$5.5 Million Awardee
For more than three decades, Coastal Enterprises, Inc., (CEI) has pioneered new ways to create economic opportunity in rural communities. Founded in 1977, CEI was Maine’s first local development company. In its early years, the organization focused on mobilizing capital to create jobs in the state’s natural resources industries, such as fishing, farming, and forestry. Over time, however, it has expanded to serve the rest of New England and beyond, and has diversified its lending to include manufacturing enterprises, affordable housing projects, and community facilities.
And now, with the creation of its highly innovative Working Partners Initiative (WPI), CEI has developed another new way to serve rural communities—this time using the New Markets Tax Credit (NMTC) program.
CEI’s experience with the NMTC program extends back more than a decade. The organization was one of the program’s principal architects and has remained deeply involved in policy development and advocacy since the program was enacted by Congress in 2000. And CEI has used the NMTC program extensively. Over the years, it has been awarded a total of $683 million in tax credits, which makes it the program’s second largest allocatee and the largest serving rural communities.
CEI conceived the Working Partners Initiative as a way to use the fees it earns from its NMTC projects to build the capacity of other community-based economic development organizations. The idea is simple. When CEI undertakes an NMTC project that is large enough to generate significant fee income, it uses a portion of that fee income to support the compliance and reporting activities associated with the project and to capitalize new projects of its own. The remainder it passes on to other CDFIs—its working partners.
Through the Initiative, CEI has established formal partnerships with seven CDFIs around the nation that serve low-income rural communities, and it shares a portion of its fee income from its NMTC projects with these partners to enable them to undertake new projects in their own communities. The Initiative thus brings new resources to CDFIs and rural communities that would not otherwise have access to them.
The WPI has already helped to launch projects in rural markets in 12 states from Hawaii to Louisiana. CEI will use the $5.5 million Wachovia Wells Fargo NEXT Award to expand the program. The organization expects to add three to five new partners and estimates that the NEXT Award will almost double the amount of money that the initiative provides to community-based rural development organizations. CEI also believes that the Initiative offers a model that other CDFIs can easily adopt, and hopes that the NEXT Award will elevate the program to national view.
The whole idea, according to Ron Phillips, CEI’s President and CEO, is to widen the circle of benefits. “The Working Partners Initiative is the largest and perhaps the first program to use fee-sharing from NMTC projects to build the capacity of rural CDFIs,” he says. “It enables us to get the money back out to other CDFIs so it can have more impact at the local level.”
$2.75 Million Awardee
For more than 60 years, the economy of southwestern Pennsylvania has struggled. “We lost our basic industry—steel and the businesses it supported,” says David Kahley, the President and CEO of The Progress Fund. “Since the end of World War II, it’s been more bust than boom. Even in good times, we don’t catch up.” The Progress Fund was established in 1997 to help put an end to the bust. The organization works to create economic opportunity throughout a 39-county region that includes western Maryland, West Virginia, and eastern Ohio, as well as southwestern and northern Pennsylvania. And while its basic strategy—providing loans and technical assistance to underserved entrepreneurs—is typical of many CDFIs, its highly focused approach to lending is not.
Rather than being what Kahley calls a “come-all kind of lender” that simply reacts to individual requests for financing, The Progress Fund proactively identifies the local industries that offer the best opportunities for growth, and then directs its capital to businesses that will spur the development of those industries. The intent is to create an economic development strategy that will benefit the entire region.
One of the promising industries The Progress Fund has identified is tourism, and the organization’s focused lending approach is well demonstrated by the Trail Town Program, an innovative initiative that The Progress Fund developed with the Allegheny Trail Alliance to capitalize upon the remarkable popularity of a regional bicycle trail called the Great Allegheny Passage.
The 150-mile Great Allegheny Passage runs from Homestead, Pennsylvania, to Cumberland, Maryland, where it connects with the 184-mile C&O Canal Towpath to form a 334-mile route between Pittsburgh and Washington, D.C. The trail has been named one of the country’s best bike trails and in 2010 attracted 800,000 visitors.
The Trail Town Program launched in 2007. Its primary goals are to retain existing trailside businesses and to increase their revenues; to recruit sustainable new businesses; to improve the buildings and infrastructure in trailside towns; and to promote collective action among the towns to create a world class recreational destination.
