~l elol./ g)~ EVALUATION OF SEVEN MAJOR TECHNICAL ASSISTANCE PROJECTS WITH NATIONAL SCOPE OCTOBER 1971 ECONOMIC DEVELOPMENT ADMINISTRATION U.S. DEPARTMENT OF COMMERCE EVALUATION OF SEVEN MAJOR TECHNICAL ASSISTANCE PROJECTS WITH NATIONAL SCOPE OCTOBER 1971 ECONOMIC DEVELOPMENT ADMINISTRATION U.S. DEPARTMENT OF COMMERCE Digitized by the Internet Archive in 2012 with funding from LYRASIS Members and Sloan Foundation http://www.archive.org/details/evaluationofseveOOunit ACKNOWLEDGMENTS In the summer of 1970, Robert A. Podesta, Assistant Secretary of Commerce for Economic Development, requested the Program Analysis Division to conduct an evaluation of national technical assistance projects. This report summarizes the evaluations which have been conducted and contains, as appendices, the individual reports which have been presented to Mr. Podesta and his staff. Arnold H. Leibowitz, Director of the Office of Technical Assistance, and his staff, deserve special acknowledgment for their continued help during this evaluation effort. Raymond H. Milkman, Assistant Director for Program Analysis, and Howard L. Walton, Deputy Chief of the Program Analysis Division, provided valuable counsel and guidance throughout the project. The project was directed by Harry Gildea. The following members of the professional staff participated in the evaluation : Christopher Bladen, . John A. Flory, Steven A. Frank, Lillian L. Jackson, C. James Sample, Alice H. Scott, and Leonard F. Wheat. FOREWORD The Economic Development Administration's role in programs to help minority business enterprise was initiated in the mid- 1960' s. Initially, the emphasis of EDA technical assistance projects was in specific urban areas. As the need for urban projects became increasingly clear, some attention became focused upon minority leaders with national support and interests. This shift in attention tended to coincide with a developing interest by other Federal agencies and private foundations in nationally oriented minority projects. National leadership and potentially significant Federal and private support become new and substantial resources for the development of EDA's minority business assistance program. With these resources, it became possible to attack barriers to minority business enterprise that were national in scope and to call upon leadership, talent, expertise and capital which were seeking benefits beyond local areas. Specific groups assisted by EDA have represented a wide range of activities, interests and leadership. One of the primary aspects of each project was that local interests were represented through membership, associates, branch offices, affiliates or in some other way. EDA's role in assisting local communities was effectively maintained, while supplementing the effort with national resources. Special-purpose projects, such as those dealing with furniture dealers, truckers, banking, insurance interests, and construction contractors , attracted specialists in these fields. Also, the projects frequently received support from large associations. Organizations interested in loan pack- aging and management assistance for the minority business community operated through local offices in many locations. They attracted skilled professionals and those seeking new opportunities in this field. In all, EDA has assisted 16 groups that operate technical assistance projects with national scope. For the fiscal year ending June 19 71, nine groups were funded at $2.4 million, or about 20 percent of total technical assistance obligations in that year. It is expected that the Office of Minority Business Enterprise will assume responsibility for these and other nationally oriented projects when it is funded. li EDA has assisted the folJ owing groups which aid minority business enterprise: American Savings and Loan League, Association of Furniture Dealers, Black Economic Union, Congress of American Indians, Independent Truckers League, . Interracial Council for Business Opportunity, Minority Contractor Assistance Program, National Bankers Association, National Business League, . National Council for Equal Business Opportunity, National Economic Development Association, National Insurance Association, . National Progress Association for Economic Development, National Urban League, Opportunities Industrialization Centers, and Plans for Progress. EDA has supported other groups with programs for urban economic development, industrial development, local develop- ment, economic development coordination and for other purposes. These groups include: American Industrial Development Council, Council for Urban Economic Development (formerly the HUB Council) , Federation of Rocky Mountain States, National Association of County Engineers, and National Association of County Research Foundations. iii TABLE OF CONTENTS SECTION PAGE NO. II HIGHLIGHTS Scope of Evaluation Findings Business Development Groups Trade Associations Recommendations EVALUATION METHODOLOGY Evaluation Objectives Interviewing Guides Outline of Data Elements Data Sources Sample Interviewing Guide 1 4 4 9 10 16 16 16 20 26 26 APPENDIX B C D E F G National Progress Association for Economic Development National Business League Black Economic Union Interracial Council for Business Opportunity National Urban League American Savings and Loan League National Insurance Association IV LIST OF EXHIBITS EXHIBIT TITLE PAGE NO, I EDA FUNDING OF GRANTEES EVALUATED 2 II FUNDING OF NATIONAL TECHNICAL ASSISTANCE GRANTEES 13 III IMPACTS OF BUSINESS DEVELOPMENT GROUPS 14 IV INVESTMENT PER JOB FOR BUSINESS DEVELOPMENT GROUPS 15 V INFORMATION REQUIREMENTS 17 VI DATA REQUIREMENTS 18 VII DERIVATION OF DATA ELEMENTS 19 VIII SAMPLE INTERVIEWING GUIDES 27-36 I. HIGHLIGHTS SCOPE OF EVALUATION In November 1970, the Program Analysis Division (PAD) began a series of evaluations of some technical assistance projects with a national scope at the direction of the Assistant Secretary for Economic Development. These projects consist of support to five business development organizations: . National Progress Association for Economic Development (NPAED) , National Business League (NBL) , Black Economic Union (BEU) , Interracial Council for Business Opportunity (ICBO) , and National Urban League (NUL) . In addition, two national trade associations which represent minority companies were evaluated. These are : American Savings and Loan League (ASLL) , and National Insurance Association (NIA) . The 15 EDA grants to these seven groups totalled almost $3,800,000, as shown in Exhibit I. In 1970, EDA funded 30 chapters of the five business development groups, part of the national office expenses for four of these groups, and both the trade association offices. The chapters which were evaluated received $2,300,000 in financial support in addition to the EDA funds. The five business development groups which were evaluated have the common goal of helping minority economic development, but each is unique in terms of program emphasis and approach. EDA funds additional business development groups which have a national scope including, for example, the National Council for Business Opportunity. Similarly, the two trade associations which were evaluated are representative of a number of national groups of this type funded by EDA. Additional ones include the National Bankers Association and the Indepen- dent Truckers Association. EXHIBIT I. EDA FUNDING OF GRANTEES EVALUATED GRANTEE TOTAL EDA FUNDS (000) National Progress Association for Economic Development $ 665 National Business League $1,129 Black Economic Union $ 700 Interracial Council for Business Opportunity $ 118 National Urban League $ 568 American Savings and Loan League $ 200 National Insurance Association $ 386 TOTAL $3,766 During the evaluations of the seven grantees, visits were made to 20 cities (several twice) , all seven national offices, 13 chapter offices, and 14 trade association members. In all, visits were made to almost one-half of the EDA-funded chapters of the business development groups, and about 15 percent of the trade association members . Interviews were conducted with employees of the grantees, community members, local, and Federal govern- ment officials, and beneficiaries of the grantee's activities. Almost all interviews were conducted in person, although a few were conducted by telephone. Evaluators visited national offices and chapter offices in teams. Each team visiting a chapter office had a member who had also visited the national office. Interviewing procedures were standardized to obtain uniform information between chapters of a grantee , and between grantees. Interview guides are described in Chapter II of this report. On the average , more than 60 interviews were conducted for each business development group. In the trade association evaluations, interviews were primarily with the presidents of member firms, and teams averaged about 20 interviews for each grantee. \ FINDINGS The evaluation results show that the grants to these seven groups with national scope have given an impetus to minority economic development. The results provide strong support for continued EDA funding of minority business development activities. EDA support to these grantees is summarized in Exhibit II. Findings concerning the business development groups and the trade associations are discussed in the following sections. Business Development Groups EDA funding has stren g thened national and loaal programs . The Agency's funding has been instrumental in strength- ening national and local programs, most of which existed in various degrees prior to EDA support. EDA has created local institutions in virtually every city where a chapter was evaluated. These chapters have received community support and are providing necessary and visible services. The activities of the business development groups include loan packaging, franchise and dealership assistance, contractor bonding, contract procurement, technical assistance, business training, activities toward self- sufficiency, community speaking, black business directories, and various special projects. Impacts of these activities are summarized in Exhibit III. For the chapters evaluated, it appears that at least 200 new business and 300 existing businesses here received needed support and help. These figures are for one year, and represent the accomplishments of chapters which had been operational for two or three years at the most. Each of these businesses implies: realization of potential and income for the entrepreneur , . employment of several minority group members, visibility of minority ownership in the community , . increased services that are frequently lacking in these communities , and . strengthening of the financial base of the community through retained wages and profits. Stated in terms of new and saved employment alone, EDA's investment was about $775 per direct job, as shown in Exhibit IV. This figure is based only on those chapters of these seven groups which were evaluated and also being funded by EDA at the time of the evaluation. It is well within the range of estimates based on evaluations of other EDA technical assistance projects. This investment per job figure includes only loans to new businesses and technical assistance efforts, it lists of specific jobs were not available, an average of three jobs for each new business and one job for each technical assistance effort was used. This is based on estimates provided by several chapters. Business develovment groups r equire at least one year to begin showing signifi cant results. The community must learn about the organization's services and the chapter must become familiar with the banks, the local Small Business Administration office, available training facilities, and various sources of consulting assistance. After this, time is required to process a loan or to render technical assistance. Evaluations for most of the chapters which were evaluated indicated that significant results could not be measured until one or two years after the start of operations. Therefore, the EDA investments for each business and job should decline from the values found in this evaluation, because the realization of benefits generally expands rapidly over the period of a program s operation. The effectiveness of the director is a primary factor in a chapter ' s success . In those chapters where the director was vigorous and independent, the chapter was effective. If the directorship experienced a rapid turnover, was monitored closely by the national office, or was not filled by a dynamic person, the chapter was weak or declining. Strong directors were able to generate community support, obtain outside funds, and had more applicants for assistance than they could process. Their staffs were also well motiviated. This was the case for BEU in Kansas City, NBL in Atlanta, NUL in Indianapolis and other chapters. Chapters without a strong director were much more likely to have difficulty generating community support and outside funds. Chapters where this situation occurred included NPAED in Cincinnati and BEU in Cleveland. The effectiveness of the Washington chapter of the Black Economic Union declined after its director was placed by a weaker leader with fewer administrative capabilities. His replacement has strengthened the organization. National staffs sometimes provide insufficient support to the chapters . Most chapters were infrequently visited by their national staff and received limited technical assistance from them. There seem to be a number of causes, including the large number of chapters whose activities must be coordinated, the fact that some national staffs do not extend themselves to render this type of assistance, limi- tations in travel funds, and the fact that some chapters have learned to do the work themselves. Some of the expertise at the national offices would be helpful at the local level. Many chapters would have been even more effective with larger staffs . Financial limitations have forced staff members to be generalists. Most chapter staffs appeared to be overburdened. An increase in staff would permit use of specialists and allow more attention to clients. In those chapters where a staff member was able to apply his special expertise, results were generally excel- lent. This was true for the loan packaging activity at NBL in Columbus, the contractor and marketing _ assistance programs at BEU in Washington, and other cases . ,.„„.. advodam is m asmm »£B ™« most tttoHiS results . Loans are directly responsible for new ~ expanding businesses, and these benefits are relatively visible ,nfl certain All loan advocacy programs have been oeneficiai The impacts of the other activities are less easily measurable, although frequently very beneficial Loan follow-up ac tivities need improvement. Most business development ^oups try to do s« sees sr.-«ss p & £?&•::''*=.*:? do more follow-up. Te chn ical g SS is ^ ,aaf forts have been very helpful i n r JuZdobe a»* in making mUoTitV b us^nes ses^nore e fficient . Firms receiving technical assistance seemed to be P leasedTith e Se he?p in marketing and site selection, advertising, accounting and other *!•«■; Many ™tea that their businesses had been improved through these efforts There are indications that the technical asflstance efforts have resulted in saved D obs and, occasionally, in new jobs. Activities toward financ ial in dependence have been generally unproductive . Most grantee programs now include efforts to become financially independent. NPAED has a blueprint for stock sales to the community through the 10 36 Program, which has been successful in Philadelphia. A " h °^ "fforts have been made to implement the plan in several cities no stock has been offered. The only successes noted in^hf evaluation are the three NBL ^apters fre're^ive^^^ some lord Foundation funds to invest for equity positions. Contract procurement and contractor bonding activities aypear to be successful > but cannot be fully assessed. The immediate result of these activities is usually creation of a number of short-term jobs. Time is required to measure the lasting impacts. Most of the contractor bonding and contract procurement activities were started too recently to accurately measure their impact. There are currently few minority subcontractors and still fewer prime contractors, although the number is increasing. Therefore, these activities are expected to become more important in the future. Some unique chapter activities have had exceptional results . Several special activities of the chapters have been unusually visible and have had substantial impacts. These include minority business fairs in Kansas City (BEU) and Indianapolis (NUL) ; business training programs in Columbus (NBL) and Kansas City (BEU) ; and the use of the free consulting services of lawyers , accountants , college professors, and others in several cities. However, some chapters, such as BEU in Cleveland, have devoted too much effort to special activities which are inci- dental to economic development or require too much effort for the benefits which might be expected. Most chapter staffs were underpaid, but most national staff members were better compensated . Salaries of most chapter directors were between $9,000 and $12,000 annually. These salaries are frequently insufficient to attract and retain talented and experienced individuals. Other chapter staff members were paid even less, generally $6,000 to $8,500 a year. At the national offices, however, some executives were paid $15,000. Travel funds were inadequate for virtually every grant which was evaluated . Most grants seem to provide very restricted travel funds. The result is to limit assistance and restrict the benefits of the grant. Chapter employees and national staff members are often requested to provide assistance in distant places. Also, travel budget restrictions have limited chapter visits by the national staff and training for the local staffs. 8 Some nhavters hd££ burred ^ye .n tes by not receiving ■kheiv payments on time, . ?„ Y *ome caLsrSis n LrE e een caused by inadeguate record keeping procedures at the grantee s offices. Trade Associations nat ional trad * ^ociaUons supported by EVA, have \llided valui mT^ TMeejL^r, , services to their members . The EDA grants have permitted the National Insurance Association (IlA) and the American Sav ings an *£™ _ League (ASLL) to greatly •g^^.^'tEir^SEr. sssScfs ss-rrES « » ^ to SS^rf-Si^ To £S£i to af n Provide useful services if an effective director could be obtained. These associations have been able to represent the viewpoint! of their members to other trade groups £S V gov: P ™t agencies They Publish journals and lorThe unigueTr^l- ° "hefr £ExS. They.also provide some direct technical assistance to their members. Trade a eeooi^"«« M& ™ ml u " ited a ° aess to 0utside funding . Trade associations have more difficulty in obtaining nriw J* funding than business development groups. Neither SS Ls f o^ia n tLnTas received, support from groups other than EDA. However, NIA is trying ^ form a stock corpo ration which would assume the ^P * 8 ^ 1 ^ 6 * °*gt EDA qrant. These associations represent the largest b^ack businesses in the nation so that the need for financial assistance and tax effects of this assistance, may^ot be clear to potential fading sources All of the business development groups have received financial assist ance from other government agencies, the Ford Foundation, or various church and private groups. RECOMMENDAT IONS The project analyses, which are contained in this report, recommended continued EDA assistance to four of the business development groups, and possibly the fifth, after some further observation. Continued funding of the two trade associations was also recommended. Some additional recommendations , which are based upon analyses of the seven grants, are discussed below. EDA should continue support of national offices of business development group s\ hut emphasize adequate financing of chapter activities . National offices of business development groups coordinate chapter activities and parOvide contact with other organizations and government agencies. It is important to maintain the character of the national program by continuing support to these offices. Most chapters of these groups, however, operate on very limited budgets. Additional staff members would improve effectiveness. Chapter staff salaries and often fairly low, so that it is difficult to attract and retain talented and experienced personnel. Funds are frequently required for improvement of office facilities and equipment. The total funds which EDA can allocate to chapters of a business development group should not be disbursed too widely. The evaluation indicates that it is fre- quently better to provide somewhat larger allocations to fewer chapters. Additional allocations to chapters would facilitate their development as strong components of a national organization. Finally, with fewer chapters, a national office can more effectively administer a grant and balance organizational goals. EDA should consider funding commitments for two years, with review six months before termination . All grantees must have adequate time to begin programs and establish links with the community. Commit- ments for two years would help grantees to attract and retain superior personnel, because employment would be 10 assured for a longer time. In addition, two-year grants would allow grantees to devote more effort to develop- ment activities, and less to seeking additional financial support. Finally, renewals involve substantial govern- ment effort and time, and sometimes strain the relation- ship between EDA and the grantee. It is difficult for EDA to make extended commitments because the Agency receives funds annually from Congress. Nevertheless, consideration should be given to some type of contingent contractual obligation based upon EDA s renewed funding level. Evaluations should be started six months before the grants expire so that results can be evaluated and decisions made substantially before expiration. The gtwtagreement should vrovide f or two months renewal/ JT^^TT^J^tT^ Tbefore the end of the gran t or a funded extensio~n~oT~the errant to two months from the d ate of notification . * — ' — ■ — — ~ — It is clear that EDA attempts to provide at least two months notice whenever possible. However, when this could not be done, it was difficult for the grantee to retain trained staff members. Staff continuity is important. Also, if the grant is not being renewed, earlier notification would permit the grantee to seek other sources of funding or reduce operations. A minimum notification period would also reduce possible adverse feelings created by the termination of funding. It is desirable for the EDA protect di rector to maintain close personal contact with th e grantee. Results of the evaluations indicate that close contact between EDA personnel and the grantee is an important element of a successful project. Although travel budget limitations are important, every effort should be made to maintain close personal contact with grantees. It appeared that BEU, NIA, NBL and NPAED staffs felt that additional visits by EDA personnel would be helpful. 11 JSITJ ,t° " ld " 0t h ° "Yt*"* to addition. tH SPter* desirfto^Lan^^h 8 - develo P m ^t groups expressed a Befnro cm^- achieved some financial independence SSKMf a ^^^ "** is ^sutficle^ this ohL?f OPOSed u SW ^ tching su PPort from Columbus when £h£%™? P ^ W ^ ginning to become self-sufficient l^Lt u luatl ? n indicated that the loss of EDA fSnds might have eliminated proqress to d*^ Jh7~ ^rly i^ rtant becau f e ^-| D f ^- w ^s was partio- reoui™ 9 ° vernment "PP°rt which the chapter would fTdrff "re'nt SS3 tieT ST L V S ^""as°f„te„ded erent activities than those funded by EDA. businetf^S^ ™ £ ^^ re ^| national ^hTviSiLv^of T Si Z e a " sist -« -d d co^uni S ty Tu PP ort ollselv relLSl *he chapters evaluated seemed to be thedirectt ** stren ? th ^^ independence of over in m ?nS? P ^ rS !! aVe ex Perienced * fairly high turn- WU. ThlS " aS ° bSerVed at BEU *» Washington? for 12 h3 i o Eh CO ** Q a Z o P o Em - UJ UJ < CD w a O fo *-| O 3 3 a\ o o «•«■«• HTOO rH •«* 00 lO P- V£> «■«■«■ o o o o o 00 o o in m oo ■c/xo- oo o\ in rH o o CN m cm 00 VD •«r in a 3 + en o vo ■CO- + CN r- CN CN •cn- I C O o o •H C 4->-H (0 TJ P C 0) 3£ O -P 4-1 O CD ^3 *0 C 3 rd • rH CQ U - U C co Q) •H -P CD CU co 4-i rd TS A c: cr> o P c m -h H3 c 0) P -H T3 Q) rd c J3 »H 3 ■p -p m O H CO H • 0) cn o 0) CD c 3 -H & -9 Si CD CO g JG p ■P CD - -P CO U a. -p (d c <4-) 43 * M w Cn i ■P rH T3 Eh o <3 > CNl 13 CO Q. r> o «3 UJ o a) CO P > < r- CQ i— • X X LU r> o 1 CN ■H O a\ O VD H CM o O in 00 CM J o O D * «. Z CO H ■00- vo o 1 1 vo «* 00 ^ i (N O r4 © in CO 00 m O u * *» H CM O eg C £ > 3 u CO tO -P CD u > (0 en H Q4 M CO d) -P -P 5-1 -P tO U CO tO •P ! Eh <: a) in -H tji O O Q) C O (U CO C CO CO H .q to A c fd H)n p •H jQ Q) -H CO U *0 > w e +j O to M M 1 £ C § eg H e 3 C U 4-> £ 3 •HO) rH JQ CO Eh tO S En to u C C2< O S3 co co rj 5 D U u < 0) 3 P i •P 0) •H M > tO •H ■P -P CO O a> c 10 -H +j ^ jC ■H CD O > >H tO •rl O 0) ■p m a) c (0 >H •H 0) a) £ Cn CO 4-1 C a) •H J3 » 0> Eh T3 to c tn to C • 01 CO CO u cu CQ & (0 +J xi en c c cu •h g d) a a, CQ a. O rH XI ^ a) -p CO > a) sh iw »d m CO ■P CO c C d) d) C •H g-H 4J a. m « O 3 3 H ^5 H d) tO > u > d) d) d) ^5 Cr> d) C X! •H -p d) ■O £ d) C -P (1) Hh !H CO a Q) • CO d) +» M P CO ■H tO O O .Q d) O Xi •H >i M-l 4J £ X d> g d) c tO -P U d) cn J3 O 3 tO H SH d) -P O d) x: C > Eh c •iH ,<3 CN| 14 EXHIBIT IV, INVESTMENT PER JOB FOR BUSINESS DEVELOPMENT GROUPS GRANTEE NUMBER OF JOB Si/ INVESTMENT PER JOBl/ NPAED 4 Potential=590 $37,750 $ 255 NBL 339 $ 398 BEU 315 $ 629 ICBO 142 $ 430 NUL 90 $ 1,594 TOTAL 890 $ 774 1/ The estimate is based upon three jobs for each new business and one for each technical assistance effort, except when specific data was available. Impacts of other grantee activities are not included, 2/ Investment per job values are only for chapters evaluated which were funded by EDA at the time of the evaluation. 15 II, EVALUATION METHODOLOGY EVALUATION OBJECTIVES The objectives of the evaluation were to: determine the degree of accomplishment of project objectives, assess grantee impact on jobs, employment struc- ture, services provided, and private investment, make recommendations for future direction of the grantee's activities, and make recommendation for action by EDA on renewal or non-renewal of the grant. INTERVIEWING GUIDES Standard questionaires were developed so that similar information would be obtained for the various chapters of a grantee and for each of the grantees. This also facili- tated comprehensive interviews and minimized possible omis- sions. Standarization was most easily achieved at the national headquarters of the business development groups. At the chapter level and the trade associations' headquarters, specific programs were emphasized, which nesessiated variations in the interviewing technique. A three- stage procedure was used to determine the nec- essary data elements for the evaluations. Initially, broad questions were formulated which addressed the evaluation objectives. The procedure is summarized in Exhibit V. However, the answer to each question was too general to represent an individual data element. Each question, there- fore was furthur reduced to several sub-questions. These sub-questions were the basis for determining the data ele- ments used in developing the questionaires. The methods of translation from questions to sub-questions and sub-questions to data elements are indicated in Exhibits VI and VII, re- spectively, Examples of the guides used are presented at the end of this section. 16 EXHIBIT V. INFORMATION REQUIREMENTS FY^l IIATTON (fflJFCTIVES ACCOMPLISHMENT OF- PROJECT OBJECTIVES ASSESSMENT OF IMPACTS . JOBS . EMPLOYMENT STRUCTURE . SERVICES . ECONOMIC DEVELOPMENT PROCESS RECOMMENDATIONS FOR FUTURE DIRECTION 4. ESTIMATE OF BENEFITS IF RENEWED 5. EFFECT ON GRANTEE OF NON-RENEWAL TPANSIAT FD IN™ PUF&TIONS _ 1. IS EDA EFFECTIVE IN CRE- MATING NATIONAL INSTITUTIONS? 2. WHAT HAS EDA LEARNED FROM THE PROJECT WHICH HAS BEEN APPLIED TO OTHERS? WHAT DO OTHER POTENTIAL FUNDING SOURCES THINK ABOUT GRANTEE? HAVE NATIONAL PROJECTS REALLY BEEN SUCCESSFUL IN HELPING IMPRO\ r E EMPLOYMENT OPPORTUNITIES FOR TARGET GROUPS? 17 EXHIBIT VI. DATA REQUIREMENTS QUESTIONS IS EDA EFFECTIVE IN CREAT- ING NATIONAL INSTITUTIONS? HAVE NATIONAL PROJECTS REALLY BEEN SUCCESSFUL IN HELPING IMPROVE EMPLOY- MENT OPPORTUNITIES FOR TARGET GROUPS? TRANSLATED INTO SUB-QUESTIONS 1A. WHAT IS REPUTATION OF THE INSTITUTION NATIONALLY? IB. WHAT IS REPUTATION OF THE INSTITUTION IN BASE COMMUNITIES? 1C. IS THE INSTITUTION FINANCIALLY SOUND? (EXAMPLE FOR VOCATIONAL TRAINING) 4A. WHAT IS TOTAL DEMAND FOR TRAINING IN THE COMMUNITY? 4B. WHAT FRACTION OF THIS DEMAND DOES GRANTEE MEET? 4C. HOW DOES GRANTEE SELECT TRAINEES? 4D. HOW IS FOCUS ON TARGET GROUPS MAINTAINED? 4E. WHAT DO TRAINEES THINK ABOUT TRAINING THEY RECEIVED? 4F. HOW DO EMPLOYERS ASSESS THE TRAINING? 18 EXHIBIT VII. DERIVATION OF DATA ELEMENTS SUB-QUESTIONS 1C. IS THE INSTITUTION FINANCIALLY SOUND? HOW DO EMPLOYERS ASSESS THE VOCATIONAL TRAINING? TRANSLATED INTO DATA ELEMENTS 1. ASSETS AND LIABILITIES 2. HISTORICAL BUDGET PERFORMANCE 3. INCOME AND EXPENSE PROJECTIONS 4. FUNDING COMMITMENTS FROM OTHER GROUPS 5. COMPLETENESS OF FINANCIAL REPORTS ACTIONS 1. NO. PREVIOUSLY UNEMPLOYED WHO OBTAINED EMPLOYMENT 2. TYPES OF JOBS 3 . EARNINGS 4. NO. WHO CHANGED JOB TITLE OR RECEIVED INCREASE IN EARNINGS 5. TYPES OF JOBS (BEFORE/AFTER) 6. AMOUNT OF INCREASE OPINIONS 7. QUALITATIVE STATEMENT OF WHY TRAINING MADE MAN ELIGIBLE FOR JOB OR PROMOTION 19 OUTLINE OF DATA ELEMENTS The following general formac was used as a guideline in organizing and preparing the questionaires: background information: project identification, EDA funding, location of grantee, organization of grantee, progress reports submitted by grantee, objectives of grantee activities supported by EDA, activities designated for EDA support, additional support received by applicant, supplemental information; chronology of project milestones: previous activities, milestones of EDA^- funded activity ; program management: planning, execution, reporting ; resources of the grantee : financial, professional, supporting staff and facilities; credibility of the institution: nationally, locally-target groups, locally-general; description and impact of economic development activities: financial assistance: new businesses, established businesses; technical assistance : ... new businesses, . . . established businesses; direct establishment of industrial or commercial activities, other types of assistance, 20 community interactions: training, vocational , management , entrepreneurial , f . organizational, informational , community , other . Each of the catagories in the general guideline above were itemized furthur to obtain the data elements for the questionaries. A sample of the breakdown is presented be- low. The primary interest of the evaluations is the degree to which the grantee has provided impetus to minority economic development. The sample of final data elements , therefore, is for that section of the questionaire dealing with economic development. Numbers before each data element refer to their position in the document containing all the data elements for each item in the guideline. They are included only to give a perspective of the total document. II. Economic Development 1. Financial Assistance 1.1 New businesses For each program to provide financial assistance to new businessess, give 1.1.1 Name of program 1.1.2 Start of date 1.1.3 Completion date (past or expected, if an 1.1.4 Goal of program 1.1.5 Focus on target group 1.1.5.1 Target gtoup 1.1.5.2 How is focus maintained? 1.1.6 Businesses receiving assistance 1.1.6.1 Number in each time period 1.1.6.2 Number related to target group 1.1.6.3 Names of businesses receiving assistance 1,1.7 Unfilled demand for financial assistance to new businesses 1.1.7.1 Criteria for selection 1.1.7.2 Any attempt to help unfilled demand? 1.1.8 Information for each aided business in a sample 21 1.1.8.1 Name of business 1.1.8.2 Address of business 1.1.8.3 Relationship, if any, to target group 1*1. 8. 4 Characteristics of Entrepreneur 1.1.8.4.1 Member of target group? 1.1.8.4.1. Previous business experience 1.1.8.5 Nature of prospective business 1.1.8.6 How were applicant and business brought together?? 1.1.8.7 Describe assistance provided 1.1.8.8 Date of loan, if any, resulting from assistance 1.1.8.9 Starting date of operations (past or anticipated) 1.1.8.10 Employment 1.1.8.10.1 Current number 1.1.8.10.2 Nature of jobs 1.1.8.10.3 Current percentage full-time 1.1.8.10.4 Current percentage of target groups 1.1.8.10.5 Projected for future time periods 1.1.8.10.6 What steps are taken to ensure that target group members will have fair opportuni- ties for employment? 1.1.8.10.7 What steps are taken to ensure that target group members will have fair opportuni- ties for advancement? 1.1.8.10.8 How many, if any, individuals who have completed the appli- cant ' s training course have been hired? 1.1.8.11 Sales 1.1.8.11.1 Current 1.1.8.11.2 Projected for future time periods 1.1.8.12 Payroll 1.1.8.12.1 Current amount 1.1.8.12.2 Current percentage to target groups 22 1.1.8.12.3 Projected for future time periods 1.1.8.13 Profit 1.1.8.13.1 Current amount 1.1.8.13.2 Projected for future time periods 1.1.8.14 Financing 1.1.8.14.1 Amount received through efforts of applicant 1.1.8.14.2 Source of these funds 1.1.8.14.3 Additional amount re- ceived from outside sources 1.1.8.14.4 Amount supplied by principals 1.1.8.15 Specific factors identified which may limit growth of the bmsiness 1.1.8.15.1 By the applicant 1.1.8.15.2 By the firm 1.1.8.15.3 By selected employees 1.1.8.15.4 By independent busi- ness reference 1.1.8.16 Specific measures being taken to increase market share. 1.1.8.17 Evaluation of assistance by the business 1.1.8.17.1 Positive features 1.1.8.17.2 Negative features 1.1.8.17.3 Did business know of EDA aid too" applicant? 1.1.8.18 Latest two Balance Sheets and latest Profit and Loss Statement (if available) 1.1.9 Future plans for the program 1.2 Established businesses For each program to provide financial assistance to established businessess, give 1.2.1 Name of program 1.2.2 Start date 1.2.3 Completion date 1.2.4 Goal of program 1.2.5 Focus on target group 1.2.5.1 Target group 1.2.5.2 How is focus maintained? 1.2.6 Business receiving assistance 1.2.6.1 Number in each time period 1.2.6.2 Number related to target group 1.2.6.3 Names of businesses receiving assistance 23 1.2.7 Unfilled demand for financial assistance to established businesses 1.2.7.1 Critieria for selection 1.2.7.2 Any attempt to help unfilled demand 1.2.8 Information for each aided business in a sample 1.2.8.1 Name of business 1.2.8.2 Address of business 1.2.8.3 Relationship, if any, to target group 1.2.8.4 Characteristics of Management 1.2.8.4.1 Number in target groups 1.2.8.4.2 Previous business ex- perience 1.2.8.5 Nature of business 1.2.8.6 How were applicant and business brought together? 1.2.8.7 Describe assistance provided 1.2.8.8 Date of lean, if any, resulting from assistance 1.2.8.9 Starting date of operation 1.2.8.10 Employment 1.2.8.10.1 Number before loan date 1.2.8.10.2 Current number 1.2.8.10.3 Current percentage of target groups 1.2.8.10.4 Projected for future time periods 1.2.8.10.5 What steps are taken to ensure that target group members will have fair opportuni- ties for employment? 1.2.8.10.6 What steps are taken to ensure that target group members will have fair opportuni- ties for advancements 1.2.8.10.7 How many, if any, individuals who have completed the appli- cant's trianing courses have been hired? 1.2.8.11 Sales 1.2.8.11.1 Before loan dates 1.2.8.11.2 Current 24 1.2.8.11.3 Projected for future time periods 1.2.8.12 Payroll 1.2.8.12.1 Before loan date 1.2.8.12.2 Current amount 1.2.8.12.3 Current percentage to target groups 1.2.8.12.4 Projected for future time periods 1.2.8.13 Profit 1.2.8.13.1 Before loan date 1.2.8.13.2 Current amount 1.2.8.13.3 Projected for future time periods 1.2.8.14 Financing 1.2.8.14.1 Amount received throug] efforts of applicant 1.2.8.14.2 Source of these funds 1.2.8.14.3 Specific use of in- tended funds 1.2.8.14.4 Total current debt 1.2.8.14.5 Total current equity 1.2.8.15 Specific factors identified which may limit growth of the business 1.2.8.15.1 By the applicant 1.2.8.15.2 By the firm 1.2.8.15.3 By selected employees 1.2.8.15.4 By independent busift ness references 1.2.8.16 Specific measures being taken to increase market share 1.2.8.17 Evaluation of assistance by the business 1.2.8.17.1 Positive features 1.2.8.17.2 Negative features 1.2.8.17.3 Did business know of EDA aid to appli- cant? 1.2.8.18 Latest two Balance Sheets and latest Profit and Loss Statement (if available) 1.2.9 Future plans for the program 25 DATA SOURCES Data was obtained by a search of files and by personal interviews. Most interviews were in person although, in certain cases, telephone interviews were condmcted. Sources included: EDA personnel Director - Office of Technical Assistance Division Chiefs - Office of Techincal Assistance project officers grantee national headquarters staff and files chapter staffs and files groups related to the grantee groups providing additional funding (e.g., Ford Foundation) groups with similar purposes (e.g., other local development groups) beneficiaries of the grantee's assistance firms receiving assistance community members trainees SAMPLE INTERVIEWING GUIDES Some sample questionaires are presented on the following pages. These questionaires do not include those used at the national headquarters, which were intended to obtain general information on the grantee's programs. The first guide (0-1A) was used to determine basic information on local grantee activities. The second (F-1B) was used to determine some of the information on loan packaging activities. The third guide (0-2A) was used to obtain information on employees of the grantee. The fourth (0-5) lists J^feBences for visits by EDA field personnel. The remainder of the guides are a sample of those used in interviewing beneficiaries of the grantee's activities. These interviews were a major source of information on grantee accomplishment. 