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Clinton Presidential Records
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This is not a presidential record. This is used as an administrative
marker by the William J. Clinton Presidential Library Staff.
This marker identifies the place of a publication.
Publications have not been scanned in their entirety for the purpose
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SBA
U.S. Small Business Administration
Mail Code:
409 Third Street, S.W.
Washington, DC 20416
Official Business
Penalty for Private Use, $300
Forwarding and return postage guaranteed
Championing America's Entrepreneurs
CO 0004 5/96
BORROWER'S
Championing America 's Entrepreneurs
SBA
U.S. Small Business Administration
GUIDE
Other Sources
U.S. Small Business Administration.
State economic development agencies
Chambers of commerce
SBA
Local colleges and universities
Libraries
Championing America 1 Entrepreneurs
Manufacturers and suppliers of small, business
products and services.
Small business or industry trade associations
The Facts About
All of the SBA's programs and services are provided
to the public on a nondiscriminatory basis.
Micro
For further information regarding the SBA
MicroLoan Program, contact:
Loans
The MicroLoan Demonstration Program
combines the resources and experience of the
U.S. Small Business Administration with that
of locally based nonprofit organizations to
provide small loans and technical assistance
to small businesses. Under the MicroLoan
Program, the SBA lends money to qualified
nonprofit organizations, which act as intermedi-
ary lenders. The intermediaries use the funds
provided by the SBA to make loans to new and
existing small businesses.
Under the MicroLoan Program, a small busi-
ness can borrow up to $25,000 from an inter-
mediary lender, which also provides manage-
ment and technical assistance designed to help
ensure success.
FS0068 (1/96)
Federal Recycling Program
Printed on Recycled Paper
Eligibility Requirements
Credit Requirements
For More Information
Virtually any type of for-profit small business is
MicroLoan applicants must meet the credit
Information is power. Make it your business to
eligible for the MicroLoan Program. The form
requirements of their local intermediary lender.
know what is available, where to get it and,
of the business, whether a proprietorship, part-
Generally, however, applicants will be expected
most importantly, how to use it. Sources of
information include:
nership or corporation, is not a determining
to demonstrate good character, a'strong com-
factor. It must, however, meet the SBA's size
mitment to their business idea, and a credit his-
U.S. Small Business Administration
standards at the time of application (generally,
SBA District Offices
tory that demonstrates a reasonable assurance
borrowers applying for this type of loan will fall
that the loan will be repaid. In addition, appli-
Small Business Development Genters
well within these standards).
cants should have some management expertise
(SBDCs)
or be willing to participate in training designed
Service Corps of Retired Executives
to strengthen management skills.
(SCORE)
Use of Loan Funds
Small Business Institutes (SBIs)
SBA OnLine (electronic bulletin board).
MicroLoan funds may be used for working cap-
ital or to purchase inventory, supplies, furniture,
Collateral Requirements
Business Information Centers (BICs)
fixtures, machinery and/or equipment. These
As with credit standards, collateral requirements
The SBA has offices located throughout the
United States. For the one nearest you, look
funds may not be used to purchase real estate,
for the MicroLoan Program are set by the local
under "U.S. Government" in your telephone
to provide a down payment on a project in
intermediary lender. In most cases, loans are at
directory, or call the SBA Answer Desk at
excess of $25,000 in value, or, with limited
least partially collateralized by equipment, con-
(800) 8-ASK-SBA. To send a fax to the SBA,
exceptions, to refinance existing debts.
tracts, inventory or other property. Lenders
dial (202) 205-7064. For the hearing impaired,
may also require personal guaranties.
the TDD number is (202) 205-7333
To access the agency's electronic public infor-
Loan Terms
mation services, you may call the following
Under the MicroLoan Program, the maximum
Applying for a Microloan
SBA OnLine:
electronic bulletin board - modem and computer
loan amount is $25,000. The average is around
The first step in applying for a microloan is to
required
$10,000.
contact your local intermediary lender. The
(800) 697-4636 (limited access)
The maximum term allowed for a loan is six
lender in your area may be listed on the back of
(900) 463-4636 (full access)
years. However, loan terms vary according to
this brochure. The intermediary will provide
(202) 401-9600 (D.C. metro only)
the size of the loan, the planned use of funds,
the details on applying for a loan or receiving
Internet:
the requirements of the intermediary lender,
technical assistance.
using uniform resource locators (URLss)
and the needs of the small business borrower.
SBA:Home Page:
Interest rates vary, depending upon the inter-
The Microl oan Program is a pilot program
http://www.sbaonline.sba.gov/
mediary lender. Rates are generally competitive.
and not available everywhere. If no intermedi-
SBA gopher:
ary lender is listed on this pamphlet, contact the
gopher://gopher.sbaonline.sba.gov/
nearest SBA office to find out if one operates in-
File transfer protocol:
ftp://ftp.sbaonline.sba.gov/
your area.
Telnet:
telnet://sbaonline.sba.gov/
You also may request a free copy of The Resource
Directory for Small Business Management, a listing
of for-sale publications and videotapes, from
your local SBA office or the SBA Answer Desk.
7-23-1998 2:02PM
FROM MARY BOURDETTE 96905750
P.2
Under CCDBG grants or loans can be made to providers to help meet state standards or licencing
requirements, including minor construction or renovations.
38 Lead Agencies have such grants
Of these 21 give grants to help meet standards (example: CT; LA;NV)
Of these 4 encourage the purchase of new equipments (example: NM; WY)
Example, after Hurricane Andrew, Lead Agencies wanted to help child care providers repair
damage caused by the Hurricane -- this was o.k. as long as minor remodeling is included as
necessary to meet state standards.
JUN-22-1998 09:19
OFC FIN INST POL
202 6220256 P.01
Office of Government Sponsored Enterprises Policy
Room 3025 - Main Treasury Bldg.
Date:
JUNE 22, 1998.
Addressee Name (s):
Nicole Rabner / Jennifer Klein.
[One Copy for each]
Fax Number (s):
456-2878
Number of Pages (including cover sheet): 4
From: Scott Frame.
Sender's Fax Number: (202) 622-0256
Sender's Confirmation Number:
Comments or Special Instructions:
JUN-22-1998 09:19
OFC FIN INST POL
202
6220256
P.02
Summary of Kiddie Mac Hearing
Issue
On June 16, 1998, the Subcommittee on Capital Markets, Securities, and GSE's (chaired by
Richard Baker) held a hearing on H.R. 3637, the Children's Development Commission Act.
The legislation, also known as Kiddie Mac, is co-sponsored by Rep. Baker (R-LA) and Rep.
Maloney (D-NY).
H.R. 3637 authorizes HUD (through the FHA) to issue guarantees to private lenders for the
construction or rehabilitation of child care and development facilities. Program participants
are required to be certified by a newly established Children's Development Commission (or
Kiddie Mac).
Attendees
Chairman Baker (R-LA), Rep. Kanjorski (D-PA), Rep. Maloney (D-NY), and Rep. Lazio (R-
NY). Rep. Vento (D-MN) arrived during the deliberations.
Opening Statements
Chairman Baker opened the hearing by thanking all the participants and supporters of H.R.
3637. He then went on to briefly describe the proposal. Baker also thanked Rep. Lazio for
allowing this hearing to be held in the capital markets subcommittee, rather than that for
housing.
Representative Kanjorski noted that Kiddie Mac is the first legislative attempt to work on the
supply side of the child care problem. He discussed the bill and drew parallels to a program
operated by HUD that targets housing for senior citizens. Kanjorski emphasized that the
assistance in this bill should benefit all sectors -- not just white, suburban, dual-income
families. To this end, he suggested higher guarantees for those institutions serving the
underserved.
Representative Maloney began her statement by citing several statistics in support of her
contention that affordable, quality child care is in short supply. She went on to describe the
bill in detail and outline its place as a small piece of the broader child care puzzle.
Representative Lazio reiterated the importance of affordable, quality child care -- citing
personal experience. However, he did mention a degree of concern with the loan guarantees.
Panel 1
The first panel consisted of Sen. Herbert Kohl (D-WI) and Sen Alfonse D'Amato (R-NY), co-
sponsors of a similar measure in the Senate. While neither Senator appeared before the
JUN-22-1998 09:20
OFC FIN INST POL
202
6220256
P.03
committee, their statements were entered for the record.
In his statement, Senator Kohl stressed the importance (and shortage) of quality child care --
likening it to the necessities of food, shelter, and clothing. The Senator also noted that recent
welfare reforms have exacerbated existing shortages -- citing statistics for Wisconsin and New
York. Kohl went on to describe Kiddie Mac as a "market-based, small-government approach
to moving capital toward investments that will remedy these unsustainable shortages of quality
child care."
Senator D'Amato discussed the need for affordable, quality child care. He also remarked that
"the day care shortage is reaching the crisis level" and that "Kiddie Mac could make a life or
death difference for a child." Later, D'Amato likened Kiddie Mac to the other GSE's because
the government would not get directly involved in the activity. Rather, the government is
simply reducing barriers and providing incentives to the private marketplace.
Panel 2
Melinda Green (Director of the African-American Early Childhood Center of the National
Black Child Development Institute) stated that her group strongly supports H.R. 3637.
However, she outlined several additional recommendations, including: (1) modeling the
federal child care standards after existing national accreditation systems; (2) expanding the
function and requirements regarding micro-loans; and (3) providing technical assistance to
child care and development facilities.
Jim Wunderman (Vice President of Corporate Affairs, Providian Financial Corp.) cited
instances in which his company was involved in providing child care in underserved areas. He
noted that securing credit for these businesses is difficult because: (1) the buildings are often
single-use; (2) there is generally little equity (i.e., these are often high loan-to-value
mortgages); and (3) cash flows are tight - making debt service difficult. Mr. Wunderman
also noted that the Small Business Administration does provide loans for child care facilities,
but only those operating for-profit.
Trinita Logue (President, Illinois Facilities Fund) mentioned that her association works with
non-profits to build and operate child care centers. She echoed Mr. Wunderman's assertions
concerning the difficulties these small firms face in raising capital.
Donna Klein (Director of Worklife Initiatives for Marriott International) discussed the overall
paradigm shift in public perception of the child care problem from a family paradigm (i.e.
child care is private concern) to a workplace paradigm (i.e., onsite daycare and flexible
schedules) and ultimately to a community-wide model. She then described the difficulties that
Mariott faced in obtaining financing for a child care center via a non-profit affiliate.
Mildred Wurf (Director of Public Policy, Girl's Inc,) said that the groups she represented
worked primarily with school-age children (such groups include the YMCA and Campfire
Boys/Girls). She then went on to talk generally about the social problems facing young people
JUN-22-1998 09:20
OFC FIN INST POL
202 6220256 P.04
in our society today.
Questions and Answers
Chairman Baker opened the question and answer session by trying to relate child care quality
with cost - citing price differentials for the care of youngest children (under three years) with
older ones. Responding, Ms. Logue missed his point. However, she did state that no one
should pay more than 10 percent of their income in child care. Chairman Baker then asked
Mr. Wunderman if there was anything else that could be included in H.R. 3637 to entice
lenders to extend credit to child care centers. Mr. Wunderman responded that financial
training and technical assistance for the operators of the centers.
Representative Maloney then asked the panel whether child care centers were bad risks? And
if not, why can't they get credit? Ms. Logue responded that these firms generate little revenue
and thus can't service the debt - noting that 80 percent of the cost of child care goes to
salaries. She recommended that existing block grants be allowed as equity for child care
centers seeking loans. Rep. Maloney then went on to cite statistics demonstrating that New
York City doesn't have space for all children needing daycare by 2001.
Representative Vento expressed some concern with national standards - particularly with
respect to insurance provision. He also noted that the bill, as drafted, assumes that the
program will be self-sustaining. Rep. Vento then cited the government's experience with
student loan and FHA multifamily programs.
Representative Baker then discussed problems for these centers in obtaining liability insurance.
He also kicked around the idea of offering direct, guaranteed loans to individuals - presumably
similar to student loans. Rep. Maloney then suggested a separate hearing focusing exclusively
on liability insurance for child care centers.
TOTAL P.04
CEA freas
Meeting Discussion Paper - Does Not
staff paper
Represent the
Administrations position.
Evaluation of "Kiddie Mac" proposal
SUMMARY
Rep. Maloney and Rep. Baker have recently introduced a bill -- H.R. 3637 ("Kiddie Mac") -- to
subsidize the supply of high-quality child care. We believe that the proposal in the President's FY
99 budget is a much more effective way of increasing the supply of high-quality, affordable child
care. The need for affordable, quality child care is better met by giving subsidies directly to
consumers of child care, rather than subsidizing the providers. Furthermore, the provider subsidy
offered in Kiddie Mac may be particularly ineffective at increasing the supply of affordable child
care. Finally, we are concerned that the bill sets a precedent for the federal government to set
national standards for child care providers, a regulatory role that has traditionally been left to the
states and could actually serve to limit the supply and increase the cost of child care.
THE PROPOSAL
The proposal is an amendment to the National Housing Act. In order to reduce the cost to
qualifying child care providers of loans for construction or renovation, Kiddie Mac will, through
HUD, offer guaranty insurance to lenders for making loans to child care facility builders and
operators. This is intended to reduce the cost of loans to child care providers by reducing the risk
faced by lenders. The HUD guarantee will cover no more than 90 percent of the loan, or 95
percent if the mortgagor is a non-profit.
