CDCs Access New Economic Development Resources

Historically, community development organizations have pursued traditional federal funding for their economic development projects. Grants and loans are annually requested from:

• HUD’s Community Development Block Grant Program (although its economic development component remains underutilized);
• HUD’s Section 108/ Economic Development Initiative (EDI);
• Economic Development Administration (EDA) resources from the Department of Commerce;
• “Equity-like” grants from the Department of Health and Human Services Office of Community Services;
• Lending resources from the Treasury Department’s Community Development Financial Institution (CDFI);
• U.S. Department of Agriculture Rural Business Enterprise Grants (RBEG) and USDA’s Intermediary Relending Program; and
• Brownfields restoration programs using Environmental Protection Agency, HUD, Department of Defense, and EDA funds.

Agencies and trade associations regularly hold briefings and conferences around the country on how to access these funds and on innovations by grantee CDCs.

Less Traditional Resources

Recently, however, CDCs have begun accessing less familiar federal resources for diverse economic development initiatives. In Oakland, the Spanish Speaking Unity Council received $2.3 million from the Department of Transportation’s (DOT) Livable Communities Initiative as well as a $470,000 DOT planning grant to develop components of a mixed-use project featuring retail, service, and residential activities in a complex adjacent to a major transit station operated by Bay Area Rapid Transit. In Boston, Nuestra Comunidad Development Corporation has established a retail pushcart endeavor creating self-employment opportunities for low-income residents using resources from the Congressionally-funded Neighborhood Reinvestment Corporation (while also collaborating with a nearby federally-funded Main Street program). In Washington, D.C., the Marshall Heights CDC used funding from the Department of Commerce’s National Telecommunications and Information Administration to create websites for its microloan program and to help client entrepreneurs advertise and sell products/services.

Training and Welfare Funds

A number of CDCs have successfully pursued U.S. Department of Labor Welfare-to-Work grants, which offer seven-figure funding over a multi-year period. Fifth Avenue Committee (FAC), a Brooklyn CDC, has obtained technical assistance and a bridge loan (convertible to equity) for working capital for its subsidiary company, FirstSource Staffing, a business specializing in temporary-to-permanent placement of former welfare recipients. FAC has worked on the project with NCB Development Corporation (a subsidiary of the National Cooperative Bank, which received its initial capitalization from Congress). NCB Development Corporation is working with CDCs in a number of cities to operate similar staffing companies with anticipated DOL matching resources. CBOs should also benefit from revisions to job training approaches included in the Workforce Investment Act, allowing them to pursue innovations with Workforce Investment Boards, which will generally replace Private Industry Councils and will presumably be more of a gatekeeper than a competitor in operating programs.

Most dramatically, the federal Temporary Assistance for Needy Families (TANF) program has new regulations that will allow governors to work directly with CDCs to “share in the cost of CDC/CBO projects that create jobs [or] fund CDC/CBO projects that will employ TANF clients, including planning, development, and implementation costs.” HHS has been emphasizing to the governors and CDC movement representatives that these funds are extremely flexible. The agency has commissioned the National Congress for Community Economic Development, in conjunction with the Economic Development Assistance Consortium, to prepare a guidebook (to be released in October) informing community groups and state officials about best practices and how to access and manage these resources. Senior HHS officials in Washington and regional offices have already held satellite briefings with CDC representatives to begin informing the field and states about the increased priority of such approaches.

“New Markets” Community Empowerment

The President’s tour of distressed areas and CDC sites in July created visibility and momentum for the Administration’s New Markets legislative proposals. The actual legislative drafts were not available as this article went to press, but the White House widely distributed summaries of key components to both private sector and community development organizational leaders. The New Markets initiatives, if enacted, will feature expansions of current programs operated by SBA, Treasury, and HUD while creating (subject to legislative enactment) several new approaches including America’s Private Investment Companies (APICs), New Markets Venture Capital (NMVC) Firms, and a 25 percent tax credit for investments in targeted low-income areas.

HUD’s Community Empowerment Fund (CEF) is also scheduled to receive substantial new resources, subject to Congressional approval. HUD is currently using previous appropriations for a smaller-scale demonstration of a secondary market program under CEF. HUD is expected to select approximately 10 cities, which will then be eligible to package economic development and community revitalization loans for sale to the private markets. Various incentives will be available to make these issuances attractive to the private sector. CBOs operating lending programs may become eligible for technical assistance to standardize loan originating, underwriting, and servicing. Mentors from financial institutions are likely to be valuable new resource people recruited as part of this new demonstration. CDFIs will likely be well-served by expanded networks with Wall Street institutions and other regional financial centers, which are expected to become more active in future collaborations with community development lenders.

Mentorships and Linkages

Congressional actions resulting in budget cuts for some traditional programs coupled with new resources for less familiar federal initiatives suggest that community development advocates must become resourceful in pursuing project funding from more diverse sources. New linkages with corporate mentors and related networks will also be valuable in accessing federal dollars that have devolved to states with surpluses of unspent funds. CDC activities in workforce development and business nurturing are gaining new admirers from the private, governmental and philanthropic sectors. Organizations that learn how to access funds from less traditional sources will find fewer barriers to capitalizing innovative community economic development undertakings.

Contacts:

• HUD Empowerment Zone/Enterprise Communities, www.ezec.gov.
• HUD, www.hud.gov.
• Department of Health and Human Services’ Office of Community Service (OCS) Grants, www.acf.dhhs.gov/programs/ocs/.
• Department of Treasury Community Development Financial Institution (CDFI) Fund, www.cdfifund.gov.
• U.S. Department of Agriculture, www.rurdev.usda.gov.
• U.S. Department of Transportation Livable Communities Initiative, www.fta.dot.gov/library/planning/livbro.html.
• U.S. Department of Labor Welfare-to-Work Grants, wtw.doleta.gov.
• SBA, www.sba.gov/8abd.
• SBA New Markets Initiatives and BusinessLINC, www.businesslinc.sba.gov.