The Economic Development and Industrial Corporation, which intends to create a recovery loan fund that would make low-interest loans available to small businesses, might not be allowed to under current legal guidelines. Town Counsel Frank K. Duffy said at the Monday, May 11, selectmen’s meeting that there are a number of legal hurdles that might require state action before such a fund is created.

“The purpose and intent and the mechanics of the recovery loan program, as it exists or as it has presented to us, are outside the limits of Chapter 121C and therefore currently beyond the authority of the EDIC,” he said. “That doesn’t mean all is lost because certainly the Legislature has the power to grant a special act to the Falmouth EDIC to allow them to create a recovery loan program and carry out the purposes as they envisioned.”

While a special act would enable the EDIC to establish and manage a recovery loan fund, Mr. Duffy said there is a second challenge that needs to be addressed.

“The town’s contribution runs against the same impediments, really,” Mr. Duffy said. “There is a provision in the Massachusetts Constitution which prohibits the use of public funds for private purposes, and also this is not necessarily one of the purposes for which the town can appropriate money, because it would be setting up a fund that would be loaning money to private parties for private purposes.”

He said special legislation may be necessary to allow the town to contribute money to the proposed loan fund. Selectmen agreed to pursue the actions necessary to move the creation of the recovery loan fund forward.

“We have town counsel who is right now laying out the road map toward how this can be done, and it comes at a point in time when the adaptations that small businesses will have to make for COVID are expensive,” Selectwoman Susan L. Moran said. “These are folks who have lost business, who have lost employees and are now going to have to make further investment to move forward, if and when they are opened up. There certainly are some hurdles, but I think if anyone can do it, Falmouth can.”

There was also a question related to the funding source. In order to secure a line of credit, the EDIC asked selectmen to allocate the ground lease payments the town gets from Citizens Energy for the landfill solar development project to the corporation.

Chairwoman Megan E. English Braga, citing a conversation with Town Meeting member Joseph A. Netto of Clark Street, East Falmouth, said she was uncomfortable with the proposed plan of this nature based on the fact that he really feels it would undo the intent of a Town Meeting vote that would take place.

Noting the EDIC is a nonprofit organization, Selectman Douglas H. Jones asked if the project could move forward by using private grants instead of public funding. Mr. Duffy said special legislation would be required regardless.

“I’m not sure that would solve the problem, Doug, because the problem is the EDIC has certain authorized powers and duties, and the recovery loan fund as presented by the EDIC doesn’t square with their authorization,” he said.

The EDIC discussed the fund further when it met the following morning.

Noting Ms. English Braga’s comments from Monday night, Ms. Moran said selectmen would consider public sentiment in going forward with the Falmouth recovery loan fund. EDIC member Michael B. Galasso said the general public supports creating the fund.

“If there is another sentiment that people have, we haven’t heard it,” Mr. Galasso said. “We’ve heard from the community at large and the business community that this is a program that is desperately needed and they applaud the EDIC and the town for moving forward.”

“I think there certainly is a huge benefit too, not just to businesses, but to everyone in the town, in having a vibrant Main Street,” Ms. Moran said. “I presented this at the board of selectmen as sort of a springboard for Falmouth, because not every town has an EDIC, which has the unique ability to potentially implement these creative programs. Personally, I think everyone benefits from a vibrant Main Street, and that’s what we’re targeting here.”

However, she acknowledged that some individual taxpayers are concerned about how the town funds get spent.

“It is not to say there is anything at all that should be criticized about this program,” Ms. Moran said. “I think it is creative and really necessary for some folks to be able to continue in business at all, and those are our local families. It is just a matter of weighing how financial decisions have to be made in general, and particularly now, with the pandemic.”

EDIC director Michael DiGiano said the EDIC is working with legal counsel to determine its authority to run such a loan program. He said the EDIC worked with Coastal Community Capital to oversee a smaller loan program in 2012. The EDIC has also loaned money to local nonprofit organizations.

“We didn’t do any of those loans without having a legal opinion that we have authority to do them, but now, all of a sudden, someone takes a different view of the legislation and doesn’t agree,” Mr. Galasso said.

Given that town counsel has raised a legal question regarding the EDIC’s authority, Mr. DiGiano recommended the corporation spend $3,000 to retain an attorney familiar with municipal law and economic development and industrial corporations to examine the matter further. Ms. Moran recommended increasing this amount to $5,000. The corporation voted to spend $5,000 to retain a lawyer to examine the matter and develop special legislation.

Committee member Christopher R. Simmler said it will delay the creation of a recovery loan fund.

“Here we are trying to do something good for people and businesses, and it seems like everyone is in agreement to do something, but all of these things are in the way, and I’m trying to understand why all these things are in the way,” Mr. Simmler said.

He said it could take three to five months before anything can come from the fund.

“It is frustrating,” he said. “I would want something to come out yesterday.”

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