projects • Small business expansion • Tenant build-out assistance • Property rehabilitation ===== PDF PAGE 5 ===== What It Would Take to Establish an RLF Establishing an RLF would require the City to function, in part, as a financial institution or partner with one. Below are some key elements to consider: A. Capitalization • Initial funding source (e.g., TIF, General Fund, grants such as EDA or HUD CDBG) • Minimum viable fund size (typically $500,000+ to be impactful) • Policy on loan size, terms, and eligible uses B. Governance & Policy Framework • Loan policy (eligibility, underwriting criteria, collateral requirements) • Defined public purpose (job creation, tax base growth, redevelopment) • Approval authority (EDC advisory vs. City Council approval) C. Underwriting & Risk Management • Financial analysis of applicants (cash flow, creditworthiness, projections) • Collateralization (liens, personal guarantees) • Risk rating and loan loss reserves D. Administration Options include: • In-house administration (staff-driven) • Third-party administrator (e.g., bank, nonprofit lender, regional economic development or- ganization) • Hybrid model Administrative responsibilities include: • Application intake and review • Loan servicing (billing, collections) • Compliance monitoring • Reporting and auditing E. Legal & Regulatory Requirements • Loan agreements and security instruments • Compliance with state and federal laws (if grant-funded) • Public sector procurement and transparency requirements Key Challenges • Requires specialized financial expertise and ongoing administration • Introduces risk of default and potential enforcement actions • Shifts the City’s role from partner to lender with risk assumption • Adds administrative burden beyond traditional programs • May duplicate existing private lending resources Opportunities • Addresses financing gaps that limit redevelopment • Creates a reusable funding source through loan repayment • Can be targeted to priority areas (e.g., downtown redevelopment) • Leverages additional private investment • Offers flexibility in structuring terms to meet project needs ===== PDF PAGE 6 ===== Work Plan Alignment & Strategic Fit The 2026–2028 Economic Development Work Plan establishes a comprehensive set of initiatives fo- cused on downtown revitalization, business growth, and strategic investment. A Revolving Loan Fund generally aligns with these goals, particularly: • Supporting redevelopment and infill projects • Assisting small business growth and tenant buildout • Addressing financing gaps that may limit investment However, the Work Plan is structured around the City serving as a facilitator of investment, with a specific emphasis on: • Connecting businesses to capital (e.g., banks, CDFIs) • Advancing redevelopment readiness • Implementing targeted grant and incentive programs An RLF would represent a shift in role from facilitator to direct lender and is not currently identified as a strategy within the adopted Work Plan. Capacity & Operational Impact The Work Plan includes a substantial number of core initiatives scheduled for 2026, many of which require significant staff coordination and implementation. Several initiatives are also dependent on additional staffing resources, including the new Business Support Specialist, indicating that capacity is already a known constraint. Establishing an RLF would introduce new and ongoing responsibilities, including: • Financial underwriting and risk assessment • Loan administration and servicing • Legal coordination and compliance These functions are specialized and continuous. Advancing an RLF at this time would likely: • Divert staff capacity from core Work Plan initiatives • Slow progress on priority redevelopment and business support efforts • Introduce additional administrative and financial risk Considerations A Revolving Loan Fund can be an effective economic development tool, particularly for addressing financing gaps and supporting redevelopment. However, it requires a level of capacity, expertise, and ongoing administration that differs from the City’s current program structure. Key considerations include: • Role: Should the City act as a lender or continue to facilitate access to capital? • Capacity: Can this be implemented without impacting priority initiatives? • Need: Is there a demonstrated financing gap that existing tools cannot address? • Alternatives: Would expanding or refining grant programs achieve similar outcomes with less risk? • Funding: What level of investment is required, and what would be the source of funds? Commission Direction Requested Given the considerations outlined above, the Commission’s guidance is requested to determine the appropriate path forward. ===== PDF PAGE 7 ===== Specifically, the Commission should consider whether to: • Continue focusing on implementation of the 2026–2028 Economic Development Work Plan, recognizing the scope of identified initiatives and existing staff capacity; or • Pursue the creation of a Revolving Loan Fund, acknowledging that doing so would represent a shift in strategy and require additional resources, administrative capacity, and financial over- sight. If the Commission recommends pursuing a Revolving Loan Fund, it is further recommended that the Commission: • Identify and prioritize the intended purpose of the fund (e.g., downtown redevelopment, small business support, gap financing); and • Recommend which existing Work Plan initiatives should be de-prioritized or deferred to ac- commodate the additional workload and ensure successful implementation. Clear direction from the Commission will ensure that staff efforts remain aligned with the City’s high- est priorities and are implemented effectively within available resources. ACTIONS PROPOSED: Staff requests Commission guidance regarding the City’s role in the creation of a Revolving Loan Fund.