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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
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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
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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
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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.
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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 .
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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.
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PENN STATE UNIVERSITY LIBRARIES
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