26 EXHIBIT VIII. SAMPLE INTERVIEWING GUIDE NATIONAL TECHNICAL ASSISTANCE PROJECTS EVALUATION FORM - EDA SUPPORTED LOCA^L ACTIVITIES - DESCRIPTION 0-lA P. A. Code No. Name of Grantee Complete one Form 0-1A for each Activity Code used on Form 0-1. C i ty Activity Code Classification: /-J Centra] Office Management O Assistance to Businesses '—' <- e ""* J Wi 3 in obtaining Financing n Coordination or Guidance of Field Activities (Complete Forms F1A.F1B, £— - F 1 C & F 1 D ) fj Member Services ^ Qrganization of Conjnunit ; n Training (Complete Forms T1A,T1B & TIC) /_/ ij.ai.iu.iiy * f £j In f ormat ion to Community n Management Assistance to Business ~ (Complete Forms NlA, NIB, & NIC) /_/ Community Planning /7 Industrial or Commercial Activity Owned or Operated by Grantee (Complete Form ElA) Describe Activity (Use Additional Sheets if Necessary) What are Goals of Activity?. Target Group Identified & Benefits to Them: What are Future Plans for Program? ch^r): if Contractor Used /___/ ' (Complete Form 0-1B) 27 * < EXHIBIT VIII. SAMPLE INTERVIEWING GUIDE (CONT) NATIONAL TECHNICAL ASSISTANCE PROJECTS EVALUATION FORM - SCOPE OF FINANCIAL ASSISTANCE PROGRAM Name of Grantee p. A. Code No. City F-1B Activity Code Complete one Form F-1B for each Financial Assistance Program identified on Form H-1A or Form 0-1A. Name of Program Number of Target Group Firms Potentially Using This Assistance How Estimated? How are Businesses Selected for Assistance? Are Businesses Which Grantee is not able to Directly Help Aided in Any Way? How? Complete table below for each time period that program was operational in this city. Number of Businesses Receiving Assistance Total Employment Finan- cial Assist- ance Type * Code No. Period To- tal Start- ing Busi- nesses Estab- blished Busi- nesses Target Group Firms Before Assistance After Assistance From To "I L J *See Form F-1A for code numbers, Notes and Comments Source Form Completed By 28 Date EXHIBIT VIII. SAMPLE INTERVIEWING GUIDE (CONT) NATIONAL TECHNICAL ASSISTANCE PROJECTS EVALUATJON_FORM - CONFIDENTIAL PROFESSIONAL STAFF DATA - LOCAL 0-2A Name of Grantee , . P - A ' Cod * No ' Complete one Form 0-2A for each Staff Reference Number assigned on Form 0-2. Namc Age Staff Reference Number City Compensation Received from Grantee: Last Year Anticipated this Year Basis of Selection (describe how hired) Unique Educational Qualifications for Activities of Grantee Un ique Work Experience for Activities of Grantee Source of Data above Performance Evaluation By Superior in Grantee Organization Name of Superior By EDi: Project Officer Form Completed By Date 29 EXHIBIT VIII, SAMPLE INTERVIEWING GUIDE (CONT) NATIONAL TECHNICAL ASSISTANCE PROJECTS EVALUATION FORM ~ LOCAL REFERENCES Name of Grantee City 0-5 P. A. Code No. Grantee Representative's Definition of Target Group in City Name of Grantee Representative in S city? JVJdUalt; Wh ° haV ° bGan cloEel - y involved with grantee's program Exclude trainees or representatives oi! businesses assisted by grantee. £££-kHfi£. employees of grantee. Include, at least A. 3 or more representatives of target group B. 2 representatives of the local political" structure l. i iocal businessmen f>. 2 other responsible citizens Please try to list at least 12 names, and for each Activity (on Form 0-1) include at least 2 individuals familiar with its history and sta?S. " ' 1 - Make Check i £ Interview was completed Complete a Form X-2 for each Local Reference Code Assigned. Fonr. Completed By Date 30 EXHIBIT VIII. SAMPLE INTERVIEWING GUIDE (CONT) NATIONAL TECHNICAL ASSISTANCE PROJECTS EVALUATION FORM - CONFIDENTIAL STATEMENT BY LOCAL REFERENCE X-2 (Page 1) P. A. Code No. . Name of Grantee City Complete one Form X-2 for each Local Reference interviewed. Name of Local Reference Race Address . Home Telephone _ Position Employer Address of Employer _ ... Business Telephone Nature of Relationship to Grantee Period of Relationship: From To How was Relationship Established? Comments by Local Reference Interviewer's Comments on Local Reference GO TO X-2 (Page 2) Form Completed By Date 31 EXHIBIT VIII. SAMPLE INTERVIEWING GUIDE (CONT) NATIONAL TECHNICAL ASSISTANCE PROJECTS EVALUATION FORM - CONFIDENTIAL STATEMENT BY LOCAL REFERENCE X-2 (Page 2) Name of Grantee P. A. Code No. Name of Local Reference Activity Code Respondent's Description of Grantee's Activities Known to Him Responent's Assess- ment of the Value of Activity Respondent's Rating of Activity - What are the Grantee's Principal Deficiencies? What is the Potential of the Grantee? Notes or Comments Form Completed By Date 32 FXHIRITVIII SAMPLE INTERVIEWING GUIDE (CONT) tXHlbl I ^y^L TECHNICAL ASSISTANCE PROJECTS EVALUATION FORM - CONFIDENTIAL STATEMENT BY BUSINESS - DESCRIPTION S-l OF BUSINESS Name of Grantee P- A - Code No « city ; Activity Code Complete one Form S-l for each Business Code identified on Form F-1C or Form N-1C. Name of Firm Code No ' Address _ __T e lephone Name of Representative :__ Position Type of Assistance Code No. . (From Form F-1C and/or Form N-1C) Describe Type of Business . . — — — Date Established _ No. of Employees: Present Maximum Ever Members of Target Group? Owner Manager Employees (%) Describe Unique Qualifications of Principals of Business __ — What are External Problems Encountered in Your Business? What are Internal Problems Encountered in Your Business? Wha t Steps Is Your Business Taking to Increase Its Share of the Market? What Factors are Most Likely to Limit Future Growth of Your Business? Notes or Comments Form Completed By , Date 33 EXHIBIT VIII. SAMPLE INTERVIEWING GUIDE (CONT) NATIONAL TECHNICAL ASSISTANCE PROJECTS EVALUATION FORM - REPORT OF ASSISTANCE RECEIVED BY BUSINESS S -2 Name of Grantee P. A. Code No. Clty _Activity Code Form^F-lc " 6 ^^ S " 2 *" eaCh Business Code Identified on Form N-lc or Name of Firm . . Code No Address JTelephone Name of Representative _Position Type of Assistance Code No's (From Form p.ir = „.* / Form N-1C) ' ( ° orm F 1C and /° r How did you Laarn of Grantee's Assistance Program? What Specific Assistance Did Grantee Provide? Period of Assistance: Frc To Did a Loan Result? \ Lender Name Amount Date Period Interest Rate Purpose of Loan Did Any Cost Savings Result? Nature of Savings $ Value Describe Other Kays Assistance Was of Value, If Any Was Assistance Instrumental to Your Starting or Staying in Business? Please Assess Quality of Grantee Assistance Provided Could Grantee's Assistance Have Been More Helpful? if Yes, Explain Were You Charged for Assistance? if So, How Much? Could You Have Obtained Comparable Services From Another Source? Which Sources? At whafc $ CQst? Please Assess Grantee's Overall Assistance Program (Scope, Content, Personnel) -33 Fnmi r^mnlorprl fiv EXHIBIT VIII. SAMPLE INTERVIEWING GUIDE (CONT) EVALUATION FORM - CONFIDENTIAL STATEMENT OF EMPLOYMENT OF BUSINESS S-3 Name of Grantee City P. A. Code No, Activity Code Complete one Form S-3 for each Business Code identified on Form F-1C or Form N-1C. Also, complete one Form S-3 for each Form E-1A. Also, complete one Form S-3 for each self-employed trainee identified on Form T-2A. Name of Firm Address Name of Respondent Type of Assistance Code No's Please Complete Table Below Total Full-time Employees Total Part-time Employees (less than 35 hrs . per week) Number of Target Group Members Employed Full-time Number of Target Group Members Employed Part-time _Business Code No. Telephone Position (From Form N-1C and/or Form F-1C) t Forecast Reference Present Present Date Date (Plus 1 year) * (If business received management or financial assistance from grantee, reference date should be close to but before that date on which assistance was rendered. If business is owned or operated by grantee, reference date should be date of establishment or date of acquisition by grantee. If business is operated by trainee, reference date should be date of beginning of training.) Size "of Management Group of Target Group Was Change in Employment Related to Grantee Assistance? Number Who Are Also Members If So, How? Policy Toward Hiring of Target Group Members How Many Employees Have Completed Grantee's Training Course? Notes or Comments Form Completed By J3L5. EXHIBIT VIII, SAMPLE INTERVIEWING GUIDE (CONT) NATIONAL TECHNICAL ASSISTANCE PROJECTS EVALUATION FORM Name of Grantee City CONFIDENTIAL STATEMENT OF FINANCIAL CONDITION OF BUSINESS P. A. Code No. Activity Code S-4 Complete one Form S-4 for each Business Code identified on Form F-1C. Also, complete one Form S-4 for each Form El-A. Also, complete one Form S-4 for each self-employed trainee identified on Form T-2A. Name of Firm Address Name of Representative, Type of Assistance Code No's F-1C) Please complete table below Sales Total Annual Dollars Year Ending _Code No. Telephone Position (From Form N-1C and/or Form * Forecast Reference Present Present Date Date (Plus 1 year) Payroll Total Monthly Dollars Dollars to Target Groups Month Name Profit Total Annual Dollars Year Ending Capitalization Total Dollars Total Debt Total Equity Amount of Capitalization Attributed to Grantee mmmmmrngmmmmmm — wy ■ wmtmmmmmmmmm *If Business was established on Reference Date, indicate zero for all sales, payroll and profit entries. . — Were Changes in Sales Related to Grantee Assistance? If So, How? Foi in Completed By Date 36 APPENDIX A EVALUATION OF THE M fl T TnMfli PRnfiRFSs fl^nriATTON FO R FrONOMC PFV FLOPHFNT (NPAED) (ZION NON-PROFIT CHARITABLE TRUST) JANUARY B71 ECONOMIC DEVELOPMENT ADMINISTRATION U.S. DEPARTMENT OF COMMERCE NATIONAL PROGRESS ASSOCIATION FOR ECONOMIC DEVELOPMENT T ftFl f QF CONTENTS SECTION VI HIGHLIGHTS AND RECOMMENDATIONS Introduction Status Impacts Recommendations INTRODUCTION PAGE NQ A-l A-l A-l A-2 A- 5 A- 5 Scope of Grants g Scope of Evaluation A ~ A- 7 A-10 A-14 A-16 II SUMMARY OF ACTIVITY STATUS III SUMMARY OF IMPACTS IV ISSUES V BENEFITS AND COSTS DETAILED PROGRAM DESCRIPTION A" 17 A-17 National Organization " Formation of Corporations A ~ L0 Formation of Technical Advisory Committees (TAC) Formation of Community Advisory Committees (CAC) Analyses of Minority Business Community 9n Community Savings Programs A_ ^ Entrepreneurial Development Training Centers (EDTC) A "^ Development of Business Enterprises A "" A-18 A-19 A-i NATIONAL PROGRESS ASSOCIATION FOR ECONOMIC DEVELOPMENT LIST OF EXHIBITS EXHIB IT PAGE NO. 1 FEATURES OF FUNDING ALTERNATIVES A- 2 2 EDA FUNDING OF NPAED A- 5 3 STATUS OF AFFILIATE ACTIVITIES A- 9 4 IMPACTS OF AFFILIATE ACTIVITIES A- 11 5 POTENTIAL SHOPPING CENTER EMPLOYMENT A-13 6 EDTC PROGRAM IN THREE AFFILIATES A-22 7 CHARACTERISTICS OF TRAINEES IN EDTC CLASSES A- 2 3 8 STATUS OF SHOPPING CENTERS A- 2 5 9 STATUS OF OTHER BUSINESS DEVELOPMENT ACTIVITIES A-27 A-ii HIGHLIGHTS AND RECOMMENDATIONS INTRODUCTION In 1969, EDA began supporting the National Progress Association for Economic Development (NPAED) , a part of the Zion Non-Profit Charitable Trust. The NPAED is one of the national groups supported by EDA through technical assistance grants. This report describes the status and impacts of activities in three of the 13 affiliate cities funded in two grants totaling $665,000. It also contains recommendations for further assistance to this grantee. STATUS The three affiliates evaluated in this study, Cincinnati, Harrisburg and Baltimore, were established in the period June 1969 to February 1970. The staffs of the affiliate offices and the national office, both supported by EDA funds, have been working to implement a common program used exten- sively by Zion in Philadelphia. This coordinated program includes formation of the necessary corporations and com- mittees, survey of the business community, establishment of a Community Savings Program (10/36 Plan) , and establishment of an Entrepreneurial Development Training Center (EDTC) . However, its focal point is the establishment and operation of a variety of business ventures, particularly shopping centers, which will be owned by members of the community and which will provide a variety of business opportunities to blacks. The three affiliates have completed most of their preliminary activities. The Community Savings Program has not been launched in any city, but initial EDTC courses have been held, with mixed results. Two gas stations are being operated by the Harrisburg affiliate. At least one shopping center is planned in each city; ground was recently broken for the center in Harrisburg. All affiliates are preparing for a number of additional ventures. IMPACTS Direct impacts of the grantee's activities in the three cities have been minimal to date. It is clear that at least A-l two to three years is required for fruition of the key activities in the NPAED program. However, EDA has aided in creating an effective national institution. This in- stitution has already had a significant impact on the development process, particularly in Harrisburg, which has a small black community and where the gas stations provide visibility. The potential for black participation in the ownership and management of small businesses is very high. Although job impact has been low, its potential is high. For the three affiliates, the EDA cost per direct job is about $6,600 at present. However, when the planned shopping centers are occupied, an EDA cost of approximately $260 is anticipated. RECOMMENDATIONS Recommendations for future action with respect to this grant are discussed in this section of the report. EDA_ should fund new affiliates 3 if existing affiliates are assured of support 7 Funding alternatives for NPAED are summarized below. EXHIBIT 1, FEATURES OF FUNDING ALTERNATIVES ALTERNATIVES POSITIVE FEATURES NEGATIVE FEATURES Fund Phase-Three Cities Possible Extension of PAED Pattern to New Cities Further Dilution of National Staff Efforts per City ! Do Not Fund Grantee ! . Other Investment Opportunities Possible Failure of Existing Affiliates Refund Existing Affiliates Increase Likeli- hood of Fruition of Activities in Established Affiliates No Extension of ! PAED Pattern to New Cities A-2 NPAED has submitted a request to EDA to fund a third group of affiliate cities. This evaluation indicates that existing affiliates require further support. They are now on the verge of showing tangible impacts as projects mate- rialize. NPAED has not yet acquired funding for nine cities funded by EDA, for which grants expire December 31, 1970.^- However, some funds remain to be expended, and a no-cost extension will possibly provide a temporary solution for some cities. In view of the requirements of existing affiliates, and the desirability of extending the program pattern to other cities, it is recommended that EDA fund Phase III cities if NPAED is assured of support from other sources for Phase I and Phase II affiliates. This evaluation cannot address the issue of total fund- ing for the grantee, because this is a problem of allocating total technical assistance funds. However, if more funds are available for NPAED, consideration should be given to additional support for the national staff, because demands on this staff are presently great. If the funding is to re- main at the current level, an alternative would be to provide additional funding to the national staff and support fewer affiliates. A two-year period is required for an affiliate to demon- strate tangible results. Furthermore, the Community Savings Program, which potentially provides funds for affiliate ac- tivities, has not been implemented in the first year of oper- ations. Therefore, it is highly desirable for an affiliate to have reasonable assurance of support for two years. Al- though groups other than EDA have assumed support of some affiliates after one year, the Agency should give consideration to the policy of providing a two-year funding commitment, if funds are available. Affiliates require the services of business planners 3 additional support staff and higher salaries for professional staff. The critical activities of the affiliates require business planning expertise. Each affiliate could use the services of a professional planner. Additional secretarial support, on a part-time basis, would be desirable. The evaluation indicated that work demands upon the supporting staff are unreasonably high. NPAED has no firm funding plans for Baltimore, Phoenix and Omaha, or for the Phase II cities, although some EDA funds remain for extension of support to the Phase II cities. A-3 A reasonable salary level is important in order to attract and retain good professional personnel in the affiliates. NPAED does not supplement the salaries pro- vided in the EDA grant. The salaries of lead developers in the affiliates are in the range $9,000 to $11,000 annually. The Agency should either insist that the grantee provide a supplement, as appropriate, or it should make adjustments in the professional staff salary line item, as needed. The Entrepreneurial Development Training Center should not compete with similar programs in affiliate cities . The Entrepreneurial Development Training Center (EDTC) requires considerable effort by the national and regional staffs. Benefits have been minimal, and it appears that highly specialized skills and a significant amount of addi- tional funding would be required to increase impact substan- tially. However, the EDTC meets a need for entrepreneurial training in many cities. For example, the evaluation indi- cated that this program was unique in Cincinnati and Harris- burg. However, in Baltimore, a program supported by the Department of Health, Education and Welfare (HEW) was recently initiated. It is recommended that resources of the NPAED not be used for EDTC operations if entrepreneurial training can be obtained by community residents at no or low cost under another program. A-4 I. INTRODUCTION SCOPE OF GRANTS In 1969 , EDA began supporting the National Progress Association for Economic Development (NPAED) , a part of the Zion Non-Profit Charitable Trust. The NPAED is one of the national groups supported by EDA through technical assis- tance grants. Characteristics of the EDA grants to fund NPAED are summarized in Exhibit 2. EXHIBIT 2, EDA FUNDING OF NPAED PHASE GRANT AMOUNT GRANT PERIOD GRANT SCOPE I $351,000 July 1969-Dec. 1970 7 affiliate cities and national staff II $314,000 Jan. 1970-Dec. 1970 6 other affiliate cities and nation- al staff Grants provide approximately $42,000 in each city for two professional staff members, one secretary and office expenses, plus funds for national office coordination and support. The first grant included seven cities for one year 2 f and the second grant funded six additional cities. Cincinnati, Ohio; Harrisburg, Pa.; Phoenix, Ariz.; Omaha, Neb.; Providence, R.I. ; Baltimore, Md., and Nashville, Tenn (Camden, N.J. was originally selected, but was replaced by Baltimore after several months.) J Washington, D.C.; Augusta, Ga.; Champaign-Urbana, 111.; Kansas City, Mo.; Trenton, N. J. , and Dayton, Ohio. A- 5 For some cities, the first grant was extended to end at the same time as the second. 4 Application for a grant to fund six additional (Phase III) affiliates is now pending. 5 SCOPE OF EVALUATION At the direction of the Assistant Secretary for Economic Development, the Program Analysis Division of EDA initiated a series of analyses of national technical assistance projects The evaluation of NPAED is the first in this series. Field work was performed in the period November 5-25 , 1970. In this period, field teams visited: Philadelphia national headquarters, and . affiliate offices in three Phase I cities: Baltimore, Cincinnati and Harrisburg. These affiliates were chosen primarily on the basis of their proximity to Washington for this initial evaluation effort. Visits to the four cities were conducted after extensive review of file materials in Washington and discussions with Agency personnel familiar with the grants. During the field visits, interviews were conducted with approximately 50 in- dividuals, including employees of the grantee, community members and beneficiaries of the grantee's activities. Mem- bers of organizations other than EDA which fund the grantee were also interviewed. 4 Baltimore, Md. ; Phoenix, Ariz.; Providence, R.I.; and Omaha, Neb., were extended. Cincinnati, Ohio; Harrisburg, Pa.; and Nashville, Tenn. , have been assumed under a grant by the Office of Equal Opportunity. 5 Seattle, Wash.; Richmond, Va.; Indianapolis, Ind. ; New York City, N.Y. ; Knoxville, Tenn., and either Jacksonville, Fla. or San Jose, Calif. A- 6 II, SUMMARY OF ACTIVITY STATUS EDA supports seven professional personnel and three supporting personnel at the NPAED headquarters office in Philadelphia. This support enables the national staff to provide technical and management services to affiliates and to help develop common affiliate structures using the Philadelphia program as a model. This model for each affiliate is composed of the following major elements. Formation of Corporations - The Progress Association for Economic Development (PAED) and the Progress Investment Association for Economic Development (PIAED) are established. The first is established as a non-profit corporation; the second is a profit-making corporation which will own or operate business activities . Formation of Technical Advisory Committees - A Technical Advisory Committee consisting of business and professional people is formed in each affiliate city to provide a source of free expert services and guidance. Formation of Community Advisory Committees - A Community Advisory Committee consisting of target group leaders is formed to involve the community in the program and provide a vital channel of communication. Analysis of Minority Business Community - A list of minority businesses is compiled and analyzed to provide basic information for PAED and PIAED activities. Establishment of Community Savings Program (10/36 Plan) - Any individual may buy one share of stock, which costs $360 ($10 a month for 36 months) . Sixty percent of the capital goes to PIAED and the remainder to PAED. Thus, the program not only permits wide participation in both community development and profit- making activities, but also provides capital for business ventures conducted by PIAED. A- 7 Establishment of Entrepreneurial Development Training Center (EDTC ) - This center provides free business training with a strong emphasis on entrepreneurial skills to help target group members enter or improve their businesses. Development of Business Enterprises - The focal element of the program is the establishment of community-serving business enterprises. A shopping center is the key element which is planned for all cities. The plan also includes the development of franchising opportunities to provide additional possibilities for black participation in business. Exhibit 3 indicates the status of each program element in each of the three affiliate cities evaluated. The month of formal establishment of each of the affiliates is indicated in this exhibit. Operations in Harrisburg were in fact initiated somewhat after operations in Cincinnati, so that affiliates are ordered chronologically, from left to right. A- 8 EXHIBIT 3. STATUS OF AFFILIATE ACTIVITIES PROGRAM ELEMENT CINCINNATI (ESTABLISHED JUNE 1969) HARRISBURG (ESTABLISHED JUNE 1969) BALTIMORE (ESTABLISHED FEB. 1970) Formation of Corporations . PAED . PIAED Incorporated Incorporated Incorporated Incorporated Incorporated Pending state approval Formation of Technical Advisory Committee (TAC) Formed, small sub-group used Formed, used extensively Formed, used extensively Formation of Community Advisory Committee (CAC) Not operating Formed , used Formed, in- active 1 Analysis of 1 Minority Business | Community 8 List completed List completed List completed l 1 Community Savings Program (10/36 Plan) Pending Planned for Jan. 1971 Pending Entrepreneurial Development Training Center (EDTC) First class un- successful; Second class starting First class graduated 8 of 12 First class completing session ! Development of Business Enter- prises Shopping center site selected but not acquired; Planning gas station/car wash; Considering sea food restaurant Broke ground : for shopping center in Nov. 1970; Two gas stations operational Negotiating for plazarette site; Shopping center site tentatively selected A- 9 III. SUMMARY OF IMPACTS Activities of the PAED in the three cities have had a variety of impacts. Exhibit 4 summarizes the impacts to the present time on: the economic development process, jobs, and private investment. Exhibit 4 also indicates potential impacts of each activity. A-10 EXHIBIT 4, IMPACTS OF AFFILIATE ACTIVITIES ACTIVITY ECONOMIC DEVELOPMENT PROCESS JOBS PRIVATE INVESTMENT POTENTIAI Formation of PAED & PIAED Medium visibility 19 staff jobs; 1 other job • Formation of Technical Advisory Committee (TAC) Better informed staff decisions In-Kind Services Formation of Community Advisory Committee (CAC) Medium community involvement Analysis of Minority Business Community Planning tool - defines constituency Community Savings Program (10/36 Plan) None as yet High Entrepreneurial Development Training Center (EDTC) 7 graduates 1 In-Kind Services Development of Business Enterprises Gas station visibility 2 new jobs (Gas Stations) Working capital from ARCO; Urban Renew- al land High A-ll Activities of the three affiliates have had a medium impact upon the economic development process in their respective communities. . The organizations have local reputations as catalytic forces for minority economic devel- opment. . The PAED and PIAED Boards and Community Advisory Committees (CAC) in Harrisburg and Baltimore have involved leaders and other community members in the planning process. . The Harrisburg EDTC has prepared 12 trainees to establish or improve their businesses. Two gas stations operated by PIAED in Harris- burg provide visibility and credibility. The impacts of the affiliates' activities on employment have been small to the present time. . Agency funds have paid for 19 staff jobs which are held by blacks. The Harrisburg gas stations employ ten persons (eight full-time job equivalents on an hourly basis) , with an annual payroll of approximately $38 , 000. Only two of these jobs are new, be- cause existing leases were assumed. . A city planner has been hired as a result of a contract with the City of Cincinnati. . A new job for one EDTC trainee in Harrisburg was reported. The principal outside investment has been the contribu- tlo "° f m time . and slices by professional experts who serve ?S ™J; eC ? niCal Advisorv Committees and by instructors for the EDTC classes in Harrisburg and Baltimore. The Atlantic Richfield Company (ARCO) provided a small amount of working capital for the service stations. The site for the shopping center in Harrisburg is urban renewal land, obtained at no mfim »^ Ug l h t Department of Housing and Urban Development (HUD) and a state authority. A number of significant impacts are expected as a result of implementation of the 10/36 Plan. This program A-12 will provide a vehicle for additional community involvement and also provide funds for development of business activities Shopping centers have a major potential impact in the three cities. Potential employment of the shopping centers is summarized in Exhibit 5. EXHIBIT 5. POTENTIAL SHOPPING CENTER EMPLOYMENT CITY Harrisburg Shopping Center Baltimore Plazarette Baltimore Shopping Center Cincinnati Shopping Center EXPECTED EMPLOYMENT 150 25-50 200-300 approx. 150 EXPECTED OCCUPANCY Dec. 1971 Winter 1972 Unknown Late 1972 CURRENT STATUS Broke ground Nov. 1971 Negotiating for site Site tentatively selected Site selected, but not acquired A-13 ,J«T IV, ISSUES Four issues are important in determining whether the EDA grants to NPAED have been effective. These issues are addressed in this section of the report. Issue 1 . Has EDA been effective in helping to create a national institution? Response With EDA support, a national institution is now functioning, as indicated by the observations below. The Zion Non-Pro fit Charitable Trust is a strong parent institution for NPAED. Zion has an excellent national reputation. NPAED has established a wide geographical base through many operating affiliates. The affiliates have an excellent program model, which has proved successful in Philadelphia. Issue 2 . What do other funding sources think of the grantee? R esponse Discussions with representatives of three funding sources indicate that they believe NPAED is a good organization with a worthwhile program. SBA funded 12 affiliates for their first year of operation with two grants totalling $584,000. The Office of Economic Opportunity (OEO) has assumed support of eight affiliates, and is partially sup- porting the national office with a $1 million grant which expires in June 1971. The Forfi Foundation funded the National Intern Program to train economic developers for affil- iates as part of a $400,000 grant. A-14 Issue 3. Has NPAED been successful in helping improve — ~~ employment and ownership opportunities for target groups ? Response To the present time, it has not. Few jobs, other ~~ than staff jobs, have been created, and the EDTC program has yet to take a firm hold in the communi-_ ties. However, employment and ownership opportunities for minority group members should increase markedly when the shopping centers are completed. Issue 4. What is the potential of the grantee? Response The NPAED has excellent potential to accomplish its long-range objectives in affiliate cities. The program is an ambitious one. A two-to-four year gestation period is required before many tangible results can be observed. The programs in Baltimore and Harrisburg have advanced well. It is expected that significant tangible results will be obtained in these two cities during 1971, and that important advances will be made in Cincinnati this year. A-15 V, BENEFITS AND COSTS The benefits of the EDA grant to NPAED have been diverse. An effective national institution has been created. The institution has had a moderate impact on the economic development process in a number of affiliate cities. It has a high potential impact on black partici- pation in business. The impact on employment has been low, but there is a high potential impact when shopping centers are occupied. Approximate benefit to EDA cost ratios for the three affiliates are: Present: $6,600 per direct job Potential: $260 per direct job. These ratios are based upon costs of $126,000 for the three affiliates and an allocation of $25,000 of the national office funding (total cost of $151,000). They assume no additional funding of these affiliates. Twenty-three direct jobs, in- cluding 19 staff jobs, are assumed for the present time; 590 potential direct jobs are assumed. A-16 VI. DETAILED PROGRAM DESCRIPTION NATIONAL ORGANIZATION The NPAED national staff provides management and technical guidance to the affiliates in implementing programs closely resembling the successful program initiated several years ago in Philadelphia. NPAED activities are directed by Mr. Robert Byrd. Four regional coordinators serve under him. All three cities included in the present evaluation, Baltimore, Cincinnati and Harrisburg, are in the Eastern Region. There is evidence of a direct relationship between the distance of the affiliate from Philadelphia and the rate of program development. Harrisburg has received much attention from the national office, and most program elements have advanced more in that city than in the other two. Although the Cincinnati affiliate began operations earlier, activities have apparently progressed the least rapidly in that city. Correspondingly, the coordinator for the Eastern Region made his first visit to that city in connection with the field work completed for this evaluation. The national office provides general administrative support such as centralized accounting and payroll operations. More important, however, is the role played by the national staff in planning for acquisition, development and operation of business ventures, including shopping centers. The evaluation indicates that the efforts of the national staff supported by EDA (seven professional and three support ^ personnel) are spread thinly. As indicated above, national staff attention to many aspects of the affiliates' activities appears to be of great importance. To describe the activities and impacts of the NPAED ^ program, however, attention must be focused on the affiliates. The following sections of this report describe the principal activities and their impacts in each of the affiliates in- cluded in this evaluation. A- 17 FORMATION OF CORPORATIONS The Progress Association for Economic Development (PAED) and the Progress Investment Association for Economic Develop- ment (PIAED) are the organizational units which execute the NPAED program in each city. The first is established as a non-profit corporation; the second is established as a profit-making corporation to own or operate business ventures The Boards of Directors of the two corporations provide access to leadership in the community and provide some lever- age for the program. Board members, of course, contribute their time and services at no charge, which is an in-kind contribution to the grantee. At the time of the present evaluation, the PAED was legally incorporated in all three cities evaluated. How- ever, incorporation of the PIAED was not fully completed in Cincinnati. In each affiliate, EDA is funding two professional personnel and one support person. NPAED operates a train- ing program in Philadelphia for affiliate professional personnel. The directors of the Harrisburg affiliate and the Cincinnati affiliate have participated in this program. Recently, the City of Cincinnati contracted with NPAED to perform a city planning analysis of Avondale, the target community. The contract provides $80,000 to pay the salary of a city planner and additional consultants for a six-month period. The planner was hired by PAED and is now working in its office. FORMATION OF TECHNICAL ADVISORY COMMITTEES (TAC) The Technical Advisory Committe (TAC) in each affiliate provides specialized advice to the professional staff. It does not meet as a body, or act as a committee, in the usual sense. Rather, the individual members, most of whom are prominent white business or professional people, act as volunteer consultants to the staff. Examples of TAC efforts are : Baltimore: The partners of a law firm provide the affiliate with free legal counsel. A-18 Baltimore: TAC members established and are conducting the first EDTC class, with services "valued" at $5,000 to $10,000. Harrisburg: TAC members provided feasibility studies for the possible acquisition of a num- ber of business enterprises. Technical Advisory Committees have been formed in all three cities evaluated. There are 20 or more active members in Baltimore and in Harrisburg, but only a few in Cincinnati. In all three cities, TAC services have been a valuable in- kind investment in the PAED and the PIAED. They have led to better informed staff decisions and are hastening the real- ization of efforts in other program areas. Their indirect impacts make these groups an important element in the pro- gram. FORMATION OF COMMUNITY ADVISORY COMMITTEES (CAC) The Community Advisory Committee (CAC) in each affiliate provides advice to the professional staff. It is also in- tended to help keep the staff in touch with the problems and needs of the community. Members of the CAC are generally target group members who are recognized as leaders by their peers. The CAC, un- like the TAC is designed to meet as a committee and make a unified set of recommendations to the Boards of the PAED and the PIAED, as well as to the professional staff of the affiliate. The CAC has been far less effective and helpful than the TAC, It was found to be active only in Harrisburg, where it has approximately 25 members. In Baltimore, a group had been formed, but is now inactive. A CAC is not operating in Cincinnati, although an initial attempt has been made to form such a group. It is possible that the problem in these two larger cities is the broad definition of the target group. In Baltimore, this includes blacks throughout the entire city. A-19 When individuals acquire