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Potsdam plans dissolution of Community Development Corporation

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POTSDAM - The village Community Development Corporation will likely dissolve in the coming months in order to bypass stringent state regulations.

Village leaders are in talks with the North Country Housing Council, a nonprofit organization that may take over the corporation’s duties.

The corporation loans village money to local businesses in order to spur economic development.

State law forbids the village from lending money directly to private entities. Instead, the village loans money to the Community Development Corporation, which is staffed by a board of volunteers, which in turn can lend the funs to businesses in need. This model is used by many small governments.

Only three such loans have been issued so far this year, although before the recession six to eight loans would be issued annually, according to Potsdam Planning and Development Director Frederick J. Hanss. Businesses receive about $25,000 on average, although the amount can vary widely based on the need.

These loans have gone to Potsdam businesses like Jernabi Coffee, Potsdam Specialty Paper and Village Wines and Liquors in recent years. They are used to support businesses that would otherwise have difficulty garnering funds from private sources.

“The vast majority of people who borrow money from us have repaid us,” Mr. Hanss said.

The problem stems from the Public Authority Accountability Act, a 2005 state law created to battle corruption allegations at large public entities like the state Canal Corporation. The law calls for regular audits and for annual training of those who work for public authorities. The same law applies to large and small entities, including the Community Development Corporation, which has made things difficult for small government bodies.

“They have reporting requirements that are onerous to say the least,” said village Administrator David H. Fenton.

The annual audit costs Potsdam $2,500 a year.

These costs and restrictions get in the way of the village distributing loans to those that need them, Mr. Fenton said. In order to avert these regulations, Potsdam leaders are looking for a new way to loan funds to small businesses.

“As soon as we find an alternate method of doing this, I think we will dissolve the CDC,” Mr. Fenton said.

The village is in the early stages of discussion with the North Country Housing Council, a private, not-for-profit Canton organization that would not be subject to the Public Authority Accountability Act’s stringent reporting requirements.

If the council agrees to take over the duties of the Community Development Corporation, Potsdam will pay it an annual fee, and loan money to the council which in turn will be loaned to Potsdam business owners.

Whether the housing council takes over or another option is found, the Community Development Corporation will likely be dissolved early next year, Mr. Fenton said.

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