In addition, Kiddie Mac will:
Establish a Children's Development Commission which will, in conjunction with the
Secretaries of HUD and HHS, determine the laws, standards and requirements that a
facility must meet, in addition to any state requirements, in order to be eligible for the
federal guarantee.
Offer "mini-loans" to qualifying child care providers to help them meet licensing
requirements. These loans will be made by the Development Commission.
Provide "reasonably priced" liability and fire insurance to qualifying providers.
Establish and fund a foundation that will research issues in early childhood development,
fund pilot programs and produce education materials.
Total lending and guarantee activity will be limited to $2 billion and will expire in 2005.
ANALYSIS
Reducing the cost of child care
The bill argues that liability and fire insurance are not available at "reasonable prices" and that the
interest rates on loans are "too high". These rates are high, but there is no evidence that there is
some form of market failure that causes prices to be greater than what banks need to cover their
costs. The rates are high because the risks are high. Efforts to reduce these rates are designed to
increase the supply of affordable child care. But, as we discuss below, subsidies to consumers are
a more effective way of achieving this aim.
Will Kiddie Mac increase the supply of affordable child care?
In order for the Kiddie Mac program to reduce the costs to consumers of child care (or,
analogously, in order for it to increase the "supply of affordable child care") an affirmative answer
would be needed to both of the following questions:
Would the interest rates that banks charge child care providers fall in response to
the subsidy? The federal guarantee reduces the risks to those who make loans to child
care providers. If there are a large number of such lenders eligible for the government
guarantee who participate in the program, then their reduced lending costs will be passed
on to the child care providers in the form of lower interest rates on loans. But if only a
small number of firms are eligible to make such loans or have an incentive to participate in
the program, then a large portion of the government subsidy would benefit banks and
other lenders rather than child care providers.
The bill stipulates that the HUD secretary must approve the lender. Even if the approval
criteria are sufficiently unrestrictive that many lenders are eligible, there is reason to be
concerned that few institutions will choose to participate. For example, there may be large
start up costs to learning about the program or costs involved in monitoring providers to
ensure that they comply with Commission standards.
Would a reduction in provider costs have much benefit for consumers? Even if the
proposed subsidies lower costs to child care providers, consumers may not benefit from
these lower provider costs. Available evidence suggests this is not likely to be a problem.
But if eligibility standards were made sufficiently restrictive (for example through stringent
quality standards) that relatively few providers were eligible, then eligible providers would
face little competition from other providers, and could pass through only a limited portion
of their cost reductions to their consumers in the form of lower prices.
The uncertain answers to these questions suggest that subsidies to consumers are much more
likely to be effective in increasing the supply of affordable child care than indirect subsidies to
providers. Evidence that the supply of child care will respond to increases in demand at roughly
current prices indicates that subsidizing consumers will decrease the cost to consumers and
increase the supply of child care at these lower costs, rather than merely driving up the price of
care.
If the proposal did result in an increased supply of affordable child care, what consumers
would benefit?
Reaching particular consumers. Subsidies administered to consumers can be targeted to
benefit particular consumer groups, such as low-income parents. Subsidies to providers,
however, even if they do result in lower costs to consumers, benefit all of the providers'
customers, regardless of income level, employment of the mother, or any other consumer
characteristic.
Likely beneficiaries are centers rather than family day care. Although in principle any
provider that meets the state and Commission's standards can benefit from Kiddie Mac, in
practice the federally guaranteed loans to establish and renovate facilities are likely to
benefit centers disproportionately, since their operating costs are much higher than family
day care homes. This creates an artificial advantage for centers -- without any evidence
that center care is better for children than family day care. In addition, center care is used
disproportionately by higher income parents and hence benefits would accrue
disproportionately to these parents, since any consumer cost reductions benefit the
families who were already purchasing the care as well as the families who now start doing
so.
Improving the quality
The proposal calls for the establishment of a national Commission which, in conjunction with
HUD and HHS, would determine the standards that providers must meet in order to be eligible
for any of the subsidies offered by Kiddie Mac. These standards would apply in addition to any
state standards.
The federal government currently does not set national standards for child care providers. In
doing so, the Commission's work could undermine the goal of increasing the supply of affordable
child care. Compliance with regulations can be costly, and the imposition of these federal
regulations on top of existing state regulations might either impose costs that make it not
worthwhile for providers to comply in order to get the Kiddie Mac benefits, or could result in
providers having to raise their prices, thus counteracting the desired decrease in prices from
federally guaranteed loans. Furthermore, as discussed above, the result of stringent standards and
limited eligibility may be a situation in which a limited number of providers benefit without
passing on much of their reduced costs to their consumers in the form of lower prices.
Additional concerns
Is the 5-10% portion of the loan that is not guaranteed the right amount? In choosing what
percentage of the loan to guarantee, a tradeoff must be struck between the goal of encouraging an
increase in lending and not distorting the incentives of the lenders to make good loans. In general,
most government guarantee programs have addressed this tradeoff by choosing lower guarantee
rates. For example, the SBA guarantees loans made to small businesses guarantees 80% of the
loan if it is under $100,00 and only 75% if it is above $100,000.
Duplicating existing programs
SBA 7(a) program. The SBA 7(a) program provides partial guarantees on loans to small
businesses. Many commercial child care providers could therefore get reduced interest
rates on loans for construction and renovation through this program rather than the
proposed one.
"Micro loans" by Commission. This is duplicative of SBA micro loan programs for
many for-profit child care providers.
Is HUD the appropriate agency to administer the program? The loans to child care providers
for construction and renovation are commercial real estate loans. It is not clear that HUD -- rather
than, say, SBA, is the appropriate programmatic agency for the proposal.
Treasury Study of Secondary Markets. The proposed Treasury study of secondary markets for
insured commercial real estate loans for child care and development facilities is likely to be
infeasible. Due to relatively small loan volumes and geographic dispersion, a private secondary
market is unlikely to develop.
LAN M. FRIED
LEGISLATIVE ASSISTANT
HON. CAROLYN B. MALONEY (D-NY)
(202) 225-7944
1330 LONGWORTH BUILDING
(202) 225-4709 FAX
WASHINGTON, D.C. 20515 E-MAIL: [email protected]
house of Representatives
Washington, D.C. 20515
MEMORANDUM
NICOLE RABNER:
KATHY BONK SUGGESTED 1 SEND You
A COPY OF THE KISDIE MAC BILL. WE WOULD
LOVE YOUR COMMENTS.
PLEASE CONTACT ME WITH ANY
QUESTIONS
- LAN FRIED
CAROLYN B. MALONEY
DISTRICT OFFICES:
14TH DISTRICT, NEW YORK
110 EAST 59TH STREET
2ND FLOOR
1330 LONGWORTH BUILDING
WASHINGTON, DC 20515-3214
NEW YORK, NY 10022
(202) 225-7944
(212) 832-6531
COMMITTEES:
BANKING AND FINANCIAL
28-11 ASTORIA BOULEVARD
SERVICES
ASTORIA, NY 11102
Congress of the United States
(718) 932-1804
GOVERNMENT REFORM AND
OVERSIGHT
house of Representatives
619 LORIMER STREET
BROOKLYN, NY 11211
JOINT ECONOMIC COMMITTEE
(718) 349-1260
Washington, DC 20515-3214
May 4, 1998
Dear Friend:
I thought you might be interested in a bill I introduced to Congress earlier this month
which is aimed at encouraging the creation of more and higher quality child care facilities. As
you know all too well, the availability of good child care is not matching the need. As more
parents enter the workforce and as each state implements welfare reform, we all must find
ways to address
The bill itself is really a new concept in how to tackle the lack of quality places for
kids. It authorizes HUD to sell guarantees to financial institutions which wish to lend to child
care providers. The idea is that with a guaranty on their loans, lenders are more likely to give
loans to projects involving child care which are currently perceived as being too risky.
In order for HUD to authorize the guaranty, the bill creates the Children's
Development Commission, or "Kiddie Mac," as the certifying authority. Kiddie Mac will
make certain that the borrower meets all the necessary criteria. The Commission will have
twelve months to determine: federal standards for providers who seek the loans, as well as a
method for providing affordable fire and liability insurance. In addition, Kiddie Mac will
provide micro-loans to child care providers who need some capital to fund the necessary
changes in their facility in order to meet licensing standards.
The focus of this legislation is to stimulate the private sector into meeting the growing
demand for child care. But another reason for this design is to have a place in the federal
government which is totally focussed on the issue of providing quality child care. To this end,
the legislation also asks the Commission to set up a not-for-profit foundation which will work
on assisting research and training programs related to child care.
I am very optimistic about the future of this legislation. I am working with my
cosponsor, Rep. Richard Baker of Louisiana, on hearings to be held shortly. When we return
from recess, a similar bill will be introduced in the Senate by Senator Herb Kohl of
Wisconsin.
I have enclosed the bill, as well as some information sheets about the legislation. I
would appreciate your thoughts, comments, questions and suggestions. Please contact me, or
my staffer working on the issue, Ian Fried, at 202-225-7944.
Thank you for your time and I look forward to hearing from you.
Sincerely,
Carolyn B. Mabry
CAROLYN B. MALONEY
PRINTED ON RECYCLED PAPER
KIDDIE MAC SUMMARY
Legislation introduced by Rep. Carolyn Maloney (NY)
and Rep. Richard Baker (LA)
H.R. 3637
GOAL: To fill the unmet need for quality, affordable child care, the
Children's Development Commission ("Kiddie Mac"), will be created as a
government entity which will be a catalyst for private-sector construction
and development lending.
THE BASIC ELEMENTS:
1.
The Concept: The private sector now hesitates to provide loans for
construction or operation of child care facilities because it perceives a high
risk of borrower liability in running such centers. Kiddie Mac will reduce
that perceived risk to lenders, thus encouraging loans for the construction
and opening of child care facilities. Using a combination of products,
Kiddie Mac will spur private lending to child care providers, give small
loans to get facilities up to licensing standards, and provide affordable fire
and liability insurance.
2.
Guaranty Insurance=Low-Cost Loans: Kiddie Mac will, through HUD,
offer guaranty insurance to lenders for potential child care facility builders
and operators. Currently, while the private sector appears to want to do
something in this area, the perceived risk is too high. A guaranty should
be enough security to spur lending with reasonable terms. In order to
prevent the cost of insurance from becoming a barrier for starting a
facility, Kiddie Mac will also offer reasonably priced liability insurance
and fire insurance to qualifying child care providers.
3.
Start-up Costs and Rent: Besides actual facilities being built or
rehabilitated, often what is needed is money for start-up costs and rent.
Kiddie Mac will offer mini-loans to qualifying child care providers for
these costs. These loans will also be available for a facility which needs to
make certain improvements in order to meet licensing standards.
4.
Foundation: With the money made from its other activities, Kiddie Mac
will establish a foundation that will research issues in early childhood
development, fund pilot programs and produce educational materials. It
will also provide materials and activities to guide applicants through the
Kiddie Mac process.
SPECIAL CHARACTERISTICS OF KIDDIE MAC:
1.
Executive salaries will be capped.
2.
An annual report to Congress and hearings on activities and performance
will be required, similar to the Humphrey-Hawkins hearings the banking
committees hold with the Federal Reserve Chairman.
3.
Total lending and guaranty activity will be limited to $2 billion. If a need is
found beyond this amount, Congress may increase the ceiling.
Common Questions about
KIDDIE MAC
"Child Development Commission Act" H.R. 3637
Introduced by Rep. Carolyn Maloney (NY) and Rep. Richard Baker (LA)
1. Why is Kiddie Mac Necessary?
A: The United States is falling behind in meeting the needs of its children for
high-quality care. Other nations understand the critical role that child care
plays in early development, but the quality and quantity of child care space
in this country are below acceptable levels. While demand is enormous and
growing for trustworthy infant and pre-school slots nationwide, the need is
not being met.
2. Do we really need federal participation to do this?
A: YES. Such a commission is necessary when private-sector market
mechanisms fail for some reason to address a major demand. Child care is an
example of a broad demand that profit-seeking firms have been unwilling to
meet.
Current market conditions discourage private sector investment in child care
facility development. Clearly, with the heightened need for care for America's
children, and relief for America's working parents, the capital markets need to
be encouraged to contribute toward the care and devlopment of our kids.
Lenders have concerns about risk and the threat these risks pose to safety and
soundness to their institutions. Like any financial institution or governmental-
sponsored corporation, these institutions need the reliability of the federal
government backing them up.
2
3. How would Kiddie Mac work?
A: Kiddie Mac would certify requests for loans so the Department of Housing
and Urban Development (HUD) could then sell guaranty insurance to the
lenders. Many private lenders want to invest in child care facilities but are
uncomfortable with the risks. Kiddie Mac will provide guaranty insurance for
mortgages, loans and some other debts, encouraging private lenders to invest
in the needs of our children.
4. Will Kiddie Mac help someone who wants to convert a building to child
care, add to existing facilities or bring a center up to licensing standards?
A: Yes. Kiddie Mac will provide small-facilities loans for improvements to
existing centers for the purpose of meeting licensing standards, or to improve the
quality of care and/or increase the number of children who can take part. A
family-run child-care home, for example, could qualify for one of these loans to
make the changes needed for licensing.
5. Who will pay for Kiddie Mac?
A: After a small appropriation to fund its initial incorporation, Kiddie Mac
will be funded by the premiums paid by the lenders who purchase the
insurance, never costing the taxpayer anything more.