ownership through the Community- Savings Program, their interest in the CAC may increase. However, an active CAC may be necessary to effectively initiate this program. ANALYSES OF MINORITY BUSINESS COMMUNITY The analysis of the minority business community provides a data base for planning the affiliate's own business ventures and other program elements. The analysis should: list minority businesses, discuss the condition of these businesses, and analyze the problems which they face. All three affiliates which were evaluated have compiled lists of minority businesses. Professional staff members use the lists extensively. However, none of the affiliates have performed analyses of the data because of time constraints The national staff conducted a general study of the problems faced by black businessmen. P This study encompasses virtually all conceivable business problems in urban areas, and can serve as a useful reference for the affiliate staffs. COMMUNITY SAVINGS PROGRAMS The Community Savings Program, or "10/36 Plan," is the cornerstone of community ownership and participation in the overall program. Any individual may buy one share of stock (maximum of four shares per family) by paying $10 a month for 3 6 months. Sixty percent of the capital is for PIAED. Div- idends may be paid on this share out of profits from PIAED business ventures. The remaining 40 percent is an investment in community development, through the non-profit corporation, PAED. 6 This was submitted to EDA in the grantee's progress report for the third quarter of 1970. A-20 None of the three affiliates evaluated had begun sales of 10/36 stock at the time of field visits. The status of the plan in these cities is summarized below. Baltimore: The plan has been widely publicized through bus trips to Philadelphia to observe the results of implementation there. Enthu- siasm was great, but sales do not appear to be imminent. Cincinnati: State authorization is expected at any time, but definite plans for sales have not been made. Harrisburg: Sales have been delayed for six months awaiting certification of PAED as a non-profit corporation. However, the plan is scheduled to be launched officially on the anniversary of Martin Luther King's birthday, January 15, 1971. The Community Savings Program was the element of the affiliates' activities which was usually the most enthu- siastically endorsed by community members interviewed dur- ing the evaluation. The following sentiments were strongly and widely expressed. The plan is a unique concept for community ownership. Community members will become more community- conscious by feeling that they have a personal stake in economic development. It appears that the plan has already had a very significant psychological impact on minority group members. Residents of the affiliate cities are looking to Philadelphia as a model. In that city, more that 6,000 shares have been sub- scribed. The shopping center, built with 10/36 funds, is a very successful operation. It is anticipated that Phil- adelphia 10/36 stock will pay its initial dividend next year. Furthermore, on a private sale basis, it is reported by NPAED that a share of stock will sell for at least several times its face value of $360. ENTREPRENEURIAL DEVELOPMENT TRAINING CENTERS (EDTC) The Entrepreneurial Development Training Centers (EDTCs) provide blacks with the skills to enter business or to A-21 enlarge or improve businesses which they may be operating. EDA grants do not support the classes directly, although affiliate staffs organize the Centers. Tuition is not charged for the classes. Instructors in Harrisburg and Baltimore have donated their time to this effort. The grantee does not engage in placement activities in con- nection with the EDTC. Each of the affiliates evaluated has initiated this program. The initial program in Cincinnati was conducted more than a year ago ; a second one is planned for the near future. Harrisburg" s first class was completed last spring; a second class is scheduled for January 1971. Baltimore's first class was nearing completion at the time of the field visit there. Exhibit 6 summarizes characteristics of the EDTC Program in these cities. EXHIBIT 6, EDTC PROGRAM IN THREE AFFILIATES Month class started CINCINNATI HARRISBURG BALTIMORE Nov. 1969 Feb. 1970 Sept. 1970 Month class ended Jan. 1970 May 1970 Dec. 1970 Number of students entering 72 12 23 Number of students finishing 7 12 (now in class) Other comparable program available? No No Yes _ , , , . The Harrisburg class was the only one which had been completed at the time of this evaluation. Of the seven students graduating, one reported that he had obtained a job, and one other reported that his position had been up- graded. Although the students felt the training had been beneficial, they did not directly attribute the job up- grading or new job to the training they had received. A-22 In spite of the small classes, Harrisburg and Baltimore classes have been successful in comparison with Cincinnati. In that city, classes were held in a cold church basement, with no books or supplies. The first class attracted 72 people of very diverse backgrounds. The single instructor was grossly overburdened. Students quickly lost interest, and attendance dropped to two or three people. The course was terminated after two months. Cincinnati, however, is one of the 10 affiliates to be refunded by an OEO grant. This $88,000 grant is basically for EDTC classes, one-half for salaries, about $15,000 for student stipends and the remainder for overhead expenses. A major reason for OEO support may be the lack of entre- preneurial training programs in Cincinnati. There is no comparable training program in Harrisburg. However, in December, HEW began supporting a Model Cities Training Program for individuals in Baltimore who wish to upgrade their business skills. There is no tuition for this course. A number of trainees were interviewed in Baltimore and Harrisburg. The characteristics of the trainess in these cities are summarized in Exhibit 7. (Trainees were not interviewed in Cincinnati because the class was quickly disbanded. ) EXHIBIT 7, CHARACTERISTICS OF TRAINEES IN EDTC CLASSES TPAINEE CHARACTERISTICS HARRISBURG BALTIMORE Race 1 All black All black Educational Level 8th grade, overall 7 5% completed high school ; average 50% completed some college; 25% completed college Employment Status 60% operate own busi- 40% managerial or professional ; nesses 20% operate own businesses A-23 Six of the seven individuals who had completed the Harrisburg course were interviewed in this evaluation. Many of these individuals are operating their own businesses and feel that the training is helping them. All six in- dividuals interviewed believe that the training will be of some future value to them. Five of the trainees currently attending the Baltimore course were interviewed. Many expressed a desire to enter business and considered the training essential in achieving that goal. All five were pleased with the course. Several individuals in Harrisburg and Baltimore who had not completed the courses were also interviewed. In all cases, the reason given for not continuing was a personal one, such as a conflict between class times and their busi- ness commitments. All expressed generally positive views toward the EDTC and felt they had obtained some benefit even from their limited attendance. A serious question can be raised as to whether affil- iate staffs should be involved in organizing a training program. The principal arguments against this activity are summarized below. Much staff time is expended on the EDTCs . This effort should be put in other areas, especially business development. An organization which concentrates on minority training is better equipped to conduct an entrepreneurial training course. The following arguments may be presented to support the EDTCs. They provide training for potential shopping center tenants and for potential managers of PIAED businesses. They fulfill a training need which is not met in many of the affiliate communities. They give the affiliate visibility very quickly, They can be established and operated with a minimum of capital. A-24 The impact of entrepreneurial training can be great if it enables trainees to own or manage successful busi- nesses Whether PAED should conduct entrepreneurial training, therefore, is a trade-off between how well an affiliate learns to conduct such a program and the possi- bility of training being provided by another source. If a comparable program is available in the community, it is difficult to justify PAED efforts in this area. DEVELOPMENT OF BUSINESS ENTERPRISES The focal activity of the affiliate is the develop- ment of community-owned business enterprises. Because detailed planning is necessary, this activity requires a great deal of affiliate staff time and considerable nation- al staff support. All of the affiliates have major plans for the con- struction and operation of at least one shopping center. Exhibit 8 summarizes the status of shopping center devel- opment in each of the three cities evaluated. EXHIBIT 8. STATUS OF SHOPPING CENTERS EVALUATION FINDING Expected Occupancy Number of Stores Projected Employment CINCINNATI SHOPPING CENTER HARRISBURG SHOPPING CENTER Site selected 1 Broke but not ac- 1 ground in quired I Nov. 1970 Late 1972 6 to 10 approx. 150 Dec. 1971 to 9 150 PLAZARETTE Negotiating with HUD for site SHOPPING CENTER Winter of 1972 5 to 7 25-50 Beginning to acquire site from private owners Unknown approx. 20 200-300 A-25 The greatest progress has been made in Harrisburg, where ground was broken on a 2.6 acre site (including park- ing) by Secretary Stans in November 1970. Shopping centers will be modeled after the successful Progress Plaza, in Philadelphia. That center contains 17 facilities, of which eight are "Triple-A." The 17 units include offices of an insurance company, Bell Telephone of Pennsylvania, two banks and 13 stores. Total employment is approximately 200 persons. Additional business development activities of the three affiliates are summarized in Exhibit 9. Harrisburg has made the most progress in this area. The PIAED in that city op- erates two ARCO service stations which employ ten persons. Some are employed part-time, thus providing approximately eight full-time job equivalents, on an hourly basis. The leases were acquired in September and October of 1970, respectively. Eight people were employed when the stations were acquired, so that only two new jobs have been created. The total annual payroll is approximately $38,000. Both stations are making marginal profits. Monthly gross is approximately $13,000 and $20,000, respectively. ARCO advanced several thousand dollars for initial working capital. Employees have required much supervision. This problem, and others typical of a new business, have consumed a large portion of professional staff time. Never- theless, the stations provide considerable visibility and credibility in the city's relatively small black community of 27,000 people. Cincinnati's plans for business development are in the formative state. Negotiations have been completed with Gulf Oil Company and a car wash firm. The staff is now looking for a reasonably priced site for a combination gas station/car wash. The Cincinnati PIAED is looking into the possibility of a franchise with Sea Galley, a restaurant chain. Although operations began in Baltimore after those in Cincinnati, business activities are equally advanced in the two cities. The Baltimore affiliate is considering operation of convenience food stores, patterned after the "Our Markets" operated by the Philadelphia affiliate. It is also conduct- ing discussions with oil companies and investigating various franchises . A-26 The Baltimore affiliate has submitted bids on con- ++*,*+* In use as a base for manufacturing operations. One bid has gone to Western Electric Company for electrodes work which would permit the PIAED, once incorporated, to 11 in a small factory. Another bid was submitted to the General Services Administration (GSA) for the production of metal desks. The Baltimore affiliate has been conducting discussions with tne city housing authority to seek participation in the development of 1,000 units of new housing in two areas of the city. EXHIBIT 9. STATUS OF OTHER BUSINESS DEVELOPMENT ACTIVITIES ACTIVITY Small Businesses Industrial Enterprises Franchises Discount Sales Program CINCINNATI HARRISBURG Negotiations completed with Gulf Oil Co. for gas sta- tion/car wash; Looking for site Considering Sea Galley Restaurant Selling from affiliate office Operates two ARCO service stations BALTIMORE Feasibility studies be- ing conducted Beginning to sell from af- filiate office Considering con- venience food stores; Talking with oil companies about possible gas stations Bids submitted to Western Electric and GSA Feasibility studies being conducted Operating in a store Considering new housing develop- ment of 1,000 units A-27 All three affiliates recently began participation in an NPAED feasibility study to determine the best markets for "Progress Discount" stores. The stores, to be estab- lished in those cities with the greatest exhibited market potential, will sell health and beauty aids, small appli- ances and other specialty merchandise. In November, the emphasis was on Christmas-related items. In Baltimore, operations are on a space-sharing basis in a small store. The Cincinnati and Harrisburg affiliates are selling from their offices. In summary, many business activities are in various stages of preparation in all three affiliates. At least one to two years will be required before tangible results can be observed. A-28 J - APPENDIX B EVALUATION OF THE NATIONAL BUSINESS LEAGUE (NBL) (project outreach) JANUARY 1971 ECONOMIC DEVELOPMENT ADMINISTRATION U.S. DEPARTMENT OF COMMERCE SECTION NATIONAL BUSINESS LEAGUE IA£Lf_OL-CONTENTS HIGHLIGHTS AND RECOMMENDATIONS Introduction Status INTRODUCTION II SUMMARY OF ACTIVITY STATUS National Headquarters Chapters III SUMMARY OF IMPACTS National Headquarters IV ISSUES V BENEFITS AND COSTS VI ACTIVITIES OF CHAPTERS Introduction PAGE NO B-l B-l B-l B-l Impacts B _ 2 Recommendations B-5 Scope of Grants *?-5 Scope of Evaluation B-7 B-7 B-8 B-ll B-ll B-ll Chapters _ R ,r Impact of Unique Activities *~ ±: > B-17 B-20 B-21 B-21 B— 21 Loan Packaging Franchises and Dealerships ZT%% Contract Bonding and Procurement Business Problem Solving _ Marketing and Site Location Business Training . Chapter Activities for Self Sufficiency List of Black Businesses Unique Activities of the Chapters B-24 B-26 B-26 B-30 B-30 B-l EXHIBIT I X NATIONAL BUSINESS LEAGUE I 1ST OF EXHIBITS PAGE NO, OUTREACH FUNDING B-5 II SUMMARY OF ACTIVITY STATUS FOR NATIONAL HEADQUARTERS B--8 III SUMMARY OF ACTIVITY STATUS IN CHAPTER CITIES B "" 10 IV SUMMARY OF IMPACTS B_12 V DATA ON IMPACTS B ~ 14 VI CHAPTER LOAN PACKAGING ACTIVITIES B-22 VII SUMMARY OF CONTRACTOR BONDING AND CONTRACT PROCUREMENT ACTIVITIES B-24 VIII SUMMARY OF BUSINESS PROBLEM- SOLVING ACTIVITIES B ~ 25 IX ADDITIONAL SOURCES FUNDING THE ABL B-2 8 ADDITIONAL SOURCES FUNDING THE CBL B-29 XI ADDITIONAL SOURCES FUNDING THE JBL B-30 B-ii HIGHLIGHTS AND RECOMMENDATIONS INTRODUCTION In June 1967, EDA and the Office of Economic Opportunity (OEO) began supporting Project Outreach, an activity of the National Business League (NBL) . Since that time, the task of financing the program has shifted primarily to EDA with assist- ance from the Small Business Administration (SBA) . Total EDA support has been $1,129,000. This report describes the status and impacts of activities of three of the present ten chapter cities, and of the national headquarters in Washington, D.C. It also contains recommendations for further assistance to this grantee. STATUS The three chapter cities evaluated were Atlanta, Ga. , Columbus, Ohio, and Jackson, Miss. The general program of each chapter is established by the national headquarters, but the relative emphasis placed on the activities varies to meet the local conditions. The program includes contract procure- ment, bonding of contractors, loan advocacy, business problem, solving, marketing and site location, and business training. The three chapter cities are conducting most of the activities listed above. In these cities, loan advocacy, business problem-solving, and management assistance have been given high priority. The emphasis placed on the remain- ing activities listed above has varied. In addition, each chapter office has emphasized unique activities, such as the establishment and management of a cabinet factory in Jackson. IMPACTS The NBL believes that in order to help establish success- ful minority business enterprises, a total package of service must be offered. This package generally includes management training, loan packaging and business problem-solving after the business has been established or expanded. Additional services include feasibility studies on various site locations, referral of potential clients to government agencies, and information on potential contracts that the business is capable of obtaining. i-l The major impact in the three cities visited has been in improving minority business management. In addition, in 1970, at least 200 direct jobs resulted from the loan pack- aging program, about 300 direct jobs resulted from the busi- ness problem-solving activity, and at least 40 direct jobs resulted from the franchises obtained. Other jobs have been obtained through contractor bonding and contract procurement. In 1970, 219 businesses received business problem-solving assistance from the three chapters, and 74 loans were approved by banks and the SBA. RECOMM ENDATI O NS EDA sh ould refund existing chapters . NBL has submitted a proposal to EDA to refund the existing 10 chapters. It is recommended that the three chapters eval- uated during this study be refunded. The Atlanta and Columbus chapters will receive additional support in the near future, but the staff members in these cities assume that these funds will augment the EDA grant rather than substitute for it. Support to the chapters should be increased relative to support to the national office . The national office has performed its task as national representative body of the NBL but has not achieved signifi- cant progress in many of its activities. Funds are needed more in the chapter cities. EDA would achieve greater impact from its grant to NBL if the funding of the chapter cities were increased relative to that of the national office. If necessary to decrease total support to one of the three chapters visited, funding to Columbus should be decrease d. Support to the Columbus chapter should be decreased before support to the Atlanta or the Jackson chapters. Both the Atlanta and Columbus chapters are approaching the stage when they will be self-sufficient. The Jackson chapter will not be self-sustaining in the near future and it is important that funding of this chapter be continued. Six other minority economic development efforts in Jackson have failed, leaving only the Jackson Business League (JBL) . B-2 Atlanta is scheduled to be an Office of Minority Business Enterprises (OMBE) city and therefore that chapter must be supported. The delay in the OMBE funding of Atlanta has caused embarassment and political pressure on the U. S. Department of Commerce Regional Office in Atlanta. The curtailment of EDA funds to the Atlanta chapter would cause additional problems at this time. The Columbus chapter has founded a profit-making corpora- tion and is presently operating on a budget twice the amount of EDA funding. The Columbus chapter, therefore, is approach- ing self-sufficiency. Salary dis parities between the national office staff and the local office staffs should be c orrected. The average salary of the national office professional staff, excluding the President but including the research assistant and the editor, is approximately $15,000. The average salaries in Atlanta and Columbus are $12,500. The salary of the project director in Jackson is $10,000 and that of the assistant director is $6,000. The capabilities of the chapter personnel are very high and the salary disparities cannot be justified on this basis. National staff salaries are believed to be equitable. EDA should increase travel funds in the grant . The travel line item in the 197 grant was originally $6,000. This was substantially increased by amendment because travel funds were exhausted for the NBL training session. Increasing the travel funds would enable more cooperation be- tween the national headquarters and the chapter cities, which has been a critical point in the past. It would also help chapter staffs to coordinate efforts with clients in nearby areas . EDA should consider a two-year funding commitment, with review six months before termination . A two-year period is required for a chapter to demonstrate tangible results. Furthermore, a two-year commitment would facilitate hiring of capable professional personnel by pro- viding assurance of greater employment stability. For these reasons EDA should consider a two-year grant period. In addition, a proposal for refunding should be evaluated six months before the grant terminates. The activities of the b-3 >;- NBL, and most other technical assistance grantees, are con- tinuous activities that are artificially broken into program years. Termination of funding without sufficient notice may necessitate cutting activities before fruition. Prior notice would permit the scaling of activities or the securing of alternative funding to maintain operation. Conversely, some time is required before efforts on an activity can be accel- erated if funding is increased. B-4 I. INTRODUCTION SCOPE OF GRANTS The initial EDA grant to the National Business League of $93,859 was approved in June 1967 to supplement an 0E0 arant of $300,000. In August 1967, a supplementary grant of $35 000 was approved by EDA. Since that time, the inancing of NBL has shifted primarily to EDA, as shown m Exhibit 1. EXHIBIT I. OUTREACH FUNDING SBA FUNDS TOTAL $428,859 $550,000 $100,000 $1,128,859 $300,000 $100,000 $550, 00C $1,528,859 The number of chapter cities funded by EDA has fluctuated. The original 13 cities were reduced to 9 when Los Angeles, New York, Chicago and Detroit were dropped. Los Angeles and New York were terminated as Outreach Cities because of their size. Chicago was dropped because the Chicago Economic Development Corporation was recognized as the principle minority economic development organization in the city. Detroit wa * tf^^roit as an Outreach city because of racial problems. In 1970, Detroit was again opened as an NBL chapter city. NBL has submitted a proposal to fund the next effort, Outreach IV, for $759,000. This application proposes support- ing the present ten chapters!/ at the current level of funding, 1 Atlanta, Memphis, Richmond, Detroit, Jackson, Durham, Columbus, Norfolk, Seattle, and Chicago. B-5 with the exception that the four OMBE cities 2 will receive an additional $50,000 within the scope of this grant. SCOPE OF EVALUATION At the direction of the Assistant Secretary for Economic Development, the Program Analysis Division of EDA initiated a series of analyses of national technical assistance projects The evaluation of NBL is the second in this series. Field work was performed in the period December 9-18, 1970. In this period, teams visited: Washington, D.C. national headquarters, and . chapter offices in Atlanta, Columbus and Jackson. Visits to the four cities were conducted after extensive review of file materials in Washington and discussions with Agency personnel familiar with the grants. The chapter cities were selected in consultation with the Office of Technical Assistance and on the basis of NBL progress reports. Cities with different degrees of success in each activity were se- lected. During the field visits, interviews were conducted with approximately 60 individuals , including employees of the grantee, community members, and beneficiaries of the grantee's activities. Members of organizations other than EDA which fund the grantee were also interviewed. 2 Atlanta, Memphis, Richmond, and Detroit B-6 II, SUMMARY OF ACTIVITY STATUS NATIONAL HEADQUARTERS EDA supports seven professional personnel and four support- ing personnel in the principal NBL office in Washington. The activities of this office are primarily research, planning, and coordination of chapter efforts. These national activities are described below. Lon g-Range Planning - The national office is presently fathering data and working on a three-year plan with the following goals: (1) increase membership from 12,000 to 100,000; (2) develop a profit-making cor- poration that will sell shares through the member- ship; (3) develop a $1.0 million capital reserve to fund NBL after the EDA grants terminate; and (4) develop a large Minority Entrepreneur Small Business- man Industrial Corporation (MESBIC) . Con tacts with National Corporations - NBL works to establish a favorable working relationship with national corporations. The primary objective is to get large national corporations involved in solving the problems of minority business through technical and financial assistance. Tr aining Seminars - NBL holds bi-annual seminars in Capahosic, Va. for national and chapter staffs. _ They deal with the history of NBL and black busi- nesses, with examples of successful business efforts. . A ssistance to Chapters - The national headquarters acts as a clearing house for potential sources of business for the clients of the chapters. It also reviews loan proposals and studies conducted by the chapters when requested to do so by the chapter staffs. . solicitation of Funds - The national office maintains continuous contacts with Federal and state govern- ments in order to obtain funding. It also keeps the chapters informed of potential sources of state and local funds . B-7 Exhibit II summarizes the status of the national staff activities . EXHIBIT II, SUMMARY OF ACTIVITY STATUS FOR NATIONAL HEADQUARTERS ACTIVITY STATUS Long-Range Planning Active Contacts with National Corporations Active, but limited Training Seminars Bi-annual Assistance to Chapters Active, but limited Solicitation of Funds Active, but limited CHAPTERS The major activities of each chapter are formulated by the national headquarters. However, the degree of emphasis placed on each activity by a chapter varies according to the local situation. The principal services provided by the local chapters are : financial assistance , including loan packaging, analysis of franchises and dealership possibilities, and franchises and dealership procurement; management assistance , including contractor bonding and procurement, business problem-solving, and marketing and site location; and unique chapter activities. B-8 Chapter activities are described below: . Loan Packaging - This activity consists of all iteps necessary in constructing an acceptable loan application. This often includes market analysis, auditing and follow-up after the loan is obtained. Franchise s and Dealerships - This activity con- * Ixir^-^-obtiinTng franchises and dealerships for minority businessmen when favorable terms can be arranged. Contractor Bonding - This activity consists of obtalnlHg~T3ndIH?"for minority contractors so that they can secure contracts for more than $20,000. Contract Procurement - This activity consists of * ^U^nn^~E^tKEtE with various government agencies and private firms so that the clients of NBL may be informed of potential contracts. Business Problem-Solving - This activity consists of ' - E ^ s tQ im prov e~The~Tfficiency of minority-owned businesses. It is the main tool used to prevent business failures. Marketinq and Si te Location - This act ivity con- iiits~^fc^nducting marketing and site location analysis for minority businessmen. These studies are often included in loan applications. Business Tra ining - This activity consists pri- ^nj7~oTTic^ulting minority businessmen for management training courses conducted by local colleges. The NBL chapters also help organize these classes. . Chapter Activities^ for^elfzSuffj^ier^ - This activity consists of continuous efforts by the chapters to obtain additional sources of support. List of Black Busine sses - This activity consists * ^r-c^m?Dl^g-a-Ti^r-oT-black-owned enterprises m the area so that NBL can channel business between and to these firms. . nniaue Activities - These consist of activities unique z^-^h~cha?teTrsuch as the establishment of a cabinet assembly plant in Jackson. Exhibit III summarizes the status of each of these activities. B-9 EXHIBIT III. SUMMARY OF ACTIVITY STATUS IN CHAPTER CITIES ACTIVITY I. i „ ATLANTA COLUMBUS JACKSON Loan Packaging Active Active Active Franchises & j Active, but Dealerships j limited None Active, but very limited Contractor Bonding Now handled by Minority Con- tractor Assoc. i i None None Contract Procurement Now handled by Minority Con- tractor Assoc. Active Active Business Problem- Solving Active Active Active Marketing and Site Location i j Active Active Active j Business Training Several classes Several classes completed; J completed; others about others about to start 1 to start Several classes completed; others about to start Chapter Activities for Self-Suf f iciency 1 Started tax consulting firm Started develop- ment corporation Pending List of Black Businesses Published Completed; to be published in March 1971 Published Unique Activities Active Active Active B-10 Ill , SUMMARY OF IMPACTS NATIONAL HEADQUARTERS Impacts of national headquarters activities are summarized below. Long-Range Planning - No impact has been achieved to date, but assuming realization of the plan, the impact will be the self-sufficiency of NBL. Contacts with National Corporations - There has been little visible impact of this activity. Training Seminars - The impact of this activity hii~been"high.~~These week-long sessions permit useful interchange of ideas between NBL personnel. Assistance to Chapters - The Columbus and Jackson chapters receive very little support from the national office, whereas the director of the Atlanta chapter claims that he receives a great deal of help and advice. 3 Solicitation of Funds - Very little impact has been achieved. Because the only two Federal agencies funding NBL are EDA and SBA, it appears that NBL has not been successful in obtaining other funding. Additional funds received _ by the chapters have been a result of local initiative rather than of efforts by the national office. CHAPTERS Exhibit IV summarizes economic development process impact, job impact, outside investment and potential for the three chapter cities visited. Exhibit V presents data on the impacts 3 Atlanta will receive OMBE funds in 1971. B-ll EXHIBIT IV. SUMMARY OF IMPACTS ACTIVITIES ECONOMIC DEVELOPMENT PROCESS JOBS 4 INVESTMENT 5 POTENTIAL Loan Packaging High Visibility 180 $4,007,800 Very High ] Franchises & Dealerships Some Visibility 39 Working Capital Low i Contractor Bonding High Visi- bility in Atlanta; Low Visi- bility in Columbus & Jackson High in Atlanta; Low in Columbus & Jackson High in Atlanta; Low in Columbus & Jackson j Contract Procurement High Visibility High . High Business Problem- Solving Improved quality of minority businesses 318 Very High Marketing and Site Location High Visibility High In-King Services High Business Training Improved basic busi- ness capa- bilities i High Chapter Activities for Self -Sufficiency - Received $184,650 Committed $467,000 High in Atlanta & Columbus ; Low in Jackson Footnotes 4 and 5 on next page. B-12 (cc )NT. ) 1 EXHIBIT IV. SUMMARY OF IMPACTS (CONT.) ACTIVITIES List of Black Businesses Unique Activities ECONOMIC DEVELOPMENT PROCESS JOBS' Client in- formation base INVESTMENT" High Visibility 16 In-Kind Services In-Kind Services POTENTIAL High 4 The job impact is estimated on the basis of three jobs per new business. This procedure is used by staff members in the chapters and has been confirmed by EDA field team visits to a significant number of businesses in each of the three cities. When "high" or "low" is used in this column, it implies relative job impacts, because no accurate estimate could be made. 5 This includes private investment, as well as grants and loans from government sources . B-JL3 EXHIBIT V. DATA ON IMPACTS ACTIVITY ATLANTA i COLUMBUS JACKSON Loans Approved Number Amount New Firms 14 $1,794,000 8 28 $457,000 22 32 $1,756,800 30 Franchises Received by Clients 12 I — ._ — ... 1 Contractors Bonded I 7 Contracts Procured for Clients Number Amount ■ | 24 $141,468 3 $2,464,000 1 $8,000 Business Problem-Solving Total Firms New Firms i . 