Sunday, November 10, 2019
Post Katrina Business Recovery Essay
CDFIs            Stand for community development financial institutions. These are unique financial institution in that they provide funding to the low-income bracket that is otherwise ignored by the mainstream financial institutions. They are privately owned by the local community and have an aim to make profit. However, their emphasis on profit making is subject to benefits to local community. They provide funds for rebuilding businesses and housing especially in disaster hit areas. CDFIs include community development banks, community development trade unions, community development loans funds micro enterprises funds, community development venture funds, and community development corporation-based lenders and investors (www.cdfiorg,2007)            CDFIs are quite useful in helping people who have lost investments in disasters rebuild. Small businesses that were destroyed by Hurricane Katrina in the Gulf Coast could get funding to rebuild from CDFIs. CDFIs form a channel for the disinvested people to make new investments or rebuild their old investments. They can also offer advice and financial know-how to the borrowers and assist them stabilize and repay the loans. Finally, they offer other banking services that the low-income community requires (Mascarenhas, Prianjalo, 2006). CDFIs are most effective because they do not require the traditional securities from borrowers and have flexible rules of engagement with clients to help both parties achieve their objectives. The low collateral makes funds easily accessible to the community members rebuilding their business from the disaster. The private sector can come in to invest in CDFIs and provide additional capital. This gives the CDFI greater coverage and flexibility. The CDFIs will bridge the gap between the un-banked disaster victims and the traditional banking system. Tax credits            Tax credits provide a taxpayer a tax savings and in effect raise the personal of business income. Tax credits unlike tax deduction reduce the tax payable rather than the taxable income. The federal or state governments apply them to encourage a certain investment program and to achieve an overall social goal. They integrate social awareness in business investment decisions in the private sector. (Laws, Forrest, 2007). In the Katrina recovery program, tax credits would be useful in encouraging investment the Gulf Coast. The Coast became hostile to investment due to the hurricane damage and the resultant poverty levels. Such tax credits would also be useful when extended to disinvested people trying to restart their business in that region. They do not have to pay full taxes while their businesses are struggling to regain profitability. The tax credits can be based on and expense such as wage bill to boost employment and the society achieves a double bottom line. Such tax credits are also effective when they actually make the disaster-hit area more appealing to investor over other investment destinations (Seck, Kathyrn 2007). Tax credits may help businesses break even stay afloat in a harsh business environment. Tax credits also ensure enough cash is available to run operations. Guaranteed loans and bonds            They are loans provided by the private sector to borrowers whose businesses were affected or destroyed by a disaster for which the federal or state government provides partial guarantee in case of default. These loans target small businesses that fit in within a certain criteria provided when such a program is set up. The amount loaned out must also be in tandem with the number of employees. These loans are effective if the interest rates charged are reasonable to enhance accessibility by the borrowers. These loans provide necessary cash to run operations of the businesses (www.doa.louisiana.gov.2006) Business improvement districts            This is an initiative taken by business taken by business people and property owners within a given urban area to payout extra taxes or fees in return for specified services within that area. The fees are paid to a local authority, which in turns provides the services such services may include: additional security, enhanced clean-ups, or public lighting. The private sector group involved demands the services that transform the target area in to an attractive destination either for investment or for consumptions. One of the advantages is that BIDs direct private sector enthusiasm to improve on the business environment. They also enable the private sector to make their own priorities in the public services they need. The private sector also directly benefits from the contracts to provide such services. BIDs also ensure constant cash flow contributed by all beneficiaries from which the services are provided. Contributions are mandatory to all. (Stokes, R. 2006)            On the other hand BIDs may impose excessive fees that may not be unanimous to all but the majority may push through their figure. BIDs may also benefit the members unevenly in spite of ratio of contribution made. BIDs provide such services as refurbishment of disaster urban area. The local business community and property owners will with local authority to join rehabilitate the damage infrastructure. They will also be in involved in lighting up the public areas and provision of social services. The BIDs will also enhance security in the recovery period finally they will regain their market segment through aggressive sales promotion both locally and nationwide.