6. Who will have access to Kiddie Mac?
A: Anyone who is currently licensed or who can demonstrate the ability to
be licensed can use Kiddie Mac's services. This includes community
organizations, not-for-profit groups, community development financial
institutions, for-profit businesses, family-home facilities, churches and other
employers.
7. Will those operations be competing against private businesses?
A: Private businesses which want to develop child care facilities, nursery
schools or after-school programs are allowed to access Kiddie Mac just like
anyone else. As for private lenders, since the problem in child care has been
that the needs are not being met by the open market. Kiddie Mac is needed
to fill this role.
3
8. How about churches and synagogues? Aren't they banned from taking
government money?
A: If a church or synagogue or any other religious body can qualify to be
licensed as a child care provider, Kiddie Mac's services are available.
9. Will Kiddie Mac help in addressing some of the other problems of child
care and child development?
A: Yes. Using some of the funds generated by its financial activity, Kiddie Mac
will establish a foundation to research problems in child care and child
development, fund pilot programs and educational materials, and find ways to
make the Kiddie Mac process efficient and accessible to as many people as
possible.
I
105TH CONGRESS
2D SESSION
H. R. 3637
To amend the National Housing Act to authorize the Secretary of Housing
and Urban Development to insure mortgages for the acquisition, con-
struction, or substantial rehabilitation of child care and development
facilities and to establish the Children's Development Commission to
certify such facilities for such insurance, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
APRIL 1, 1998
Mrs. MALONEY of New York (for herself, Mr. BAKER, Mr. KANJORSKI, Mr.
JACKSON of Illinois, Mrs. MEEK of Florida, Mr. MANTON, Mr. ALLEN,
Ms. VALÁZQUEZ, Ms. WOOLSEY, and Mrs. TAUSCHER) introduced the fol-
lowing bill; which was referred to the Committee on Banking and Finan-
cial Services
A BILL
To amend the National Housing Act to authorize the Sec-
retary of Housing and Urban Development to insure
mortgages for the acquisition, construction, or substan-
tial rehabilitation of child care and development facilities
and to establish the Children's Development Commission
to certify such facilities for such insurance, and for other
purposes.
1
Be it enacted by the Senate and House of Representa-
2 tives of the United States of America in Congress assembled,
2
1 SECTION 1. SHORT TITLE.
2
This Act may be cited as the "Children's Develop-
3 ment Commission Act".
4 SEC. 2. CONGRESSIONAL FINDINGS.
5
The Congress finds the following:
6
(1) The need for quality nursery schools, both
7
full-time and part-time child care centers and after-
8
school programs, after school programs, neighbor-
9
hood-run mothers-day-out programs, and family
10
child care providers has grown among working par-
11
ents, and parents who stay at home, who want their
12
children to have access to early childhood education.
13
(2) All parents should have access to safe, stim-
14
ulating, and educational early childhood education
15
programs for their children, whether such programs
16
are carried out in a child care center, a part-time
17
nursery school (including a nursery school operated
18
by a religious organization), or a certified child care
19
provider's home.
20
(3) The number of available enrollment oppor-
21
tunities for children to receive quality child care
22
services is not meeting the demand for such services.
23
(4) In 1995 there were about 21,000,000 chil-
24
dren less than 6 years of age, of whom 31 percent
25
were participating in center-based child care services
26
and 14 percent were receiving child care in homes.
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3
1
Between 1992 and 2005 the participation of women
2
24 to 54 years of age in the labor force is projected
3
to increase from 75 percent to 83 percent.
4
(5) In States that have set up a mechanism to
5
provide capital improvements for child care facilities,
6
the demand for services of such facilities still has
7
not been met.
8
(6) The United States is behind other western,
9
industrialized countries when it comes to providing
10
child care services. In France, almost 100 percent of
11
all children 3 to 5 years of age attend nursery
12
school. In Germany this number is 65 to 70 percent.
13
In Japan 90 percent of such children attend some
14
form of preschool care. In all of these countries early
15
childhood care has proven to increase children's de-
16
velopment and performance.
17 SEC. 3. INSURANCE FOR MORTGAGES ON NEW AND REHA-
18
BILITATED CHILD CARE AND DEVELOPMENT
19
FACILITIES.
20
Title II of the National Housing Act (12 U.S.C. 1707
21 ct seq.) is amended by adding at the end the following
22 new section:
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4
1
"MORTGAGE INSURANCE FOR CHILD CARE AND
2
DEVELOPMENT FACILITIES
3
"SEC. 257. (a) PURPOSE.-The purpose of this sec-
4 tion is to facilitate and assist in the provision and develop-
5 ment of licensed child care and development facilities.
6
"(b) GENERAL INSURANCE AUTHORITY.-The Sec-
7 retary may insure mortgages (including advances on such
8 mortgages during construction) in accordance with the
9 provisions of this section and upon such terms and condi-
10 tions as the Secretary may prescribe and may make com-
11 mitments for insurance of such mortgages before the date
12 of their execution or disbursement thereon.
13
"(c) ELIGIBLE MORTGAGES.-To carry out the pur-
14 pose of this section, the Secretary may insure any mort-
15 gage that covers a new child care and development facility,
16 including a new addition to an existing child care and de-
17 velopment facility (regardless of whether the existing facil-
18 ity is being rehabilitated), or a substantially rehabilitated
19 child care and development facility, including equipment
20 to be used in the operation of the facility, subject to the
21 following conditions:
22
"(1) APPROVED MORTGAGOR.-The mortgage
23
shall be executed by a mortgagor approved by the
24
Secretary. The Secretary may, in the discretion of
25
the Secretary, require any such mortgagor to be reg-
.HR 3637 IH
5
1
ulated or restricted as to charges and methods of fi-
2
nancing and, if the mortgagor is a corporate entity,
3
as to capital structure and rate of return. As an aid
4
to the regulation or restriction of any mortgagor
5
with respect to any of the foregoing matters, the
6
Secretary may make such contracts with and acquire
7
for not more than $100 such stock or interest in
8
such mortgagor as the Secretary may consider nec-
9
essary. Any stock or interest so purchased shall be
10
paid for out of the General Insurance Fund, and
11
shall be redeemed by the mortgagor at par upon the
12
termination of all obligations of the Secretary under
13
the insurance.
14
"(2) PRINCIPAL OBLIGATION.-The mortgage
15
shall involve a principal obligation in an amount not
16
to exceed 90 percent of the estimated value of the
17
property or project, or 95 percent of the estimated
18
value of the property or project in the case of a
19
mortgagor that is a private nonprofit corporation or
20
association (as such term is defined pursuant to sec-
21
tion 221(d)(3)), including-
22
"(A) equipment to be used in the operation
23
of the facility when the proposed improvements
24
are completed and the equipment is installed; or
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6
1
"(B) a solar energy system (as defined in
2
subparagraph (3) of the last paragraph of sec-
3
tion 2(a)) or residential energy conservation
4
measures (as defined in subparagraphs (A)
5
through (G) and (I) of section 210(11) of the
6
National Energy Conservation Policy Act), in
7
cases in which the Secretary determines that
8
such measures are in addition to those required
9
under the minimum property standards and will
10
be cost-effective over the life of the measure.
11
"(3) AMORTIZATION AND INTEREST.-The
12
mortgage shall-
13
"(A) provide for complete amortization by
14
periodic payments under such terms as the Sec-
15
retary shall prescribe;
16
"(B) have a maturity satisfactory to the
17
Secretary, but in no event longer than 25 years;
18
and
19
"(C) bear interest at such rate as may be
20
agreed upon by the mortgagor and the mortga-
21
gee, and the Secretary shall not issue any regu-
22
lations or establish any terms or conditions that
23
interfere with the ability of the mortgagor and
24
mortgagee to determine the interest rate.
HR 3637 IH
7
1
"(d) CERTIFICATION BY CHILDREN'S DEVELOPMENT
2 COMMISSION.-The Secretary may not insure a mortgage
3 under this section unless the Children's Development
4 Commission established under section 258 certifies that
5 the facility is in compliance, or will be in compliance not
6 later than 12 months after such certification, with-
7
"(1) any laws, standards, and requirements ap-
8
plicable to such facilities under the laws of the
9
State, municipality, or other unit of general local
10
government in which the facility is or is to be lo-
11
cated; and
12
"(2) after the effective date of the standards
13
and requirements established under section
14
258(c)(2), such standards and requirements.
15
"(e) RELEASE.-The Secretary may consent to the
16 release of a part or parts of the mortgaged property or
17 project from the lien of any mortgage insured under this
18 section upon such terms and conditions as the Secretary
19 may prescribe.
20
"(f) MORTGAGE INSURANCE TERMS.-The provisions
21 of subsections (d), (c), (g), (h), (i), (j), (k), (1), and (n)
22 of section 207 shall apply to mortgages insured under this
23 section, except that all references in such subsections to
24 section 207 shall be considered, for purposes of mortgage
25 insurance under this section, to refer to this section.
HR 3637 IH
8
1
"(g) MORTGAGE INSURANCE FOR FIRE SAFETY
2 EQUIPMENT LOANS.-
3
"(1) AUTHORITY.-The Secretary may, upon
4
such terms and condition as the Secretary may pre-
5
scribe, make commitments to insure and insure
6
loans made by financial institutions or other ap-
7
proved mortgagees to child care and development fa-
8
cilities to provide for the purchase and installation
9
of fire safety equipment necessary for compliance
10
with the 1967 edition of the Life Safety Code of the
11
National Fire Protection Association (or any subse-
12
quent edition specified by the Secretary of Health
13
and Human Services).
14
"(2) LOAN REQUIREMENTS.-To be eligible for
15
insurance under this subsection a loan shall-
16
"(A) not exceed the Secretary's estimate of
17
the reasonable cost of the equipment fully in-
18
stalled;
19
"(B) bear interest at such rate as may be
20
agreed upon by the mortgagor and the mortga-
21
gee;
22
"(C) have a maturity satisfactory to the
23
Secretary;
24
"(D) be made by a financial institution or
25
other mortgagee approved by the Secretary as
HR 3637 IH
9
1
eligible for insurance under section 2 or a mort-
2
gagee approved under section 203(b)(1);
3
"(E) comply with other such terms, condi-
4
tions, and restrictions as the Secretary may
5
prescribe; and
6
"(F) be made with respect to a child care
7
and development facility that complies with the
8
requirement under subsection (d).
9
"(3) INSURANCE REQUIREMENTS.-Thc provi-
10
sions of paragraphs (5), (6), (7), (9), and (10) of
11
section 220(h) shall apply to loans insured under
12
this subsection, except that all references in such
13
paragraphs to home improvement loans shall be con-
14
sidered, for purposes of this subsection, to refer to
15
loans under this subsection. The provisions of sub-
16
sections (c), (d), and (h) of section 2 shall apply to
17
loans insured under this subsection, except that all
18
references in such subsections to 'this section' or
19
'this title' shall be considered, for purposes of this
20
subsection, to refer to this subsection.
21
"(h) SCHEDULES AND DEADLINES.-The Secretary
22 shall establish schedules and deadlines for the processing
23 and approval (or provision of notice of disapproval) of ap-
24 plications for mortgage insurance under this section.
HR 3637 IH
10
1
"(i) DEFINITIONS.-For the purposes of this section,
2 the following definitions shall apply:
3
"(1) CHILD CARE AND DEVELOPMENT FACIL-
4
ITY.-The term 'child care and development facility'
5
means a public facility, proprietary facility, or facil-
6
ity of a private nonprofit corporation or association
7
that-
8
"(A) has as its purpose the care and devel-
9
opment of children less than 12 years of age;
10
and
11
"(B) is licensed or regulated by the State
12
in which it is located (or, if there is no State
13
law providing for such licensing and regulation
14
by the State, by the municipality or other politi-
15
cal subdivision in which the facility is located).
16
The term does not include facilities for school-age
17
children primarily for use during normal school
18
hours. The term includes facilities for training indi-
19
viduals to provide child care and development serv-
20
ices.
21
"(2) EQUIPMENT.-The term 'cquipment' in-
22
cludes machinery, utilities, and built-in equipment
23
and any necessary enclosures or structures to house
24
them, and any other items necessary for the func-
25
tioning of a particular facility as a child care and
HR 3637 IH
11
1
development facility, including necessary furniture.
2
Such term includes books, curricular, and program
3
materials.
4
"(3) MORTGAGE; FIRST MORTGAGE; MORTGA-
5
GEE.-The term 'mortgage' means a first mortgage
6
on real estate in fee simple, or on the interest of ci-
7
ther the lessor or lessee thereof under a lease having
8
a period of not less than 7 years to run beyond the
9
maturity date of the mortgage. The term 'first mort-
10
gage' means such classes of first liens as are com-
11
monly given to secure advances (including advances
12
during construction) on, or the unpaid purchase
13
price of, real estate under the laws of the State in
14
which the real estate is located, together with the
15
credit instrument or instruments (if any) secured
16
thereby, and any mortgage may be in the form of
17
one or more trust mortgages or mortgage indentures
18
or deeds of trust, securing notes, bonds, or other
19
credit instruments, and, by the same instrument or
20
by a separate instrument, may create a security in-
21
terest in initial equipment, whether or not attached
22
to the realty. The term 'mortgagor' has the meaning
23
given the term in section 207(a).
24
"(j) LIMITATION ON INSURANCE AUTHORITY.-
HR 3637 IH
12
1
"(1) TERMINATION.-No mortgage may be in-
2
sured under this section or section 223(h) after Sep-
3
tember 30, 2005, except pursuant to a commitment
4
to insure issued on or before such date.