98 49 61 42 60 15 Marketing and Site Location Studies 52 99 27 Funds Received by Chapters Total Grants Received and Committed Allocations to Revolving Funds Stock Sold $260,950 $60,950 $200,000 $370,^00 $55,700 $250,000 $65,000 $10,000 $10,000 Number of Black Businesses Identified 1,300 550 3C0 - — , , — B-14 Activities of the three chapters have had a favorable impact upon the economic development process. New businesses have been started and others have been expanded as a result of the loan advocacy, marketing and site location studies, franchise development (Atlanta and Jackson) , and contract bonding and procurement. Business efficiency has been improved through the business problem-solving activity. The V.I. P. cabinet factory in Jackson may demonstrate that black business can succeed in this area. The Minority Contractors Association was established primarily by the Atlanta Business League. The business leagues in Atlanta and Columbus have been instrumental in setting up a referral system for minority businessmen to obtain assist- ance from the government agency best able to provide the particular type of assistance needed. The business leagues in the three cities have made a large contribution to saving jobs and creating new jobs for minority employees. However, because of the lack of follow- up personnel, accurate accounting of these jobs is difficult. Each of the chapter cities has been able to generate Federal and local government funds to supplement their activ- ities. Private capital has also been mobilized. The potential of the NBL in Atlanta and Columbus is very high. The potential of the NBL in Jackson is uncertain at this time. IMPACT OF UNIQUE ACTIVITIES Each chapter has engaged in unique activities. In some cases, particularly in Jackson, they have assumed very high priority. These activities are summarized below. B-15 The Atlanta chapter has : formed a Minority Contractors Association to assume the contractor bonding and contract procurement activities, established a local development corporation, helped to establish an effective referral system for clients between the Atlanta Business League (ABL) , the Atlanta Chamber of Commerce, SBA, National Urban League, Economic Opportunity Atlanta, and the Model Cities Programs, and has formed a tax consulting firm that will act as a fund-raising unit after EDA support has been terminated. The Columbus chapter has : established the Community Resources for the Encouragement of Economic Development (CREED) to be the permanent economic development successor to the Columbus Outreach chapter, and has helped to establish and obtain contracts for a manufacturing company that has received a $230,000 Department of Labor grant for on- the-job and classroom training for 91 employees who were "hard core unemployed." The Jackson chapter has : established and is now managing the V.I. P. Cabinet factory which is the only major black business in the Jackson area, and completed plans for the Mid-South Industry, Training and Education Foundation (MITE) which, if funded, would provide business training for minority businesses in twelve areas of Mississippi B-16 IV. ISSUES Seven issues are significant in determining whether the EDA grants to the NBL have been effective. These issues are addressed in this section of the report. Issue 1 . Has EDA been effective in creating a national institution? Response With EDA support, a national institution is now functioning, as indicated by the observa- tions below. NBL has established a national reputation. NBL now has chapters in 70 cities. Issue 2 . Has EDA been effective in creating local institutions? Response Strong local institutions have been created in Atlanta and Columbus. The Jackson chapter has the potential of becoming a strong local in- stitution. Prior to EDA assistance, the chapter offices did not exist. The EDA- funded chapters are very active. The chapters are currently recognized as the prime local organizations working on minority entrepreneurial development in the cities evaluated. Issue 3 . Has the headguarters office of the NBL effectively supported the chapters? Response It appears that the headquarters office has not provided strong support. The chapters rely on their own business acumen and expertise. Most of the chapters' work is with local groups or branch offices of national organizations such as SBA. B-17 NBL headquarters provides some contact with national organizations and dis- tributes EDA funds. Issue 4 . Has NBL been successful in helping to improve minority employment opportunities? Response Significant minority employment has resulted from the success of the minority entrepreneurial pro- grams in the cities visited. At least 200 jobs can be attributed to the loan packaging program. About 300 jobs can be attributed to business problem-solving activities. At least 40 jobs can be attributed to the franchises obtained. Additional jobs have been obtained through contractor bonding and contract procurement. Issue 5 . Has NBL been successful in obtaining funds from other organizations? Response The local chapters have been more successful than the national headquarters in obtaining additional support. The main sources are listed below. OEO made the initial grant to NBL. SBA currently funds part of the head- quarters staff, six chapters, and also contributes $100,000 to the EDA- funded chapters . The chapters have received funds from a variety of sources; including Model Cities, the Presbyterian Church, the Episcopal Church, the Methodist Church, local banks and businessmen, and the Atlanta Chamber of Commerce. The chapters receive a large amount of free consulting services. B-18 Issue 6 . Ave there any plans for self-suffieiency? Response Most plans are in the formative stages. The national office has developed plans. Atlanta is implementing plans. Columbus is implementing plans. Jackson has no such plans. B-19 V. BENEFITS AND COSTS The benefits of the EDA grant to NBL have been very high. Effective local economic development insti- tutions have been created. These institutions have helped increase the number of minority business owners and em- ployers. These institutions have been effective in improving the stability of many existing businesses and jobs. The impact of these institutions should continue to increase in the future. The cost per job, estimated only on the basis of loans obtained, franchises obtained and business problem-solving, has been approximately $324 per direct job. This figure does not include saved jobs, jobs obtained through contractor bond- ing and contract procurement, or jobs obtained as a result of the business activities of the chapters. This cost includes total EDA and SBA support of the chapters in Atlanta, Columbus and Jackson and 30 percent of the support of the headquarters office. B-20 VI. ACTIVITIES OF CHAPTERS INTRODUCTION The NBL, under the direction of Berkely Burrell, began operation in January 1968 in the present ten EDA chapter cities. Mr. Burrell, at that time, attempted to enlist a project director in each city who knew the problems of the city and was relatively well known by the local business and political communities. The importance of this cannot be overestimated. The activities of the chapter cities are a direct result of the initiative displayed by the project directors, rather than a result of national office assistance. The NBL headquarters in Washington has established general _ goals and a number of activities which are used to accomplish the goals. The implementation is left principally to the project director. The project directors are very competent and, most importantly, dedicated to the economic development of minority business. In all cases, the staff members of the chapters have worked to their fullest potential. In summation, the successes that have been achieved must be attributed directly to the project directors and their staffs. Each of the activities in each chapter is discussed in detail in the following pages. LOAN PACKAGING Loan packaging is the focal activity in all chapters. This activity encompasses all of the other types of assist- ance in the process of preparing an acceptable loan package. The NBL emphasizes the "packaging" of business loans because the potential businessman must be prepared to manage the business as well as obtain the needed capital. Therefore, the first aspect of the loan packaging activity is a com- plete analysis of business condition, needs and potential. This often involves an audit, and concludes with feasibility and site location studies. The guidelines for this procedure are set by the NBL headquarters in the form of a business proposal to be completed by all prospective clients with the aid of the chapter staff. The result of this procedure is that the clients are screened by the chapter staffs before the bank or SBA offices are approached. According to the SBA offices in all three cities, this procedure has been responsible for the fact that 80 percent of the loan appli- cations sponsored by each chapter have been accepted. This B-2l compares with an acceptance rate of 20 percent when the minority businessmen have not used NBL in the application stage. To further reduce business failures and to protect NBL's reputation, extensive loan follow-up in the form of business problem-solving is given to each client. This follow-up involves all the aspects listed under the busi- ness problem-solving category and was consistently stressed as the area of greatest need by the chapter staffs. The achievements of the three chapters evaluated are presented in Exhibit VI. EXHIBIT VI, CHAPTER LOAN PACKAGING ACTIVITIES 1 LOANS ATLANTA JAN. -NOV. 1970 COLUMBUS JAN. -NOV. 1970 JACKSON JAN. -DEC. 1970 Approved Number Value 14 $1,794,800 28 $457,000 32 $1,756,800 Pending Number Value 4 $3,214,000 21 $320,200 5 $84,000 Declined Number Value 6 $1,274,850 6 $80,000 FRANCHISES AND DEALERSHIPS Although there were several franchisors at NBL's 70th convention this year, the chapters have shown great reticence in the area of franchising and dealerships. This is primarily because of the high charges and the loss of control which such agreements often involve. B-22 The Atlanta chapter developed a model contract to be used as a guideline in franchise negotiations. The emphasis has been to neutralize the leverage exercised by the fran- chisors. Approximately 20 franchises have been evaluated by ABL and 12 of these have been obtained. The one franchise visited has proven to be a successful minority business. Dealerships have been pursued as a favorable alternative, but these have been difficult to obtain. The Columbus Business League (CBL) has not actively sought franchises. The expressed feeling is that such operations require much more capital and less autonomy than other businesses. With one or two exceptions, the franchises available in the black community were not desirable. No franchises have been established in' Columbus. In Jackson, black businessmen have not been interested in franchising. Some background work has been done in deter- mining good site locations, but the primary use for these will be in the future. One good franchise has been obtained, although its is quite far from Jackson. CONTRACT BONDING AND PROCUREMENT The primary purpose of this activity is to develop within the minority community the expertise and capability to perform construction work other than small sub-contracting. In Atlanta, firms desiring bonding have come to the Atlanta Business League (ABL) both directly and through the recommendation of other local groups, primarily SBA. Attempts are usually made to involve a local bank in the bonding pro- cedure. Seven companies have secured bonding through ABL. All of them are established firms. The ABL has also estab- listed an autonomous contractors association which is likely to receive Ford Foundation and Model Cities monies for staffing and venture capital. The association presently acts as a clearinghouse for all information on potential contracts. It is expected that the ABL's contractor bonding and procure- ment activities can be transferred to the association. ABL has identified 135 potential contractor members, of which more than 40 have joined the association. Assistance has also been provided to contractors in the preparation and presenta- tion of proposals and bids. In Columbus, there is very little construction work being done. Because of this, contractor bonding has not been emphasize* Additionally, two other local groups were engaged in this activit and there was no need for effort by NBL. However, the Columbus B-23 chapter did engage in contract procurement, by assisting in obtaining a $2.3 million contract from the Department of Defense for the manufacture of concertina wire, a contract of $14,000 for a dry cleaning establishment, and a contract for $150,000 to manufacture trash cans. Jackson's bonding and procurement activities have been limited. Although the Hines County Contractors Association was established, it has not been active. In total, one contract has been obtained ($8,000) and two are in the negotiation stages ($15,000 and $50,000). Most contractors in Jackson are small and perform less than $40,000 per year of work. This limits the need for any formal bonding program because bonds are not needed unless the contract is for more than $20,000. The exhibit below summarizes NBL bonding and procurement activities. EXHIBIT VII, SUMMARY OF CONTRACTOR BONDING AND CONTRACT PROCUREMENT ACTIVITIES ..... ....... ACTIVITY - — - , — _ — , ATLANTA COLUMBUS JACKSON Contractors Bonded 7 Contract Procurement Number Amount 24 $141,468 3 $2,464,000 1 $8,000 BUSINESS PROBLEM-SOLVING Business problem-solving includes such activities as accounting, inventory control, distribution methods, personnel B-24 development and legal assistance. The staff of each chapter emphasized that this activity encompasses the major thrust of their program. It involves helping many minority businesses in all phases of their daily operations in an effort to make them viable enterprises. When an enterprise receives assistance under other programs, such as loan packaging, it also receives business problem-solving assist- ance. In each of the chapters, volunteer consulting help was utilized as a supplement to staff work in this area. The chapters in Atlanta and Columbus emphasized that their great- est present need is additional staff to follow-up businesses assisted. These chapters believe that establishing a busi- ness through loan packaging or site location is only a first step. The business problem-solving activity becomes important in the planning and operational stages of the business, and functions as the major tool to prevent business failures. Exhibit VIII summarizes NBL business problem-solving activities . EXHIBIT VIII, SUMMARY OF BUSINESS PROBLEM-SOLVING ACTIVITIES CHAPTER TOTAL NEW BUSINESSES ASSISTED ESTABLISHED BUSINESSES ASSISTED ESTIMATED NEW JOBS* Atlanta 98 49 49 147 Columbus 61 42 - 19 126 Jackson 60 15 45 45 Because of the wide range of expertise needed for various business problems, the chapters rely heavily on volunteer con- sultants. The Atlanta chapter uses between 500 and 600 con- sultants who have agreed to volunteer their time. The Columbus chapter used 90 consultants in 1970, and estimates that at least Estimated on the basis of three new jobs in each new business. B-25 2000 man-hours have been contributed by these consultants. The Jackson chapter has estimated that 10 consultants have contributed a total of 1500 man-hours. MARKETING AND SITE LOCATION In conjunction with the other types of management assist- ance, the Project Outreach offices have developed an expertise in market and product development, feasibility studies, and site location. The Atlanta chapter completed, with the assistance of volunteer consultants, 52 feasibility studies dealing with marketing and site location. The ABL does not separate market- ing from site location studies. The clients of ABL expressed confidence in the decisions made by the ABL and indicated that they would continue to use the chapter for future problems. The capabilities of the ABL were particularly good in the area of site location. In 1969 and 1970, the Columbus chapter assisted 59 and 99 clients, respectively, in marketing and site location. Among other ventures were cleaners, jewelry stores, a rest- aurant, a car wash, and a child day care center. The JBL completed 27 feasibility studies for marketing and site location during 1970. Twenty-five of these were for new businesses. The JBL attributed more than 100 jobs to this activity. The JBL relied strongly on the Mississippi Research and Development Center (MRDC) for help in this area. This center was also funded by EDA. BUSINESS TRAINING Since Outreach I, (1968), the responsibility for the business training activity has been transferred from NBL chapters to local colleges. This activity, during Outreach III, was jointly sponsored in the three cities visited by the chapter and one of the local colleges. The business league's responsibility was primarily recruiting, leaving the respon- sibility for organization and implementation to the college. The attitudes expressed by the students who have attended these classes in the three cities were that they were very useful. ^ There were many instances in which the experiences gained in the classes were implemented by the students in their businesses. This was most evident in the accounting, tax and marketing areas. B-26 The transfer of this activity to the colleges should not be interpreted to mean that the NBL has de-emphasized its importance. Training remains within the NBL package as one of the most important elements. It has been recognized that the successful implementation of business training requires a full-time commitment. Therefore, by achieving the coopera- tion of local colleges, the quality and efficiency of these courses have been improved. The training program in Atlanta is sponsored by Atlanta University. It has been successful in the past. The accomplish' ments have been attributed to one professor who was able to establish good rapport with the black students. Future funds for this program are uncertain at the present time, but the ABL plans to continue the program if the Atlanta University terminates its co-sponsorship. In Columbus, the 1970 training activity was sponsored in cooperation with Ohio State University. This endeavor was terminated when campus unrest started on the proposed date of inception. The University was subsequently closed. The program is expected to begin again in 1971. In previous classes, instructors included local businessmen, members of the banking community, and members of the College of Admin- istrative Science at Ohio State. All of the teachers con- tributed their time and efforts. The classes had a minimal fee of $25 because the University received Federal funds through Title I of the Higher Education Act of 1965. The trainees were recruited through the local chapter's efforts, both personally and through local communications media. The training program in Jackson has been conducted by Jackson State College, a predominantly black college within the city limits. It was stressed by the JBL staff that the single most important need in that area was for business training. A major obstacle to successful minority enter- prises has been the lack of motivation and self-confidence within the black community of Jackson. The attitude taken by the JBL is that business training must be placed highest in priority to overcome this obstacle. In addition to con- tinuing the program with Jackson State College, the JBL has drafted a proposal which would establish the MITE Foundation to conduct a business training in Mississippi. The proposal calls for a two-year budget of approximately $1 million. In its present form, the chances for funding are doubtful. B-27 CHAPTER ACTIVITIES' FOR SELF-SUFFICIENCY The chapters frequently need operating funds in excess of those provided by EDA and SBA for additional staff and ancillary expenses related to increased levels of activity. Other funding sources include government agencies, local businessmen, and national church organizations. Columbus and Atlanta are initiating procedures to become financially self-supporting. These procedures will entail service fees for the assistance on either a fixed-fee basis or relative to the amount of service. Columbus is in the pro- cess of developing a lending company to continue its present services and to provide seed capital for minority enterprises. Atlanta is establishing a tax consulting com- pany as a profit-making venture. Until profit-making ventures are firmly established, the chapters must rely on their alternative income sources for additional working capital. The sources now providing additional support are listed in Exhibits IX, X and XI. EXHIBIT IX, ADDITIONAL SOURCES FUNDING THE ABL SOURCES AMOUNT STATUS PURPOSE Local Banks and Savings & Loan Institutions $3,950 Received Operating Funds Model Cities $200,000 Committed Venture capital & 1 staff Model Cities $32,000 Committed — - — 2 professional positions Atlanta Chamber of Commerce $25,000 Committed 1 professional & 1 secretary B-28 EXHIBIT X. ADDITIONAL SOURCES FUNDING THE CBL SOURCES Local Businessmen thodist Church Model Cities Model Cities Episcopal Church Model Cities Episcopal Church Received Presbyterian Church $20,000 Received Operating Funds Operating Funds $25,000 i Received $10,000 | Received Operating Funds Program Development Received; 7 | Revolving Fund year note at] 5%; 30 month moratorium on principal repayment $10 0,000 Committed Revolving Fund $50,000 j Committed - negotiating Revolving Fund $50,000 Negotiating Revolving Fund CREED Stock $65,000 Sold Operating Funds CREED B-29 EXHIBIT XI. ADDITIONAL SOURCES FUNDING THE JBL SOURCES AMOUNT STATUS PURPOSE N.Y. Community Trust Fund $10,000 Received Management Training Jackson State College 80% of the sal- aries of 5 students who work for JBL 20 hrs. per week One of the 5 students is now working Operating Support LIST OF BLACK BUSINESSES To facilitate the implementation of the NBL program, each chapter has compiled a list of black-owned and operated busi- nesses. These lists are helpful in channeling business between and to minority firms. The Atlanta chapter completed a list of 1,300 black busi- nesses and the Columbus chapter completed a list of 550. These lists include a business profile and capabilities description. The list in Jackson was completed in preparation for the National Association for the Advancement of Colored People (NAACP) convention held there in 1969. This list is currently being up-dated by Jackson State College and presently includes approximately 300 black businesses. UNIQUE ACTIVITIES OF THE CHAPTERS Atlanta The ABL recently formed the Minority Contractors Association (MCA) to assume the contractor bonding and contract procurement activities. This association now has 48 members and expects to B-30 increase its membership to 75 by February 1971. It was formed with the cooperation of the ABL, SBA, the National Urban " u and local bank. The SBA representatives, however, aave primary credit to the ABL for creating this association. ?Sp association is optimistic about receiving funds under the Minority" Contractors Bonding Program of the Ford Foundation. A major function of MCA will be to establish a capital nool which will provide members with a line of credit for bondina Also, MCA will enlist major white and black con- tractors to help train minority contractors and to provide on-the-job training for minority persons. ABL has established a local development corporation which has obtained funds to start four businesses. ABL was instrumental in the establishment of a referral svstem for clients between the ABL, the Atlanta Chamber of Commerce, the SBA, the National Urban League, Economic Oppor- tunity and the Model Cities Programs. Representatives from all of these groups expressed pride in the effectiveness of this referral system. It has enabled minority businessment to obtain help from the agency best equipped to meet individ- ual needs . in addition, ABL has established a tax 9 on ^ t ^! n ^ U ^f SS to help support all of its activities when the EDA grant has been terminated. This firm is a subsidiary of JBL and is currently operating from the JBL office. Columbus CBL recently established the Community Resources for the Encouragement of Economic Development (CREED) . This self- supporting corporation will be the economic development successor to CBL' s Outreach Program. CREED will provide most of the ser- vices now provided by CBL and will charge fees for these services In addition, CBL helped to establish and obtain contracts for the Futon Corporation, a company that manufactures concer tina wire. This company has received a $230,000 grant from the Department of Labor for training 91 employees who were hard core unemployed." On-the-job and classroom instruction has been provided. Jackson The JBL established and is now managing the V.I. P. Cabinet factory. The project director of the JBL is the president of B-31 this corporation and is now working full-time on its activ- ities. NBL headquarters considers him to be on a special assignment and therefore is continuing to pay his salary. The factory employs 16 people. It is considered to be the only major black business in the Jackson area. The JBL believes that the failure of the factory would mean the failure of the business league in Jackson because of its value as a key demonstration project. This attitude was confirmed by leaders of the political and business com- munities of Jackson. The concern of the Mayor of Jackson for this project was demonstrated when he helped obtain the land for the factory at one-half of the established price. The Jackson chapter has completed plans to establish the Mid-South Industry, Training and Education Foundation (MITE) . A proposal for funding will be submitted to the Ford Foundation. The proposed two-year budget is approx- imately $900,000. If funded, this foundation will provide management training for minority businessmen throughout Mississippi. The concept is sound, but the proposal is weak in form. Two-thirds of the two-year budget is agge- gated into three general categories of $200,000 each. These categories are library materials and films, television production and promotion, and other printed material. B-32 APPENDIX C EVALUATION OF THE BLflO LffflffllC UNION (BEU1 INARCH 1971 ECONOMIC DEVELOPMENT ADMINISTRATION U.S. DEPARTMENT OF COMMERCE SECTION BLACK ECONOMIC UNION JARI E OF CONTENTS HIGHLIGHTS AND RECOMMENDATIONS INTRODUCTION II SUMMARY OF ACTIVITY STATUS National Office Chapters III SUMMARY OF IMPACTS National Chapters IV ISSUES V BENEFITS AND COSTS VI ACTIVITIES OF CHAPTERS CITIES PAGE NO C-l C-l C-l Introduction Status Q_± Impacts c _2 Recommendations C-3 C-3 Scope of Grants 4 Scope of Evaluation C-5 C-5 C-7 C-10 ,-.-. C-10 National Office C-10 C-14 C-16 C-17 C-17 Introduction C-17 Loan Packaging Contractor Bonding and c-19 Contract Procurement c-20 Technical Assistance c-21 Special Projects C-22 Business Seminars C-23 Housing C-2 4 Black Business Directory C-i BLACK ECONOMIC UNION LIST OF EXHIBITS EXHIBIT TITLE PAGE NO , I BEU FUNDING C-3 II SUMMARY OF ACTIVITY STATUS FOR NATIONAL HEADQUARTERS C-7 III SUMMARY OF ACTIVITY STATUS IN CHAPTER CITIES C-9 IV SUMMARY OF IMPACTS FOR 1970 C-ll V DATA ON IMPACTS C-12 VI CHAPTER LOAN PACKAGING ACTIVITIES C-18 VII CHAPTER CONTRACTOR BONDING AND CON- TRACT PROCUREMENT ACTIVITIES C-19 VIII CHAPTER TECHNICAL ASSISTANCE ACTIVITIES C-21 C-ii HIGHLIGHTS AND RECOMMENDATIONS INTRODUCTION The Black Economic Union was founded as the Negro Indus- trial and Economic Union in November 1966 The Union was formed by professional black athletes and associates in the business and entertainment fields. It has attempted to capi- talize on this unique resource. BEU's major support since April? 1968 has come from EDA ($700,830) and the Ford Founda- tion ($726,000). STATUS The initial EDA grant funded six chapters and the national headquarters. The most recent f-t financed the chapters in Cleveland, Kansas City, Mo., and Washington, D.C., "well as the national headquarters, also located in Cleveland. The n^tiona? headquarter! and the Cleveland office mer ged in September 1970. The other original chapters wer e^an Francis co" New York, and Los Angeles. The chapters in San Francisco and New York have closed. There is a small amount jfactivxty in Los Angeles but this is not funded by EDA. The Kansas City chapter was designated as an OMBE affiliate in December 1970. The three existing chapters in Cleveland, Kansas City, and Washington were evaluated. IMPACTS BEU believes that minority economic development is not the s e solution to the problem of upgrading minority status . Many problems exist and broad programs must be under ken o solve them. BEU activities have included food and clothing for the poor? job incentive programs for the young , and ^ob creation programs for the adult population. The latter ^^J"^ 1 ^ packaging, general business assistance, contractor bonding, and contract procurement. BEU has not achieved the high degree of success which was initially projected for it. This is partly because of BEU s organizational structure, and partly because of misallocation of resources. The national organization has permitted little independence by the chapter staffs, resulting in personality conflicts and local inefficiency. Furthermore, national BEU has placed great emphasis on special projects which, although C-l beneficial to the community/ have required a disproportionate amount of effort relative to their development impacts. BEU has submitted a refunding proposal which is directed at correcting these problems and, if implemented, would prob- ably transform BEU into a very effective development entity. Past performances of BEU must be considered in determining the probability of achieving this re-direction or the ration- ality of permitting a trial period for its implementation. After careful consideration of these past performances, the following are presented as the most reasonable recommendations RECOMMEND ATI ONS Do not fund BEU for six months after grant expiration BEU has promised re-direction several times in the past. Each time this re-direction has not brought the results which EDA anticipated. In the immediate future BEU should be able to exist without EDA funding. The Kansas City chapter is now an OMBE affiliate; the Washington chapter is receiving $35,000 from SBA for contractor bonding; and the Ford Foundation will hopefully fund several staff members at the national office which would be moved to Los Angeles. The latter funds will "be to over- see allocation of Ford's recoverable loan. The only certainty among these alternative funding sources are the OMBE monies. Some additional funds are available through membership dues although part of these are spent recruiting members, and other dues would probably terminate with any inactivity. Evaluate grantee in six months and reconsider funding The program BEU has outlined in its current proposal is one which, if accomplished, would definitely benefit minority development. The critical question is that of implementing the organizational re-direction. If BEU accomplishes this task, EDA should consider refunding the grantee. C-2 I, INTRODUCTION SCOPE OF GRANTS The initial EDA grant was made in 1968 to the Negro industrial and Economic Union, the precursor of the Black Economic Union. EDA crants , for BEU support, have totalled S700 830 The funding of BEU has been primarily shared by " ' .; h „^ri Foundation. Other funds have been received EDA and the Ford J° u "° at x °£ inc i ude an Office of Economic for special ^ivities. These i ^ ^ q£ S??°500 for participation expenses in Project Able at the Univer- !itv of Massachusetts; assistance for support of contractor bending from the Small Business Administration (SBA); a»»™r bonding rrom tn program; contributions to distribute rood and clothing to 9 needyindividu;is; and a work study program a? a black university. Total BEU funding is summarized in Exhibit I. EXHIBIT I, BEU FUNDING Year 1968 1969 No. of Chapters Funding 1/ EDA FORD $251,400 $251,400 $260,000 OTHER TOTAL Unavail- $511,400 able $216,000 1970 1968-70 $198,030 $700,830 $250,000-/ $726,000 $276,969 $744,369 $239,873 $687,903 $516,842 $1,943,672 - 7 Funding noted for EDA and the Ford Foundation is on a grant year basis. Other funding is on a calendar year basis. C-3 The original and subsequent EDA grants funded the national headquarters in Cleveland as well as chapters in Cleveland, Kansas City, Washington, San Francisco, New York, and Los Angel- es. The offices in New York and San Francisco were unsuccess- ful. The Los Angeles chapter, with one BEU employee and the assistance of Jim Brown, conducted some activities and has identified several prospective investments for BEU. Chapters funded under the current grant are in Cleveland, Kansas City, and Washington. The national headquarters and each chapter receive about $50,000 from EDA. In September 1970, the national office and the Cleveland chapter were merged. The Kansas City chapter was incorporated in Missouri as the Black Economic Union of Greater Kansas City late in 1969. By the later part of 1970, the chapter was operating as an independent entity, with its own Executive Director, and little or no connection with the national organization. Data on the Kansas City Chapter are included in this report because the chapter was funded by EDA through 1970. SCOPE OF EVALUATION At the direction of the Assistant Secretary for Economic Development, the Program Analysis Division of EDA has initiated a series of analyses of national technical assistance projects. The evaluation of BEU is the third in this series. Field work was performed in the period January 17-29, 1971. In this period, teams visited: . Cleveland, combined national and chapter offices, and . Chapter offices in Kansas City, Mo., and Washington, D.C, Visits to the three cities were conducted after an inten- sive review of EDA's file materials and discussions with Office of Technical Assistance personnel responsible for the BEU grant. During the field visits, interviews were conducted with approximately 85 individuals, including employees of the grantee, community members, Federal and local government employ- ees, community members and beneficiaries of the grantee's activities. Members of organizations other than EDA which fund the grantee were also interviewed. C-4 II, SUMMARY OF ACTIVITY STATUS NATIONAL HEADQUARTERS EDA supports one professional and one supporting staff member in the BEU headquarters in Cleveland. The prime responsibility of the professional staff member is the direction of the local chapters. The location of a chapter in Cleve- land has broadened his scope to include work on several of the chapter's business projects. In addition, the Ford Foundation funds approximately nine professionals, as well as an attorney and a comptroller on retainers, and several supporting staff. The main emphasis of the group funded by the Ford Foundation appears to be the special projects in which BEU has been involved. The. principle national activities are described below and summarized in Exhibit II. Fos ter Self-sufficiency - BEU is attempting to find equity investment opportunities. The mam source of investment funds is $500,000 made avail- able by the Ford Foundation. This money is in the form of a recoverable loan; only those parts which are recovered will be returned to the Foundation and BEU will retain the equity position. To date one loan has been made. The terms of this $70,000 loan, to a film company, are: first position repay- ment, ten percent of net profits, and 8 1/2% interest on the investment. The Ford Foundation has indicated that the approval of only one loan was the fault of the Foundation and not BEU. The problem is the Foundation's high cost of conducting each proposal evaluation and the relatively small amounts requested by BEU. In addition to the investment in the film company, work has been completed towards a finance company, a MESBIC, and investments in the fields of poly- ester bonding, modular housing, clothing manu- facture, and food franchising. BEU is also seeking additional sources of capital and other enterprises for investment. C-5 Athletic Competitions - Athletic events are sponsored to raise funds for BEU and to provide black athletes with some of the advantages of active competition and media coverage. Six Grambling College football games were on national television; one of these was held in Cleveland. In addition, the Cleveland Holiday Open was sponsored for black golfers. Food First - This is a program to provide food and clothing to needy blacks in Holly Springs, Mississippi. This program was expanded to include poor people in the three chapter cities as well as at least six other cities where athletes, students, or other interested groups formed Food First coalitions. Marketing Seminars - This program was intended to familiarize the minority businessman with franchises, advertising, management, retail marketing, and lending. The program consisted of guest speakers and panelists at a three day seminar. Marketing seminars have been held in Cleveland and Kansas City and are scheduled soon for Washington and Los Angeles. Attendees at the Cleveland seminar were from Minnesota, West Virginia, Ohio, Pennsyl- vania, and Virginia. Contract Negotiations - BEU represents black athletes in negotiations with professional ball clubs. The objective of this activity is to obtain both the representation fee for BEU and the maximum return for the athlete so that he can eventually invest capital in minority enterpreneurship. BEU has also recently become a representative for a major athlete-oriented investment corporation, International Management Association, and will represent the Association in team negotiations. Project JIM - Job Interest Motivation (JIM) is a program intended to apprise youth (5 years old to college) of the opportunities afforded by business and the benefits of jobs, education and saving. This is partially done through job place- ment. The program has been primarily conducted in Cleveland and Los Angeles. C-6 Community Speaking - Each staff member speaks to community organizations, high school and college students, and businessmen about six times per month. The topics include business careers, community involvement, formation of black banks, and various BEU programs. EXHIBIT II. SUMMARY OF ACTIVITY STATUS FOR NATIONAL HEADQUARTERS ACTIVITY STATUS Fostor Self-Sufficiency Active Athletic Competitions Active, in Season Food First Inactive Marketing Seminars Active, but limited Contract Negotiations Active Project JIM Active, mainly in summer Community Speaking Active CHAPTERS EDA's support to the chapters is mainly for the salaries of the chapter director, a business specialist and a secretary. Part of the funds also go to the salaries of the director's adminis- trative assistant and a field representative. Chapter activities are described below and summarized in Exhibit III. Loan Packaging - This activity consists of the many varied efforts required prior to. submitting a loan application to local banks or SBA. It includes accounting assistance and projections, market analysis, feasibility studies, and the identification of risk capital. Loan follow-up is often provided. Contractor Bonding and Contract Procuremen t - Charters have placed particular emphasis on bonding minority contractors in the building trades and C-7 in service oriented fields. In addition, minority businessmen often do not possess the expertise or contacts for the successful pursuit of available contracts. By familiarizing itself with Federal and local government contracts and methods, as well as those of private sources, the chapters perform valuable referral and assistance services. Technical Assistance - The types of activities required for maintaining or expanding an operating business are very similar to those required for loan packaging. If BEU cannot furnish the necessary expertise, the client is referred to a skilled volunteer or to another group with the necessary skills. Special Projects - These projects are part of the special program of the national office and, there- fore, include Food First and the membership drive. In addition, there are activities unique to the chapters which include an advertising clinic, computer services , and a fiberglass manufacturing plant. Business Seminars - This activity recognizes that marketing and management training are among the most important needs of the minority businessman. It is hoped that the seminars can be expanded to a program of continuing education. This activity must also be pursued with the recognition of alternative local programs. Future plans are to use the local staff as teachers rather than rely completely on guest speakers and to give classes to students at several educational levels. Housing - BEU is sponsoring the building and reha- bilitation of houses in minority areas. This work may provide the dual benefits of adequate housing and business for minority contractors. In addition, financial and technical assistance are being provided. Non-profit sponsorship has been received for one project from the Department of Housing and Urban Development and, in Washington, successful contacts have been made with a large mortgage banking firm which is interested in urban projects. C-8 Black Business Directory - This activity involves " the compiling ot a list o f black-owned or managed businesses and, sometimes, equal pppar %£* employers. The directory serves as a reference Io"r purchasing, selling, and job seeking. In Washington another group has Per*or»dt£; ^ tion but BEU compiled a list or conuau. assisted businessmen. EXHIBIT III. SUMMARY OF ACTIVITY STATUS IN CHAPTER CITIES ACTIVITY Loan Packaging Contractor Bonding and Contract Pro- curement Technical Assist- ance Special Projects Business Seminars Hous mg Black Business Directory CLEVELAND Active, but limited None Active , but limited Active Active Active Active KANSAS CITY Active Active Active Active Active None Active WASHINGTON Active, but limited Active Active, but limited Active , but limited Active Active Compiled by another group C-9 III. SUMMARY OF IMPACTS NATIONAL HEADQUARTER A summary of the impacts of the BEU national headquarters is presented below: . Food First - This program has had a social impact on the recipients of its benefits. It was well publicized in ten cities and has spread BEU's recognition. It has virtually no economic develop- ment impact. • Marketing Seminar - This was attended by about sixty businessmen and was well received. It provided insights into various aspects of marketing, had a medium impact and somewhat greater visi- bility. • Contract Negotiations - This activity has a medium visibility, primarily in Cleveland, after the various professional athlete drafts. It has currently had a minimal effect on economic development. The expectation is that the atheletes will eventually channel funds into minority enterprises. • Project JIM - Job Interest Motivation (JIM) has a high degree of visibility in Cleveland and Los Angeles. Although its immediate impacts are severely restricted by focusing on youth, the lonq term effects are expected to be significant. During the past four years more than 1200 students have participated in the program. • Communit y Speaking - some direct impact has been achieved by this activity. The primary benefit has been an increase in BEU members resulting from requiring permission to solicit membership whenever speaking is done. This activity has pro- vided a high visibility through the large number of community groups which have been spoken to and the broad range of subjects which have been dis- cussed. CHAPTERS nrt „, Exhibit IV summarizes the impact of the different activities S.i l' C ^° mi ? development process, jobs, investment, and poten- tial for Cleveland, Kansas City and Washington. Exhibit V presents more quantative data on these activities. presents C-10 EXHIBIT IV. SUMMARY OF IMPACTS FOR 1970 ACTIVITY ECONOMIC I DEVELOPMENT PROCESS JOBS investment!