Helping Homebuyers, Small Business

A Lifeline During COVID-19

By Jay Gonzales

A little-known financial assistance program in Tucson has the funding and heart to help those in need of a loan for a small business, a down payment or the chance to buy a first-time home.

The Tucson Industrial Development Authority is a self-funded corporation set up in 1979 by a City of Tucson resolution to provide monetary assistance in three areas – first-time homebuyers, small businesses with capital needs and large projects eligible for bond financing.

With a volunteer board of local business leaders, the IDA can make loans on its own and participate with other organizations, such as the local Business Development Finance Corporation and the Pima County IDA to make its money go even farther.

During the COVID-19 pandemic alone, the Tucson IDA has already doled out $1 million in loan help.

“We were trying to be ready in different ways when all this started,” said Patricia Schwabe, an IDA board member and small business owner. “I think we’re able to jump fast – faster than other organizations to make decisions to be able to support small businesses in the community.”

An initial $500,000 earlier this year went directly into the paycheck protection loan program administered by the City of Tucson to help small businesses avoid layoffs and stay in business during the pandemic. Simultaneously, the IDA froze loan payments for businesses with existing loans from the corporation, infused another $500,000 into the loan program and participated in the Downtown Tucson Partnership’s Gift Card Incentive Program to aid downtown businesses.

The timely pandemic assistance is just a small example of what the IDA can do with the funds it generates through its loan programs, at no cost to taxpayers. The IDA receives no public funds, grants or donations. Funding for its loans comes from revenue the IDA draws from loans and services in its portfolio. Proceeds go right back into more loans for businesses and individuals without access to capital.

“Sometimes these businesses don’t have that relationship with a commercial banker,” Schwabe said. “They don’t have a history with their business. It might be a new business.”

“Our priority is women-owned, minority-owned, veteran-owned enterprises in target areas that the city has deemed a priority for them,” said IDA President Larry Lucero, one of the board’s six volunteers. “Downtown is one, but we also have other parts of the community where we need to focus our attention. They really don’t have access to the regular banking system, so we fit right into that niche.”

While the IDA is there for small businesses – it has 19 loans currently in its portfolio – the main focus of the organization is assisting first-time homebuyers and providing capital for affordable housing.

“The three functions of the IDA are pretty cut and dried, but historically, the Tucson IDA has focused on affordable housing. Period. End of discussion,” Lucero said. “By affordable housing, we’re talking everything from A to Z in affordable housing.”

That includes funding for affordable multi-family housing – apartments – for the general workforce and for seniors. Funding also helps the first-time homebuyer, primarily with a program that cuts the time a buyer must save for the substantial down payment needed on homes with a median price over $300,000 for new and about $225,000 for resale.

The down payment assistance program essentially loans the down payment – up to 6% of the home loan amount – to the buyer, but the buyer doesn’t have to make loan payments, said Karen Valdez, a BDFC program manager and IDA adviser. If the buyer keeps and lives in the home for three years, the loan is 100% forgiven. A maximum income of $109,000 is required to qualify. 

The tax credit program gives the buyer up to a $2,000 tax credit per year for as long as they live in the home. The credit is available for households with income up to $72,000 and can be up to 40% of the yearly mortgage interest paid, capped at $2,000.

The Tucson IDA is a particular win for young professionals who move here, especially post-COVID-19 – a handy recruitment tool for businesses trying to attract them.

“The majority of the borrowers are single, right out of college,” Valdez said, noting that the youngest person to use the program to buy a house was single and 22. “It’s perfect because their income is at a level where it’s going to grow. The income limits are for qualifying only. Once you’re in the program and if your income is now outside of that limit, you don’t get kicked out.”

In its long history, the Tucson IDA has also managed to avoid defaults in providing loans to businesses and individuals not traditionally viewed as low risk, Lucero said. Since 1979, only two loans have defaulted–one individual and one business.

“We have a high level of confidence that these (individuals and businesses) are going to be successful and this is going to help them get there,” Lucero said. “It’s interesting to note that these people are not considered by a regular bank because of their size or maybe because they’re a startup.

“But then, you meet with them and connect all those dots and you come to the conclusion that these people are as bankable as anybody else, yet nobody wanted to take the risk. And so, the IDA and the BDFC step in and play that role, which the mayor and council of the city of Tucson have seen as an absolutely valuable tool.”

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