The Progress Fund initially focused its efforts on six towns along the trail—the number has since grown to eight—and has provided operational funding for the program and played a leadership role in forming partnerships with a variety of foundations, government agencies, and other supporters. It has also provided experienced staff to help the towns maximize the trail’s economic potential and supplied critical start-up capital for new trail-related businesses, such as inns, B&Bs, outfitters, and retail shops. From 2007 to 2010, 61 new businesses opened and another 12 expanded operations.
The Progress Fund will use its Wachovia Wells Fargo NEXT Award to continue making loans through the Trail Town Program. It will also use the added visibility that the NEXT Award affords to introduce the program to a wider audience.
Indeed, Kahley believes the program—or at least the highly focused lending approach on which it is founded—can be replicated by other CDFIs. The key, he says, is for CDFIs to play to their own strengths and to find opportunities in their own areas. “We found bicycling. Others will find other things,” he says. “You decide what you have in your community that’s good and you support that.”
$25,000 Awardee – Advocacy
The Advocacy award recognizes Ithaca, NY-based Alternatives Federal Credit Union for its policy and advocacy leadership on Living Wages. Alternatives’ leadership and advocacy on the Living Wage began at the local level and has grown into a national movement. In 1994, the credit union undertook a study of what it costs to live in Tompkins County, NY. Alternatives publicly announced the study, making the distinction between a living wage and the official minimum wage and their commitment to paying a living wage to all employees. Based on Alternatives’ study, Tompkins County and City of Ithaca governments voted that organizations receiving their funding must meet Living Wage guidelines. Private employers in and outside Ithaca have adopted a living wage, and people in other cities have used Alternatives’ study as a model for their own efforts to improve the lives of the working poor. In 2009, Alternatives conducted another Living Wage study which indicated that at least 2,500 workers, more than 5% of the County’s workforce, would see an increase in pay as a result of its work.
$25,000 Awardee – Community Impact
St. Paul, Minnesota-based Neighborhood Development Center (NDC) is the recipient of the Community Impact award for achieving a high volume of community impact, tracking and analyzing this impact, and using the information to improve its programs. NDC seeks to empower emerging entrepreneurs with business knowledge and access to opportunity to develop businesses that allow them to move out of poverty, become self-sufficient, and develop and transform their own neighborhoods. In 2009 and 2010, NDC provided services to more than 1,700 individuals. A recent evaluation of its programs found that during that time: NDC-trained entrepreneurs started 80 new businesses and created 250 new jobs; 56% of NDC–assisted businesses reported increasing revenues by an average of $120,000 a year, up from $48,000 a year in 2007; 41% of NDC-assisted businesses now occupy a building that was formerly vacant, up from 32% in 2007; NDC—assisted businesses now return more than $68 million annually—in the form of rents, taxes, and other businesses expenses—to the Twin Cities up from $29 million in 2007.
$25,000 Awardee – Financing
Charter School Development Corporation (CSDC), a Hanover, MD-based CDFI, was selected to receive the Financing award for accessing capital markets in innovative ways that establish replicable models for acquiring affordable capital in difficult economic times. CSDC is an $85 million CDFI that provides credit enhancement lending and uses tax credits in innovative ways to help charter schools procure capital commitments for their facilities. CSDC focuses on financing new and early-stage schools with less than three years’ operating history. It has invested $42 million to leverage over $560 million in financing for 217 schools in 24 states with a default rate of less than 1.8%. These investments have financed 25,000 new student seats and 3.8 million square feet of facilities. In 2010, CSDC entered into a strategic alliance with Entertainment Properties Trust (EPT), a real estate investment trust that will invest up to $100 million with CSDC for charter schools.
$25,000 Awardee – Innovation
Genesis Community Loan Fund (Genesis Fund), based in Damariscotta, Maine, received the Innovation award for its work with island communities in Maine. In 2004, the Genesis Fund launched a program to support development on the 14 Maine islands that sustain year-round communities. For generations, these communities have been home to Maine’s fishing and lobstering industries, but lacked affordable housing. Genesis Fund’s work resulted in new housing and led the island organizations to work together on a collective approach to securing resources to help sustain their communities. In 2010, the Genesis Fund realized that a significant new source of capital was needed for the islands to build scale in their affordable housing efforts. The Genesis Fund encouraged island communities to work with the Maine Affordable Housing Coalition—of which the Genesis Fund Executive Director was chair—to advocate for and pass the largest affordable housing bond in the state’s history. The legislation authorized up to $50 million in bonds, of which $2 million was allocated to support the islands.