5
"(2) AGGREGATE PRINCIPAL AMOUNT LIMITA-
6
TION.-The aggregate principal amount of mort-
7
gages for which the Secretary enters into commit-
8
ments to insure under this section or section 223(h)
9
on or before the date under paragraph (1) may not
10
exceed $2,000,000,000. If, upon the date under
11
paragraph (1), the aggregate insurance authority
12
provided under this paragraph has not been fully
13
used, the Secretary of the Treasury shall submit a
14
report to the Congress evaluating the need for con-
15
tinued mortgage insurance under this section."
16
"(k) REGULATIONS.-The Secretary shall issue any
17 regulations necessary to carry out this section. In issuing
18 such regulations, the Secretary shall consult with the Sec-
19 retary of Health and Human Services with respect to any
20 aspects of the regulations regarding child care and devel-
21 opment facilities.
HR 3637 IH
13
1
SEC. 4. INSURANCE FOR MORTGAGES FOR ACQUISITION OR
2
REFINANCING DEBT OF EXISTING CHILD
3
CARE AND DEVELOPMENT FACILITIES.
4
Section 223 of the National Housing Act (12 U.S.C.
5 1715n) is amended by adding at the end the following new
6 subsection:
7
"(h) MORTGAGE INSURANCE FOR PURCHASE OR RE-
8 FINANCING OF EXISTING CHILD CARE AND DEVELOP-
9 MENT FACILITIES.-
10
"(1) AUTHORITY.-Notwithstanding any other
11
provision of this Act, the Secretary may insure
12
under any section of this title a mortgage executed
13
in connection with the purchase or refinancing of an
14
existing child care and development facility, the pur-
15
chase of a structure to serve as a child care and
16
development facility, or the refinancing of existing
17
debt of an existing child care and development facil-
18
ity.
19
"(2) PURCHASE OF EXISTING FACILITIES AND
20
STRUCTURES.-In the case of the purchase under
21
this subsection of an existing child care and develop-
22
ment facility or purchase of an existing structure to
23
serve as such a facility, the Secretary shall prescribe
24
any terms and conditions that the Secretary consid-
25
ers necessary to ensure that-
HR 3637 IH
14
1
"(A) the facility or structure purchased
2
continues to be used as a child care and devel-
3
opment facility; and
4
"(B) the facility complies with the same
5
requirements applicable under subsections (d)
6
and (c) of section 257 to facilities having mort-
7
gages insured under such section.
8
"(3) REFINANCING OF EXISTING FACILITIES.-
9
In the case of refinancing of an existing child care
10
and development facility, the Secretary shall pre-
11
scribe any terms and conditions that the Secretary
12
considers necessary to ensure that-
13
"(A) the refinancing is used to lower the
14
monthly debt service costs (taking into account
15
any fees or charges connected with such refi-
16
nancing) of the existing facility;
17
"(B) the proceeds of any refinancing will
18
be employed only to retire the existing indebted-
19
ness and pay the necessary cost of refinancing
20
on the existing facility;
21
"(C) the existing facility is economically
22
viable; and
23
"(D) the facility complies with the same
24
requirements applicable under section 257(d) to
HR 3637 IH
15
1
facilities having mortgages insured under such
2
section.
3
"(4) DEFINITIONS:-For purposes of this sub-
4
section, the terms defined in section 257(i) shall
5
have the same meanings as provided under such sec-
6
tion.
7
"(5) LIMITATION ON INSURANCE AUTHORITY.-
8
The authority of the Secretary to enter into commit-
9
ments to insure mortgages under this subsection is
10
subject to the limitations under section 257(j).
11 SEC. 5. CHILDREN'S DEVELOPMENT COMMISSION.
12
Title II of the National Housing Act (12 U.S.C. 1707
13 et seq.) is amended by adding at the end (after section
14 257, as added by section 3 of this Act) the following new
15 section:
16
"CHILDREN'S DEVELOPMENT COMMISSION
17
"SEC. 258. (a) ESTABLISHMENT.-Therc is hereby
18 established a commission to be known as the Children's
19 Development Commission.
20
"(b) MEMBERSHIP.-
21
"(1) APPOINTMENT.-The Commission shall be
22
composed of 7 members appointed by the President,
23
not later than the expiration of the 3-month period
24
beginning upon the enactment of this section, by and
25
with the advice and consent of the Senate, as fol-
26
lows:
HR 3637 IH
16
1
"(A) 1 member shall be appointed from
2
among 3 individuals recommended by the Sec-
3
retary of Housing and Urban Development or
4
the Secretary's designee.
5
"(B) 1 member shall be appointed from
6
among 3 individuals recommended by the Sec-
7
retary of Health and Human Services or the
8
Secretary's designee.
9
"(C) 1 member shall be appointed from
10
among 3 individuals recommended by the Sec-
11
retary of the Treasury or the Secretary's des-
12
ignee.
13
"(D) 4 members shall be appointed from
14
among 12 individuals recommended jointly by
15
the Speaker of the House of Representatives,
16
the Majority Leader of the Senate, Minority
17
Leader of the House of Representatives, the
18
Minority Leader of the Senate.
19
"(2) QUALIFICATIONS OF CONGRESSIONALLY
20
RECOMMENDED MEMBERS.-Of the members ap-
21
pointed under paragraph (1)(D)-
22
"(A) each shall be an individual who ac-
23
tively participates or is employed in the field of
24
child care and has academic, licensing, or other
HR 3637 IH
17
1
eredentials relating to such participation or em-
2
ployment; and
3
"(B) not more than 2 may be of the same
4
political party.
5
"(3) TERMS.-Each appointed member of the
6
Commission shall serve for a term of 3 years.
7
"(4) VACANCIES.-Any member appointed to
8
fill a vacancy occurring before the expiration of the
9
term for which the member's predecessor was ap-
10
pointed shall be appointed only for the remainder of
11
that term. A member may serve after the expiration
12
of that member's term until a successor has taken
13
office. A vacancy in the Commission shall be filled
14
in the manner in which the original appointment was
15
made.
16
"(5) CHAIRPERSON.-The chairperson of the
17
Commission shall be designated by the President at
18
the time of appointment.
19
"(6) QUORUM.-A majority of the members of
20
the Commission shall constitute a quorum for the
21
transaction of business.
22
"(7) VOTING.-Each member of the Commis-
23
sion shall be entitled to 1 vote, which shall be equal
24
to the vote of every other member of the Commis-
25
sion.
HR 3637 IH
18
1
"(8) PROHIBITION ON ADDITIONAL PAY.-
2
Members of the Commission shall serve without
3
compensation, but shall be reimbursed for travel,
4
subsistence, and other necessary expenses incurred
5
in the performance of their duties as members of the
6
Commission.
7
"(c) FUNCTIONS.-The Commission shall carry out
8 the following functions:
9
"(1) CERTIFICATION OF COMPLIANCE.-The
10
Commission shall collect such information and make
11
such determinations as may be necessary to deter-
12
mine, for purposes of section 257(d), whether child
13
care and development facilities comply, or will be in
14
compliance within 12 months, with-
15
"(A) any laws, standards, and require-
16
ments applicable to such facilities under the
17
laws of the State, municipality, or other unit of
18
general local government in which the facility is
19
or is to be located, and
20
"(B) after the effective date of the stand-
21
ards and requirements established under para-
22
graph (2), such standards and requirements,
23
and shall issue certifications of such compliance.
24
"(2) ESTABLISHMENT OF STANDARDS.-
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19
1
"(A) STUDY.-Not later than 12 months
2
after the date on which appointment of initial
3
membership of the Commission is completed,
4
the Commission, in consultation with the Sec-
5
retary of Housing and Urban Development and
6
the Secretary of Health and Human Services,
7
shall conduct a study to determine the laws,
8
standards, and requirements referred to in
9
paragraph (1)(A) that are applicable in cach
10
State. Taking into consideration the findings of
11
the study, the Secretary shall establish stand-
12
ards and requirements regarding child care and
13
development facilities that are designed to en-
14
sure that mortgage insurance is provided under
15
section 257 and section 223(h) only for safe,
16
clean, and healthy facilities that provide appro-
17
priate care and development services for chil-
18
dren.
19
"(B) PUBLICATION.-The Commission
20
shall issue regulations providing for the stand-
21
ards and requirements established under sub-
22
paragraph (A) to take effect, for purposes of
23
sections 257(d)(2) and 223(h)(2)(B) and para-
24
graph (1)(B) of this section, not later than 18
HR 3637 IH
20
1
months after the date of the enactment of this
2
section.
3
"(3) SMALL PURPOSE LOANS.-The Commis-
4
sion shall, to the extent amounts are made available
5
for such purpose pursuant to subsection (i) and
6
qualified requests are received, make loans, directly
7
or indirectly to providers of child care and develop-
8
ment facilities for reconstruction or renovation of
9
such facilities, subject to the following requirements:
10
"(A) Loans under this paragraph shall be
11
made only for such facilities that are financially
12
and operationally viable, as determined under
13
standards and guidelines to be established by
14
the Commission.
15
"(B) The aggregate amount of loans made
16
under this paragraph to a single borrower may
17
not exceed $50,000.
18
"(C) A loan made under this paragraph
19
may not have a term to maturity exceeding 7
20
years.
21
"(D) Loans under this paragraph shall
22
bear interest at rates and be made under such
23
other conditions and terms as the Commission
24
shall provide.
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21
1
"(4) NOTIFICATION.-Thd Commission shall
2
take such actions as may be necessary to publicize
3
the availability of the programs for mortgage insur-
4
ance under sections 257 and 223(h) and loans under
5
paragraph (3) of this subsection in a manner that
6
ensures that information concerning such programs
7
will be available to child care providers throughout
8
the United States.
9
"(5) LIABILITY INSURANCE.-Not later than 12
10
months after the date on which appointment of ini-
11
tial membership of the Commission is completed, the
12
Commission shall establish standards and guidelines,
13
applicable to mortgage insurance under sections 257
14
and 223(h) and loans under paragraph (3) of this
15
subsection, requiring child care providers operating
16
child care and development facilities assisted under
17
such provisions to obtain and maintain liability in-
18
surance in such amounts and subject to such re-
19
quirements as the Commission considers appro-
20
priate.
21
"(6) RESEARCH FOUNDATION.Not later than
22
12 months after the date of the enactment of this
23
section, the Commission shall submit a report to the
24
Congress recommending a plan for establishing and
25
funding a foundation that is an entity independent
HR 3637 IH
22
1
of the Commission (but which maintains association
2
with the Commission), the purpose of which shall
3
be-
4
"(A) to support research relating to child
5
care and development facilities;
6
"(B) to fund pilot programs to test innova-
7
tive methods for improving child care; and
8
"(C) to engage in activities and publish
9
materials to assist persons interested in mort-
10
gage insurance under sections 257 and 223(h)
11
and other assistance provided by the Commis-
12
sion.
13
"(d) NONDISCRIMINATION REQUIREMENT.-
14
"(1) IN GENERAL-The Commission may not
15
certify under subsection (c)(1) or carry out any ac-
16
tivities of the Commission with respect to any child
17
care and development facility if the provider of the
18
facility discriminates on account of race, color, reli-
19
gion (subject to paragraph (2)), national origin, SCX
20
(to the extent provided in title IX of the Education
21
Amendments of 1972 (20 U.S.C. 1681 et seq.)), or
22
handicapping condition.
23
"(2) FACILITIES OF RELIGIOUS ORGANIZA-
24
TIONS.-The prohibition with respect to religion
25
shall not apply to a child care and development facil-
HR 3637 IH
23
1
ity which is controlled by or which is closely identi-
2
fied with the tenets of a particular religious organi-
3
zation if the application of this subsection would not
4
be consistent with the religious tenets of such orga-
5
nization.
6
"(3) CERTIFICATION.-As a condition of certifi-
7
cation under subsection (c)(1) and eligibility for a
8
loan under subsection (c) (3), the provider of a child
9
care and development facility shall certify to the
10
Commission that the provider does not discriminate,
11
as required by the provisions of paragraph (1) of
12
this subsection.
13
"(e) POWERS.-
14
"(1) ASSISTANCE FROM FEDERAL AGENCIES.-
15
The Commission may secure directly from any de-
16
partment or agency of the Federal Government such
17
information as the Commission may require for car-
18
rying out its functions. Upon request of the Com-
19
mission, any such department or agency shall fur-
20
nish such information.
21
"(2) ASSISTANCE FROM GENERAL SERVICES
22
ADMINISTRATION.-Tho Administrator of General
23
Services shall provide to the Commission, on a reim-
24
bursable basis, such administrative support services
25
as the Commission may request.
HR 3637 IH
24
1
"(3) ASSISTANCE FROM DEPARTMENT OF
2
HOUSING AND URBAN DEVELOPMENT.- Upon the re-
3
quest of the Commission, the Secretary of Housing
4
and Urban Development shall, to the extent possible
5
and subject to the discretion of the Secretary, detail
6
any of the personnel of the Department of Housing
7
and Urban Development, on a nonreimbursable
8
basis, to assist the Commission in carrying out its
9
functions under this section.
10
"(4) MAILS.-The Commission may use the
11
United States mails in the same manner and under
12
the same conditions as other Federal agencies.
13
"(f) STAFF.-
14
"(1) EXECUTIVE DIRECTOR.-The Commission
15
shall appoint an executive director of the Board, who
16
shall be compensated at a rate fixed by the Commis-
17
sion, but which shall not exceed the rate established
18
for level I of the Executive Schedule under title 5,
19
United States Code.
