INVESTING PUBLIC DOLLARS FOR ECONOMIC GROWTH

By PATRICK QUINN, Illinois Treasurer

As Illinois Treasurer, I take seriously my responsibility to safeguard your investment in government. That is why I have maintained a high standard for investing the more than $3.1 billion under my management in over 400 state funds. First and foremost, I insist on safety for all state investments, combining maximum yield with security.

I also aggressively seek investments that make the taxpayers' money work twice. By targeting our investments to economic development within Illinois, we get a good rate of return in the present and earn a long-term return in the form of economic growth for Illinois businesses and families.

In my first year as Treasurer, I have shifted the focus of the traditional linked deposit program away from the "megadeals" and "smokestack chasing" of the 1980s. Our investments now support such important areas of the state economy as affordable housing, agriculture, minority-and women-owned businesses, small businesses and health care providers.

This is accomplished without making any direct loans or putting Illinois money at risk, and while maintaining a competitive yield that outperformed the benchmark Federal Funds rate every month last year. On several of these economically targeted investments, we have joined in partnership with city government agencies as well as local banks, credit unions and savings and loan associations.

My office places state investments with Illinois lenders who will put the money to work revitalizing their communities. Using the state deposits, those financial institutions make loans to qualified businesses.

The term, rate and size of both the Treasurer's deposit and the financial institution's loan are negotiated to produce the most favorable loan for the business and the bank. Deposits range in size from $50,000 to $5,000,000, carry a term of one to five years, and, because of the negotiated rate spread, provide below-market interest rates to the borrower.

Investments are made under the following programs:

• Agriculture Loan Program: This ten-year program reached an all-time high of $200 million in 1991, serving 6,285 farmers statewide. The program was expanded in 1992 to include loans for production, irrigation and both soil and water conservation.

• Economically Targeted Investments (ETI): This program emphasizes lending to small- and medium-sized businesses that have difficulty getting capital or need below-market interest rates to make a project successful. Nearly $33 million deposited in 1991 helped create or retain 1164 jobs statewide.

• Small Business Means Big Business for Illinois: Launched at the end of 1991, this partnership with the federal Small Business Administration uses an innovative combination of economic incentives and technical assistance to stimulate small business. Incentives include targeted deposits to back SBA loans and a $25 million fund to purchase SBA loans in the secondary market.

• Women's Finance Initiative: This partnership with financial institutions and women's business development groups provides women-owned businesses with both low-interest loans backed by the Treasurer's office and technical assistance and business planning they need to grow a successful business.

• Housing Linked Deposit Program: Creative financing organized under this program helped stimulate affordable housing projects from Single Room Occupancy to median-income developments. Community groups, financial institutions and public and private agencies joined their resources with the Treasurer's office to leverage projects that otherwise might have fal-

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tered in a stagnant economy. A total of $15 million has been invested under this program.

• Health Care First: This program provides low-interest, working capital lines of credit to health care agencies suffering cash flow problems due to the state's slow-pay system. Nearly $18 million was deposited in 1991 for bridge loans to pharmacies, nursing homes, hospitals and other Medicaid providers.

• Community Health Partnerships: This pilot program is a partnership with the Southern Illinois University Medical School, offering low-interest loans to SIU graduates willing to set up practice in the 68 Illinois counties designated by the federal government as medically underserved.

• Fresh Start for Midway Employees: Low-interest loans offered under this program are available for the 4,000 laid-off Midway Airlines employees, as well as for those in related service businesses. Funds can be used for retraining and small business start-ups.

• Veterans' Programs: Veterans of the Persian Gulf War and other tours of duty are eligible for low-interest loans to help put their lives back on track. In 1991, 212 veterans received nearly $2.7 million in loans through these programs to help make the transition to civilian life.

As municipal officials, you are in a good position to know of opportunities to use state resources to support local development. We want to customize our relationship with Illinois financial institutions to develop public/private partnerships around Illinois to prepare our state's economy for the next century. We need to take advantage of every opportunity or look for creative ideas to boost the Illinois economy.

I invite community leaders, financial institutions and businesses to join us in using state deposits as leverage to fuel our economy. If you are interested in participating in our linked deposit programs, contact my Economic Development Division at (312) 814-3571, or, write to us at the State of Illinois Center, Suite 15-600, 100 W. Randolph, Chicago, Illinois 60601. •

Page 16 / Illinois Municipal Review / may 1992