Future of county revolving loan fund in doubt

But Port is likely to continue program seen as important to economic development in light of federal change

The Port Washington Community Development Authority recommended the city provide a $150,000 revolving fund loan for renovations at the Harborview Holiday Inn, where construction continued this week.
Ozaukee Press staff

The City of Port Washington should continue its revolving loan fund program — a program that has successfully helped promote business throughout the community over the past 30-plus years — the Community Development Authority agreed Monday.

The CDA also recommended a new revolving loan be approved by the Common Council.

Revolving loan funds are important to counties and municipalities, since they are one of the few economic development tools available to communities hoping to attract and retain businesses. Often those businesses seek the low-interest loans from both the city and county to supplement other private financing. 

However, Ozaukee County is pondering whether to do away with its program now that the Department of Housing and Urban Development, which provided seed money for the loans, has eliminated its revolving loan  program.

Ozaukee Economic Development Executive Director Kathleen Cady Schilling on Monday told members of the county Executive Committee that the county has three options.

The first is to “get out of the business,” which would require paying the state the fund’s current cash on hand, which is about $664,000. 

If that is done, the current loans, which total about $450,000, would continue with the county administering them with the payback going to the state.

The second option, Cady Schilling said, would be to convert the money to a community development block grant, or CDBG, to benefit low to moderate-income individuals, blighted neighborhoods, senior citizens or some other eligible project.

The money could be used for as many as two projects at a time, she said.

The third option is to convert the cash on hand to a CDBG and buy out the outstanding loans. Both the cash on hand and the loan payments would then go toward eligible projects.

If either the second or third option is pursued, officials said one possibility would be to use the funds to assist county seniors or improve the county-owned Lasata Senior Living Campus in Cedarburg.

“We could maybe leverage that money to close the loop at Lasata and develop a CBRF,” county Administrator Jason Dzwinel said, referring to creating a community-based residential facility at Lasata to create a continuum of care.

A CBRF provides services to people of advanced age, dementia, developmental disabilities, mental health problems or physical disabilities.

County officials have long envisioned a CBRF at Lasata to fill the gap of care provided by the campus’ three senior living facilities, Lasata Heights independent living apartments, Lasata Crossings assisted living facility, and Lasata Care Center nursing home and rehabilitation center.

Supr. Pat Marchese also suggested polling local nonprofit organizations to gather ideas for other potential projects

No vote was taken, but Cady Schilling said the county should focus on developing one or two project ideas by May 2020 to meet a state deadline of February 2021.

But in Port Washington, the change in the revolving loan fund program could benefit the city, Cady Schilling told the Community Development Authority Monday.

“It actually turned out to be a really good situation for the City of Port Washington,” she said. “It really allows you to do what you want with your money.”

That’s because the city received its funds for the program from HUD before 1992. When HUD decided recently to get out of the revolving loan business, it allowed those communities to retain the money.

The city initially received its funding for the program in the mid-1980s, Cady Schilling said. The county received its funds after 1992.

The fund allows communities to loan money to companies at a low interest rate in exchange for creating jobs, especially for low-income residents. As the money is repaid, communities can use both the principal and interest to lend funds to other businesses. 

The so-called “defederalization” of Port Washington’s revolving loan program was approved by the state last week, Cady Schilling told the CDA.

“Those funds are now the City of Port Washington’s,” she said, and can be used to continue the revolving loan program or for other development programs.

Since the city received its initial loan of about $500,000, Cady Schilling said, its pot of money has grown to about $1 million.

There are currently six active loans, she said, adding all the businesses are making payments in a timely manner.

Now that it’s been “defederalized,” the $1 million won’t grow, except by the interest accrued through loans and investment, Cady Schilling said.

In retaining the program, the CDA recommended several changes to the loan standards.

While the loans will continue to require employee retention and job creation, she said, it will no longer require low-income residents to fill those positions.

It also recommended creating two loan standards — loans of more than $25,000, which would be approved for a maximum 10 year term, and those of less than $25,000, which would be lent for a five-year maximum term.

“For the smaller loans, that made more sense,” Cady Schilling said, adding that the city has not granted smaller loans in the past because of the administrative cost.

Larger loans would come with a $1,500 application fee, while the smaller loans would have a fee of $250.

The CDA also recommended approving loans to help with construction costs.

“All we’re trying to do is clean up the guidelines,” Cady Schilling said.

Immediately after making the recommendation, the CDA recommended approval of a $150,000 loan for the Harborview Holiday Inn to aid in the renovations of the hotel. 

The $2.5 million project includes facade improvement, the creation of a new restaurant and bar, an enlarged lobby and entrance, new windows and upgraded room amenities and new conference, meeting and party rooms.

Cady Schilling said the hotel is “very strong.”

“The hotel makes money,” she said, and its revenues will likely increase with additional food and drink revenue as well as increased business in the off-season.

“If the hotel weren’t successful, it would leave a big hole in your downtown,” Cady Schilling told the CDA. 

City Administrator Mark Grams noted that the hotel pays more than $150,000 annually in room tax to the city. Even if the hotel were to default on the loan, he said, in essence it would have gotten its money back through the room tax.

Work on the hotel is underway. Owner Eric Lund told the CDA that the lobby and lower level are expected to be completed by the first week in May, with the new restaurant and bar opening at the end of June.

The loan and program recommendations will be considered by the Common Council when it meets on Tuesday, March 19.


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Wisconsin’s largest paid circulation community weekly newspaper. Serving Port Washington, Saukville, Grafton, Fredonia, Belgium, as well as Ozaukee County government. Locally owned and printed in Port Washington, Wisconsin.

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