20
"(2) OTHER PERSONNEL.-In addition to the
21
executive director, the Commission may appoint and
22
fix the compensation of such personnel as the Com-
23
mission considers necessary, in accordance with the
24
provisions of title 5, United States Code, governing
25
appointments to the competitive service, and the
HR 3637 IH
25
1
provisions of chapter 51 and subchapter III of chap-
2
ter 53 of such title, relating to classification and
3
General Schedule pay rates.
4
"(g) REPORTS.-Not later than March 31 of each
5 year, the Commission shall submit a report to the Presi-
6 dent and the Congress regarding the operations and activi-
7 ties of the Commission during the preceding calendar year.
8 Each annual report shall include a copy of the Commis-
9 sion's financial statements and such information and other
10 evidence as is necessary to demonstrate that the activities
11 of the Commission during the year for which the report
12 is made. The Commission may also submit reports to the
13 Congress and President at such other times as the Com-
14 mission deems desirable.
15
"(h) DEFINITIONS.-For purposes of this section, the
16 terms defined in section 257(i) shall have the same mean-
17 ings as provided under such section.
18
"(i) AUTHORIZATION OF APPROPRIATIONS.-There
19 are authorized to be appropriated to the Commission to
20 carry out this section $10,000,000 for fiscal year 1999,
21 to remain available until expended, of which not more than
22 $2,500,000 shall be available for administrative costs of
23 the Commission and the remainder of which shall be avail-
24 able only for loans under subsection (e)(3).".
HR 3637 III
26
1
SEC. 6. STUDY OF AVAILABILITY OF SECONDARY MARKETS
2
FOR MORTGAGES ON CHILD CARE FACILI-
3
TIES.
4
The Secretary of the Treasury shall conduct a study
5 of the secondary mortgage markets to determine-
6
(1) whether such a market exists for purchase
7
of mortgages eligible for insurance under sections
8
223(h) and 257 of the National Housing Act (as
9
added by this Act);
10
(2) whether such a market would affect the
11
availability of credit available for development of
12
child care and development facilities or would lower
13
development costs of such facilities; and
14
(3) the extent to which such a market or other
15
activities to provide credit enhancement for child
16
care and development facilities loans is needed to
17
meet the demand for such facilities.
18 The Secretary of the Treasury shall submit to the Con-
19 gress a report regarding the results of the study conducted
20 under this section not later than the expiration of the 2-
21 year period beginning on the date of the enactment of this
22 Act.
HR 3637 IH
MAY-22-1998 17:20 TO:N RABNER
FROM:DADE, J.
P. 3/22
Draft
The Honorable Carolyn B. Maloney
U.S. House of Representatives
Washington, D.C. 20515
Dear Ms. Maloney:
This responds to your March 18 letter to Secretary Rubin requesting the views of the Department
of the Treasury on HR 3637, the "Children's Development Commission Act." Since the bill as
introduced on April 1 differs from the draft that you sent to us in March, we will confine our
comments to the bill as introduced. Your bill has been carefully reviewed within the
Administration, and we have consulted widely within the Administration in developing the views
set forth here.
The Administration shares your interest in increasing the availability of, and access to, quality
child care services. We regret that we cannot support H.R. 3637 as it is currently drafted. We
would like to suggest ways in which the bill might be improved.
H.R. 3637 would authorize the Secretary of Housing and Urban Development (HUD) to insure
mortgages related to child care and development facilities and to establish a Children's
Development Commission. The Commission would be charged with certifying child care and
development facilities for insurance and for other purposes. The bill would require the
Department of the Treasury to submit three nominees for the Children's Development
Commission, submit a report to Congress concerning the possibility of creating a secondary
market for child care and development facility loans, and submit a report to Congress after the
program's expiration in 2005 that evaluates the need for continued mortgage insurance for child
care facilities.
We have doubts about whether potential child care facility operators -- either large or small --
face different capital constraints than other types of businesses of like size. It is therefore unclear
whether there exists a credit market imperfection that would warrant the establishment of the
proposed credit program. Morcover, full HUD insurance of what are essentially commercial
property loans with loan-to-value ratios up to 90 percent may not provide sufficient private sector
incentives to underwrite reasonably good credit. Poor underwriting or excessive Federal
guarantees would increase the government's potential risk exposure. We note that the Small
Business Administration (SBA) achieved favorable loss mitigation results by decreasing its
maximum risk exposure from 100 percent to 90 percent, and losses were further decreased when
its maximum risk exposure was decreased to 75 percent. Accordingly, we recommend that the
degree of government guarantee in this proposal be reconsidered.
The proposed Children's Development Commission raises several concerns. First, by
establishing national child care standards for program participants. the Commission could
actually increase the cost of child care by creating another layer of regulation. Second, the
proposed micro-loan program places all of the credit risk associated with these loans on the
government and duplicates other Federal programs (e.g., the SBA's micro-loan program). Third,
the proposed research foundation is unlikely to be "independent" of the Federal government,
particularly if it ultimately relies on the government for funding. For these reasons, we
MAY-22-1998 17:20 TO:N RABNER
FROM: DADE, J.
P. 4/22
recommend that this section of the bill be eliminated.
From a technical perspective, we note that the terms and conditions of the proposed programs do
not conform to the principles of OMB Circular No. A-129, "Policies for Federal Credit Programs
and Non-Tax Receivables." In keeping with that circular, the proposed guarantees should be
limited to a certain percent of the outstanding principal and interest of each loan, as
recommended above The bill also should require a determination that there is a reasonable
assurance of repayment before a loan could be guaranteed or made, authorize the collection of
guarantee fees, provide H maximum term to maturity for guaranteed loans that is less than the
useful life of the physical assets to be financed by such loans, prohibit any guaranteed or direct
loan from being subordinated to other debt contracted by a borrower, and prohibit a guaranteed
or direct loan from being used to provide significant collateral or security for tax-exempt
obligations.
We are also concerned that proposed section 257(c)(1), in authorizing HUD to acquire certain
interests in a borrower to facilitate regulatory compliance, would authorize HUD to acquire
equity interests in child care and development centers. As a general policy, Treasury opposes the
Federal government acquiring equity interests in private businesses.
Several terms and conditions of existing HUD insurance programs would be explicitly applied to
the proposed new insurance programs, including the authority of the HUD Secretary w pay
default claims by issuing debentures instead of by paying cash. The issuance of such debentures
is essentially a form of borrowing by the issuing Federal agency. We oppose such authority
because it would be more costly and less efficient than other readily available methods of
financing HUD's obligation to make payments under the proposed new insurance programs. We
would note that the Federal Credit Reform Act of 1990 gives agencies authority to borrow
directly from the Treasury if a program agency lacks funds to honor its obligations under its
guarantee contracts.
The Office of Management and Budget has advised us that the views set forth herein are
consistent with the Administration's policy.
Sincerely,
MAY-22-1998 17:20 TO:N RABNER
FROM:DADE, J.
P. 5/22
998-SE-0036
DISTRICT OFFICER:
TTD Easy UTM Street
1330 LONGWORTH Builting
- FLOOR
WASHINGTON, DC 26515-3214
NEW York, NY 19922
(213) TH=7M4
(213)532-4321
COMMITTEE
BANKING AND FINANCIAL
28-11 ASTORIA BOUUEVARD
SERVICES
Congress of the United States
as 1 NY 11142
(718) 022-1804
GOVERNMENT REFORM AND
OVERSIGHT
House of Representatibes
BYB LORMER EYESET
JOINT ECONOMIC COMMITTEE
BROOKLYNL NY 11311
Washington, DC 20515-3214
4718) 248-1200
March 18, 1998
Secretary Robert Rubin
Department of the Treasury
1500 Pennsylvania Ave, NW
Washington, DC 20220
Dear Secretary Rubin: Dot,
Attached please find a copy of a letter I have sent to the President regarding the Kiddie
Mac bill about which I spoke with you in New York earlier this month. Shortly I will be
submitting it to Congress. As I explained then, this bill would create a government sponsored
enterprise to address the growing need for child care facilities using the secondary mortgage
market, guarantees, and micro-loans.
I am including for your review the latest draft of the bill and some fact sheets regarding
the proposal. Your thoughts, comments and questions would be greatly appreciated.
sincerely,
Orel MALONEY
Member of Congress
cc: Under Secretary John Hawke, 3r.
PRINTED ON RECYCLED PAPER
MAY-22-1998 17:20 TO:N RABNER
FROM: DADE, J.
P. 6/22
HR 3637 IH
105th CONGRESS
2d Session
H. R. 3637
To amend the National Housing Act to authorize the Secretary of Housing and Urban Development to
insure mortgages for the acquisition, construction, or substantial rehabilitation of child care and
development facilities and to establish the Children's Development Commission to certify such facilities
for such insurance, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
April 1, 1998
Mrs. MALONEY of New York (for herself, Mr. BAKER, Mr. KANJORSKI, Mr. JACKSON of Illinois,
Mrs. MEEK of Florida, Mr. MANTON, Mr. ALLEN, Ms. VALAZQUEZ, Ms. WOOLSEY, and Mrs.
TAUSCHER) introduced the following bill; which was referred to the Committee on Banking and
Financial Services
A BILL
To amend the National Housing Act to authorize the Secretary of Housing and Urban Development to
insure mortgages for the acquisition, construction, or substantial rehabilitation of child care and
development facilities and to establish the Children's Development Commission to certify such facilities
for such insurance, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in
Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the 'Children's Development Commission Act'.
SEC. 2. CONGRESSIONAL FINDINGS.
The Congress finds the following:
(1) The need for quality nursery schools, both full-time and part-time child care centers and
after-school programs, after school programs, neighborhood-run mothers-day-out programs,
and family child care providers has grown among working parents, and parents who stay at
home, who want their children to have access to early childhood education.
(2) All parents should have access to safe, stimulating, and educational early childhood
education programs for their children, whether such programs are carried out in a child care
center, a part-time nursery school (including a nursery school operated by a religious
organization), or a certified child care provider's home.
(3) The number of available enrollment opportunities for children to receive quality child
care services is not meeting the demand for such services.
(4) In 1995 there were about 21,000,000 children less than 6 years of age, of whom 31
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percent were participating in center-based child care services and 14 percent were receiving
child care in homes. Between 1992 and 2005 the participation of women 24 to 54 years of
age in the labor force is projected to increase from 75 percent to 83 percent.
(5) In States that have set up a mechanism to provide capital improvements for child care
facilities, the demand for services of such facilities still has not been met.
(6) The United States is behind other western, industrialized countries when it comes to
providing child care services. In France, almost 100 percent of all children 3 to 5 years of
age attend nursery school. In Germany this number is 65 to 70 percent. In Japan 90 percent
of such children attend some form of preschool care. In all of these countries early
childhood care has proven to increase children's development and performance.
SEC. 3. INSURANCE FOR MORTGAGES ON NEW AND REHABILITATED
CHILD CARE AND DEVELOPMENT FACILITIES.
Title II of the National Housing Act (12 U.S.C. 1707 et seq.) is amended by adding at the end the
following new section:
'MORTGAGE INSURANCE FOR CHILD CARE AND
DEVELOPMENT FACILITIES
`SEC. 257. (a) PURPOSE- The purpose of this section is to facilitate and assist in the provision
and development of licensed child care and development facilities.
`(b) GENERAL INSURANCE AUTHORITY- The Secretary may insure mortgages (including
advances on such mortgages during construction) in accordance with the provisions of this section
and upon such terms and conditions as the Secretary may prescribe and may make commitments
for insurance of such mortgages before the date of their execution or disbursement thereon.
'(c) ELIGIBLE MORTGAGES- To carry out the purpose of this section, the Secretary may insure
any mortgage that covers a new child care and development facility, including a new addition to
an existing child care and development facility (regardless of whether the existing facility is being
rehabilitated), or a substantially rehabilitated child care and development facility, including
equipment to be used in the operation of the facility, subject to the following conditions:
'(1) APPROVED MORTGAGOR- The mortgage shall be executed by a mortgagor
approved by the Secretary. The Secretary may, in the discretion of the Secretary, require any
such mortgagor to be regulated or restricted as to charges and methods of financing and, if
the mortgagor is a corporate entity, as to capital structure and rate of return. As an aid to the
regulation or restriction of any mortgagor with respect to any of the foregoing matters, the
Secretary may make such contracts with and acquire for not more than $100 such stock or
interest in
such mortgagor as the Secretary may consider necessary. Any stock or interest so purchased shall be
paid for out of the General Insurance Fund, and shall be redeemed by the mortgagor at par upon the
termination of all obligations of the Secretary under the insurance.
'(2) PRINCIPAL OBLIGATION- The mortgage shall involve a principal obligation in an
amount not to exceed 90 percent of the estimated value of the property or project, or 95
percent of the estimated value of the property or project in the case of a mortgagor that is a
private nonprofit corporation or association (as such term is defined pursuant to section
221(d)(3)), including-
'(A) equipment to be used in the operation of the facility when the proposed
improvements are completed and the equipment is installed; or
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`(B) a solar energy system (as defined in subparagraph (3) of the last paragraph of
section 2(a)) or residential energy conservation measures (as defined in subparagraphs
(A) through (G) and (I) of section 210(11) of the National Energy Conservation
Policy Act), in cases in which the Secretary determines that such measures are in
addition to those required under the minimum property standards and will be
cost-effective over the life of the measure.