( Mitchell, Jerry, 1999.)            BIDs required professional management that is able to evaluate various ideas and provide a systematic way of achieving them. The management should be accountable to all members providing as report of low the funds have been utilized. BIDs on formation should provide a clear appraisal methodology to check on whether the laid down goals are met. Tax investment financial district            This is a local authority initiative that involves identifying of a particular area in a city and enhancing private sector investment in that area through channeling of tax increment to fund the initiative. The city issue bonds to raise funds for providing incentives in the specified district. Such incentives could be road network on institution or a toxic waste removal. These incentives rebuild the district appeal to investors and the property prices go up. The higher property prices expand the taxable property income and consequently, the property taxes. The authority then channels the tax increment caused by the redevelopment in to a special fund, which bay the bonds. The city sets the boundaries for district and uses the taxable income of the plan as the base. TIFs runs for a specified period after which the tax freeze is lifted and property owners can profit from the redevelopment. (Michael, Joel, 2006) TIFs are advantageous in that they promote investment in area where the private sector had shunned and was disinvesting. They ensure balanced growth through out the city without some parts lagging for behind. Tax revenues are also not diverted from other areas of the city to promote investment in a particular district. However TIFs may lead to displacement of low-income earners by the rich one the district is improved the poor are pushed to poorer areas of the city.( Tyler, Norm, 2007)            TIFs will finance such development as: restoration public infrastructure, utilities, rehabilitation parks and side walks, lighting up of the districts and provision of parking facilities in the disaster-hit towns of the gulf coast. When these services are provided, the private sector will find the cities to be more appealing to private sector. However, the authorities need to carry out a detailed study in the viability of the program and in setting up the boundaries of the district. Public expenditure should go to project that would stimulate private sector growth raise property prices taxes. (Eathington, Liesl, and David Swenson, 2002)  References:  Seck, Kathyrn, 2007. Landrieu Introduces Gulf Coast Small Business Recovery Package. US Senate Committee on Small Businesses & Entrepreneurship. Retrieved On 11/30/07 from http://sbc.senate.gov/record.cfm?id=269054 Coalition of CDFI, 2007. What are CFDIs? Retrieved On 11/30/07 from http://64.233.169.104/search?q=cache:OraXP0FLmrkJ:www.cdfi.org/whatare.asp+CDFI&hl=en&ct=clnk&cd=4&gl=ke Prinjali, Mascarenhas, 2006. Groups Investing In Katrina-Torn Gulf Region. Washington DC. Retrieved On 11/30/07 from http://www.socialinvest.org/news/releases/pressrelease.cfm?id=55 Laws, Forrest, 2007. Baucus: Permanent Disaster Fund, Tax Credits To Ease Budget Crunch. Farm press. Retrieved On 11/30/07 from http://deltafarmpress.com/farmbill/070914-Tax-Package/ Louisiana Office of Community Development; Disaster Recovery Unit, 2006. Long Term Recovery Loan Guarantee Program: Proposed Guidelines. Retrieved On 11/30/07 from http://www.doa.louisiana.gov/cdbg/dr/ed/Proposed-LTRLP-Guidelines-06_11_27.pdf Mitchell, Jerry, 1999. Business Improvement Districts and Innovative Security Delivery. Retrieved On 11/30/07 from http://www.businessofgovernment.org/pdfs/Mitchell.pdf Tyler, Norm, 2007. Tax Increment Financing. Downtown Revitalization. . Retrieved On 11/30/07 from http://www.emich.edu/public/geo/557book/d232.tif.html Eathington, Liesl, and David Swenson, 2002. Do Tax Increment Finance Districts in Iowa Spur Regional Economic and Demographic Growth? Department of Economics. Iowa State University. Retrieved On 11/30/07 from http://www.econ.iastate.edu/research/webpapers/paper_4094_N0138.pdf Stokes, R. 2006. Business Improvement Districts and Inner City Revitalization: The Case Of Philadelphia’s Frankford Special Services District. International Journal of Public Administration, Volume 29, Issue 1 – 3 January 2006. Michael, Joel, 2006. Tax Increment Financing. Minnesota House of Representatives. Retrieved On 11/30/07 from http://www.house.leg.state.mn.us/hrd/issinfo/sstif.htm
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