locally owned since 1854

Foundation might run revolving loan fund for Middletown residents to improve property

By Dan Miller


Posted 3/7/18

A community foundation is stepping forward to administer a new residential loan program that is being considered by Middletown Borough Council.

The offer comes from The Foundation for Enhancing …

This item is available in full to subscribers.

Please log in to continue

Log in

Foundation might run revolving loan fund for Middletown residents to improve property


A community foundation is stepping forward to administer a new residential loan program that is being considered by Middletown Borough Council.

The offer comes from The Foundation for Enhancing Communities, an organization with about $100 million in assets that is active in Cumberland, Dauphin, Franklin, Perry and Lebanon counties.

The loan program was proposed in January 2017 by Councilor Diana McGlone.

Under the concept McGlone laid out, loans from $2,000 to $10,000 would be made available through the borough to residential property owners in Middletown, both for owner-occupied and rental properties. Loans could also eventually be made available to small business owners.

Loans would be for things such as facade improvements, new roofs; new windows; and upgrades to electrical and heating, ventilation and air conditioning systems. A major objective would be tying improvement projects to getting a property in compliance with building and property codes.

The borough has $436,000 available to start the program. The money is from a state grant the borough provided to a developer to build Woodlayne Court apartments on Wilson Street. The developer repaid the grant to the borough in 2013.

The borough has “preliminary approval” for using the $436,000 for the loan program from the state Department of Community and Economic Development, borough Solicitor Adam Santucci told council on Feb. 20.

As the loans are repaid, the dollars coming back in would replenish the $436,000 in seed money, so that more loans can be made on a revolving basis.

One reason why the loan program is not up and running are concerns that have been expressed by some council members and borough staff regarding the ability of staff to take on and administer the new program.

The proposal the foundation has put on the table would go a long way toward addressing those concerns.

For $9,000 a year, the foundation would administer the program according to whatever “parameters” council and the borough sets, said foundation Vice President and Chief Financial Officer Kirk C. Demyan, who was accompanied during the foundation’s Feb. 20 presentation to council by foundation President and Chief Executive Officer Janice R. Black.

The foundation would not be involved in deciding who gets the loans for what — that would be determined through the parameters set by council, Demyan said.

Once council approves a loan, the foundation would make the payments for the work to the contractor identified to do the job, Demyan said.

The foundation would also be responsible for collecting loan repayments from the property owner. The borough could choose to involve a collection agency if the payments become delinquent, Demyan noted.

The $436,000 in seed money would be turned over to the foundation, which would place the money in a special account set aside just for the loan program.

The foundation already has 900 such funds and accounts, each separate from one another for auditing purposes.

Council and the borough could allow the foundation to invest the seed money in “passive” investment models the foundation uses that are meant to ensure that the money lasts “in perpetuity,” Demyan said.

A big advantage of partnering with the foundation is that the borough loan program would qualify for tax-exempt status as a nonprofit organization.

For example, the borough could solicit contributions to the loan program from individuals and businesses, and these contributions would be tax-deductible, Demyan said.

Council did not act on the foundation presentation during the Feb. 20 meeting.

Going forward, the ball is in council’s court. As Council President Damon Suglia noted, it is up to council to set the parameters — the rules and regulations — that would govern how the loan program is to operate.

This includes such things as who is eligible to receive a loan, what kind of improvements would qualify for a loan, and what contractors would be used. Council for example could restrict the contractors to those who live in the borough.

“As far as applicants — who says they can get the money or not — that’s not you, that’s us,” Suglia said, to which Demyan agreed. “We have to come up as a council with all these guidelines first before we can even implement something with you.”

The normal term for repaying a $10,000 loan under a program such as this runs from five to eight years, Demyan said.

Council and the borough may want to limit how many loans are made in the first year of the program, and cap the total amount of money going out, so that the borough doesn’t spend down the seed money too fast before repayments start coming in from the first loans, said Borough Manager Ken Klinepeter.

McGlone reminded council that other program goals are to create economic activity in the borough, and to improve property values.

Middletown is the oldest town in Dauphin County. Of all the housing now in Middletown, 28.5 percent was constructed before 1939, according to data that was reported in 2012, McGlone said.

She envisions council creating a special committee to review loan applications and decide which applications are approved.

One’s credit score could determine the maximum loan amount for which an applicant can qualify, McGlone said, adding that the borough already uses credit scores to determine the amount of deposit someone must pay when they sign up as a new electricity customer.