'(3) AMORTIZATION AND INTEREST- The mortgage shall-
'(A) provide for complete amortization by periodic payments under such terms as the
Secretary shall prescribe;
'(B) have a maturity satisfactory to the Secretary, but in no event longer than 25
years; and
'(C) bear interest at such rate as may be agreed upon by the mortgagor and the
mortgagee, and the Secretary shall not issue any regulations or establish any terms or
conditions that interfere with the ability of the mortgagor and mortgagee to determine
the interest rate.
'(d) CERTIFICATION BY CHILDREN'S DEVELOPMENT COMMISSION- The Secretary may
not insure a mortgage under this section unless the Children's Development Commission
established under section 258 certifies that the facility is in compliance, or will be in compliance
not later than 12 months after such certification, with-
'(1) any laws, standards, and requirements applicable to such facilities under the laws of the
State, municipality, or other unit of general local government in which the facility is or is to
be located; and
'(2) after the effective date of the standards and requirements established under section
258(c)(2), such standards and requirements.
`(e) RELEASE- The Secretary may consent to the release of a part or parts of the mortgaged
property or project from the lien of any mortgage insured under this section upon such terms and
conditions as the Secretary may prescribe.
'(f) MORTGAGE INSURANCE TERMS- The provisions of subsections (d), (e), (g), (h), (i), (j),
(k), (1), and (n) of section 207 shall apply to mortgages insured under this section, except that all
references in such subsections to section 207 shall be considered, for purposes of mortgage
insurance under this section, to refer to this section.
`(g) MORTGAGE INSURANCE FOR FIRE SAFETY EQUIPMENT LOANS-
'(1) AUTHORITY- The Secretary may, upon such terms and condition as the Secretary may
prescribe, make commitments to insure and insure loans made by financial institutions or
other approved mortgagees to child care and development facilities to provide for the
purchase and installation of fire safety equipment necessary for compliance with the 1967
edition of the Life Safety Code of the National Fire Protection Association (or any
subsequent edition specified by the Secretary of Health and Human Services).
'(2) LOAN REQUIREMENTS- To be eligible for insurance under this subsection a loan
shall--
'(A) not exceed the Secretary's estimate of the reasonable cost of the equipment fully
installed;
'(B) bear interest at such rate as may be agreed upon by the mortgagor and the
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mortgagee;
'(C) have a maturity satisfactory to the Secretary;
'(D) be made by a financial institution or other mortgagee approved by the Secretary
as eligible for insurance under section 2 or a mortgagee approved under section
203(b)(1);
'(E) comply with other such terms, conditions, and restrictions as the Secretary may
prescribe; and
'(F) be made with respect to a child care and development facility that complies with
the requirement under subsection (d).
'(3) INSURANCE REQUIREMENTS- The provisions of paragraphs (5), (6), (7), (9), and
(10) of section 220(h) shall apply to loans insured under this subsection, except that all
references in such paragraphs to home improvement loans shall be considered, for purposes
of this subsection, to refer to loans under this subsection. The provisions of subsections (c),
(d), and (h) of section 2 shall apply to loans insured under this subsection, except that all
references in such subsections to 'this section' or `this title' shall be considered, for purposes
of this subsection, to refer to this subsection.
'(h) SCHEDULES AND DEADLINES- The Secretary shall establish schedules and deadlines for
the processing and approval (or provision of notice of disapproval) of applications for mortgage
insurance under this section.
`(i) DEFINITIONS- For the purposes of this section, the following definitions shall apply:
'(1) CHILD CARE AND DEVELOPMENT FACILITY- The term 'child care and
development facility' means a public facility, proprietary facility, or facility of a private
nonprofit corporation or association that--
`(A) has as its purpose the care and development of children less than 12 years of age;
and
'(B) is licensed or regulated by the State in which it is located (or, if there is no State
law providing for such licensing and regulation by the State, by the municipality or
other political subdivision in which the facility is located).
The term does not include facilities for school-age children primarily for use during normal
school hours. The term includes facilities for training individuals to provide child care and
development services.
'(2) EQUIPMENT- The term 'equipment' includes machinery, utilities, and built-in
equipment and any necessary enclosures or structures to house them, and any other items
necessary for the functioning of a particular facility as a child care and development facility,
including necessary furniture. Such term includes books, curricular, and program materials.
(3) MORTGAGE; FIRST MORTGAGE; MORTGAGEE- The term 'mortgage' means a
first mortgage on real estate in fee simple, or on the interest of either the lessor or lessee
thereof under a lease having a period of not less than 7 years to run beyond the maturity date
of the mortgage. The term 'first mortgage' means such classes of first liens as are commonly
given to secure advances (including advances during construction) on, or the unpaid
purchase price of, real estate under the laws of the State in which the real estate is located,
together with the credit instrument or instruments (if any) secured thereby, and any
mortgage may be in the form of one or more trust mortgages or mortgage indentures or
deeds of trust, securing notes, bonds, or other credit instruments, and, by the same
instrument or by a separate instrument, may create a security interest in initial equipment,
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whether or not attached to the realty. The term `mortgagor' has the meaning given the term
in section 207(a).
'(j) LIMITATION ON INSURANCE AUTHORITY-
'(1) TERMINATION- No mortgage may be insured under this section or section 223(h)
after September 30, 2005, except pursuant to a commitment to insure issued on or before
such date.
'(2) AGGREGATE PRINCIPAL AMOUNT LIMITATION- The aggregate principal
amount of mortgages for which the Secretary enters into commitments to insure under this
section or section 223(h) on or before the date under paragraph (1) may not exceed
$2,000,000,000. If, upon the date under paragraph (1), the aggregate insurance authority
provided under this paragraph has not been fully used, the Secretary of the Treasury shall
submit a report to the Congress evaluating the need for continued mortgage insurance under
this section.'.
'(k) REGULATIONS- The Secretary shall issue any regulations necessary to carry out this
section. In issuing such regulations, the Secretary shall consult with the Secretary of Health and
Human Services with respect to any aspects of the regulations regarding child care and
development facilities.'.
SEC. 4. INSURANCE FOR MORTGAGES FOR ACQUISITION OR
REFINANCING DEBT OF EXISTING CHILD CARE AND DEVELOPMENT
FACILITIES.
Section 223 of the National Housing Act (12 U.S.C. 1715n) is amended by adding at the end the
following new subsection:
`(h) MORTGAGE INSURANCE FOR PURCHASE OR REFINANCING OF EXISTING CHILD
CARE AND DEVELOPMENT FACILITIES-
'(1) AUTHORITY- Notwithstanding any other provision of this Act, the Secretary may
insure under any section of this title a mortgage executed
in connection with the purchase or refinancing of an existing child care and development facility, the
purchase of a structure to serve as a child care and development facility, or the refinancing of existing
debt of an existing child care and development facility.
'(2) PURCHASE OF EXISTING FACILITIES AND STRUCTURES- In the case of the
purchase under this subsection of an existing child care and development facility or
purchase of an existing structure to serve as such a facility, the Secretary shall prescribe any
terms and conditions that the Secretary considers necessary to ensure that--
'(A) the facility or structure purchased continues to be used as a child care and
development facility; and
'(B) the facility complies with the same requirements applicable under subsections (d)
and (e) of section 257 to facilities having mortgages insured under such section.
'(3) REFINANCING OF EXISTING FACILITIES- In the case of refinancing of an existing
child care and development facility, the Secretary shall prescribe any terms and conditions
that the Secretary considers necessary to ensure that---
'(A) the refinancing is used to lower the monthly debt service costs (taking into
account any fees or charges connected with such refinancing) of the existing facility;
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'(B) the proceeds of any refinancing will be employed only to retire the existing
indebtedness and pay the necessary cost of refinancing on the existing facility;
'(C) the existing facility is economically viable; and
'(D) the facility complies with the same requirements applicable under section 257(d)
to facilities having mortgages insured under such section.
'(4) DEFINITIONS- For purposes of this subsection, the terms defined in section 257(i)
shall have the same meanings as provided under such section.
`(5) LIMITATION ON INSURANCE AUTHORITY- The authority of the Secretary to
enter into commitments to insure mortgages under this subsection is subject to the
limitations under section 257(j).'.
SEC. 5. CHILDREN'S DEVELOPMENT COMMISSION.
Title II of the National Housing Act (12 U.S.C. 1707 et seq.) is amended by adding at the end
(after section 257, as added by section 3 of this Act) the following new section:
'CHILDREN'S DEVELOPMENT COMMISSION
'SEC. 258. (a) ESTABLISHMENT- There is hereby established a commission to be known as the
Children's Development Commission.
`(b) MEMBERSHIP-
'(1) APPOINTMENT- The Commission shall be composed of 7 members appointed by the
President, not later than the expiration of the 3-month period beginning upon the enactment
of this section, by and with the advice and consent of the Senate, as follows:
'(A) 1 member shall be appointed from among 3 individuals recommended by the
Secretary of Housing and Urban Development or the Secretary's designee.
'(B) 1 member shall be appointed from among 3 individuals recommended by the
Secretary of Health and Human Services or the Secretary's designee.
'(C) 1 member shall be appointed from among 3 individuals recommended by the
Secretary of the Treasury or the Secretary's designee.
`(D) 4 members shall be appointed from among 12 individuals recommended jointly
by the Speaker of the House of Representatives, the Majority Leader of the Senate,
Minority Leader of the House of Representatives, the Minority Leader of the Senate.
'(2) QUALIFICATIONS OF CONGRESSIONALLY RECOMMENDED MEMBERS- Of
the members appointed under paragraph (1)(D)-
'(A) each shall be an individual who actively participates or is employed in the field
of child care and has academic, licensing, or other credentials relating to such
participation or employment; and
'(B) not more than 2 may be of the same political party.
(3) TERMS- Each appointed member of the Commission shall serve for a term of 3 years.
'(4) VACANCIES- Any member appointed to fill a vacancy occurring before the expiration
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of the term for which the member's predecessor was appointed shall be appointed only for the remainder
of that term. A member may serve after the expiration of that member's term until a successor has taken
office. A vacancy in the Commission shall be filled in the manner in which the original appointment was
made.
'(5) CHAIRPERSON- The chairperson of the Commission shall be designated by the
President at the time of appointment.
`(6) QUORUM- A majority of the members of the Commission shall constitute a quorum
for the transaction of business.
'(7) VOTING- Each member of the Commission shall be entitled to 1 vote, which shall be
equal to the vote of every other member of the Commission.
'(8) PROHIBITION ON ADDITIONAL PAY- Members of the Commission shall serve
without compensation, but shall be reimbursed for travel, subsistence, and other necessary
expenses incurred in the performance of their duties as members of the Commission.
'(c) FUNCTIONS- The Commission shall carry out the following functions:
'(1) CERTIFICATION OF COMPLIANCE- The Commission shall collect such
information and make such determinations as may be necessary to determine, for purposes
of section 257(d), whether child care and development facilities comply, or will be in
compliance within 12 months, with-
'(A) any laws, standards, and requirements applicable to such facilities under the laws
of the State, municipality, or other unit of general local government in which the
facility is or is to be located, and
'(B) after the effective date of the standards and requirements established under
paragraph (2), such standards and requirements,
and shall issue certifications of such compliance.
'(2) ESTABLISHMENT OF STANDARDS-
'(A) STUDY- Not later than 12 months after the date on which appointment of initial
membership of the Commission is completed, the Commission, in consultation with
the Secretary of Housing and Urban Development and the Secretary of Health and
Human Services, shall conduct a study to determine the laws, standards, and
requirements referred to in paragraph (1)(A) that are applicable in each State. Taking
into consideration the findings of the study, the Secretary shall establish standards and
requirements regarding child care and development facilities that are designed to
ensure that mortgage insurance is provided under section 257 and section 223(h) only
for safe, clean, and healthy facilities that provide appropriate care and development
services for children.
'(B) PUBLICATION- The Commission shall issue regulations providing for the
standards and requirements established under subparagraph (A) to take effect, for
purposes of sections 257(d)(2) and 223(h)(2)(B) and paragraph (1)(B) of this section,
not later than 18 months after the date of the enactment of this section.
'(3) SMALL PURPOSE LOANS- The Commission shall, to the extent amounts are made
available for such purpose pursuant to subsection (i) and qualified requests are received,
make loans, directly or indirectly to providers of child care and development facilities for
reconstruction or renovation of such facilities, subject to the following requirements:
`(A) Loans under this paragraph shall be made only for such facilities that are
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financially and operationally viable, as determined under standards and guidelines to
be established by the Commission.
'(B) The aggregate amount of loans made under this paragraph to a single borrower
may not exceed $50,000.
'(C) A loan made under this paragraph may not have a term to maturity exceeding 7
years.
'(D) Loans under this paragraph shall bear interest at rates and be made under such
other conditions and terms as the Commission shall provide.
'(4) NOTIFICATION- The Commission shall take such actions as may be necessary to
publicize the availability of the programs for mortgage insurance under sections 257 and
223(h) and loans under paragraph (3) of this subsection in a manner that ensures that
information concerning such programs will be available to child care providers throughout
the United States.
'(5) LIABILITY INSURANCE- Not later than 12 months after the date on which
appointment of initial membership of the Commission is completed, the Commission shall
establish standards and guidelines, applicable to mortgage insurance under sections 257 and
223(h) and loans under paragraph (3) of this subsection, requiring child care providers
operating child care and development facilities assisted under such provisions to obtain and
maintain liability insurance in such amounts and subject to such requirements as the
Commission considers appropriate.
