Md. agency seeks to go private

March 12, 1994|By Joel Obermayer | Joel Obermayer,Sun Staff Writer

The Maryland Small Business Development Financing Authority is planning to privatize as part of an effort to develop a $40 million pool of investment capital to aid minority and disadvantaged businesses in Maryland.

The authorization for the change is part of House Bill 1566, which was considered in a hearing before the House Economic Matters Committee yesterday.

By changing its status, the state agency would be able to take advantage of a federal Small Business Administration program that would vastly increase the money it has available for loans, direct investments and other financing arrangements for small businesses.

"For every dollar we put in, we can attract three to four dollars from the government," Stanley Tucker, executive director of the agency, testified.

Since 1978, the agency has provided loans and management expertise to socially and economically disadvantaged businesses.

Mr. Tucker said the agency, which is part of the Maryland Department of Economic and Employment Development, has been able to pay its own operating expenses for several years with money from repaid loans.

The plan is for the agency to take about $10 million it has on hand and create an investment company that would try to attract $30 million more from the Small Business Administration. No general revenue funds would be needed.

Other programs administered by the agency would be managed by the private entity, but all of its mainte- nance activities would be handed over to the Department of Economic and Employment Development.

Mr. Tucker said the private company would be able to market itself more effectively and to compete for funds from nongovernmental sources looking to invest in minority businesses.

"We will also try to attract pension funds, foundations and banks as well," Mr. Tucker said after the hearing.

During the hearing, Del. Louis P. Morsberger, D-Baltimore County, questioned whether the plan would result in more efficiency. "It looks like you're setting up a bureaucracy with a new group of agencies," he said.

Mr. Tucker said the changes would let the agency save money by contracting for legal services and by cutting other overhead expenses, but that essential services would not change.

Mr. Tucker gave much of the credit for the plan to U.S. Rep. Kweisi Mfume, a Baltimore Democrat who sponsored legislation in 1992 that created the mechanism the agency hopes to use to attract federal funds.

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