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Funds in a Revolving Loan Fund Controlled by Erie County Have Been Stuck in a Game of Tug-of-War Between The Fed Economic Development Admin & Dept. Of Housing And Urban Development For Over 10 Years; That Federal Dispute Has Prevented Erie County from Using Their Portion for Critical Economic Development Projects, Like Redeveloping Bethlehem Steel Site 

Schumer Says Erie County Has Ready-to-Go Projects Like Improving Utility Lines, Building Access Roads, and Demolishing Buildings that Could Bring New Jobs to Bethlehem Steel Site, But Those Projects are Stalled Until the Federal Agencies Unfreeze the Funding; Senator Pushes Agencies to Release Funds ASAP  

Schumer: Unlocking Frozen Federal Funds is Key to Energize Redevelopment at Beth Steel 

U.S. Senator Charles E. Schumer today urged the U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of Commerce’s Economic Development Administration (EDA) to work together to unlock significant funding – now frozen due to a tug-of-war between the agencies -- that would allow Erie County to jumpstart critical local economic development projects. Schumer explained that, since 2005, Erie County officials have been unable to fully utilize money they invested in the Regional Development Corporation (RDC) Revolving Loan Fund because of a bureaucratic dispute between HUD and the EDA. Schumer explained that both HUD and EDA have claimed their agencies’ rules should apply to how the funds are spent, and because each agencies rules are different, Erie County has not been able to utilize the funds Because the $4 million in funds have been in dispute for over 10 years, Erie County has been unable to withdrawal their portion of the and use it for key projects like redeveloping Bethlehem Steel.   

“A mindless bureaucratic tug-of-war between federal agencies is preventing Erie County from using these frozen federal funds to energize potential job-creating development projects like redeveloping the dormant Bethlehem Steel site. That is why I am strongly urging EDA and HUD to get over it and resolve their differences ASAP – so we can to create jobs and revitalize Western New York,” said Schumer. “The redevelopment of the former Bethlehem Steel Site – which could bring good-paying local manufacturing jobs back to Buffalo – has been stuck in the muck of federal bureaucracy for years now. This is unacceptable and is threatening local economic development.”

Schumer explained that in 1979, Erie County established the RDC Revolving Loan Fund to make loans to businesses and support local economic development. This fund is a combination of federal and local money that would be loaned to businesses for various purposes. The businesses who benefited early on paid back their loans to the loan fund with interest, increasing the fund and its ability to make loans to other businesses. The fund originally included $7 million in EDA funds, and $4 million in funding from Erie County and the City of Buffalo that they originally received from HUD.

Over time HUD has changed its interpretation of its own rules and now claims that the Erie County and City of Buffalo contribution to the fund is actually HUD money and is therefore subject to HUD rules. The result of that interpretation is that the funds in the Revolving Loan Fund are now subject to the requirements of both HUD and EDA. These two different sets of requirements have greatly reduced the effectiveness of the fund and its ability to grant loans, and have rendered both the EDA funds and the local funds virtually useless.

Given the importance of this funding, and that this dispute not only prevents projects from moving forward but also results in tax payer dollars not being used for their intended purpose Senator Schumer is proposing a two-pronged effort to resolve the differences between the EDA, HUD and Erie County. First, Schumer is asking the EDA to allow Erie County to withdraw the $4 million in HUD funds plus interest from the loan fund. The money could then be repurposed to pay for development projects at the Bethlehem Steel site. Both HUD and EDA would need to agree to this solution. Second, Schumer urged the EDA and HUD to resolve the outstanding regulatory issues with the fund to ensure it can get back to its original purpose of helping fund local economic development projects. Schumer said local economic development efforts should not have to suffer over bureaucratic red tape that has existed for decades between these agencies.

By agreeing to allow Erie County to withdraw the money, Schumer said the projects at the Bethlehem Steel site can get underway. In addition, creating a streamlined regulatory process for the Revolving Loan Fund will ensure it will help local businesses to create jobs and help Erie County attract new businesses for future projects and years to come.

Schumer said Erie County has plans for infrastructure improvements to 1,000 acres of property at the former site of Bethlehem Steel, and the $4 million in funds plus the interest it has generated could be used for this purpose. This land requires upgrades such as improved utility lines and access roads, building demolition and environmental remediation. However, in order for that to happen, HUD and the EDA must work together to resolve the outstanding regulatory issues that has left these millions of dollars untouched, which is why Senator Schumer is urging the agencies to take action. Schumer said releasing these funds could unlock potential to attract a developer to the Bethlehem Steele site, and create good-paying local manufacturing jobs. 

A copy of Senator Schumer’s letter to HUD and the EDA appears below:

Dear HUD Secretary Castro and Commerce Department Assistant Secretary Jay Williams:

As you may know, Erie County has been unable to fully utilize their Buffalo & Erie County Regional Development Corporation (RDC) Revolving Loan Fund since 2005 due to a bureaucratic issue between the U.S. Department of Housing and Urban Development (HUD) and U.S. Economic Development Administration (EDA). This has led to increasingly intractable problems that cannot be solved without the cooperation and flexibility of both EDA & HUD. I urge your offices to work together and with Erie County and RDC to fix this problem so that the revolving loan fund can once again be used for its original purpose, to support new and growing businesses in Erie County.

The RDC Revolving Loan fund was established in 1979 with a combination of funds from EDA and HUD funds allocated by Erie County, and the City of Buffalo. At the time that the fund was established federal rules allowed for the HUD money to serve as the non-federal match for the EDA funds. Over time this interpretation has changed, and as a result the funds in Erie County’s Revolving Loan fund have been subjected to the requirements and stipulations of both HUD & EDA funds. These two different sets of requirements have greatly reduced the effectiveness of the fund. Furthermore it has caused the unintended consequence of stymieing potential projects from benefiting from both the federal and local funds currently entangled in the Loan Fund. 

I urge your respective agencies to work together to resolve this issue as quickly as possible and allow Erie County leaders to put these important economic development funds to the best possible use. First, I urge you to allow Erie County to withdraw excess local funds that were originally contributed to the loan fund. When the loan fund was established, the City, County, and ECIDA all voluntarily contributed a total excess of $2.3M to further bolster the fund and make additional loan funding available. The County should now be allowed to withdraw these funds, as well as the interest it has earned, and put those dollars immediately toward an economic development project in Western New York. Secondarily, I urge you to resolve any outstanding regulatory issues with the fund, beyond the withdrawal of excess local funds, so that the fund can get back to functioning properly for its intended purpose. Given the complicated history of the fund and corresponding federal requirements, in resolving both of these issues I urge both of your agencies to avoid taking any punitive actions against Erie County or the loan fund

Allowing Erie County to withdraw these local funds and resolving the regulatory issues with the fund will allow the remaining funds to again assist with key economic development projects, creating jobs and bringing investment into the region.

I appreciate your attention to this issue.


Charles E. Schumer

United States Senator