'(6) RESEARCH FOUNDATION- Not later than 12 months after the date of the enactment
of this section, the Commission shall submit a report to the Congress recommending a plan
for establishing and funding a foundation that is an entity independent of the Commission
(but which maintains association with the Commission), the purpose of which shall be--
'(A) to support research relating to child care and development facilities;
'(B) to fund pilot programs to test innovative methods for improving child care; and
'(C) to engage in activities and publish materials to assist persons interested in
mortgage insurance under sections 257 and 223(h) and other assistance provided by
the Commission.
'(d) NONDISCRIMINATION REQUIREMENT-
`(1) IN GENERAL- The Commission may not certify under subsection (c)(1) or carry out
any activities of the Commission with respect to any child care and development facility if
the provider of the facility discriminates on account of race, color, religion (subject to
paragraph (2)), national origin, sex (to the extent provided in title IX of the Education
Amendments of 1972 (20 U.S.C. 1681 et seq.)), or handicapping condition.
'(2) FACILITIES OF RELIGIOUS ORGANIZATIONS- The prohibition with respect to
religion shall not apply to a child care and development facility which is controlled by or
which is closely identified with the tenets of a particular religious organization if the
application of this subsection would not be consistent with the religious tenets of such
organization.
'(3) CERTIFICATION- As a condition of certification under subsection (c)(1) and
eligibility for a loan under subsection (c)(3), the provider of a child care and development
facility shall certify to the Commission that the provider does not discriminate, as required
by the provisions of paragraph (1) of this subsection.
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'(e) POWERS-
'(1) ASSISTANCE FROM FEDERAL AGENCIES- The Commission may secure directly
from any department or agency of the Federal Government such information as the
Commission may require for carrying out its functions. Upon request of the Commission,
any such department or agency shall furnish such information.
'(2) ASSISTANCE FROM GENERAL SERVICES ADMINISTRATION- The
Administrator of General Services shall provide to the Commission, on a reimbursable
basis, such administrative support services as the Commission may request.
'(3) ASSISTANCE FROM DEPARTMENT OF HOUSING AND URBAN
DEVELOPMENT- Upon the request of the Commission, the Secretary of Housing and
Urban Development shall, to the extent possible and subject to the discretion of the
Secretary, detail any of the personnel of the Department of Housing and Urban
Development, on a nonreimbursable basis, to assist the Commission in carrying out its
functions under this section.
'(4) MAILS- The Commission may use the United States mails in the same manner and
under the same conditions as other Federal agencies.
'(f) STAFF-
`(1) EXECUTIVE DIRECTOR- The Commission shall appoint an executive director of the
Board, who shall be compensated at a rate fixed by the Commission, but which shall not
exceed the rate established for level I of the Executive Schedule under title 5, United States
Code.
'(2) OTHER PERSONNEL- In addition to the executive director, the Commission may
appoint and fix the compensation of such personnel as the Commission considers necessary,
in accordance with the provisions of title 5, United States Code, governing appointments to
the competitive service, and the provisions of chapter 51 and subchapter III of chapter 53 of
such title, relating to classification and General Schedule pay rates.
`(g) REPORTS- Not later than March 31 of each year, the Commission shall submit a report to the
President and the Congress regarding the operations and activities of the Commission during the
preceding calendar year. Each annual report shall include a copy of the Commission's financial
statements and such information and other evidence as is necessary to demonstrate that the
activities of the Commission during the year for which the report is made. The Commission may
also submit reports to the Congress and President at such other times as the Commission deems
desirable.
`(h) DEFINITIONS- For purposes of this section, the terms defined in section 257(i) shall have
the same meanings as provided under such section.
`(i) AUTHORIZATION OF APPROPRIATIONS- There are authorized to be appropriated to the
Commission to carry out this section $10,000,000 for fiscal year 1999, to remain available until
expended, of which not more than $2,500,000 shall be available for administrative costs of the
Commission and the remainder of which shall be available only for loans under subsection (c)(3).'.
SEC. 6. STUDY OF AVAILABILITY OF SECONDARY MARKETS FOR
MORTGAGES ON CHILD CARE FACILITIES.
The determine- Secretary of the Treasury shall conduct a study of the secondary mortgage markets to
(1) whether such a market exists for purchase of mortgages eligible for insurance under
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sections 223(h) and 257 of the National Housing Act (as added by this Act);
(2) whether such a market would affect the availability of credit available for development
of child care and development facilities or would lower development costs of such facilities;
and
(3) the extent to which such a market or other activities to provide credit enhancement for
child care and development facilities loans is needed to meet the demand for such facilities.
The Secretary of the Treasury shall submit to the Congress a report regarding the results of the
study conducted under this section not later than the expiration of the 2-year period beginning on
the date of the enactment of this Act.
END
10 of 10
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FROM:DADE, J.
P. 16/22
CAROLYN a. MALONEY
14TH DISTRICT, NEW York
DISTRICT DFRCES:
110 EASY BOTH STREET
1230 LANDWORTH Sushme
ZIP FLOOR
WASHINGT DC 20616-3114
New YEAR NY 10022
1803 225-7944
(212) 832-6531
COMMITTEES
BANKING AND FINANCIAL
SERVICES
#-11 Amonu BOULEVRARD
Congress of the United States
ASTORM. NY 11109
1715 S32-1804
GOVERNMENT REFORM AND
OVERSIGHT
Bouse of Representatives
BY LOWER STREET
JOINT ECONOMIC COMMITTEE
Expensive, NY non
Washington. BC 20515-3214
DIE 348-1380
March 19, 1998
President William J. Clinton
The White House
Washington, DC 20500
Dear Mr. President: m. President
As you may recall, during a conversation WE had earlier this month I mentioned to you
a piece of legislation I am developing which will address the increasing need for quality child
care facilities. The members of the child care community with whom I have spoken about this
have called it revolutionary, and a new approach to addressing the needs which exist. This bill
will create a new government sponsored enterprise which we are calling "Kiddic Mac," which I
hope will do for day care what Fannie Mae and Freddie Mac have done for home ownership.
Equally as important, Kiddle Mac will be an incubator for now ways of addressing issues
regarding child care and development.
Kiddie Mac will allow working parents, single parents and stay-at-home parents to have
access to quality child care. Rep. Richard Baker of Louisiana, chairman of the Subcommittee
on Capital Markets, Securities and Government Sponsored Enterprises, has agreed to co-
sponsor this legislation with me, making it a bipartisan proposal.
Kiddie Mac will have four basic components. First. it will have child care facilities be
part of the secondary mortgage market by selling the paper to Fannie Mae so it can be bundled
into their securities they sell on Wall Street, taking advantage of their high volume and lower
interest rates. Second, Kiddie Mac will offer guaranty insurance to those who lend to child
care facilities, thereby acting as a catalyst for the private sector, reducing the risk and thereby
encouraging lending.
Third, for those who are not building or completely rehabilitating facilities, Kiddle Mac
will offer micro-loans. These loans can be used for start-up costs, rent payments, or for
improvements for facilities which wish to be licensed.
Finally, Kiddie Mac will offer liability insurance to all child care providers so as to
facility. make certain that the costs associated with liability are not a factor against the creation of a
Through the profits created from Kiddie Mac's activities, a foundation will be funded.
This foundation will focus on researching child care and development, funding projects and
pilot programs. It will also develop materials and aids in order to people in accessing,
understanding and taking advantage of the Kiddie Mac process.
Certain elements have been added to the bill in order to make certain that Kiddie Mac
stays focussed on the task at hand. These include a capped salary structure for executives, an
annual report with congressional hearings similar to Humphrey-Hawkins hearings, and a $2
billion limit on total activity which can be raised by congressional approval.
Plum PRINTED ON RECYCLED PAPER
MAY-22-1998 17:20 TO:N RABNER
FROM:DADE, J.
P. 17/22
I believe that this approach to addressing the growing need for quality child care is
Innovative and feasible. Most importantly, Kiddie Mac. after an initial appropriation for its
incorporation, is self-financing. It also provides a location withing the federal government
which focusses solely on child care and child development.
Mr. President, Kiddie Mac adds to your child care program by addressing the lack of
quality facilities. It allows both for-profit businesses and not-for-profit organizations, including
churches and synagogues, to supply their communities. The passage of this bill will mean
greater access to quality child care for all American families.
I am enclosing the latest draft of the bill, though there are still a few teems to be
worked out. I am also adding an outline of the bill and an information sheet. I hope you find
the proposal stimulating and I look forward to any questions and comments you or your staff
may have.
Thank you for your commitment to affordable and available child care.
Sincerely,
Cord Member of Congress
CAROLYN B. MALONEY
cc: Vice-President Albert Gore
Secretary Robert Rubin
Enclosures
MAY-22-1998 17:20 TO:N RABNER
FROM:DADE, J.
P. 18/22
KIDDIE MAC SUMMARY
Legislation to be introduced by Rep. Carolyn Maloney (NY)
Status as of 3/20/98
GOAL: To fill the unmet need for quality, affordable child care, the
Children's Development Insurance and Mortgage Corporation ("Kiddie
Mac"), will be created as a government sponsored enterprise which will
be a catalyst for private-sector construction and development lending.
THE BASIC ELEMENTS:
1.
The Concept: The private sector now hesitates to provide loans for
construction or operation of child care facilities because it perceives a high
risk of borrower liability in running such centers. Kiddie Mac will reduce
that perceived risk to lenders, thus encouraging loans for the construction
and opening of child care facilities.
2.
The Key: the Secondary Mortgage Market: Kiddie Mac will do for
child care and development what Fannie Mae and Freddie Mac have done
for home ownership. Kiddle Mac will purchase mortgages and then sell
them to Fannie Mae who will bundle them into the securities they sell on
Wall Street. This should allow Kiddie Mac to be able to take advantage of
the volume of business done in the mortgage market, which leads to lower
interest rates.
3.
Guaranty Insurance=Low-Cost Loans: Kiddie Mac will offer guaranty
insurance to commercial banks for potential child care facility builders and
operators. Currently, while the private sector appears to want to do
something in this area, the perceived risk is to high. A guaranty should be
enough security to spur lending with reasonable terms. In order to prevent
the cost of insurance from becoming a barrier for starting a facility, Kiddie
Mac will also offer reasonably priced liability insurance to qualifying child
care providers.
4.
Start-up Costs and Rent: Besides actual facilities being built or
rehabilitated, often what is needed is money for start-up costs and rent.
Kiddie Mac will offer mini-loans to qualifying child care providers for
these costs. These loans will also be available for a facility which needs to
make certain improvements in order to meet licensing standards.
MAY-22-1998 17:20 TO:N RABNER
FROM:DADE, J.
P. 19/22
5.
Foundation: With the money made from its other activities, Kiddie Mac
will establish a foundation that will research issues in early childhood
development, fund pilot programs and produce educational materials. It
will also provide materials and activities to guide applicants through the
Kiddie Mac process.
SPECIAL CHARACTERISTICS OF KIDDIE MAC:
1.
Executive salaries will be capped.
2.
An annual report to Congress and hearings on activities and performance
will be required, similar to the Humphrey-Hawkins hearings the banking
committees hold with the Federal Reserve Chairman.
3.
Total lending and guaranty activity will be limited to $2 billion. If a need is
found beyond this amount, Congress may increase the ceiling.
Prepared by the office of Rep. Carolyn Maloney
MAY-22-1998 17:20 TO:N RABNER
FROM:DADE, J.
P. 20/22
Common Questions about
KIDDIE MAC
1. Why is Kiddle Mac Necessary?
A: The United States is falling behind in meeting the needs of its children for
high-quality care. Other nations understand the critical role that child care
plays in early development, but the quality and quantity of child care space
in this country are below acceptable levels. While demand is enormous and
growing for trustworthy infant and pre-school slots nationwide, the need is
not being met.
2. Do we really need another government sponsored enterprise to do this?
A: YES. Such an enterprise is chartered when private-sector market mechanisms
fail for some reason to address a major demand. Child care is an example of a
broad demand that profit-seeking firms have been unwilling to meet.
Reasons involve lenders' view that loans to child care facilities carry a high risk
because of possible liability claims. Such facilities are also regarded as bad risks
because they must be constructed or modified to meet strict safety and facility
licensing standards, and are therefore seen as inflexible for conversion to other
uses.
The result is that too little space is available; most existing space is too expensive
for working parents to afford; and much of what is available is of a quality too
low to help much in developing children's potential. Government intervention is
needed to overcome the startup barriers and get good child care facilities into
operation nationwide.
MAY-22-1998 17:20 TO:N RABNER
FROM:DADE, J.
P. 21/22
2
3. How would Kiddie Mac work?
A: It would have two main components:
1. Use of the secondary mortgage market: In this market, Fannie Mae and
Freddie Mac buy mortgages, bundle them and sell them as securities
on Wall Street. The transactions create additional capital volume, and
the mechanism has served to kcep interest rates low and home
ownership affordable even during market recessions. Kiddie Mac
would do the same for child care facilities, buying mortgages for sale
to Fannie Mae. In this way it would produce more low-interest capital
for child care facilities.
2. Guaranty insurance: Many private lenders want to invest in child care
facilities but are uncomfortable with the risks. Kiddie Mac will provide
guaranty insurance for mortgages, loans and some other debts,
encouraging private lenders to invest in the needs of our children.
4. Will Kiddie Mac help someone who wants to convert a building to child
care, add to existing facilities or bring a center up to licensing
standards?
A: Yes. Kiddie Mac will provide small-facilities loans for improvements to
existing centers for the purpose of meeting licensing standards, or to
improve the quality of care and/or increase the number of children who
can take part. A family-run child-care home, for example, could qualify
for one of these loans to make the changes needed for licensing.
