IRVINE : Council Rejects Involvement in HUD Small-Business Loan Program

The City Council gave a unanimous thumbs down Tuesday night to a loan program that would have provided $500,000 in federal money to small businesses.

Before voting, council members worried aloud that the Chamber of Commerce-endorsed program would put the city in the uncomfortable position of picking “winners and losers” among loan applicants and foreclosing on businesses that fail.

“It just seems like government would be getting into a business they shouldn’t be getting into,” Mayor Michael Ward said. “I think it would end up being a big mess.”

A representative from the Department of Housing and Urban Development tried to assure council members Tuesday night that Costa Mesa, Los Angeles and a number of other cities have successfully administered the program at no financial risk. The community development block grants funding the program are distributed by HUD.

But most council members balked at the city government’s overseeing business loans.

Councilwoman Paula Werner said $100,000 in HUD funds would still be available in grants for capital programs for city social service agencies. She said the money could be used to purchase an additional residential unit for Irvine Temporary Housing, a nonprofit agency that houses families for up to six months.

The city’s finance commission had approved the small-business loan program as part of a larger business-incentives package, which includes funding to encourage businesses to locate in Irvine and a bank-guaranteed bond program that would offer $1-million to $10-million business loans.

The council will discuss the remainder of the business-incentives package at its next regular meeting on Sept. 27.