/ potential!/ Loan Packaging Medium Visibil- ity 197 $850,100 High Contractor Bonding High in Wash- ington; Medium in Kansas City; None in Cleve- land Unavail- able $410,000 High Contract Pro- curement Medium in Wash- ington; Medium in Kansas City; None in Cleve- land Unavail- able $1,374,200 Medium Technical Assistance Some Visibil- ity 118 - High Special Proj- ects Medium Visibil- ity 1200 for i Project JIM $92,900 Medium, but time consuming Business Seminars Medium Visibil- ity - - High Housing Little Visibil- ity - - Medium Black Busi- ness Direc- tory Little Visibil- ity - - Low - Investment other than EDA or the Ford Foundation W Estimated on the assumption that BEU implements its proposed re-direction C-ll EXHIBIT V. DATA ON IMPACTS ACTIVITY CLEVELAND KANSAS CITY WASHINGTON Loans Approved Number Amount 5 $107,500 9 $540,600 11 $202,000 Contractors Bonded Number Amount 7 $82,600 6 $327,400 Contracts Procured Number Amount 10 $464,200 4 $910,000 Technical Assistance Number of firms 45 66 7 Business Seminars Number of attendees 60 250 60 Activities of the three chapters have had varying impacts upon the economic development process. Some businesses have been started and others have been expanded or made more efficient through BEU's loan packaging and technical assistance efforts. The Cleveland chapter has had very limited success in all its activities during the past year. The Kansas City chapter has become the prime black development organization in the city and success- fully provides many types of assistance. C-12 The Washington chapter is the major group in the city providing assistance in acquiring contractor bonding and contract procurement, but has had minimal success in other activities. C-13 IV. ISSUES There are six issues which should be addressed in deter- mining whether BEU has functioned effectively under the EDA grant. These issues are discussed an this section of the report. Issue 1 - ffas EDA been effective in creating a national institution ? > Response With EDA support, BEU has received some national recognition. BEU has national and local interaction with many national economic development organizations. . BEU is a member of SBA's National Advi- sory Council on Small Business. BEU has three funded chapters plus members and affiliated groups in other cities. BEU chapter activities cover a wide geo- graphical area. Individual staff members and trustees have brought national recognition with them from other endeavors. Issue 2 - Has EDA been effective in creating local insti- tutions . Response BEU has had varied success in creating local institutions. Prior to EDA assistance, the chapters did not exist. The Cleveland chapter has had little develop- ment impact but is well recognized as a local development group. The Kansas City chapter is the main economic developer in the area. The Washington chapter has obtained partic- ular recognition only in contract related activities. C-14 . The chapters in San Francisco and New York have ceased functioning. In Los Angeles the activity is minor. Issue 3 . Has the national office effectively supported the chapters ? Response The national organization of BEU has inhibited the effective functioning of the local chapters. . Personality conflicts between national and local staffs have decreased chapter efficiency. Emphasis on special projects has required manpower commitments which could be used more fruitfully in other areas. Emphasis on determining investment opportunities for BEU has detracted from general efforts to assist the minority businessman. Issue 4. Has BEU been successful in improving minority employment opportunities ? Res ponse BEU has had limited success in improving minority business opportunities. Accomplishments have varied between the chapters. The national office's activities have not been directed towards minority economic development. . At least 197 jobs can be attributed to the loan packaging program. About 118 new jobs are estimated to have resulted from technical assistance activities. Additional jobs have been saved. An indeterminate number of jobs have been created through contractor bonding, con- tract procurement, and special projects. C-15 V. BENEFITS AND COSTS The benefits of the EDA grants to BEU have been mixed. Some effective local economic development institutions have been created. These institutions have had limited success in improving minority entrepreneurship, skills, and employment. Several non-economic benefits have accrued to the community. The cost per job, estimated only on the basis of loans obtained and technical assistance, has been approximately $629 per job. This figure does not include saved jobs, or jobs obtained through contractor bonding or contract procure- ment unless the firm also received loan assistance from BEU. This cost is based only on the 1970 EDA grant. All other funds received by BEU were for activities which were not directed at immediate minority economic development. C-16 VI. ACTIVITIES OF THE CHAPTER CITIES INTRODUCTION BEU was established in 1966 by Jim Brown, Carl Stokes, and several associates to help develop new minority businesses and expand existing businesses. Through the leadership mialities and charisma of athletes an investment pool was to bTesta^lis-Ld. Other aspects of the program were to ^entify and evaluate business prospects; provide managerial advice, SunllllingT and training; and conduct seminars in business and financial management! The most ^cent EDA grant indicated that BEU should provide assistance to twenty-five firms with an average employment of five jobs in each of the three cities. The efforts of athletes have been of 1 j mit ^ d 4 . ass i^^ is i-o BEU in actual economic development. . Although the athletes have wide community appeal, their development skills are generally limited. The local executive director has been the main ingred- ient for a successful chapter. In Kansas City, under Curtis McClinton, and in Washington, under Lewis Dodds, the chapters have flourished. The Washington chapter has been less successful since Mr. Dodds left. Interference from national BEU and high staff turnover have reduced the effectiveness of the chapters; In all cases, the staffs have been sincerely motivated and ener- getic. A description of the activities and their impacts in each city are discussed below. LOAN PACKAGING Loan packaging is a primary activity of the local chapters. This activity includes economic and financial analyses, market- ing and feasibility studies, and the preparation of °P e ^ n 9 statements and production budgets. Volunteer specialists have been used to fill specialized requirements and liason hasbeen established with SBA and local banking institutions. Exhibit VI summarizes the chapter activities in loan packaging. C-17 EXHIBIT VI. CHAPTER LOAN PACKAGING ACTIVITIES LOANS CLEVELAND KANSAS CITY WASHINGTON Approved Number Value Jobs V 5 $107,500 40 8 $540,600 79 11 $202,000 78 Pending Number Value 8 $148,000 '1 $88,000 5 $97,000 Declined Number — ' Value 2 $22,000 Not Avail- able 1 $50,000 bv two h LSnrc! S tt ^- ^ P a ? ka< ? in 9 activity has been limited i?Ert2E f . actor s: the first is that the minority community often mistakenly expects BEU to. have capital for financing local busTnesses- the second is that it has been difficult to do all ?he necessarv work with the limited staff. necessary In Cleveland BEU obtained most of its loans through the SEUNSSl -and B o t h felt that the GreatSr ClevelandGrow?h Corpora- t^BF, t 9rOUpS W6re m ° re effec tive in loan packag- \tl nno? 55 -^ P? lmarv reas °n was that BEU had not invested ™L£ capital in minority enterprises. The funds in question are not the Ford Foundation loan but capital which the anrm?norir r ° n T Sly . b ! lieVeS BEU haS mailable? Other groupl and minority members indicated that BEU has been more sucless- whtJ; V* tab i ls hmg support with the black community than GCGC, which is white dominated. uvasv., 1/ , . . fSll-time UI? ob aSSUming two P art -time jobs are equal to one 2/ ~ rph ^ nS ±n ^ leveland were declined because the banks wanted to do thi^ ^ ninety P ercent of t^eir value. BEU was unable C-18 The Kansas City chapter has been more successful with its loan packaging activity because of its highly qualified and specialized staff. Because of an increasing number of applications for loan packaging, the Kansas City BEU is trying to develop a "quickie" packaging system to meet the small financing needs of many businesses. The chapter has had a great deal of success with its follow-up servicing and is considered the principal minority group engaged in loan packaging in the Kansas City area. The loan packaging situation in Washington is somewhat unique. The competition arising from the existence of several economic development groups has been restricted by an apparent geographic ref errel system. None of the groups does a superior job of loan packaging or follow-up. The local chapter of the Interracial Council for Business Opportunity (ICBO) is the prime loan packager in/^Washington while BEU is one of three groups directly following ICBO. CONTRACT BONDING AND PROCUREMENT This activity helps black contractors, both in construc- tion and other fields, to obtain financial assistance and new contracts. BEU staff members believe that this activity will become an increasingly significant part of black develop- ment. Exhibit VII summarizes the bonding and procurement activities of the three chapters for the past year. EXHIBIT VII. CHAPTER CONTRACTOR BONDING AND CONTRACT PROCUREMENT ACTIVITIES ACTIVITY CLEVELAND KANSAS CITY WASHINGTON Contractors Bonded Number Amount Not applicable Not applicable 7 $82,600 6 $327,400 Contracts Procured Number Amount Not applicable Not applicable 10 $464,200 4 $910,000 C-19 The Ford Foundation has funded the Contractors Assistance Corporation (CAC) in Cleveland to perform contractor bonding and contract procurement. For this reason, the Cleveland chap- ter of BEU does not conduct this activity, but refers its clients to the CAC. The Kansas City chapter is the primary source of aid to black contractors. BEU has aided more than 125 contractors in negotiations for operating capital, loan packaging, and assistance in bookkeeping, and completing various forms. In the past year the Kansas City BEU has helped secure bonding for seven contractors and assisted ten firms in procuring contracts. In Washington, the BEU chapter has obtained funding from SBA for contract bonding and procurement. The current level of support is $35, 000 , for the salaries of two staff members and related expenses. This is an increase of $10,000 from the previous year. The various economic development groups visited in Washington indicated that BEU is the main source of contractor bonding and that requests for this service are directed to BEU. The Washington BEU chapter also has an elaborate referral system for new contracts and provides the technical assistance necessary for bidding on these contracts. The latter requires an intricate knowledge of the requirements of different govern- ment agencies and includes cost studies and manpower projections. TECHNICAL ASSISTANCE Technical assistance includes help to businessmen in solving accounting, bookkeeping, personnel, marketing, legal and other management problems. In addition to the work done by the BEU staff many clients were assisted by volunteer experts in the various fields. In Cleveland the volunteer work amounted to more than 1,100 hours. A great deal of the technical assist- ance to businessmen is not represented in this section because it is part of the loan packaging effort. Lending institutions in Cleveland and Washington indicated that no economic development group in their city was performing management assistance extremely well, although BEU was probably doing as well as, or better than, other groups. The institutions expressed the need for this type of assistance through a per- manent and accessable staff of capable individuals: the type of staff BEU envisions in their current proposal to EDA. Cleve- land has provided 45 firms with some technical assistance, while C-20 Washington has restricted its help to emphasis on packaging and bonding. The Kansas City chapter received so many requests that each staff member is now specialized in the type of assistance he provides. Staff duties are divided so that one member is responsible for accounting, taxes, and loan proposals, another performs credit evaluations and financial analyses and another works on franchise information, feasibility studn.es, market studies and accounting. Other staff members concentrate their efforts on additional activities. Certified public accountants and other volunteer consultants are often called upon to help provide the minority businessmen with additional specialized assistance. During the past year the Kansas City chapter provided technical assistance to more than 66 firms. Exhibit VII summarizes the chapter efforts in supplying technical assistance. EXHIBIT VIII, CHAPTER TECHNICAL ASSISTANCE ACTIVITIES . i CLEVELAND KANSAS CITY WASHINGTON Number of firms Estimated new jobs ±f 45 45 66 66 7 7 SPECIAL PROJECTS Special projects are a major function of the national office and are funded mainly under the Ford Foundation grant. The EDA funded chapter staffs spend a minimal amount of time on special projects, usually ranging between five and ten percent. The Cleveland chapter, which recently merged with the national office, is involved to some degree in most of the special projects of the national office. The chapter mainly pro- vides technical assistance on these projects. 1/ Estimated by the evaluation team on the basis that °ne-half of the firms were new and there are an average of two new jobs for each new business. C-21 The Kansas City BEU is very active in special projects as indicated by the following examples. Aquarius, the first venture of the BEU Community Develop- ment Corporation, is an effort to become self-supporting by building and operating a fiberglass manufacturing plant. The plant has begun production of a combination bathtub and shower stall unit. Additional products are expected to include truck and auto parts, housing panels, TV trays, luggage and furniture. The Kansas City chapter is establishing a business computer service to provide minority businessmen with a fast and effi- cient way for evaluating and making decisions. Routine ser- vices including bookkeeping, payroll, and inventory control will be available to minority businesses. The Kansas City chapter will also operate a mobile technical unit to visit minority businesses and provide management and technical assistance. In Washington, the principal special projects have been Food First and a membership drive. Most of the food and clothing collected by the local Food First program were distri- buted to Washington residents. The feeling expressed by the chapter was that help must be given to the local needy before consideration is given to helping others. The current membership drive is being chaired by Senator Edward Brooke of Massachu- setts. BUSINESS SEMINARS BEU conducts seminars to help businessmen gain needed management skills. The BEU staff has identified the most press- ing needs of the minority businessman and is trying to meet the educational deficiencies. "Profile '71" was the first of a series of seminars in marketing, management, and finance. Its purpose was to review and analyze marketing problems of the minority businessman and to discuss competition, the psychology of the black consumer, and general marketing and management techniques. Speakers at the well attended session in Cleveland included Dr. Edward Irons of the National Bankers Association; D. Parke Gibson, author of the $30 Billion Negro ; and representatives from the national headquarters of the Interracial Council for Business Opportunity, Greyhound Corp., McDonald's Franchises, Hough Development Corp. , and the National Council for Equal Business Opportunity. There were more than 60 attendees at the seminar. Profile • 71 is being duplicated in Washington, Kansas City, and Los Angeles. C-22 Th e second and third seminars in this -g^&SSS* in the other cities following their initial exposure. BEU is planning to establish weekly speaking and discussion their achievement. The Kansas City chapter of BEU has established the Business The Kansas utywiy / RTT n T he BITC was designed to ^rovidfrechnicaranrmanage^enl- training to Kansas City residents £nstructIon n classes and slminars have provided -formation to the construction ^^ustry on insurance, b °^^, f^anc.ng, anrf oi-hpr construction- related subjects. iecnnn,ai «« r m ent°assistance has been provided to existing and potential businessmen through courses in marketing, P^cha^ing, mercn dising, and consumer awareness. Weekly seminars fo r high school youth in the inner-city have related actual business experiences to help the students develop an understanding of the economic structure of the free enterprise system. in Washington an advertising clinic was sponsored by BEU with the assistance of the Abramson/Himme ^bAgency^ The_ purpose of the clinic was to assist the P^ticipatin^business men in making the most effective use °f.^eir advertising expenditures . An analysis of each participant s , advert "t^ Q expenses was performed by Abramson/Himmelfarb and suggestions ?or improvements were made. Panelists ^d experts included representatives of Howard University's Small Business Guidance Center? the Washington Post, the Washington Daily News, and African Spotlight. Approximately 60 businessman attended the clinic. HOUSING Relieving that economic development should function in a larger 'context, BEU has worked to improve the housing condi- tions of minorities. This activity has had no impact, but several ventures are in progress. in Cleveland, the Department of Housing and Urban Develop- ment (HUD) has approved BEU as a non-profit sponsor under "Operation Rehab." This status should enable BEU to receive swift Federal Housing Administration approval of an apartment C-23 project, which will include 492 dwelling units with a cost of more than three million dollars. Construction is expected to begin in June 1971. BEU will also establish a firm to manage the project. The Black Economic Union Development Corporation of Kansas City (BEUDC) has completed feasibility studies and sub- mitted them to the Office of Economic Opportunity. (0E0) to improve a site within the designated as the' Kansas City Impact Area. 0E0 awarded BEU a grant for $1,116,977 for the proposed work. Local businessmen have been informed of the BEU plans and will be submitting proposals for renting or building stores within the proposed redevelopment area. In Washington, BEU has developed a working relationship with the mortgage banking firm of James W. Rouse and Company, the developers of Columbia, Maryland. Future plans are for construction of a nineteen unit apartment house with several commercial units. This building, in the Kenilworth section of Washington, will require mortgage investment of approximately $191,000 from Rouse. BEU is also working with Rouse to develop the possibility of constructing and rehabilitating homes and apartments in the Upton area of Baltimore. In addition, negotiations are being conducted for BEU involvement in Columbia. BLACK BUSINESS DIRECTORY In Cleveland, BEU is assisting the W Advertising Agency to get bank and SBA loans for completion of a black business directory. Work on compiling the directory has been in progress for about one year. BEU has provided managerial and. secretarial assistance, and has helped to obtain advertising commitments. The publication will be in the form of a classified telephone directory and will be published annually. In December 1970, the Kansas City chapter published a pocket-size minority business directory listing approximately 600 businesses. This was the second directory published by the chapter. Both were designed to serve as a source of basic information about services available from the minority business- man in the area. In the Spring of 1971, the chapter plans to publish a more detailed directory which will describe the products and capabilities of each minority business and present back- ground information on the firm and its ownership. C-24 The small Business Guidance Center gJJ-^SSTSSSwy which is funded ^ EDA, has published a M-*Jo^ ^ ef£ort for Washington. D.C. HBO JJ-JJ*, ! It has also compiled a I^on^trtltorfaSi^eSmenf agencies which are potentxal sources of contracts. C-25 APPENDIX D EVALUATION OF THE INTEBRACIA! ™NCIL FOR BUSINESOPP^UMYilCBQ) APRIL 1971 ECONOMIC DEVELOPMENT ADMINISTRATION U.S. DEPARTMENT OF COMMERCE INTERRACIAL COUNCIL FOR BUSINESS OPPORTUNITY TARI F OF CONTENTS SECTION PAGE N0 HIGHLIGHTS AND RECOMMENDATIONS Introduction D-l Status D_1 Impacts D ~l Recommendation D-2 I INTRODUCTION Scope of Grants D-3 Scope of Evaluation D-5 II SUMMARY OF ACTIVITY STATUS National Office D_6 Councils D "" 6 III SUMMARY OF IMPACTS D ~ 9 IV BENEFITS D " 12 V ACTIVITIES AND IMPACTS Introduction D-13 Loan Packaging D-l 4 Technical Assistance D-15 Business Training D-16 Vendor Contracts D-17 Major Business Development D-19 D-i INTERRACIAL COUNCIL FOR BUSINESS OPPORTUNITY LIST OF EXHIBITS EXHIBIT PAGE N0 , I FUNDING OF ICBO COUNCILS D-4 II COUNCIL ACTIVITY STATUS D-8 III SUMMARY OF IMPACTS D-10 IV MAJOR SOURCES OF ICBO NATIONAL FUNDS D-13 V COUNCIL LOAN PACKAGING ACTIVITIES D-14 VI COUNCIL VENDOR CONTRACT ACTIVITY D-17 D-ii HIGHLIGHTS AND RECOMMENDATIONS INTRODUCTION in 1963 the Interracial Council for Business Opportunity (ICBO) was established in New York City. Although ICBO wa| established as a local group, it became * n ^° n ^ a £ ganlZa tion in 1965, with the aid of a Ford Foundation grant. Today, ICBO has its national headquarters in New York, and councils in eight cities. It is known W wxdely^n the financial community as an organization working effective ly to create and strengthen minority businesses. STATUS ICBO received EDA grants of about $60,000 each in 1969 arv1 iq70 to oartially support the New Orleans, La., ana It Louis, So Pa councils. These are the two youngest councils; bot-h were'es?ablished in 1969. They are also the two smallest councils, but they are growing. EDA' s support £ f °'°°° in 1970 constituted about 40 percent of their total operating funds, while total ICBO expenditures exceeded one million dollars. The focus of ICBO-s program is the creation of « n ^ e P r | his neurial opportunities for minority group members . _To meet this aim the local councils have six principal activities, screening prospective businessmen and clients, loan Packaging, Providing technical assistance through volunteer consultan ts , conducting courses in business topics , securing cont racts for minority vendors and developing major businesses. ™e relative emphasis on these activities varies between councils. For example, major business development activities receive g?ea?er Impnasis in the larger and older chapters, such as New York and Newark, N.J. IMPACTS Tn sDite of their age, the New Orleans and St. Louis chapters 8 ^ both had some activity in al ^ «gJ£W areas. The St. Louis council coordinated the financial arrangements involved in the purchase of a manor radio station in 1969. The New Orleans council is working on its first major project, participation in the financing of a combined motel and office building. D-l In 1970, about 30 loan packages prepared by the New Orleans and St. Louis councils were approved. These loans totaled more than $400,000. In addition, the two councils worked on more than 100 technical assistance cases, and obtained 11 contracts totaling about $420,000 for minority firms. RECOMMENDATION EVA should refund the two chapters ICBO is planning to request continued EDA support for the New Orleans and St. Louis chapters. These young chap- ters require additional support to overcome traditional barriers to minority businesses in the two communities. It is recommended that EDA continue to fund the two chapters at approximately the same rate as in the last two years. D-2 I, INTRODUCTION SCOPE OF GRANTS in December 1968, EDA made its initial grant of $57 ,477 to the Interracial Council for Business Opportunity (ICBO) . This grant was to support the newly-organized New Orleans and S? Louis councils for the 1969 calendar ye ar Ab out $47,000 of the grant was designated for the St. Louis council . Because of delays in initiating activities at the two new chapters, the initial grant was extended with no increase ^funding until May 31, 1970. A second grant, which pro- vided support through May 31, 1971, was approved Pursuant f recoLndation by the Office of Technical Assistance which included the statement that this would be the terminal grant for the two councils. This grant provided $61,117, about equally divided between the two councils. Both grants covered, among other things, minority con- tractor activities in the two cities During 1970, separate organizations were established in both cities for these activities? The contractor elements of the EDA grant were reprogrammed for other activities. in 1970, EDA funds paid about 40 percent of the operat- ing expenses of the two councils. The balance came from the national office and local sources. In New Orleans , the national office assumed most of the burden for added support because local fund-raising efforts resulted in two contribu- tions totalincr only about $8,000. The St. Louis council raised more than $65%00, including $50,000 from the Danforth Foundation and $10,000 from Anheuser Busch. In December 1969, EDA provided an additional grant of $12,500 for participation expenses in Project Able at tne University of Massachusetts. Exhibit I summarizes the total support received by the New Orleans and St. Louis councils in 1969 and 1970. D-3 EXHIBIT I, FUNDING OF ICBO COUNCILS YEAR NUMBER OF COUNCILS FUNDING -' EDA OTHER TOTAL 1969 2 $57,000 $51,000 $108,000 1970 2 $61,000 $89,000 $150,000 1969-70 $118,000 $140,000 $258,000 -^Funding noted in 19 70 for EDA is for grant-year, ending in Mav 1971. Other funding is on a calendar year basis. D-4 The ICBO national office, which is not supported by EDA, obtains funds from government agencies, foundations, corpor- ations and individuals,. The largest single source is the Ford Foundation, whose most recent grant provided $350,000 for three years. The Small Business Administration (SBA) has granted $175,000 to ICBO for assistance in packaging loans. Individual and corporate contributions amounted to $724,000 in 1970. In that year, the national office spent about $600,000 in addition to aid to local councils. SCOPE OF EVALUATION At the direction of the Assistant Secretary for Economic Development, the Program Analysis Division of EDA is conduct- ing a series of analyses of national technical assistance projects. The evaluation of ICBO is one of this series. Field work was performed during the period February 25 to March 11, 1971. In this period, teams visited New York national headquarters, and New Orleans and St. Louis councils. Visits to the three cities were conducted after an intensive review of EDA files and discussions with Office of Technical Assistance personnel responsible for the grant. During the field visits, the teams interviewed approximately 50 individuals, including employees of the grantee, members of the council boards, SBA field office personnel, consultants used by ICBO, community members and beneficaries of the grantee's activities. D-5 II. SUMMARY OF ACTIVITY STATUS NATIONAL OFFICE The Interracial Council for Business Opportunity (ICBO) operates a national office and eight local councils. * Its activities are focused on helping the creation and growth of minority-owned businesses through financial and technical assistance, counseling, business education and contracting assistance. Community action programs and involvement with racial issues are avoided because they could engender hostility in the banking and business communities and hinder ICBO's efforts to help minority businesses. Activities of the national office will be described briefly, because EDA does not support its operations. The national office, headed by a National Executive Director, employs 23 professional persons. Five associate directors are responsible for lending activity, a vendors program, major business development, field operations and admins tr at ion, respectively. The first three areas, which correspond to three of the six areas of local activity, involve direct relationships between the national office and clients. For example, ICBO helped establish a microelectronics firm in Philadelphia, where there is no council. The most important activity at the national level is finance. This activity involves loan packaging and negotiating assistance for prospective major businesses vis-a-vis national lending institutions such as the Chase Manhattan Bank. ICBO's Director of Capital Resources manages the ICBO Fund. This separate corporation has $750,000 in capital. It guarantees loans to minority businesses. In addition, a Minority Equity Capital Company (MECCO) with $1,000,000 in capital has been established to lend to and invest in minority firms. The national office coordinates and administers major projects, projects involving several cities, and projects in cities without a council. It also approves local budgets and handles the accounting for the local councils. COUNCILS EDA's support to the New Orleans and St. Louis councils is for salaries, related personnel benefits, and a small share of office overhead. The Agency helps to finance the four -^The councils are in New York, Newark, N.J., Los Angeles, California, Washington, D. C. , Dallas, Texas, and Chicago, Illinois (an affiliate) , in addition to New Orleans and St. Louis. Orleans and D-6 professional positions and two secretarial positions at each office. For accounting purposes, the grantee charges one-third, one-half, or all of the salary for a given posi- tion to the EDA grant. Howevever, these allocations are not related to the program; in effect, EDA supports the full range of local activities. These activities are described below. Applicant Screening - An ICBO client services officer interviews virtually everyone who drops in: people with needs or ideas who have heard about ICBO, individuals who have been referred to ICBO, or (occasionally) people who have been contacted by ICBO. The great majority of the interviewees cannot be helped, but individuals with some promise are accepted for further assistance. Loan Packaging - A loan officer helps individuals seeking business loans to prepare bank or SBA loan applications. This is more than a mechan- ical operation: it involves pinpointing needs, practical planning, counseling, and negotiating. The local director assists in making bank contacts and in negotiations. Technical Assistance - Each council maintains a roster of consultants, many of whom are retired businessmen, accountants, and lawyers. A con- sultant is assigned to each case requiring man- agerial or technical assistance; consultants are assigned to most new businesses that have re- ceived loans. Business Training - Both the New Orleans and St. Louis councils have arranged courses and seminars designed to improve the managerial talents of minority entrepreneurs. Vendor Contracts - ICBO is helping minority vendors who supply goods or services to secure contracts. Particular attention has been given to government contracts set aside for minority business under the SBA 8 (a) Program. Major Business Development - ICBO believes that it should focus on major business firms worth several hundred thousand dollars or more. It helps to average financing for initiation or acquisition of these enterprises. D-7 Exhibit II summarizes the status of each of these activities. EXHIBIT II, COUNCIL ACTIVITY STATUS ACTIVITY NEW ORLEANS ST. LOUIS Applicant Screening Active Active Loan Packaging Active Active Technical Assistance Active , but limited Active , but limited Business Training Active Active Vendor Contracts Active Active Major Business Development Active Active D-8 III. SUMMARY OF IMPACTS ICBO unlike many grantees, has not focused directly on the creation or retention of jobs. Its program is designed to foster opportunities for minority entrepreneur ship. iSbO beliefs that successful minority-owned enterprises will generate stable and valuable employment opportunities for minority group members. tcbo's proaram in New Orleans and St. Louis has had a variety of beneficial impacts. These impacts are summarized in Exhibit III. On the basis of applicant s ? reeni ^ 7 ^ Ct ^ u t e loo n cases New Orleans and St. Louis councils in 1970, about 200 cases were accepted? The need for help in obtaining loans, tech- nical assistance, or both, was explored for these cases. In 1-970, the New Orleans council packaged 47 loans . Of these, 17 amounting to $165,000 were approved. All except one of these 17 were direct SBA loans. The St. Louis council packaged 20 loans in 1970. Fourteen of the 20 were approved. Technical assistance at both chapters was ^ era ^ performed through the use of volunteer con s u ^nts. At the end of the year, there were 53 active cases in New Orleans. ?he St. Louis council had 56 active cases in early 1971. The 1970 business training program in New Orleans included a six-week accounting course, a three-day business develop- ment seminar, and a 16-week course in business management About 260 people attended the 16-week course, About 75 of these individuals were black businessmen. A 12-week business course was given twice during the year in St. Louis. About 160 people completed this course. in the two cities, ICBO helped vendors to obtain 11 contracts, valued at more than $400,000, during the year. Eiaht of the 11 contracts were awarded by Federal agencies under the SBA program for minority business.. Both councils are Increasing emphasis on contracts from private firms. ?hey are preparing guides describing qualified minority vendors to assist in this effort. The New Orleans council is working on a major motel- office building project on which construction is Panned to start this year. The real estate is valued at ab out $2 million, consisting of $150,000 for the land and $1,800,000 D-9 EXHIBIT III. SUMMARY OF IMPACTS ACTIVITY NEW ORLEANS ST. LOUIS Applicant Screening 116 accepted in 1970 85 accepted in 1970 Loan Packaging .Number approved in 1970 .Value of 1970 loans approved 17 $165,000 14 $239,000 Technical Assistance 53 active cases at end of 1970 56 active cases in early 1971 Business Training 19 individuals completed two courses; 76 black businessmen at- tended a business seminar 158 individuals completed two management courses Vendor Contracts . Number obtained in 1970 . Value of these contracts 5 $143,000 6 $286,000 Major Business Development Financing for motel-office building being arranged ($1,800,000) Helped arrange financing for purchase of radio station ($1,500,000) D-10 for the building. With the assistance of the national office, a major loan was negotiated with the New York Life Insurance Co. A loan supplement is now being negotiated. The developer, Rudolph McLeod, is the city's leading black contractor. He is co-chairman of the local ICBO board. The St. Louis radio station, KWK, was purchased in 1969 for about $1,500,000 with ICBO assistance. The national office helped arrange the financing, which included $500,000 from the Ford Foundation, $500,000 from a local St. Louis bank, and $500,000 from a group of local black doctors. The station has donated $26,500 worth of advertising time to ICBO clients. D-ll IV. BENEFITS The two EDA grants to ICBO have helped the New Orleans and St. Louis councils. The two councils are effective economic develop- ment organizations in their respective areas. Both councils maintain a competent and sensitive staff, which provides loan packaging and other management assistance for developing inner- city minority owned businesses, in order that they may overcome traditional racial barriers in both the St. Louis and New Orleans areas. Both councils have established good working relationships with local banks and SBA loan officers. This is evidence of their abilities to quickly enter the economic mainstream in their respective communities. In 1970, EDA provided $61,000 in grant support for the two councils. With this and other support, council activities resulted in $833,000 in loans and vendor contracts. In addition, the council staffs performed and directed technical assistance efforts, conducted business training programs and worked on the motel-office building project in New Orleans. Of the 31 loan packages approved, more than one-third were for new businesses. Therefore, the council activities resulted in a new business opportunity for each $6,000 of EDA grant support. D-12 V. ACTIVITIES AND IMPACTS INTRODUCTION The Interracial Council for Business Opportunity (ICBO) was established in 1963 by the American Jewish Congress and the Urban League of Greater New York. ICBO's purpose was to create and strengthen minority businesses. Its principal tool was technical assistance from volunteer consultants. Initially a New York organization, ICBO added three local coun- cils in 1965 with the aid of a Ford Foundation grant. Today, there are eight local councils: New York, Newark, Los Angeles, Washington, New Orleans, St. Louis, Chicago (an independent affiliate), and Dallas. The national office obtains its funds from government agencies, foundations, corporations, and individuals, as indicated in Exhibit IV. The largest single source is the Ford Foundation, whose most recent grant was $350,000 for three years. SBA has granted $175,000 to ICBO for assistance in packaging SBA loans to minorities. OEO provided some funds prior to 1970. Individual and corporate contributions amounted to $724,000 in 1970. The 1970 national office outlay, exclu- sive of aid to local councils, was about $600,000. EXHIBIT IV. MAJOR SOURCES OF ICBO NATIONAL FUNDS SOURCE Ford Foundation (3 years) SBA OEO AMOUNT $350,000 175,000 Individuals & Corporations (1970) 150,000 STATUS Committed Committed 724,000 Committed Contributions ICBO's primary mission is to create business opportunities, not jobs. For example, ICBO's largest vendor contract in New Orleans in 1970 was a $65,000 GSA contract for janitorial ser- vices in the old Federal Building. Thus, the ICBO effort helped D-13 create an ownership opportunity for a black businessman. It is not known whether the result has been in increase in employment opportunities. LOAN PACKAGING Loan packaging assistance is a key element of ICBO's program to develop business opportunities. Exhibit V sum- marizes this activity in the two councils in recent years. For 1970, the New Orleans and St. Louis councils packaged 47 and 20 loans, respectively. Of these, 17 and 14 were approved. EXHIBIT V, COUNCIL LOAN PACKAGING ACTIVITIES LOANS APPROVED NEW ORLEANS ST. LOUIS TOTALS 1969 Number Value 11 $234,800 fc 6 $800,500 17 $1,035,300 1970 Number Value 17 $165,000 14 $239 j ;q§§° 31 $404,000 1971 V Number Value 10 $361,989 3 $60,000 13 $421,989. TOTALS Number Value 38 $761,789 23 $1,099,500 61 $1,861,289 ICBO's loan packaging activity fills a definite need. Few of the applicants are equipped to prepare their own applications. They must either get free assistance from an organization such as ICBO or pay an accountant or lawyer for the service. ICBO takes a serious interest in its clients, however, and makes a strong effort to obtain -loan approvals. Most clients could not afford to pay for high quality pro- fessional assistance. From a technical standpoint, ICBO's loan packages are of very high quality. Both the New Orleans and the St. Louis 1 as of 2/71 D-14 loan officers are competent individuals Wlt \?