5. Who will pay for Kiddie Mac?
A: After a small appropriation to fund its initial incorporation, Kiddie
Mac will offer shares for sale to investors. This stock offering will
fund Kiddie Mac startup operations, after which it will become self-
financing, never costing the taxpayer anything more.
6. Who will have access to Kiddie Mac?
A: Anyone who is currently licensed or who can demonstrate the ability
to be licensed can use Kiddie Mac's services. This includes community
organizations, not-for-profit groups, community development financial
institutions, for-profit businesses, family-home facilities, churches and
other employers.
MAY-22-1998 17:20 TO:N RABNER
FROM: DADE, J.
P. 22/22
3
7. Will those operations be competing against private businesses?
A: Private businesses which want to develop child care facilities, nursery
schools or after-school programs are allowed to access Kiddie Mac just
like anyone else. As for private lenders, since the problem in child
care has been that the needs are not being met by the open market.
Kiddie Mac is needed to fill this role..
8. How about churches and synagogues? Aren't they banned from taking
government money?
A: Kiddie Mac will be a government-sponsored entity, not part of government
itself. If a church or synagogue or any other religious body can qualify to
be licensed as a child care provider, Kiddie Mac's services are available.
9. Will Kiddie Mac help in addressing some of the other problems of child
care and child development?
A: Yes. Using some of the funds generated by its financial activity, Kiddie
Mac will establish a foundation to research problems in child care and
child development, fund pilot programs and educational materials, and find
ways to make the Kiddie Mac process efficient and accessible to as many
people as possible.
Prepared by the Office of Rep. Carolyn Maloury
TOTAL P.22
THE WHITE HOUSE
WASHINGTON
June 12, 1998
MEMORANDUM FOR DISTRIBUTION
FROM:
NICOLE RABNER
DOMESTIC POLICY COUNCIL
RE:
"Kiddie Mac" Proposal
Per our recent conference call on the "Kiddie Mac" proposal, attached please find
information from the Small Business Administration about SBA programs that assist child care
businesses. Please circulate as appropriate. We will arrange another conference call or meeting
sometime next week. Feel free to call me at 456-7263 with any questions.
DISTRIBUTION:
Jennifer Klein, DPC
Emil Parker, NEC
Jennifer Friedman, OMB
Melissa Benton, OMB
Gus Faucher, Treasury
Ed DeMarco, Treasury
Scott Frame, Treasury
Penny Rostrow, Treasury
Maria Pataris, HUD
Mary Bourdette, HHS
Joan Lombardi, HHS
Carmen Nazario, HHS
Mary Ellen Taylor, SBA
P.2/3
JUN 12 '98 12:13PM ADA ED
STALL
DEPARTMENT
U.S. SMALL BUSINESS ADMINISTRATION
WASHINGTON, D.C. 20416
1953
NO
MEMORANDUM
DATE:
June 12, 1998
TO:
Nicole Rabner
Domestic Policy Council
FROM:
John Associate Gray, Deputy Administrator, Capital
Access
SUBJ:
H.R. 3637, "Children's Development Commission Act" (Kiddie Mac Bill)
Thank you for giving SBA the opportunity to provide information relative to H.R. 3637,
"Children's Development Commission Act" (Kiddie Mac Bill). SBA has a history of
providing capital to Child Care Businesses. We have collected data regarding the SBA
7(a) General Business Loan Guaranty Program and the Certified Development Company
Loan Program (504 program).
During the ten year period beginning in 1989 and continuing through the present, SBA
guaranteed 4,620 loans to child care businesses under the 7(a) loan program. The total
for profit
amount of 7(a) loans provided is $1.026 billion.
'gen bus loans
During the same ten year period, SBA guaranteed 591 loans to child care businesses under
the 504 loan program. The total amount of 504 loans provided is $144.5 million.
lec. der (real rate (oars)
In addition to these two lending programs, SBA has provided loans to child care
businesses through the Microloan Program. We have requested data regarding the
up to 25K
number and amounts of child care loans made under this program, which began in 1992.
per
However, this data is not available at this time.
applicants
In addition to the financial assistance described above, SBA has the capability to increase
68 and to
financial assistance to child care providers and provide industry specific technical
assistance through four specific initiatives. These are:
Date-
microloan
Targeted marketing of 7(a) loans to for-profit child care centers
$10,000
Expansion of the Microloan Program in accordance with recently enacted legislation
69,000
that allows microloans to be made to non-profit child care centers. (This is a unique
lrus.
capability as with all other loan programs there is a prohibition against loans to non-
profit businesses.)
Reqs: not for prof
allowed for 7(a)
Federal Recycling Program
Printed on Recycled Paper
P.3/3
JUN 12 '98 12:13PM ADA ED
I
Distribution of the "Dollars and Sense: Child Care Business Skills Training," a
handbook produced in collaboration with the SBA Women's Business Development
Centers to provide viable commercial child care. In addition, SBA is expanding its
online Women's Business Center (www/onlinewbc.org) with specific information on
how to start and operate child care businesses.
Expanded marketing of loans and distribution of printed materials and child care
business training through the SBA resource partner network. This network currently
includes 69 SBA District Offices, 1,000 Small Business Development Centers, 63
Women's Business Centers, 389 SCORE Chapters, 129 Microloan Program sites, 46
Business Information Centers, and 15 One Stop Capital Shops.
Again, thank you for the opportunity provide information on the level and types of
financial assistance the SBA has been providing to the nations small child care businesses
for many years.
P.2/3
JUN 12 '98 12:13PM ADA ED
STALL RUSINGSS INCIES
U.S. SMALL BUSINESS ADMINISTRATION
WASHINGTON, D.C. 20416
1951
NONE
MEMORANDUM
DATE:
June 12, 1998
TO:
Nicole Rabner
Domestic Policy Council
FROM:
John Gray,
Associate Access
Deputy Capital
SUBJ:
H.R. 3637, "Children's Development Commission Act" (Kiddie Mac Bill)
Thank you for giving SBA the opportunity to provide information relative to H.R. 3637,
"Children's Development Commission Act" (Kiddie Mac Bill). SBA has a history of
providing capital to Child Care Businesses. We have collected data regarding the SBA
7(a) General Business Loan Guaranty Program and the Certified Development Company
Loan Program (504 program).
During the ten year period beginning in 1989 and continuing through the present, SBA
guaranteed 4,620 loans to child care businesses under the 7(a) loan program. The total
amount of 7(a) loans provided is $1.026 billion.
During the same ten year period, SBA guaranteed 591 loans to child care businesses under
the 504 loan program. The total amount of 504 loans provided is $144.5 million.
In addition to these two lending programs, SBA has provided loans to child care
businesses through the Microloan Program. We have requested data regarding the
number and amounts of child care loans made under this program, which began in 1992.
However, this data is not available at this time.
In addition to the financial assistance described above, SBA has the capability to increase
financial assistance to child care providers and provide industry specific technical
assistance through four specific initiatives. These are:
Targeted marketing of 7(a) loans to for-profit child care centers
Expansion of the Microloan Program in accordance with recently enacted legislation
that allows microloans to be made to non-profit child care centers. (This is a unique
capability as with all other loan programs there is a prohibition against loans to non-
profit businesses.)
Federal Racycling Program
Printed on Recycled Player
P.3/3
JUN 12 '98 12:13PM ADA ED
Distribution of the "Dollars and Sense: Child Care Business Skills Training," a
handbook produced in collaboration with the SBA Women's Business Development
Centers to provide viable commercial child care. In addition, SBA is expanding its
online Women's Business Center (www/onlinewbc.org) with specific information on
how to start and operate child care businesses.
Expanded marketing of loans and distribution of printed materials and child care
business training through the SBA resource partner network. This network currently
includes 69 SBA District Offices, 1,000 Small Business Development Centers, 63
Women's Business Centers, 389 SCORE Chapters, 129 Microloan Program sites, 46
Business Information Centers, and 15 One Stop Capital Shops.
Again, thank you for the opportunity provide information on the level and types of
financial assistance the SBA has been providing to the nations small child care businesses
for many years.
KIDDIE MAC CALL
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KIDDIE MAC SUMMARY Mody
Legislation introduced by Rep. Carolyn Maloney (NY)
and Rep. Richard Baker (LA)
H.R. 3637
GOAL: To fill the unmet need for quality, affordable child care, the
Children's Development Commission ("Kiddie Mac"), will be created as a
government entity which will be a catalyst for private-sector construction
and development lending.
THE BASIC ELEMENTS:
1.
The Concept: The private sector now hesitates to provide loans for
construction or operation of child care facilities because it perceives a high
risk of borrower liability in running such centers. Kiddie Mac will reduce
that perceived risk to lenders, thus encouraging loans for the construction
and opening of child care facilities. Using a combination of products,
Kiddie Mac will spur private lending to child care providers, give small
loans to get facilities up to licensing standards, and provide affordable fire
and liability insurance.
2.
Guaranty Insurance=Low-Cost Loans: Kiddie Mac will, through HUD,
offer guaranty insurance to lenders for potential child care facility builders
and operators. Currently, while the private sector appears to want to do
something in this area, the perceived risk is too high. A guaranty should
be enough security to spur lending with reasonable terms. In order to
prevent the cost of insurance from becoming a barrier for starting a
facility, Kiddie Mac will also offer reasonably priced liability insurance
and fire insurance to qualifying child care providers.
3.
Start-up Costs and Rent: Besides actual facilities being built or
rehabilitated, often what is needed is money for start-up costs and rent.
Kiddie Mac will offer mini-loans to qualifying child care providers for
these costs. These loans will also be available for a facility which needs to
make certain improvements in order to meet licensing standards.
4.
Foundation: With the money made from its other activities, Kiddie Mac
will establish a foundation that will research issues in early childhood
development, fund pilot programs and produce educational materials. It
will also provide materials and activities to guide applicants through the
Kiddie Mac process.
SPECIAL CHARACTERISTICS OF KIDDIE MAC:
1.
Executive salaries will be capped.
2.
An annual report to Congress and hearings on activities and performance
will be required, similar to the Humphrey-Hawkins hearings the banking
committees hold with the Federal Reserve Chairman.
3.
Total lending and guaranty activity will be limited to $2 billion. If a need is
found beyond this amount, Congress may increase the ceiling.
Common Questions about
KIDDIE MAC
"Child Development Commission Act" H.R. 3637
Introduced by Rep. Carolyn Maloney (NY) and Rep. Richard Baker (LA)
1. Why is Kiddie Mac Necessary?
A: The United States is falling behind in meeting the needs of its children for
high-quality care. Other nations understand the critical role that child care
plays in early development, but the quality and quantity of child care space
in this country are below acceptable levels. While demand is enormous and
growing for trustworthy infant and pre-school slots nationwide, the need is
not being met.
2. Do we really need federal participation to do this?
A: YES. Such a commission is necessary when private-sector market
mechanisms fail for some reason to address a major demand. Child care is an
example of a broad demand that profit-seeking firms have been unwilling to
meet.
Current market conditions discourage private sector investment in child care
facility development. Clearly, with the heightened need for care for America's
children, and relief for America's working parents, the capital markets need to
be encouraged to contribute toward the care and devlopment of our kids.
Lenders have concerns about risk and the threat these risks pose to safety and
soundness to their institutions. Like any financial institution or governmental-
sponsored corporation, these institutions need the reliability of the federal
government backing them up.
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3. How would Kiddie Mac work?
A: Kiddie Mac would certify requests for loans so the Department of Housing
and Urban Development (HUD) could then sell guaranty insurance to the
lenders. Many private lenders want to invest in child care facilities but are
uncomfortable with the risks. Kiddie Mac will provide guaranty insurance for
mortgages, loans and some other debts, encouraging private lenders to invest
in the needs of our children.
4. Will Kiddie Mac help someone who wants to convert a building to child
care, add to existing facilities or bring a center up to licensing standards?
A: Yes. Kiddie Mac will provide small-facilities loans for improvements to
existing centers for the purpose of meeting licensing standards, or to improve the
quality of care and/or increase the number of children who can take part. A
family-run child-care home, for example, could qualify for one of these loans to
make the changes needed for licensing.
5. Who will pay for Kiddie Mac?
A: After a small appropriation to fund its initial incorporation, Kiddie Mac
will be funded by the premiums paid by the lenders who purchase the
insurance, never costing the taxpayer anything more.
6. Who will have access to Kiddie Mac?
A: Anyone who is currently licensed or who can demonstrate the ability to
be licensed can use Kiddie Mac's services. This includes community
organizations, not-for-profit groups, community development financial
institutions, for-profit businesses, family-home facilities, churches and other
employers.
7. Will those operations be competing against private businesses?
A: Private businesses which want to develop child care facilities, nursery
schools or after-school programs are allowed to access Kiddie Mac just like
anyone else. As for private lenders, since the problem in child care has been
that the needs are not being met by the open market. Kiddie Mac is needed
to fill this role.
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8. How about churches and synagogues? Aren't they banned from taking
government money?
A: If a church or synagogue or any other religious body can qualify to be
licensed as a child care provider, Kiddie Mac's services are available.
9. Will Kiddie Mac help in addressing some of the other problems of child
care and child development?
A: Yes. Using some of the funds generated by its financial activity, Kiddie Mac
will establish a foundation to research problems in child care and child
development, fund pilot programs and educational materials, and find ways to
make the Kiddie Mac process efficient and accessible to as many people as
possible.