City Council approves $200K for MCE small business incubator

By R. Mason Callejas

The Maricopa City Council approved up to $200,000 in expenditures to facilitate small business growth Oct. 4.

Supported unanimously by the council, the move grants further funding of the Northern Arizona Technology & Business Incubator’s area extension to the Maricopa Center for Entrepreneurship. MCE, in turn, provides assistance to small companies in the Maricopa area in the form of low-interest loans, inexpensive workspaces, workshops and networking opportunities.

Because of the large role small business takes in the local economy the incubator is considered by many to be a blessing. Though, however helpful, some residents are concerned about the relinquishing of tax dollars to private companies and are asking for more accountability from MCE as well as proof-of-return from their investment.

Maricopa Business Council Executive Director Eric Lacz spoke at the meeting and said he supports the idea of a city-subsidized incubator program but wants to know more about the legitimacy of the MCE program. He wants to see more concrete evidence of the incubator’s direct influence on bolstering small-business growth.

“What is the responsibility under the contract to MCE, and what are the expectations of reporting back to the city?” Lacz asked. “Is there a quarterly reporting process? Is this something that is available to the public to be able to sit back and say, ‘OK, they’ve added five new businesses this month, or this quarter, and along with it they’ve created 10 new jobs’?”

Lacz dually expressed concern about the viability of the loan program and wanted a more detailed explanation of the qualifications small businesses need to receive the loans.

MCE utilizes both the U.S. Department of Agriculture’s M-Loan program and the Arizona Microcredit Initiative to provide loans to small businesses. The funds they provide are meant to be used for small business expansion, yet there is little explanation from MCE of who is receiving what and why, and how it has helped.

MCE Executive Director Dan Beach spoke to council to answer for and defend the program his organization has championed over the past two years. He expressed no concern with the viability of the loans or their default potential. As for eligibility, he claimed he almost never says no to a loan request.

“Bad credit is good, it’s not an issue,” Beach said.  “Both of the funds are looking to create jobs in the community. They’re both funded with grants, so we have that opportunity. We’re not a bank so we don’t have to get the high interest rates.”

Beach referred to the loans as “revolving funds,” and said as the funds are repaid they then are loaned out again. Beach provided an in-house analysis of benchmarks his organization has established to help small businesses and the local economy grow. And, according to their measures, the city’s initial investment has already paid for itself more than four times over.

Beach’s presentation claimed the program has “created or retained at client companies 124 jobs (estimated),” which generated an estimated $5.6 million per year in wages. The assessment further asserted $4.3 million of the aforementioned wages was injected back into the local economy, which in turn generated almost $830,000 in local tax revenues.

The organization cites information from the USDL Bureau of Labor Statistics and the Kauffman Foundation as the source of some of these numbers. And though the math in the middle of this equation checks out, how the book-end figures were determined is not entirely understood.

InMaricopa is continuing to study these and other figures put forth by the MCE and will provide updates and a detailed analysis as more information becomes available.