°l le ^ *^£^ the New Orleans officer has a B.A. in accounting. In addition, both hive worked closely with SBA to learn its procedu res interviews with three SBA officials and three bankers in the two cities elicited praise for ICBO's work. ICBO also provides valuable negotiating assistance. ICBO will not process a loan unless the business seems viable. With will not process * effective in its persuasive erfSrtf P ?hus!'the St Louts ICBO was able to secure approval of l\ of the 20 loans it packaged in 1970 In New Orleans , Shere the banking community is less receptive to ^ n £ e % proval8 applicants, 17 of 47 were approved; all but one or rne a PP involved SBA direct loans. in addition to the 1970 loan approvals, the New Orleans council had 10 loans approved through ^"^"^L^f 6 St Louis council had 3 more approved. Another auspicious sign is that, in New Orelans , 6 of thelO loans approved in 1971 have been made by banks, whereas in 1970, 16 of 17 were SBA direct loans. The new SBA director in New Orleans has persuaded the banks to make more minority loans. In St. Louis most of the loans are SBA-guaranteed. Most loans are in the $5,000 to $25,000 range. In 1970, most of the loans went to existing firms , usually for expansion. Although this form of aid is important, it does not generate new business opportunities. The- «eW- business, moreover, are generally quite small, averaging five employees or less. TECHNICAL ASSISTANCE Technical assistance is possibly the weakest aspect of the ICBO activities in New Orleans and St. Louis. This deficiency is recoanized by both councils. Technical assistance is pro- tided mainly by volunteer consultants. ICBO assigns consultants to most new businesses that receive loan packaging assistance and ?o many existing firms, whether or not loans are involved. At the end of 1970, New Orleans had 127 consultants on its roster, of whom 53 were assigned to as many clients. St. Louis had 131 consultants of whom 56 were assigned in early 1971. The basic problem is that consultants have a limited amount of available time. Of two consultants interviewed in St. Louis, one was a member of a law firm and was consulting in lieu of defending indigent clients. The other was an ac- countant for a manufacturing firm and was consulting on com- pany time as part of an activity to enhance his employer s D-15 image. Both indicated that they were glad to help, but that the consulting activity was somewhat of an imposition and rated near the bottom of the workload priority scale. A second problem is that clients are unreceptive to advice and feel that the consultants may be too far removed to under- stand problems. An additional problem lies in the area of ICBO follow- up. ICBO admits that until recently it tended to neglect follow-up visits, designed to keep it abreast with the pro- gress and needs of its clients. Both offices are taking steps to improve follow-up procedures. In New Orleans, the four ICBO staff professionals share this follow-up work. They visited 19 clients in January and 32 in February; the goal is to visit each client about three times a year. In St. Louis, the client services officer devotes three afternoons a week to follow-up visits, and the loan officer helps when he can. Exact figures are not available for St. Louis, but the follow-up contacts are estimated at about 20 per month. BUSINESS TRAINING Business training activities in the two councils have been fairly successful. Last year, the New Orleans council sponsored a seven-week accounting course, taught by a Tulane University Ph.D. candidate, and completed by seven of fifteen enrollees; a sixteen-week business management course, part of the regular curriculum at Delgado College and jointly attended by twelve ICBO clients and some regular Delgado students; a three-day business development workshop, at- tended by 76 black businessmen and including workshops in bookkeeping, marketing, finance, management, and franchising. The workshop was co-sponsored by ICBO, the New Orleans Jaycees , and a local development group. St. Louis offered a twelve-week business management course, It was held twice during the year, once in the spring and once in the fall. A total of 158 students attended. The course was prepared by Washington University and employed a variety of instructors. D-16 Seven out of 15 enrollees completed the accounting course in New Orleans. This suggests that the course may have been aimed too high. Also, several clients who attended the busi ness management course had mixed reactions: one said it was "not too helpful", two others had no negative comments. The St. Louis course was very well organized. The classes were divided into two sections, one for people contemplating starting a business and one for those already in business. A wide range of topics was covered. One of the enrollees who was interviewed complained that a session on taxes was too ditti cult; the rest of the course brought no complaints. The overall picture, then, is one of visible success in arranging courses and seminars but uncertainty as to their impact. One strongly suspects that at least a few of the clients were helped, yet it is not clear that this is true. VENDOR CONTRACTS The vendor program attempts to secure contracts for min- ority businessmen who provide goods and services on a contrac- tual basis. Vendor contract activity for the two chapters is summarized in Exhibit VI. The councils have concentrated on helping secure government contracts. ICBO cooperates with the SBA to obtain Federal contracts set aside for minorities under SBA's 8 (a) program. ICBO has also made limited efforts in the private sector. However, most of this effort awaits comple- tion on Vendors Guides in New Orleans and St. Louis. EXHIBIT VI, COUNCIL VENDOR CONTRACT ACTIVITY VENDOR (1970) CONTRACTS Approved Number Value Pending (year Number end) Value NEW ORLEANS $143,000 ST. LOUIS - Rejected Number Value 9 y $2,149,300 $286,000 TOTAL 11 $429,000 $42,400 $2,149,300 $42,400- y Includes one potential housing development contract for the Coast Guard valued at about $2,000,000. D-17 Under the 8(a) Program, SBA acts as a clearing house for all Federal agencies with contracts to let. SBA uses ICBO as an "outreach" office for locating and screening minority vendors. In 1970 this arrangement produced four contracts in New Orleans and four in St. Louis. The New Orleans con- tracts were a $31,000 Corps of Engineers contract for grounds maintenance; a $30,000 V.A. contract for electrical repairs to a hospital; a $4,000 Coast Guard contract for repairing an officers club; and a $65,000 GSA contract for janitorial services at the Federal Building. The St. Louis contracts were a $83,000 Coast Guard contract for manufacturing buoys ; a $13,000 GSA contract for manufacturing metal boxes; a $100,000 GSA contract for manufacturing paint; and a $20,000 VA contract for paving (hospital drive, parking) . It should be added that these successes are marred by some failures. The paint manufacturer in St. Louis failed to meet GSA standards on some test samples. He is currently attempting to meet this deficiency. A GSA printing contract in St. Louis in 1969 was not completed on schedule. Penalty charges resulted in a loss for the vendor and aggravated a serious financial situation. The private sector yielded three contracts for New Orleans and St. Louis combined: a $13,000 contract to build the roof for a new motel in New Orleans; a $45,000 contract to manufacture fuse boxes for Western Electric Company; and D-18 a $25,000 contract to manufacture cabinets for a private firm- tcbo hopes for greater success in the private sector mmmmww ° n eaS: 2ras-"&2^&ss.** - r e r te firms and government agencies whose needs might be met. MAJOR BUSINESS DEVELOPMENT co^ciL'ha^one position primarily de voted to^his area. The position in New Orleans was vacant at f^^^'fro. ^CLA U Sis n su^er! Th^rnas bSen one major business develop- ment project in each of the two cities. The New Orleans council has been working on a motel- office building project, for which oon.trurtionj. «*£**£ j. • tq-71 tv>*= rpal estate is valued at about ^>z miinuu, confisring 9 of- $ 150:000 a for S lLd and $1,800,000 for the building. The l?BO national office helped to obtain a loan for $1 ; 2 million from the New York Life Insurance Co. This is to be supplemented by an additional $0.8 million loan, which is nofbeing sought. The developer, Rudolph McLeo d "the city 8 leading black contractor and is co-chairman of the ICBO board. The St. Louis council helped acquire a radio station (KWK) Formerly a white-owned country music station, it was (KWK) . *ormexxy ..... ith ICB0 assistance. The national office helped to* arrange ^ financing, which included loans of $500 000 from the Ford Foundation, $500,000 from a local bank in St Louis, and $500,000 from a St. Louis doctors as- sociation!* The station has donated $26,500 worth of adver- tising time to ICBO clients. D-19 APPENDIX E EVALUATION OF THE NATIONAL URBAN LEAGUE (NUL) AUGUST 1971 ECONOMIC DEVELOPMENT ADMINISTRATION U.S. DEPARTMENT OF COMMERCE SECTION NATIONAL URBAN LEAGUE TABLE OF CONTENTS HIGHLIGHTS AND RECOMMENDATIONS Introduction III SUMMARY OF IMPACTS IV ISSUES V BENEFITS AND COSTS VI ACTIVITIES OF LOCAL LEAGUES PAGE NO E-l E-l Status E _-^ Impacts Recommendations E-2 I INTRODUCTION E-4 Scope of Grants E _ 5 Scope of Evaluation II SUMMARY OF ACTIVITY STATUS E — 6 National Headquarters E _ g Affiliates E-9 E-14 E-16 E-17 E-18 Introduction Loan Packaging E-18 Business Problem Solving e-21 Franchises and Dealerships Contractor Bonding and Contract Procurement Business Training League Activities for Self- e-24 Sufficiency E-25 List of Black Businesses Unique Activities of the Leagues E-22 E-24 E-25 E-i NATIONAL URBAN LEAGUE LIST OF EXHIBITS EXHIBIT PAGE NO, I NATIONAL URBAN LEAGUE FUNDING E -4 II SUMMARY OF ACTIVITY STATUS IN EVALUATED CITIES E-8 III SUMMARY OF IMPACTS E-10 IV DATA ON IMPACTS E -12 V AFFILIATE LOAN PACKAGING ACTIVITIES E -19 VI SUMMARY OF BUSINESS PROBLEM SOLVING ACTIVITIES E -21 VII SUMMARY OF CONTRACTOR BONDING AND CONTRACT PROCUREMENT ACTIVITIES E-22 E-ii HIGHLIGHTS AND RECOMMENDATIONS INTRODUCTION On January 1, 1969, EDA began financial assistance to the National Urban League (NUL) for an business develop- ment program in eight cities. The initial 12-month grant was for $425,011. The grant period was subsequently extended to August 31, 1970, when all funding except for Indianapolis and the New York headquarters was terminated. The current EDA support of $143,473 extends to August 31, 1971. This report describes the status and impacts of the business development activities of the continuing Indianapolis NUL affiliate, the terminated San Diego NUL affiliate, and the headquarters. It also contains recommendations for further support to this grantee. STATUS The general program of the affiliates evaluated is established by the national headquarters, but the relative emphasis placed on the activities varies considerably with local conditions. The program includes loan advocacy, busi- ness problem solving, business training, contract procurement and contractor bonding. Both NUL affiliates stress loan advocacy (or loan pack- aging) . Indianapolis places heavy emphasis on business problem solving and training, while San Diego is much more heavily engaged in developing opportunities for minority con- tractors. Typically, the service offered by NUL is one of screen- ing potential clients, determining their needs, studying the feasibility of ideas for companies, packaging loans, and pro- viding business problem solving assistance until the client is self-sufficient. Additionally, potential clients are referred to government agencies, financial institutions, and other sources of assistance. They are informed about potential contracts and are given some advertising aid. IMPACTS The major impact in the two cities visited has been in improving minority business management. In addition, during the periods of EDA assistance, more than 155 direct jobs re- sulted from the business problem solving activity. This E-l figure does not include jobs resulting from the expansion of existing businesses or those obtained through contractor bonding and contract procurement. Some 4 00 businesses re- ceived business problem solving assistance and 88 loans were approved by banks and the Small Business Administration (SBA) . RECOMMENDATIONS EDA should extend the funding period for the Indianapolis Urban League . The grant period for the Indianapolis Urban League (IUL) will lapse in August 1971, whereas the grant funds will sup- port operations into 1972 , even if two staff persons are added. Extension of the funding period is recommended. In addition, the Indianapolis office merits additional support beyond the current grant, either from EDA or OMBE, with which it is now affiliated. If OMBE funds are not committed by the end of this year, EDA should strongly consider support for 197 2 on the basis of re-evaluation later this year. The Indianapolis office has functioned superbly as a force that has not been dependent on either local resources or its clients. It has been able to obtain an impressive amount of support for its clients from industry, business, churches, local institutions, the banks and SBA. This is partly because of its selective but sensitive screening of minority business ventures. The continued success of the IUL may well depend on independent support of its activities. EDA should consider supplemental support of t he San Diego Urban League . The San Diego Urban League (SDUL) now operates under the Model Cities program. Both Urban League and Model Cities officials stated that this grant was made with strong assur- ance that an additional $40,000 in support would be provided by EDA. Activities of this office in developing and sustain- ing minority enterprise would be considerably enhanced by new EDA support and by EDA program direction. Since the termination of EDA support, the effort devoted to business development activities has significantly declined relative to that for community development activities. An amount that would pro- vide two new staff members skilled in business and/or con- tracting techniques is recommended. San Diego may also deserve to be an OMBE affiliate. E-2 With the present level of operations, some reduction in support to the headquarters appears justified . The present $43,473 support to the National Urban League funds one professional and his secretary, who divide their time between a number of operations. It appears that less than half of their time is devoted to the promo- tion of minority entrepreneurship. E-3 I, INTRODUCTION SCOPE OF GRANTS EDA has supported only the business development activi- ties of National Urban League (NUL) affiliates. The initial EDA grant of $425,011 to the NUL was augmented by a $142,500 NUL contribution, as shown in Exhibit 1. The original Ending period for calendar year 1969 was twice extended to August 197 because of delays in attaining full operating levels. In the second EDA grant seven 1/ of the original eight cities were dropped, leaving Indianapolis and the national headquarters in New York City with support of $100,000 and $43,473, respective- ly. The current grant is scheduled to expire on August 31, 1971 EXHIBIT I. NATIONAL URBAN LEAGUE FUNDING PERIOD January 1969 to August 1970 NUMBER OF CHAPTERS EDA FUNDS NUL FUNDS September 1970 to August 1971 TOTAL $425,011 $142,560 TOTAL $143,473 $55,659 $567,571 $199,132 $568,484 $198,219 $766,703 Full staffing of the Indianapolis office was not complete as of May 1971, and a request for a time extension through early 1972 appears likely. Any further funding requests will hinge on IUL prospects for direct aid as a result of its re- cently-acquired OMBE affiliate status. - f Birmingham, Buffalo, Dallas, Houston, Milwaukee, San Diego, and San Francisco. E-4 SCOPE OF EVALUATION At the direction of the Assistant Secretary for Economic Development, the Program Analysis Division of EDA is con- ducting a series of analyses of national technical assis- tance projects. The evaluation of NUL is one of this series. Field work was performed in May and June 1971. In this period, teams visited: . New York City national headquarters, and . affiliate offices in Indianapolis and San Diego. Visits to the three cities were conducted after exten- sive review of file materials in Washington and discussions with Office of Technical Assistance personnel familiar with the grants. The affiliated cities were selected in consul- tation with the Office of Technical Assistance, and the National Urban League, and on the basis of NUL progress reports. The Indianapolis office is the only affiliate still being funded by EDA, while the San Diego office was judged by NUL to be the best of the seven that were dropped. During the field visits, interviews were conducted with more than 50 individuals, including employees of the grantee, community members, and beneficiaries of the grantee's activi- ties. Members of organizations other than EDA, which fund league clients, were also interviewed. E-5 II. SUMMARY OF ACTIVITY STATUS NATIONAL HEADQUARTERS EDA supports one professional and one secretary in the principal NUL office in New York City, at a cost of $43,473. This staff mainly coordinates the entrepreneurial efforts of several affiliated offices, with Indianapolis as the prime thrust. In addition, the professional staff member supported by EDA is a Deputy Director of NUL, assisting with the manage- ment of 12 projects, only one of which is entrepreneurial development. Any extra support that NUL receives from this arrangement is well offset, however, by the cost which NUL incurred because of the termination of EDA funding of the seven other original offices. Costs connected with the termi- nation of the Dayton Office were estimated by NUL to be about $20,000. ■ AFFILIATES The major entrepreneurial development activities of each NUL affiliate are formulated by the national headquarters. However, the degree of emphasis placed on each activity by an affiliate varies according to the local situation. The prin- cipal services provided by the affiliates are listed below: . Loan Packaging consists of all steps necessary in constructing an acceptable loan application. This often includes market analysis, site location, au- diting and follow-up after the loan is obtained. . Business Problem Solving includes accounting and management assistance to improve the efficiency of minority-owned businesses. It is also the main tool used to prevent business failures. . Franchises and Dealerships encompasses obtaining franchises and dealerships for minority business- men when favorable terms can be arranged. . Contractor Bonding consists of obtaining bonding for minority contractors so that they are eligible to secure contracts for more than $20,000. . Contract Procurement includes maintaining contacts with various government agencies and private firms so that the Urban League clients may? be informed E-6 of potential contracts. . Business Training consists of work in organizing management training classes or seminars. . chapter Activities for Self-sufficiency include continuous efforts by the chapters to obtain additional sources of income. . List of Black Businesses is a compilation of local black-owned enterprises so that NUL can channel business between and to these firms. . Unique Activities are those special activities conducted by each affiliate. Exhibit II summarizes the status of each of these activities. E- 7 EXHIBIT II. SUMMARY OF ACTIVITY STATUS IN EVALUATED CITIES ACTIVITY INDIANAPOLIS SAN DIEGO Loan Packaging Active Active Business Problem Solving Active Active Franchises & Dealerships Limited Limited Contractor Bonding Now handled by Minority Contractor Associations Active Contract Procurement Now handled by Minority Contractor Associations Active Business Training Several classes completed; others about to start Very limited Chapter Activities for Self-Sufficiency Now an OMBE affiliate; substan- tial funding supple- ments EDA grant Now completely funded by Model Cities List of Black Businesses Complete , on computer tape Nearly complete , to be published in late 1971 Unique Activities Active Active E- 8 III. SUMMARY OF IMPACTS The impact of Urban League minority business efforts is visible almost solely at the local level. Exhibit III summarizes economic development process impact, job impact, outside investment and potential for the two Leagues visited. Exhibit IV presents data on the impacts. Activities of the two Leagues have had a favorable impact upon the economic development process. . New businesses have been started and others have been expanded as a result of the loan advocacy, marketing and site location studies, and contract bonding and procurement. . Business efficiency has been improved through the business problem solving activity, particularly in Indianapolis. . Minority Contractors Associations were established in both cities. . The local Leagues have been instrumental in setting up a referral system for minority businessmen to obtain assistance from the appropriate government agency. The Leagues in the two cities have made a large contri- bution to saving existing jobs and creating new jobs for minority employees. However, because of the lack of follow-up personnel, accurate tabulation of these jobs is difficult. Each of the Leagues has been able to generate Federal and local government funds to supplement their activities. Private capital has also been mobilized. The potential of both NUL affiliates is very high. E-9 EXHIBIT III. SUMMARY OF IMPACTS ACTIVITIES ECONOMIC DEVELOPMENT PROCESS JOBS1/ INVESTMENTS2/ POTENTIAL Loan Packaging High Visibility Included in Business Problem Solving $1,533,004 Very High Business Problem Solving Improved quality of minority businesses 155 In-kind Services Very High Franchises and Dealer- ships Low Visibility None Limited Contractor Bonding Low Visibility in Indianapolis ; High Visibility in San Diego High in San Diego ; Modest in Indianapolis Limited in Indianapo- lis; High in San Diego Contract Procurement Low Visibility in Indianapolis ; High Visibility in San Diego High in San Diego $3,318,000 High Business Training Improved basic business capabil- ities in Indianapolis ; None in San Diego Almost entirely privately financed (IUL) High in Indianapolis ; Uncertain in San Diego 1/ When "high" or "low" is used in this column, it implies relative job impacts, because no accurate estimate could be made. 2/ This includes private investment, as well as grants and loans from government sources. E-10 EXHIBIT III. SUMMARY OF IMPACTS (CONTINUED) ACTIVITIES ECONOMIC DEVELOPMENT PROCESS JOBS INVESTMENT POTENTIAL Chapter Acti- vities for Self-Suffi- ciency Indianapo- lis now OMBE affiliate; San Diego now funded by the Model Cities pro- gram List of Black Businesses Client informa- tion base In-kind ser- vices (IUL) ; Advertising support (SDUL) High Unique Activities High Visibility High in San Diego In-kind Ser- vices High i E-ll EXHIBIT IV, DATA ON IMPACTS ACTIVITY INDIANAPOLIS JAN. 1969-MAR.1971 SAN DIEGO JAN. 1969-AUG. 1970 Loans Approved Number Amount New Firms 61 $826,739 21 27 $706,265 19 Business Problem 132 21 332 19 Total Firms New Firms Bonds Secured for Contractors 4 5 Contracts Procured for Clients Number Amount 2 $208,000 4 $3,110,000 Business Training Attendance (Number of Courses) Seminars Courses 80 (1) 121 (2) Recruited 200 Number of Minority Businesses in Direc- 950 2,400 tory E-12 •.'.'.. . U dH. £ The unique activities of the two offices are summarized below. The Indianapolis affiliate has: . established an annual Business Opportunity Fair, attended in 1970 by more than 200 minority sellers and 39 buyers representatives; . formed very productive links with the local business structure; particularly major corpora- tions; coordinated an unusually effective CPA service built for clients; . facilitated the formation of a Cummins Diesel Company subsidiary which will become black-owned; and . aided in the development of a black-owned bank and a community-owned supermarket. The San Diego affiliate has engaged actively in real estate ventures which should create opportunities for con- tractors, construction workers, small businessmen, and the local unemployed, in addition to improving community amenities. E-13 IV. ISSUES Seven issues are significant in determining whether the EDA grants to the NUL have been effective. These issues are addressed in this section of the report. Issue 1. Response Issue 2. Response Issue 3. Response Issue 4. Response Has EDA been effective in creating a national institution ? The NUL has existed for 60 years as a national institution, with well developed lines of com- munication into both black and white institu- tions and business structures. However, the organization had not engaged in minority business development prior to the EDA grant. Has EDA been effective in creating local instit utions? With the EDA grant, minority business develop- ment activities were launched in eight of NUL's cities. In the two cities visited, these activities continue to justify support. Has the headquarters office of the NUL effectively supported the local Leagues? It appears that there is limited headquarters support. . During the first year, the headquarters functioned actively in staff selection for local offices. It provided operating guidelines, coordinated activities, and distributed the EDA funds. . Leagues now operate more independently, but headquarters still provides coordina- tion and distributes funds. Has NUL been successful in helping to improve minority employment opportunities ? The NUL has long been active in promotion of equal employment opportunities. Additional employment has resulted from the minority entre- preneurial programs in the two cities visited. E-*14 . At least 155 jobs can be attributed to the loan packaging and business problem solving programs. . In the grant period, additional jobs were obtained through contractor bonding and contract procurement. Issue 5. Has NUL been successful in obtaining funds from other organizations ? Response The local offices have been more successful 'than the national headquarters in obtaining additional support for minority business development activ- ities. . The San Diego League is now wholly funded by the Model Cities program. It is developing additional support through publication of its business directory and formation of a business development foundation. . The Indianapolis League has drawn sub- stantial support from large local indus- trial corporations, local businesses, and the Disciples of Christ Church. It also receives a large amount of free consulting services and is trying to obtain additional support from Model Cities. It has become an OMBE affiliate. Issue 6 . Are there any plans for self-sufficiency? Response While there are no plans for complete self-suf- ficiency, free of governmental assistance , the trend is in this direction. E-15 V. BENEFITS AND COSTS The benefits of the EDA grant to NUL have been very high. . Effective local economic development institutions have been created. . These institutions have helped increase the number of minority business owners and the opportunities for minority employment. . These institutions have been effective in improv- ing the stability of many existing businesses and jobs . . The impact of the Leagues should continue to increase in the future. The EDA cost per job, estimated only on the basis of loans obtained, franchises obtained, and business problem solving, has been approximately $930 per direct job. This figure does not include saved jobs, jobs obtained through contractor bonding and contract procurement, or jobs obtained as a result of the business activities of the chapters. Costs over the periods for which the benefits were evaluated were about $144,000 for EDA and $50,000 for NUL. E-16 VI. ACTIVITIES OF LOCAL LEAGUES INTRODUCTION The NUL, one of the Nation's oldest and largest civil rights organizations, was founded in 1911 and now has affili- ated Leagues in 98 cities. Initially, the EDA entrepreneurial grant was managed in Washington, D.C. under the direction of Sterling Tucker. During the latter part of the first (eight- city) grant, and just prior to the renewal of the grant for one city, Indianapolis, the operation of the program was moved to the New York City headquarters. It is now directed by Thomas Brady. The NUL encountered delays early in the first grant period because of rigid EDA staffing requirements, the neces- sity for EDA approval of each new staff member, and financial contraints imposed by EDA and the national office. After the offices were established and staffed, a con- siderable amount of time was spent in laying the groundwork for an effective operating program. During this period, the basic direction of the program was set, each city was studied, and lines of communication were developed. The collective experience of the Leagues was analyzed at a seminar in Washington, D.C. in January 1970. Generally speaking, the NUL headquarters in New York has established goals and a number of activities to accomplish the goals. Implementation is left principally to the local project directors, and the success of the program depends critically on their competence. The project directors in the cities visited are very competent and, more importantly , dedi- cated to minority economic development. In all cases, the staff members of the Leagues appeared to work to their fullest potential. Each of the activities in the two evaluated Leagues is discussed in the following pages. E- 17 LOAN PACKAGING The packaging of loans includes economic and financial analyses, marketing and feasibility studies, and the prepara- tion of operating statements and budgets. This is the focal activity in Indianapolis and very basic to the overall opera- tions in San Diego. The NUL emphasizes the comprehensive loan packaging effort because the potential businessman must be prepared to manage the business as well as to obtain the needed Therefore, a primary aspect of the loan packaging activity is a complete analysis of relevant business conditions, needs, and potentials. Consequently, the clients are screened carefully by the local League staffs before the bank or SBA offices are approached. As a result, the denial rate for loans to minority businessmen sponsored by NUL is substantially lower than for other applicants. In both Indianapolis and San Diego, minority loans (mostly black) account for one-third of the total number of SBA loans outstanding. According to the local SBA directors, NUL development specialists effectively function as their field representatives . To further reduce business failures, loans are followed- up with business problem solving assistance. This invoives all the services listed under the business problem solving category. It was particularly stressed as the area of greatest need by the Indianapdlis staff. The loan packaging achievements of the two Leagues are presented in Exhibit V. BUSINESS PROBLEM SOLVING Business problem solving includes such activities as accounting, inventory control, distributing methods, adver- tising and promotion, personnel development, legal assistance, and marketing and site studies. It involves helping many minority businesses in all phases of their daily operations in an effort to make them viable enterprises. When an enter- prise receives assistance under other programs , such as loan packaging, it also receives business problem solving assis- tance. E-18 EXHIBIT V. AFFILIATE LOAN PACKAGING ACTIVITIES LOANS INDIANAPOLIS JAN. 1969-MAR. 1971 SAN DIEGO JAN. 1969-AUG. 1970 Approved Number Value 61 $826,739 27 $706,265 Pending Number Value 10 $286,000 4 $13,394,612 )J Declined Number Value 11 $144,750 2 $28,000 1/ Included $13,300,000 for packaging of three real estate developments. These developments are partly in support of nextf and established minority businesses, partly to provide construction work for minority contractors, and, perhaps mainly, to enhance neighborhood amenities. Notes Time periods are 27 months for Indianapolis and 20 months for San Diego. There was virtually no loan packaging activity for at least the first six months of either period. E-19 Exhibit VI, summariziiig NUL business problem solving activities, shows that a minimum of 155 jobs have been created. Business problem solving activity is extremely important in Indianapolis. It uses most of the IUL entrepreneurial development specialist's time, involves MBA students from Indiana and Purdue Universities, and is assisted by Indianapolis business, industry, and professionals. A good example is lUL's utiliza- tion of CPAs from the city's major auditing firms. The CPAs, largely under their own initiative, offered their services for three to nine months each to struggling minority business- men for virtually no fee. IUL screens the potential clients and directs them to a CPA for regular accounting and management consulting services. The clients, IUL, and the CPAs are all enthusiastic about the success of this program. As of April 1971, 13 CPA firms had contributed more than 390 hours of service to 30 clients. The CPAs state that they can provide substantially more time. The business promotional activities of IUL are another successful effort. These promotions are provided through: 1) a black-oriented radio program called "Partners in Prog- ress", 2) a column in a black weekly newspaper, "New Thrust", 3) Indianapolis News and Star business page announcements, and 4) a half -hour WISH-TV program devoted to IUL activities each month. The San Diego Urban League Director believes that a busi- ness problem solving infrastructure should be built in the black community. For example, the League is making some effort to strengthen the neighborhood bookkeeper, under the direction a CPA, to the point that he can be of valuable service to other community businessmen. While the League pays for the CPA help for example,, it generally would prefer to avoid a per- manent subsidy. Reportedly, the San Diego CPAs have discussed among them- selves the possibility of providing some volunteer service but, thus far, no action has been taken. Nevertheless, the San Diego office has provided many problem solving, as well as office services, to businesses. It has used a few volunteer consultants, although this effort is currently in need of expansion. E- 20 In addition , the SBA SCORE program has been effective in San Diego. This program involves the use of retired business- men as volunteer consultants. Indianapolis is in the process of acquiring two more staff members to strengthen follow-up activities. Both Leagues emphasize that their present need is additional staff to follow up on businesses prevously assisted. They believe that establishing a business through loan packaging is only a first step. The business problem solving activity becomes important in the planning and operational stages of the business, and functions as the major tool to prevent business failures. EXHIBIT VI. SUMMARY OF BUSINESS PROBLEM SOLVING ACTIVITIES LEAGUE | TOTAL j BUSINESSES 1 ASSISTED NEW BUSINESSES ASSISTED ESTABLISHED BUSINESSES ASSISTED ESTIMATED JOBS Indianapolis Jan. 1969 - Mar. 1971 132 21 111 98 y San Diego Jan. 1969 - Aug, 1970 332 19 313 57 y FRANCHISES AND DEALERSHIPS The Leagues have had little success in obtaining franchises for minority businessmen. This is primarily because cf the capital requirements of franchise and dealership agreements. Also, interest has lagged because franchises and dealership pro- vides less autonomy than independent business. 