Council awards grant to local economic group

By Frank Donze
Staff writer/The Times-Picayune

A nonprofit organization that launched a program last year designed to help budding entrepreneurs turn concepts into companies got a boost Thursday when the City Council awarded it a $500,000 grant.

With no discussion, the council unanimously agreed to approve the financial aid for The Idea Village, whose key players include people with close ties to Mayor Ray Nagin. The organization offers fledgling businesses a range of services from marketing advice to legal assistance to access to potential investors.

The city's contribution, which was recommended by the administration, comes from the taxpayer-financed New Orleans Economic Development Fund. The $500,000 will augment the more than $1 million the organization hopes to raise from other sources.

Idea Village organizers said they have received pledges of about $520,000 from private foundations and individuals as well as a $500,000 commitment from the state.

The program is modeled after similar economic development initiatives operating in Triangle Park, N.C.; Pittsburgh, Pa.; Houston and Austin, Texas.

Based on an overview of a strategic plan submitted to the council, future city assistance likely will not be necessary.

The Idea Village hopes to become self-sufficient after two years by taking a small equity share, (3 percent to 5 percent, of each company that passes through the program and later turning that ownership share into cash, which will then be plowed back into the operation.

Headed by a board of directors that boasts a broad base of local business and civic leaders, The Idea Village set up shop last April in donated downtown office space. To date, officials said, they have reviewed more than 30 business plans submitted by aspiring small-business owners, admitting four into its "boot camp" program.

Companies about to graduate from the program are Document IT, which proposes to put medical information on wallet-size computer disks; GourmetFoodmall.com, an Internet site for specialty foods; Advanced Software, which would specialize in managing the promotional activities of the recording industry; and Iseatz , an on-line restaurant reservation service.

Plans call for The Idea Village to graduate eight additional companies this year.

The organization set some lofty goals for its first five years : To launch or recruit 58 new businesses, creating 450 jobs with an average salary of $50,000.

Ties to Nagin

The Idea Village has several ties to Nagin's administration.

For example, its president and chief executive, Tim Williamson, is a former executive of Cox Interactive Media, a sister company of Cox Communications, where Nagin was chief executive. Before she joined city government, Beth James, Nagin's director of economic development, was general manager of Cox Interactive.

Another of the organization's founders, Greg Meffert, is Nagin's chief technology officer, who severed ties with the group before he joined the administration. And Bill Hines, chairman of MetroVision and a board member of The Idea Village, was a member of Nagin's transition team.

No one has publicly raised questions about potential conflicts of interest that might arise from the city's financial involvement in the endeavor.

But Nagin allies said the true test of The Idea Village will be whether the companies brought into the group are tied to the mayor or his friends. The results will address whether there were any insider deals, they said.

Though Williamson and other Idea Village executives have begun drawing compensation from the private donations that have started coming in, they said they are earning less than the six-figure salaries they were earning as senior executives in the private sector.

As a nonprofit, the organization will have to make public its federal tax returns, including the compensations of its highest paid employees.

Grant uses varied

The $500,000 grant comes from a fund created in 1991 when New Orleans voters, as part of an overall refinancing of city debt, approved two taxes of 2.5 mills each to create trust funds benefiting economic development and neighborhood housing.

In 1995, voters rededicated half of each fund's 2.5 mills to capital improvements, leaving 1.25 mills -- about $1.6 million annually, compared with the original $3 million pot -- for economic development.

Although the City Council has the final say on the allocations, the recommendations come from an advisory committee appointed by the mayor.

Since 1992, when the first grants were handed out, scores of groups and agencies have received more than $20 million from the fund. Many grants have been as small as $5,000.

Although each recipient is supposed to provide some sort of stimulus for the city's economy, money has been used for unorthodox purposes in the past, including support for neighborhood festivals and a $100,000 contribution to a promotional campaign to support an appearance in New Orleans by the Rev. T.D. Jakes, one of the nation's best-known evangelists.

That strategy has raised questions about the fund's value in promoting economic development.

The Nagin administration argues that by targeting large chunks of the money at larger-scale projects aimed at creating jobs, the city is more likely to get bang for its buck.

Under the plan approved by the council Thursday, the $500,000 will be appropriated in two installments: $300,000 during the first half of the year and $200,000 in the second.

Before Idea Village receives the second payment, it must submit financial and performance reports to the council.

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Frank Donze can be reached at fdonze@timespicayune.com or (504) 826-3328.
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