1/ — Estimated on the basis of 47 known new jobs in 12 new business- es, a "rule of thumb" of 3 new jobs each for the remaining 9 new businesses, plus 24 known new jobs for 4 of the estab- lished businesses, and no allowances for new jobs in the balance (97) of established businesses assisted. NUL staff estimates 137 new jobs for the period, January 196 9 through December 1970. 7 / ±J Estimated on the basis of 3 new jobs in each new business. E»21 CONTRACTOR BONDING AND CONTRACT PROCUREMENT The primary purpose of this activity is to develop within the minority community the expertise and capability to per- form construction work other than small sub-contracting. This program is presently a major focus of the San Diego Urban League, where some successes are being realized. In Indianapolis, progress in this area has been slow and diffi- cult and the IUL * s activities are now more focused on other efforts . The exhibit below summarizes NUL bonding and procurement activities : EXHIBIT VII. SUMMARY OF CONTRACTOR BONDING AND CONTRACT PROCUREMENT ACTIVITIES ACTIVITY INDIANAPOLIS JAN. 1969-MAR. 1971 SAN DIEGO JAN. 1969-AUG. 1970 Bonds Secured 4 5 Contract Procure- ment Number Amount 2 $208,000 4 $3,110,000 San Diego The San Diego Urban League has assisted two minority contractors associations: . Mexican-American Contractors Association, and . Association of General, Sub-, and Specialty Contractors of San Diego County (black firms) . The two associations have recently combined and are now known as the Minority Contractors Association. E- 22 The two minority contractors associations have partici- pated in several joint ventures, including: . a $210,000 Post-office contract, . a $1,800,000 Housing project, . a $4 00,000 Community Center, . a 101 unit town-house project. The Post Office contract gave the associations prestige and attracted support for future contracts. Additional San Diego activity in this area is described in the unique activities section. Indianapolis The Indianapolis Minority Construction Association was established in 1966. However, because of the laek of skilled workers and working capital, and because of difficulties in securing bonding, it has been inactive. The Urban League was able to secure some federal contracts under SBA's 8(a) pro- gram for minority businesses: . a $153,000 Federal Housing Contract (sub-contract, no bonding) , and . a $55,000 contract, no bond required, for refurbishing Federal Housing Authority (FHA) houses. More recently, the Indianapolis contractors have divided into several associations. Of these, the "Project 3 MC's", (Association Minority Contractors, Model City, Manpower Com- mission) has been the only association thus far to secure staff -support funds. They have received $7 5,000 from Eli Lilly & Company for costs and salaries of three professionals a director, an estimator and a bidder. E-23 BUSINESS TRAINING In Indianapolis, three courses have been given. All of these were well attended and considered successful by both the organizers and trainees. The first was an introductory one-day session, "So You Want To Go Into Business," attended by 80 people on August 25, 1969. The second was a 10-week bookkeeping course, "Self-Help Accounting," completed by 26 people in March-May 1970. The third was a 14-week Management Skills Training Course completed by 95 people in February-April, 1971. The courses were mainly supported by two General Motors divi- sions and were assisted by SBA and other local institutions. The League helped organize the courses and recruited the trainees and some of the instructors. Also, in cooperation with the Southern Christian Leadership Conference, the IUL is sponsoring a business development school designed to train youth for an "Operation Breadbasket" retail store in the com- munity. The SDUL has not initiated formal training, except for the business problem solving aspect and recruiting for courses sponsored by others. Tentative planning has started, however. LEAGUE ACTIVITIES FOR SELF-SUFFICIENCY The Leagues are encouraged to develop other funding sources, including government agencies, local businessmen, and national church organizations. Examples of IUL's success in obtaining funding are listed b&low. . The Disciples of Christ Church Headquarters has 1) supplied "We Can" Foundation (an emergency short-term loan fund under NUL direction) with a $15,000 grant, 2) made direct loans to minority businesses, and 3) assisted with the "Opportunity Fair", formation of a MESBIC , and the organizing of contractors. . Several corporations, including the Chevrolet Truck Motor and Detroit Diesel Allision Divisions of General Motors, have sponsored the training programs, the "Opportunity Fair" and several other activities. . Eli Lilly and Company has made the first grant ($250,000) to the Indianapolis Business Development Foundation (total target: $500,000), the IUL's business development group. E-24 The IUL staff devotes about 10 hours a week in planning of Model Cities' Economic Development Corporation (EDC) activ- ities and looks forward to a contractual relationship whereby it would provide expertise to the EDC and its projected 12 staff members. In this connection, HUD is providing a $700,000 grant for a credit union, opportunity bank, and a fund for minority bonding guarantees. A MESBIC is being formed, backed by the Indianapolis Business Development Foundation. Examples of success in obtaining outside support in San Diego are as follows. An attempt is being made to form an "Urban League for Economic Development", which would be a profit making corporation, to assume some of the present entre- preneurial development functions. A business directory is to be published with advertiser support which could total between $50,000 and $8 0,000. The entire development center operation is now funded by a Model Cities grant of $80,000. The Indianapolis Urban League is an OMBE affiliate, and could receive OMBE financing in the future. No OMBE affiliate has yet been designated for San Diego. LIST OF BLACK BUSINESSES To help channel business to minority firms, the Leagues are compiling lists of minority-owned and operated businesses The Indianapolis Urban League, greatly assisted by the Detroit Diesel Allision Division of General Motors, has com- pleted a list of 950 minority businesses. This list is avail- able on computer tape at Diesel Allison. The San Diego Urban League is preparing a fairly ela- borate list to be published in an advertiser-supported direc- tory. The list should contain some 2,400 firms and may raise between $50,000 and $80,000 in revenues. UNIQUES A CTIVITIES O F THE LEAGUES Ind j.anapo 1 i s The IUL has established an annual Indianapolis Business Opportunity Fair for minorities. The first Fair, held October 6-7, 1970, was considered highly successful. More than 200 minority businessmen from Indianapolis and nearby places were received by 39 purchasing departments from Indianapolis-based E-25 businesses. More than 600 referrals were made and the business obtained by minority entrepreneurs was substantial. However, it will take some time before an estimate of the Fair's total impact can be made. The IUL has formed unique cooperative links with the local business structure, particularly the corporate giants, such as Chevrolet, Detroit Diesel Allison, and Eli Lilly. Development loans, the training programs (almost cost free as far as the Urban League and EDA are concerned) and a new black-owned tool company are some of the benefits already achieved. The CPA service described earlier is probably the first of its kind in the nation to function effectively. Its suc- cess can largely be credited to IUL. The IUL is aiding the formation of a nationally-chartered black-owned bank. Its establishment seems reasonably assured. Cummins Diesel Co., has agreed to establish a subsidiary in Indianapolis which will fabricate parts for the parent com- pany. After three years, the subsidiary will be spun off to a local minority group under a guaranteed market arrangement. This effort is being coordinated by IUL. A $290,000 community -owned supermarket is being completed with IUL coordination, to both serve and employ blacks. Funds have come from SBA and the Indianapolis Business Development Foundation . San Diego The San Diego Urban League is presently negotiating with F„E. Young, a large construction company, to create a "critical pact team". This would constitute all the elements necessary to complete a project, including builders, architects, consult- ants, financial institutions and potential owners. To imple- ment this concept, SDUL is currently negotiating projects totaling more than $6 million, as described below. With a conventional loan from Mutual of Omaha, plans are set to build a $2 million medical center and business complex. Eight doctors have purchased 10.9 acres, worth some $600,000. The space allocated for a bank has already been requested by several prominent bankers in the area. The Urban League will also locate in the new business complex. The medical office site has several potential occupants and requests for space are being considered from pharmaceutical firms . E-26 . Land has already been acquired for the construction of a home for elderly residents near the Model Cities area, one city block located at 12th and Market Street. This $3,000,000 undertaking is being sponsored by the Urban League. The project will become a non- profit entity under the FHA 236 program and be eligible for 100% Federal financing. . Former football player Jim Talbert has 1.9 acres which he may use to construct a 16 unit apartment house complex. Two additional medical centers totaling approximately $4,000,000 are also being discussed, but feasibility is still to be determined,. Additional projects are in the early plan- ning stages. The purposes of all these ventures are to improve the apperarance and amenities of the Model Cities area, to pro- vide viable locations for new and existing minority business, to create permanent employment opportunities for local resi- dents, to provide minority contractors with an opportunity to establish "track records", and to create apprenticesnip programs for minority construction workers. E- 27 - ! , ■ APPENDIX F REVIBa/ of the AMERICAN SAVINGS AND LOAN LEAGUE (ASLL) APRIL 1971 ECONOMIC DEVELOPMENT ADMINISTRATION U.S. DEPARTMENT OF COMMERCE AMERICAN SAVINGS AND LOAN LEAGUE TABLE OF CONTENTS SECTION PAGE NO HIGHLIGHTS AND RECOMMENDATIONS Introduction F ~l Status F ~ 1 Impacts F_1 Conclusions F ~ 2 I INTRODUCTION Scope of Grants F ~ 3 Scope of Evaluation F ~3 II SUMMARY OF ACTIVITIES F-6 Training Deposit Generation F ~6 Information Exchange F ~ 8 New Savings and Loan Associations F-8 Public Awareness F ""9 National Interaction F-9 III SAVINGS AND LOAN ASSOCIATIONS Unique Problems of Black Associations F-10 General Problems F-ll IV FEDERAL HOME LOAN BANK BOARD F-13 F-i HIGHLIGHTS AND RECOMMENDATIONS INTRODUCTION The American Savings and Loan League (ASLL) was founded in Atlanta, Georgia, in 1948, mainly because of the inability of black savings and loan associations to gain membership in the United States Savings and Loan League (USLL) . After the (USLL) began accepting black members in the early 1950' s, the ASLL became relatively inactive. It was revitalized in 196 8 to direct its efforts at the unique problems of black _ savings and loan associations. These efforts are the foundation of a two-year EDA grant of $200,000, which was approved in May 1969. The League had slightly more than 40 members in June 1970. There are approximately 5,900 savings and loan associations in the United States. STATUS Near the end of the first year of the grant, the ASLL members decided that the most advantageous location of the League would be in Washington, D. C. , rather than in Atlanta. Therefore, the grant has been temporarily inactive since late 1970 by mutual consent of ASLL and EDA, pending the move and acquisition of a completely new staff. Activity was scheduled to recommence on April 1, 1971. Negotiations with a prospec- tive new national director were unsuccessful, causing further delay in opening the new office. The purpose of this report is to describe ASLL's past activities under the EDA grant, as well as the problems and the aspirations of the League. This review is not an evalua- tion but a guide for future evaluations. IMPACTS The main activities of ASLL are directed at training the staffs of member associations and at helping to generate deposits for members. Additionally, members have exchanged information and problem solutions through ASLL, and a public and professional awareness of black associations has been fostered, Impacts of ASLL ' s activities, prior to the move to Washington, were limited. Some of the difficulties encountered by ASLL were the relatively small size of its members, and the wide geographical dispersion of these associations. F-l RECOMMENDATI ONS The ASLL can perform a needed service for its member as- sociations. The financial base of the members, however, is insufficient to sustain ASLL without outside support. These associations will probably play a major role in black urban development; their emphasis on mortgage lending should help improve housing conditions while the newly legislated service corporations can assist in other phases of development. The restrictions on possible investments by savings and loan as- sociations limit their economic development activities to indirect assistance, except for the service corporations. A Federal Home Loan Bank Board representative has indi- cated his support of ASLL and its goals. The nature of the ASLL programs precludes any great short-term impact but they could be very effective on a longer basis. F-2 I. INTRODUCTION SCOPE OF GRANTS The American Savings and Loan League (ASLL) is an indus- try association whose members are either black or integrated savings and loan institutions. In June 1970, there were approximately 4 3 ASLL members in 22 states and the District of Columbia. Member deposits range from slightly more than $200,000 to more than $50,000,000. Not all associations have been able to pay dues and some are not federally insured. About 20 member associations have actively participated in the League's activities during the past two years. The ASLL was founded in 1948. It became dormant after its members gained admittance into the nationally recognized United States Savings and Loan League (USLL) , in the early 1950" So The USLL has a membership of about 4,850 of the nation's approximately 5,900 savings and loan institutions. Some asso- ciations are members of both ASLL and USLL. There is a third major savings and loan league, other than state leagues. The National Savings and Loan League (NSLL) has 300-400 member associations , primarily Mexican and Spanish-American. Its geographical base is southern California and South America. The ASLL was revitalized in 19 6 9 by an EDA grant for about $200,000. The purpose of this grant was to staff a national office to improve the operations of minority savings and loan associations through management training, better management practices , and deposit generation. The national office is currently being moved from Atlanta, Georgia to 5505 Fifth Street N.W. , Washington, D.C. The purpose of this move is to take advantage of the proximity to the Federal Home Loan Bank Board, other government agencies, and the pool of consultants in the area. During this transitional period, the ASLL grant has been inactive. SCOPE OF EVALUATION At the direction of the Assistant Secretary for Economic Development, the Program Analysis Division of EDA has initiated a series of analyses of national technical assistance projects. This review is the initial part of one of these analyses. Field work was performed in two stages; the initial work was performed during November 30 - December 1, 1970 in Atlanta, and the latter work was done during the period March 12 - 19, 1971 in Baltimore and Washington. In these periods, the teams visited: Atlanta; past executive director; Baltimore; Advance Federal Savings and Loan As- sociation (Assets - $6,500,000; Contact - Dr. W. 0. Bryson) ; and Washington; Independence Federal Savings and Loan Association (Assets - $6,000,000; Contact - William B. Fitzgerald) . Dr. Bryson, president of the Advance Federal Savings and Loan Association, is eastern vice-president of ASLL. Mr. Fitz- gerald, president of Independence Federal Savings and Loan Association, has been instrumental in ASLL's relocation and in staffing the new headquarters. Discussions were also held, in Washington, with: Mr. Peter Zabriskie, who was nominated as National Director of ASLL, but later declined the appoint- ment; and Robert Sangster, the director of the Office of Hous- ing and Urban Affairs at the Federal Home Loan Bank Board. To prepare this report, EDA personnel talked with John S. Stewart, President of the Mutual Savings and Loan As- sociation, Durham, North Carolina, on several occasions. Mr. Stewart is President of the ASLL. He has worked hard to maintain some continuity in the League's activities during the past few months. Telephone interviews were also conducted with several ember associations. These associations were chosen, because of their geographic and deposit differences, as representa- tive of ASLL's membership. These associations are: Richmond, Virginia; Union Mutual Savings and Loan As- sociation (Assets - $898,000; Contact - G. F. Childs) ; . Mobile, Alabama; Gulf Federal Savings and Loan As- sociation (Assets - $2,600,000; Contact - H. Leroy Davis) ; and . Chicago, Illinois; Illinois Federal Savings and Loan Association (Assets - $28,400,000; Contact - Louise K. Quarles) . F-4 Contact was also made with the Magic City Building and Loan Association in Roanoke, Virginia, with assets of $261,000. Magic City was listed as a member because it is one of the nation's black savings and loan associations. The president of Magic City, however, said his association is not a member of ASLL. It is a member of USLL. F-5 II, SUMMARY OF ACTIVITIES TRAINING ! The purpose of this activity is to improve the technical skills of black managers. All but two member associations have first-generation managers with no previous savings and loan training. The USLL provides training through its educa- tional affiliate, the American Savings and Loan Institute. However, most members of ASLL cannot afford the tuition, the travel expense, or even the cost of permitting a member of their small staff to spend several days attending classes at the Institute. These training problems have been one of ASLL's primary concerns. Initial corrective action has been taken through two regional seminars; the first was held in December 1969 in New Orleans and the second was held in February 1970 at Morgan State College in Baltimore. The conference in New Orleans was co-sponsored by ASLL and EDA. It included workshops and presentations on such varied subjects as managing a savings and loan, opportunities in inner-city housing, the future image of black savings and loan associations and the contribution of saving and loan associations to economic development. Both this conference and the Baltimore conference were attended by between 25 and 30 individuals. DEPOSIT GEN ERATION The other primary concern of ASLL is the small size of its members. This can best be seen by comparison between the assets of the 4 3 ASLL members and the assets of the approxi- mately 5,900 savings and loan associations, as shown in Table I. The average ASLL member's assets is $8,325,000, while the national average is about $27,500,000. Initial efforts by the League toward deposit generation involved con- tacts with professional atheletes and ball clubs. These efforts had no apparent effects. To overcome the general reticence of savers to deposit money m black savings and loan associations, several members have expressed an interest in joint promotional ventures. These joint ventures are necessary because few of the member institutions can afford significant individual advertising. The advertising of the USLL is not representative of black cul- ture nor directed at the unique problems of black savings and loan associations. F-6 TABLE I DISTRIBUTION OF SAVINGS ASSOCIATIONS BY ASSET SIZE ASSET SIZE NATIONALLY i/ ASLL y (Millions 1 ) Percentage of Associations ASSETS : (Millions* Percentage of Associations ASSETS (Millions) Under $1 14.5 425 15.0 3 $1 and under $5 18.9 3,874 37.5 44 $5 and under $10 17.3 8,158 30.0 85 $10 and under $25 25.4 24,806 7.5 36 $2 5 and under $50 12.4 25,945 5.0 60 $50 and under $100 6.7 27,747 5.0 105 Over $100 Total 4.8 71,207 100.0 162,162 0.0 100.0 333 17 As "of December 31, 1969 - 7 As of June 30, 1970 F-7 INFORMATION EXCHANGE The members of ASLL have common problems which are sel- dom shared by the average savings and loan institution. This has caused particular emphasis to be placed on an interchange of ideas and problem solutions among members. The ASLL, in addition to a joint convention with the USLL in November 1970, has acted as intermediary for member informational exchange through two publications, The League' s Ledger and a news- letter. • * T il£ League ' s Ledger is a monthly mailing, usually en- compassing two to four pages. There were months when it was not published prior to the move from Atlanta to Washington; there has been no publication during the move. The purpose of the Ledger is general information dissemination to members. Data in issues of the Ledger have included: a list of member associations, the ASLL by-laws and Articles of Incorporation, recommendations for improving the performance of savings and loan associations, and articles on black capitalism. NEW SAVINGS AND LOAN ASSOCIATIONS Although the ASLL is mainly directing its activities toward making the existing black savings and loan associa- tions viable institutions, it is also channeling some efforts into establishing new associations. Most of these efforts have been by individual members, who made the initial con- tact with prospective associations through ASLL. A report concerning prospective cities for new associa- tions was compiled by Dr. W. 0. Bryson, president of Advance Federal Savings and Loan Association and a teacher at Morgan State College in Baltimore. This report attempted to determine which cities could support black associations; the primary criterion was a minimum black population of Efforts have been made in areas with smaller black populations. ASLL cannot, by itself, establish an associa- tion; a group of concerned local individuals must be motivated m this direction before ASLL assistance can be effective. Several savings and loan associations have received as- istance after they started operations, but there is no evidence that ASLL has helped to establish any association. F-8 PUBLIC AWARENESS The results of ASLL's promotional activities have been largely restricted to professional circles. The ASLL has made USLL aware of the problems of black associations and enlisted USLL's assistance in training and other general areas. The ASLL has also been able to represent its member associations before the Federal Home Loan Bank Board, proba- bly with more efficacy than any individual member could achieve. NATIONAL INTERACTION The location of ASLL in Atlanta precluded close inter- action with the directors of many Federal agencies. It is expected that the move to Washington will permit closer relationships to be established with the Federal Home Loan Bank Board, EDA, the Office of Minority Business Enterprise, and other government agencies. The ASLL will also try to increase its effectiveness by developing working relationships with the USLL, the NSLL, various state leagues, and related professional societies, such as the Society of Real Estate Appraisers. There is little indication that contact has been established with any groups other than USLL and NSLL. F-9 III. SAVINGS AND LOAN ASSOCIATIONS UNIQUE PROBLEMS OF BLACK ASSOCIATIONS The ASLL members have a variety of problems, some of which are unique to black-oriented associations and others which are applicable to savings and loan institutions in general. These problems have been related by: Jesse Blayton president of Mutual Federal Savings and Loan Associa- tion in Atlanta and a member of the ASLL executive commit- tee; Harding Young, past consulting director of ASLL; William Fitzgerald, president of Independence Federal Savings and Loan Association in Washington; and Peter Zabriskie. Some of these problems are not relevant to all black as- sociations but are true in general. Average size of account - The average deposit in a black association is about $800 - 900. The average deposit in a savings and loan institution is about $2,900. This difference causes excessive administrative costs for black associations . Use of ass ociation as a checking account - Black people tend to have a higher frequency of deposits and withdrawals. This requires a higher ratio of cash-on-hand to deposits and increases administrative costs. g^aJLJglJ^g^ency ratio - The proportion of delinquent loans, m general, seems to be higher in black associations than m other associations. Collection problems - Either because of the higher delin- quency ratio, locational problems, or other conditions, there appears to be a higher cost and lower collection rate for black savings and loan institutions. Large associations locating in black areas - There is a general feeling that major associations are locating in the inner-city to accept deposits but not to make loans. Partially r>ecause of past biases of the USLL and its control over the location of savings and loan associations, virtually no black associations have located in predominantly white areas. A recent concordat between ASLL and USLL appears to have termina- ted botn these inequities. . , ,-? C *° f trained management - There is a great demand for skilled black people in the savings and loan field. The smaller size of black associations has limited their competi- tive ability to obtain or retain these individuals. F-10 Lack of confidence - Both the black and the white com- munities have a lack of confidence in the smaller, black as- sociations. This results in smaller deposits and a higher degree of effort to generate deposits. There is evidence of the ability of black associations, but they have not received the public's general acceptance. The Independence Federal Savings and Loan Association in Washington has loaned more than four million dollars in the inner-city. It has not had a single repossession or eviction. GENERAL PROBLEMS The above problems are those which are presently inherent in the operation of a black savings and loan association. The ASLL is attempting to eliminate or minimize most of them. In addition to these problems, there are certain restrictions which are related to savings and loan operations generally. Lending Restrictions Unlike commercial banks, savings and loan associations are primarily real estate investors because of government regulations* the majority of these investments are in mort- gage loans. According to a USLL representative, if 85 per- cent of an association's assets are in mortgages for one to four family homes, the other 15 percent can be placed in less constrained investments such as apartments and stores . A recent legislative change has recognized the role of savings and loan associations in community development and permits one percent of an association's assets to be put into a ser- vice corporation. This service corporation can buy property for investment, develop property, lend money to purchase household furnish- ings, and do other community-improvement related activities. ASLL members have expressed an interest in pooling assets to form larger service corporations than individually possible. Mail Deposits It is estimated that 7 5 percent of an association's deposits are by mail. This imposes some additional processing \^> O b l>b • F-ll Processing Government Lending Applications The emphasis of savings and loan institutions on family home mortgages has required a great degree of involvement with the Federal Housing Administration, Veterans Administra- tion and the Department of Housing and Urban Development's 235 and 236 programs. Applications for assistance under the respective programs may require as many as 52 forms. This necessitates both extensive administrative costs and, usually, a specially trained person to process the applications. F-12 IV, FEDERAL HOME LOAN BANK BOARD The Federal Home Loan Bank System serves as a source of secondary liquidity to its members, links mortgage lending institutions to capital through sales of consolidated obliga- tions, and acts as a stabilizer of residential construction and financing. The Federal Home Loan Bank Board (FHLBB) governs this svstem and the Federal Savings and Loan Insurance Corporation, and charters and regulates Federal savings and loan associations. Mr. Robert Sangster, director of the FHLBB' s Office of Housing and Urban Affairs, is in charge of approving charters for new or branch offices of savings and loans association to locate in the inner-city. Sangster plans to strengthen the management of black savings and loan associations. He feels the ASLL is needed to coordinate this and plans to work closely with the League. Although aware that the impacts of ASLL have been limited, Sangster indicated that USLL has done nothing to assist the inner-city. He feels that ASLL's move to Washington will help it realize its high potential and that EDA should increase its support to ASLL as a vote of confidence and to provide a longer planning horizon . F-i: APPENDIX G EVALUATION OF THE N ATIONAL INSURANCE _ASS OCIATIO N ( NIA) JULY 1971 ECONOMIC DEVELOPMENT ADMINISTRATION U.S. DEPARTMENT OF COMMERCE SECTION II III IV PAGE NO NATIONAL INSURANCE ASSOCIATION TABLE OF CONTENTS P HIGHLIGHTS AND RECOMMENDATIONS G-l Introduction G-l Status G-l Impacts G-l Recommendations and Conclusions G-3 INTRODUCTION G-6 Scope of Grants G-6' Scope of Evaluation G-ff INSURANCE HISTORY AND INFORMATION G-9 SUMMARY OF ACTIVITIES G-1.4 Development Corporation G-14 National Insurance Week G-15 National Service Month G-15 Annual Meetings G-15 NIA Convention G-15 Joint Conference G-I6 Home Office Mid-Year Conference G-16 Executive Seminar G-16 Institute for Agency Management G-16 Agency Officers ' Mid-Year Conference G-17 Publications G-17 Technical Assistance G-18 National Interaction G-18 Investment Pool G-19 SUMMARY OF IMPACTS G-20 Development Corporation G-*20 National Insurance Week G-20 National Service Month G-21 Annual Meetings G-21 Publications G-22 Technical Assistance • g-23 National Interaction G x 24 Investment Pool G-^24 G-i NATIONAL INSURANCE ASSOCIATION LIST OF EXHIBITS EXHIBIT PAGE NO, I SUMMARY OF IMPACTS G-2 II FUNDING OF NIA G-7 III LIFE INSURANCE IN FORCE G-ll IV DISTRIBUTION OF ASSETS G-ll G-ii HIGHLIGHTS AND RECOMMENDATIONS INTRODUCTION The National Insurance Association (NIA) was founded as the National Negro Insurance Association in 1921. The purpose of NIA is to act as a trade association for minority insurance companies. Total assets of the 43 member companies in 1969 were $4 37.9 million. In the same year, there were 1,820 insurance companies with total assets of $197,208 million in the United States. NIA members operate in 31 states, the District of Columbia, and the Virgin Islands. In June 196 8, NIA received a two-year $2 34,0 00 grant. The grant was extended for six months because all the funds were not expended during the original grant period. EDA's support was renewed in January 1971 through a two-year $151,000 grant. EDA is the sole source of grant support to NIA. STATUS The NIA office in Chicago and member companies in Chicago, New Orleans, Philadelphia, and Durham were visited. Dis- cussions were conducted with 13 companies, encompassing both home office and agency managements. Also, the American Life Convention, another insurance trade association, was visited. Activities of the NIA staff include technical assistance to members; national representation; distribution of technical information; training assistance; acting as a forum for dis- cussion of mutual problems and solutions; and promotion and maintenance of insurance sales. IMPACTS The NIA is a cohesive force among black insurance companies Meetings have catalyzed the exchange of ideas. However, most of the meetings and other programs have had mixed results. Impacts of the activities are summarized in Exhibit I. Benefits received by members are highly correlated with their degree of involvement in the program. The active members thought the programs were valuable. The members who did not like the program noted that they rarely interacted with NIA, although NIA had tried to begin a dialogue in the past. G-l Ten of the 43 NIA members have home offices in New Orleans. These companies have founded a very- active local association. The New Orleans members were generally more pleased with NIA than other members and indicated that they derived substantial benefits from the NIA program. EXHIBIT I. SUMMARY OF IMPACTS ACTIVITY Development Corporation National Insurance Week National Service Month Annual Meetings NIA Convention Joint Conference Home Office Con- ference Executive Seminar Institute of Agency Management Agency Officers 1 Conference Publications The PILOT H.O.M.E. National Interaction Investment Pool IMPACT Medium Medium- Low Medium Low High Medium Medium-Low Low Medium Medium High REMARKS In formative stage Most widely accepted program Emphasis should be changed Primarily social, but necessary New Most informative meeting New Too much covered Not very pertinent to needs Needs more substance Good, but only two issues published Wide industry acceptance and participation In discussion stage G-2 RECOMMENDATIONS AND CONCLUSIONS The conclusions of the report are presented to support the recommendations made below. EDA should continue to fund NIA through the current grant but not renew the grant . The NIA existed for more than forty years prior to EDA support. The purpose of the EDA grant was to increase NIA's activities and effectiveness. At the expiration of the current grant, EDA will have supported NIA for four and one-half years. The activities have met with mixed success. Many of the achievements are not significantly greater than prior to EDA support. A possible explanation of the mixed success is the broad scope of activities and the limited NIA staff size. The NIA is currently forming a development corporation which is expected to assume NIA's activities after expiration of the EDA grant. An act uary should be hired for the NIA staff , A majority of the small companies indicated a need for a consultant actuary. They do not need an actuary full-time , but stated that they could use his services periodically. This person should have the technical capabilities to remain abreast of the latest industry techniques and be able to convey them to the members. He should also be well informed about the unique problems of black insurance. An increase in travel funds would be required to adequately support the actuary. The original NIA staff, as conceived under the EDA grant, included an actuary. Limited funds for the actuary's salary restricted efforts to obtain a qualified individual. The position was not filled during the grant, which partially contributed to the fact that some funds were not used by the end of the initial grant period. If NIA cannot obtain additional funds elsewhere to hire an actuary, EDA should consider increasing its present grant for this purpose. Another possible alternative is to replace a staff member by an actuary or insurance accountant. G-3 More staff time should be devoted to teohnical assistance and less to organizing meetings and seminars . Most technical assistance received by NIA members is from other insurance companies . The recipients of this aid usually obtain the assistance through direct contact with other companies, not through NIA. However, several of the New Orleans companies indicated that NIA had been very helpful in arranging technical assistance. NIA meetings and seminars promote comraderie among mem- bers and are informative in varying degrees. However, too much staff time is spent organizing these meetings and seminars, with less time available for assisting members directly. The number and emphasis of the various annual meetings should be reviewed by NIA . Most of the meetings sponsored by NIA have had mixed results. Although helpful to members, many should be less social and more technical . The evaluation indicates that several meetings should be narrowed in scope or combined. The National Convention and the Home Office Mid-Year Conference were received better than most other meetings. It is too early to measure the effectiveness of NIA's Joint Conference or its Executive Seminar, both of which have been in existence for about two years. Particular st aff emphasis should be placed on financial informa - ti on and money management . A primary problem of members is the high liquidity re- quired by regulatory agencies and the limited investment oppor- tunities. The NIA is approaching part of this problem through the development corporation, which would purchase low yield investments from the members and free this capital for better alternatives. At the present time, however, not enough technical assistance or financial information is provided to members on a continuing basis. The NIA should improve communications with its members . There is considerable evidence that communication between NIA and its members has been weak. This problem seems parti- cularly acute for firms in places other than New Orleans or G-4 Chicago, although fairly weak communications were found with one Chicago firm. Officers of at least two member companies in large northeastern cities noted this lack of communication, and said that NIA is primarily oriented towards the problems and needs of southern conservative companies. The same two members did not know of some services offered by NIA, did not use other services, and did not generally maintain a close relationship with the association. G-5 I. INTRODUCTION SCOPE OF GRANTS The National Insurance Association was founded in 1921. The association hired its first permanent professional staff in 1952. The initial two-year $234,000 grant to NIA began in June 1968. The purpose of the grant was to expand the national staff in Chicago from a director and his secretary to a director, two associate directors, two assistant directors, an administrative assistant, and two secretaries. The staff supplement was to improve member investment capabilities, develop new means of producing income, analyze management problems, and assist in management training. Both EDA grants state that NIA members are uniquely suited to assist minority entrepreneurship. It should be noted that insurance companies basically can invest only in real estate or very high quality stocks and bonds. Investment in new businesses is prohibited. Revision of staff needs and other factors eliminated one assistant director position. This deletion and other measures left an unexpended sum which was used to extend the grant for six months through December 1970. A second two-year grant for $151,000 commenced in January 1971. It is subject to EDA's evaluation during the first year and possible alteration at the end of the year. Although the second EDA grant is smaller, NIA ! s in-kind contribution is larger than for the first grant. About two-thirds of the second EDA grant is designated for expenditure in the first year. The purpose of EDA's declining funding is to spur an increase in the grantee's degree of self-sufficiency. Approximately $25,000 of NIA's own annual grant contribu- tion comes from membership dues. Other sources of NIA's income include convention and conference registrations ($10,000 ■ $12,000); subscriptions to The Pilot and H.O.M.E. ($6,000); booth rentals at the NIA convention ($3,000) ; tuitions at the Institute for Agency Management ($4,000); the sale of promotional materials ($7,000); and voluntary contributions for the cooperative advertisement placed in Ebony ($7,000). Funding of NIA is summarized in Exhibit II. G-6 EXHIBIT II, FUNDING OF NIA PERIOD EDA FUNDS NIA FUNDS £/ TOTAL June 196 8 to December 19702/ January 1971 to December 1972 $235,000 $151,000 $162,000 $128,000 $397,000 $279,000 Total $386,000 $290,000 $676,000 1/ 2/ Estimated from NIA data, based on current income from its activities such as. the sale of promotional materials f membership dues,- and convention fees.. . 1 _ I! The first grant for" June 1968 to May- 1970 was extended six months becauser there wereiunexpend^d: funds at the end of the grant period. This extension is also reflected in the "NIA Funds." G-7 SCOPE OF EVALUATION At the direction of the Assistant Secretary for Economic Development, the Program Analysis Division of EDA is conducting a series of analyses of national technical assistance projects. The initial analyses were of organiza- tions providing direct assistance to minority members, such as loan advocacy activities. NIA, however, is a trade associa- tion serving companies in the insurance field. Field work was performed in the period April 26 to June 3, 1971. The companies visited were chosen as representative of the size and geographic dispersion of NIA members. During this period the teams visited: . Chicago ; NIA office; Supreme Life Insurance Company of America (Assets-$37 ,000 , 000 ; Contact-S.B. Robinson); Chicago Metropolitan Mutual Insurance Company (Assets- $25,000,000; Contact-A.M. Schweich) ; Agencies of Atlanta Life Insurance Company, Golden State Mutual Insurance Company and North Carolina Mutual Life Insurance Company. • Durham : Asa Spaulding, consultant and past president of NIA; and L.R. Taylor, president of NIA and actuary with North Carolina Mutual Life Insurance Company (Assets- $101,000,000) ; • New Orle ans : Progressive Industrial Life Insurance Company lAsset.s-lfl86 ,000 , Contact-Herman Dennis); Gertrude Geddes Willis Life Insurance Company (Assets-$1,000 ,000 , Contact- Irving C. Gayle) ; Peoples' Life Insurance Company of Louisiana (Assets-$3 ,900 ,000 , Contact-Benjamin J. Johnson); Good Citizens Life Insurance Company (Assets-$1 ,000 ,000, Contact-Mrs. C. Strode Cook); - Baton Rouge : Purple Shield Life Insurance Company (Assets-$430 ,000 , Contact-Homer J. Sheeler, Sr.); and . Philadelphia : Union Mutual Life, Health and Accident Insurance Company (Assets-$90 ,000 , Contact-Philip Pruitt) ; Provident Home Industrial Mutual Life Insurance Company (Assets-$2 ,300 ,000 , Contact-Edward W. Robinson). Additional information for this evaluation came from an interview with W. Lee Shields, director of the American Life Convention, another trade association; and an examination of Office of Technical Assistance files. G-8 II. INSURANCE HISTORY AND INFORMATION Most black insurance companies began as either mutual aid and fraternal societies or burial associations. The mutual aid and fraternal societies of American history were intended to aid runaway slaves, assist blacks with food and lodging , and begin commercial ventures. Burial associations were started by funeral parlors to guarantee funeral expenses. The mortuary would supply funeral services in exchange for a weekly stipend. Eventually, this burial insurance became a large part of the mortuary's business and was operated as a separate activity. There are three main types of life insurance: ordinary, industrial^ and group insurance. Ordinary insurance is characterized by relatively large policy amounts and monthly, semi-annual, or annual premiums. This type of insurance in- volves minimal administrative expense, particularly relative to the size of the policy. Ordinary insurance is most often acquired by persons whose incomes permit large premium payments. Industrial insurance policies have an average size of $500 - $1,0 00. Premiums are collected weekly and usually range between $0.25 and $1.00 per week. Industrial insurance is the only type sold by about two-thirds of the NIA companies and the predominant type sold by most of the other members. Industrial insurance has a high servicing cost and a high lapse rate., It is a successor to burial insurance and the only type of insurance which many of its purchasers can afford. A single group "policy" covers a number of individuals, frequently the employees of a company. It is usually a package containing both life and health insurance. Five NIA companies sell group insurance. Health insurance has not been very profitable and this has discouraged most companies from selling group insurance. Despite this constraint, group sales accounted for 13.4 percent of total NIA life insurance sales in 1969. Nationally, group sales accounted for 24.9 percent of all life insurance sales in 19 69. Group accident and health sales in 1969 ($29,356,353) accounted for more than 2 7 percent of total NIA member premium receipts ($107,099,988)= Although this aspect of group sales is basically unprofitable, premium income from accident and health was approximately 38 times that received from group life G-9 insurance . A large portion of the accident and health premiums are paid out shortly after receipt and, therefore, are not available for investment. The NIA is not actively trying to increase its members' group sales although it has, on occasion, contacted national black groups such as the Urban Coalition to try to acquire their group insurance business . The latest actuary's report to NIA, dated December 31, 1969, shows 43 members with total assets of about $438 million. In 1969, there were 1,820 life insurance companies in the United States, with total assets of $197,208 million. The average assets nationally ($108 million), therefore, were greater than those of the largest black company ($101 million) and more than ten times the average for black companies. The assets of the NIA members range from about $90,000 to slightly more than $100,000,000. Ten of the 43 members have assets of more than $10,000,000. Another 13 have assets between $1,000,000 and $10,000,000, so that half of the companies are exceedingly small. Ratios of insurance in force to assets range between three- and ten-.to-one. In 1920, black companies had one-twentieth of one percent of the industry's assets and about one-fifth of one percent of the insurance in force. In 1957, these figures were one- fourth of one percent of the industry's assets and three-tenths of one percent of the insurance in force. The percentages have steadily declined since 1957. Data on the current types of divestment by insurance companies, and the total life insurance in force, are presented in Exhibits III and IV, respectively. G-10 EXHIBIT III. LIFE INSURANCE IN FORCE (1969) TYPE NIA NATIONAL OF TOTAL NIA TOTAL NATIONAL INSURANCE (000,000) PERCENT (000,000) PERCENT Ordinary $ 920 37% $ 678,887 57% Industrial 1,346 52 38,614 3 Group 272 11 483,240 40 Total 1 $2,538 .., 100% $1,200,741 100% EXHIBIT IV, DISTRIBUTION OF ASSETS (196-9) TYPE NIA NATIONAL OF TOTAL NIA TOTAL NATIONAL INVESTMENT (000,000) PERCENT (000,000) PERCENT Bond s $244 56% $ 81,773 41% Stocks 24 6 13,707 7 Mortgage 10 7 24 72,027 37 Loans Real Estate 27 6 5,912 3 Policy Loans 12 3 13,825 7 Miscellane- 23 5 9,964 5 ous Assets Total $437 100% $197,208 100% G-ll Many of the problems faced by black insurance companies are similar to those faced by black savings and loan associations: . trained personnel have gone to work for the larger, white companies; . funds are not available for training, recruit- ing, and similar activities; . small size limits investment and profit oppor- tunities ; . product line involves high operating costs; and . the minority community often does not have the same confidence in them as in the larger, white companies . The turnover rate for agents in black insurance companies is estimated at 100 percent over a five year period. Immediately after passage of the Civil Rights Act of 1964, many white companies strenuously recruited trained blacks. This transfer of personnel has abated because of economic reasons, the growth of the black power movement, an awareness of limited oppor- tunities in the white companies, and satisfaction of legis- lative requirements . Although industrial insurance is expensive to administer, it is the only type within reach of much of the black community. Many companies engage in industrial sales because of the natural market and the need for this type of insurance. Estimates of the cost for a company to convert from industrial to ordinary insurance range from $250,000 by NIA to $30,000 by the NIA president who served as an actuarial consultant to a company which went through the conversion process. Costs involved in the conversion include development of actuarial tables, writing and printing of policies, and training of agents. One NIA member has evaded these costs, and part of the profits, by selling the ordinary policies of another, non-NIA company. While NIA activities have not been directed at insurance conversion or the retention of employees, they have had some impact on most of the other problems faced by black insurance companies. These activities are addressed in the following section. G-12 Insurance companies operate through two distinct entities: the home office and agencies. Several NIA members only have a home office, or headquarters. Most NIA company agencies are in black areas and sell industrial insurance to the local residents. The agency is supervised by an agency manager who has responsibility for the salesmen in his office. The agency manager often supplements his income by selling insurance. He receives direction from the agency officer in the home office. The agency officer is basically a vice-president in charge of agencies. The home office generally formulates company policy and performs most of the administrative work. NIA directives, mailings, and contacts are usually through the home office. However, the two NIA publications are also mailed directly to agencies. G-13 Ill, SUMMARY OF ACTIVITIES DEVELOPMENT CORPORATION Many NIA members invested in long-term, low-yield bonds during the last 5 to 15 years. Increasing interest rates and expenses have made these investments unprofitable, but they can only be sold at a loss. Recently, the NIA incorporated the National Insurance Development Corporation (NIDC) , whose goals include the purchase of these bonds to free members' capital for more lucrative investments. Current plans of the development corporation include an initial offering of $1 million in stock, half of which is voting stock, and $10 million in debentures. Another $6 million will be used for subordinated loans to member companies, at below market rates, for investment in either traditional markets or new opportunities. Part of the remain- ing funds ($1.5 million) will be invested by NIDC to provide for the corporation's growth, while the balance will be in a reserve for emergency use of the member companies. Since there will be $500,000 of voting stock, members can control the Corporation with a relatively small investment. The Corporation's return will be low. Therefore, an investment would be partially a contribution to economic development. Groups contacted for investment in the develop- ment corporation include the Ford Foundation , the New World Foundation, and the Cooperative Assistance Fund. NIA expects the staff hired under the EDA grant to become part of the Corporation's staff and for NIDC to continue providing the services now rendered by NIA. The NIDC was incorporated through C.T. Systems, a firm specializing in aid to incorporating groups. C.T. Systems supplied the incorporating officers, who will be replaced by NIA elected officers whenever the first NIDC corporate meeting is held. It is expected that H.A. Gilliam will be elected president and Charles Davis and Christopher Howard will be elected vice-presidents. Gilliam is Chairman of NIA's Development Corporation Task Force, a past president of NIA, and a member of the Board of Directors. Davis is the NIA executive director and Howard is a staff member. G-14 NATIONAL INSURANCE WEEK National Insurance Week was started in 1934. Originally titled National Negro Insurance Week , it was initiated by NIA to promote extra effort by salesmen in the member companies. Prizes , such as a trip to the NIA Convention, are often awarded to salesmen. A national goal for new sales is set by NIA and an award is given to the top salesman in the country. Another purpose of National Insurance Week is to publicize black insurance companies and their capabilities to compete with the white companies. A paid advertisement is placed in Ebony and public service announcements are obtained on local television and ratio stations by the member companies. The theme of this year's National Insurance Week is "Security Says It All." The NIA prepares promotional material on National Insurance Week and distributes it to home offices and agencies. There is a fee for this material. NATIONAL SERVICE MONTH Small industrial insurance policies are the main component of most member companies' insurance in force. These policies have a high lapse rate. National Service Month was instituted by NIA in 1945. It usually lasts for six weeks. During this period, salesmen try to collect premiums in advance, to rein- state lapsed policies, and make each policy current with respect to beneficiaries, addresses and other information. ANNUAL. MEETINGS The NIA sponsors a series of annual meetings. Some of these meetings are training oriented and others are directed at the exchange of information about mutual problems and their solutions These meetings are described below, N IA Convention Generally held during the summer, the convention averages between 300 and 350 attendees. The convention brings members up to date on the state of the industry. Sessions at the convention are divided into agency, home office, and general sections, with speakers and panel discussions at each one. There is an exhibition hall at the conven- tion where exhibitors pay to show their merchandise. Session speakers are experts from member companies, other trade associations , Federal and state agencies, and other G-15 groups related to NIA. Keynote speakers at past' conventions have included the Reverend Martin Luther King, Jr., Senator Edward Brooke, the Reverend Leon Sullivan, James Farmer, Senator Robert Kennedy, and Senator Jacob Javits. Joint Conference The NIA met in January 1970 and January 1971 with representatives of the Institute of Life Insurance (ILI) and the American Life Convention (ALC) , two major insurance trade associations. Through this joint conference, ILI and ALC have solicited the assistance of many of the larger white insurance companies to help NIA members. Fifty-three companies throughout the country have offered free assistance in home office and field training as well as technical advice. Home Office Mid-Year Conference This conference focuses on home office problems and on subjects such as investment opportunities, which are pertinent to home office management. Subjects discussed have included NIA's development corporation, sources of Federal financial and training assistance, reinsurance, taxes, data processing, and group insurance. Attendance averages between 50 and 55 people. Each year the location is changed to permit most people to easily attend at some time . Executive Seminar NIA has initiated an executive seminar for company presidents and their main subordinate. This seminar, started after the EDA grant, has met twice. Patterned after a similar program of the American Life Convention, the presidents discuss subjects which they would not normally discuss with their other staff members, such as succession and executive compensation. Many company presidents do not wish to publicly state their problems, although they feel freer among their peers. Institute in Agency Management The institute is a two-week training program for agency managers. The Institute was started in 1955. In 1970, emphasis was changed from sales to management skills. G-16 Topics taught at the Institute include supervision and fiscal planning. Basic materials for the program are provided by the Life Insurance Agency Management Association (LIAMA) . The Institute is held at a black college and, periodically, the location is changed. In 1970 the Institute, held at North Carolina Central University, was attended by 22 men representing 12 companies. The material is taught by member agency officials, most of whom are certified life underwriters. Although there was a two hundred dollar fee per student in 1970, the program operated at a deficit, as usual. Agency Officers' Mid-Year Conference This conference is mainly attended by agency managers and is directed at improving their grasp of the insurance industry and the black position within it. Normally convened in March, the central themes of the past two conferences have been "Recapturing the Black Market" and "New Dimensions in Agency Management", respectively. The three-day conference averages between 50 and 55 attendees and is moved each year to permit attendance by local agency managers, most of whom have limited travel budgets. Some hiring is done at this conference. There are approximately 50 agencies among the NIA members. PTOLICATIONS The NIA publishes The Pilot , on a semi-monthly basis r and H » O „ M . E . {Home Office Management Essays), on a quarterly basis. The Pilot, first published in 1951, was expanded from the original quarterly schedule to a semi-monthly one in April 1968 This expansion, immediately prior to the EDA grant, occurred during negotiations with EDA and with full anticipation of an increased staff. The Pilot is directed at agency personnel and usually contains information on conventions attended by the NIA staff, notes about the accomplishments of various member company employees, articles on management and incentives, and information on past and future NIA activities and meetings. The initial issue of H.O.M.E. was published in December 1970, The second issue is dated March 1971. The purpose of H.O .M.E ,. is to assist the home office management to function effectively. H . Q * M . E . includes articles on current events affecting insurance management, and articles by NIA standing committees on subjects such as company income tax, reinsurance, urban affairs,, and planning and financial development. G-17 TECHNICAL ASSISTANCE The NIA staff members have varied backgrounds, including public relations, insurance agency management, and accounting. Their technical backgrounds are used as a resource by the NIA members, particularly the smaller companies which have very limited home office staffs. The entire NIA staff averages one trip per month, although several members may be visited on a single trip. The purpose of these trips is to provide or obtain assistance for members, and to arrange NIA sponsored meetings. Because of the geographical dispersion of NIA members and the limited financial expertise of the NIA staff, assistance also is provided through paid and volunteer consultants, the larger NIA companies and several non-NIA companies. NIA's methods of providing assistance are particularly valuable because many small member companies , fearing attempts at acquisition, distrust any offer of aid by the larger members. This distrust is allayed by NIA and other outside consultants. NATIONAL INTERACTION The NIA represents its members to other insurance trade associations and before the Federal government. Attendance at various trade conventions, such as those sponsored by the Life Insurance Agency Management Association, the Institute of Life Insurance, and the Life Insurance Association of America exposes these groups to the black point of view and updates the staff on current insurance techniques. These techniques are then made available to members. Attendance at the National Business League and National Bankers Association conventions engenders a comraderie among black associations. The conventions are summarized in The Pilot . The NIA also assists legislatively oriented groups, such as the American Life Convention, in seeking favorable legisla- tion. Particular assistance is rendered in contacting black congressmen. Current efforts are being directed against national health bills with the expectation that, if passed, they would eliminate private health insurance. Support of NIA was voiced by President Nixon in a meeting with NIA members on July 15, 1970. G-18 INVESTMENT POOL Many NIA companies have limited funds for investment. This limitation precludes investment in very large, high- return ventures such as construction and ownership of shopping centers. The NIA staff feels that there may be a need for pooling of funds to take advantage of the higher returns available from larger investments. The pool could be used in coordination with some of the larger insurance companies. Several NIA companies already participate in such ventures with larger, white companies. The investment pool has not proceeded beyond discussions at the staff level, although it may become significant in the future. The NIA estimates that between 50 and 60 percent of past member investments have been in government securities, about 35 percent in first mortgages , and the remainder in blue chip and preferred stocks. Most of the first mortgages are in the inner city and they have declined in value in recent years. G-19 IV, SUMMARY OF IMPACTS DEVELOPMENT CORPORATION The NIA development corporation is a worthy concept. There is a need for a self-supporting organization to continue NIA's activities at the current level. The smaller members would also benefit from the corporation's purchase of their low interest investments. One NIA member, Victory Mutual Life Insurance Company, failed several years ago because of liquidity problems. The state insurance authorities were willing to let the firm continue operations if NIA supplied the. necessary funds. NIA was not able to supply cash at that time. Possibly, the existence of the development corporation would have prevented the failure. Although NIA has emphasized the need for such a corpora- tion, it appears that the larger members are not very interested They do not wish to invest in a firm to purchase low-interest obligations. Without the support of these larger companies, NIA has little probability of acquiring substantial member or outside assistance. NATION AL I NSURANCE WEEK National Insurance Week is the major annual sales thrust for many of the NIA members. Several companies, particularly in New Orleans, have expressed great satisfaction with this sales impetus. They feel that a large portion of their annual sales are generated by this promotion and that NIA is helping to educate the public on the abilities of black insurance firms. One New Orleans member noted that last years' sales during National Insurance Week were $1,400, compared with average weekly sales of between $150 and $200. Another view of National Insurance Week, expressed by NIA president L.R. Taylor and several others, is that it is merely a weekly sales talk and it is basically _ ineffective . Reasons for the latter viewpoint include: to win prizes salesmen write policies for Insurance Week and the previous week with the same dates, or they write insurance but never collect premiums. Most companies are interested more in consistency than an annual flourish of activity, and many policies result from high pressure salesmanship and are dropped G-20 the following week. Taylor feels the award should be post- poned a year and given at the following NIA convention based on new sales that were retained. The two opposing viewpoints express differing experiences with National Insurance Week. Both groups concur that NIA works diligently on the promotion. There are indications that NIA's efforts would be more helpful if they were concentrated on educating the public rather than on sales promotion. It is generally accepted that only about ten percent of the insurance held by blacks was sold by black companies. NATIONAL SERVICE MONTH National Service Month is another program which has had mixed results. Several companies feel that the timing (near Christmas) is good and that the formal impetus to collect weekly premiums is successful. The opposing viewpoing is similar to that expressed about National Insurance Week. The single month of follow-up and persistence is insufficient; if the salesman is not persistent throughout the year, the insurance will lapse immediately after National Service Month. If the salesman is persistent, this particular campaign is irrelevant. ANNUAL M EETINGS Most persons interviewed felt that a primary benefit of NIA was the fellowship fostered among black insurance companies. The NIA Annual Convention is the single meeting which all members can, and usually do, attend. It provides a forum for the exchange of ideas and is necessary for the survival and success of NIA. Although the direct assistance provided by the convention is limited, it is a necessary function. The Joint Conference has had only two meetings, NIA provided the initial impetus for the Conference. However, many of the NIA members have little knowledge of the Joint Conference. There are several instances where ideas generated by the conference have been implemented with success, but no direct assistance has been provided. This lack of achievement has led to some disenchantment; but the Joint Conference remains a very promising program. It is doubtful that the presidents of many of the nation's largest insurance companies would waste time in an effort to which they were not dedicated. A primary benefit of the conference is likely to be assistance to the large NIA members from the still larger, white insurance companies G-21 The Home Office Mid-Year Conference was the most praised training meeting conducted by NIA. Members liked the rele- vance and pragmatic approach of the meeting. Since most company decisions are made at the home office, this meeting is a very important forum. The Executive Seminar, although only two years old, has been well received. Attendees liked the freedom of dis- cussion and felt that a great deal of worthwhile information had been exchanged. There is some problem in trying to get company presidents to attend a seminar for several days, but attendance is improving and this trend is expected to continue. The Institute for Agency Management includes too much material for a two-week period. The Institute's curriculum is too broad to permit concentration on important issues. Members felt that the Institute helps agency efficiency and improves planning. Those agency managers who attended felt the work- load was unrealistic, although the subject matter was good. The Agency Officers' Mid-Year Conference has not assisted the officers in efficiently running the branches. This train- ing is greatly needed. Most agency officers have been pro- moted from agency managers and do not have a broad knowledge of management practices. PUBLICATIONS The Pilot and H.O.M.E . have been received with differing reactions by NIA members. Although several members expressed interest in The Pilot 's personal notes and brief resumes of conventions, the general feeling was that it was not substantive While directed at agency personnel, The Pilot 's scope is too broad, and information to assist agency people is too sparse. Th e Pilot provides indications of relative employee success by reporting the achievements of member personnel. However, it appears that The Pilot 's quality has improved during the EDA grant because of the expanded NIA staff. T ^ e H.O.M.E. , designed for home office distribution, deals with many of the substantive issues confronting insurance management. Reactions to H.O.M.E. are limited because there have been only two issues. , Those members who were familiar with the publication were quite impressed. G-22 TECHNICAL ASSISTANCE The amount and value of technical assistance received by the NIA members has varied greatly. NIA staff visits have averaged about one per month during the period of the grant. Visits have been to all areas of the country and en- compass such problems as reinsurance, retention of agents, and tax sheltered annuities. While several members acknowledged having received NIA assistance, most members contacted indicated they had not. Most of the assistance received by members has come from other insurance companies which were directly contacted by the recipient of the aid. In a few cases, this assistance had been arranged by NIA. A constraining factor on assistance by member NIA companies is the implied distrust by the small members of the larger ones. Small companies often feel that the larger members are looking for acquisitions and, therefore, they are cautious about accepting assistance. More confidence is placed in the NIA staff, consultants, and white companies. The NIA president, L.R. Taylor, is universally praised and often contacted to help secure assistance from the NIA staff or member companies. Those companies which received direct NIA staff assistance, primarily in New Orleans, were laudatory. These instances were few. This may be because of limited staff time or limited staff capabilities}/ : . .- Another problem NIA encounters is that many companies will not come to them until the problem is intense. The reason is" usually a combination of pride and secrecy about operations. This problem will only be solved by obtaining the complete trust of all members or periodically checking with each member. The former seems unlikely because NIA has not obtained such trust after fifty years of operation; the latter requires a change in NIA policy. Present policy is to render assistance only when it is requested. The NIA has a library which members can use. The library consists of the journals of other trade associations, articles from other sources, and books relevant to various aspects of the insurance field. The library has very limited use outside of the NIA office. Most members, although they may have a use for it, are not aware that the library exists or what it contains . G-23 NATIONAL INTERACTION The NIA has been well received by the other trade associations. These associations recognize the need for a black-oriented group whose members share certain unique problems, and through which blacks can discuss their problems more freely. The NIA receives and reviews most trade publi- cations for its members. Life Insurance Agency Management Association (LIAMA) training materials are used by NIA for some of its sessions. The NIA was also able to obtain space for four NIA members at LIAMA' s two-week training institute at Hartford, Connecticut, although these companies were not LIAMA members. Interactions with other groups at con- ventions and the Joint Conferences also appear to be generally fruitful. INVESTMENT POOL The Investment Pool is another worthwhile concept. A 1969 NIA study indicated, however, that NIA did not possess the investment and management capabilities to pursue the matter further at that time. There is little indication that the situation has changed, particularly since the NIA staff has not changed. The larger members have similar reservations about the investment pool as they have about the development corporation. G-24 PENN STATE UNIVERSITY LIBRARIES ADDDD7D 1 M2DE