New Jersey communities are teeming with creativity. From as far south as Cape May, up to the north where you can find municipalities like Newark and Morristown, art has been touted as a way to help revitalize disinvested communities, and even the local economy. It’s fitting that the Garden State would also be home to what’s believed to be the first long-term, affordable loan geared toward creative placemaking projects.
By 2018, New Jersey Community Capital expects to have amassed a $12 million revolving fund, the Creative Placemaking Fund, with the help of investors like the Kresge Foundation, Wells Fargo, and others. The 28-year-old CDFI expects to reach its goal by setting yearly benchmarks, and so far, it has exceeded its first-year target of $5 million, according to NJCC President Wayne Meyer. (He’s also confident NJCC will surpass its second year goal, too.) That was a pretty big accomplishment, especially considering the fact that investors typically see a lot of risk associated with this type of lending, Meyer says.
That’s because arts-related groups are typically thinly capitalized, and there could be lot of change occurring within an organization. Those issues both worry investors, and create complicated lending situations.
While arts-related groups generally rely on donations and grant funding, in New Jersey, some of the big arts funders have pulled out of the state, according to Jeff Yuen, NJCC’s director of resource development. For instance, the Prudential Foundation was one of the “huge arts funders,” but they no longer fund that sector.
That has left some organizations scrambling.
“Arts organizations might need to adapt and think a little bit more flexibly in terms of not just getting grant funding, not just getting donations,” Yuen says, adding that while he hopes NJCC can play a role in bridging the growing gap in arts-related financing, they are not looking to replace grants and donations.
NJCC seeks projects that can be economically viable and able to support debt, and it doesn’t want to put potential borrowers in an “an excessively risky position where repayment is dependent on everything going perfectly,” Yuen says. “There are many forms of creative placemaking, but they are not all a good fit for debt financing. Pop-up events probably are not the right fit, but maybe it’s an artist live/work lift space that can produce cash flow.”
With year two of raising capital in full swing, NJCC has already begun awarding loans to projects in the state. A $2.2 million loan was recently approved to HANDS Inc. of Orange, which—along with NJCC and other partners—recently won a New Jersey Future Smart Growth Award for the transformation of an abandoned factory into commercial and artist space. The loan will be used to preserve seven mixed-use properties that anchor a 15-block area called the Valley Arts District.
The properties, according to Yuen, are part of HANDS’ commitment to create 100 permanently affordable spaces for artists, arts-related entrepreneurs, nonprofits, and community builders.
While “creative placemaking” has been a buzzword as of late, Meyer says the need for this type of loan was fairly evident as far back as the early 2000s. That’s around the time he worked as the housing director for HANDS Inc. and was involved in the acquisition of a number of distressed properties in the city.
“We saw where arts and culture—especially when it’s part of the overall plan for the community—was an opportunity because it achieves so many goals,” says Meyer, referencing economic development, job creation, education, and helping to build neighborhood pride and identity. “When I got to NJCC, we recognized that there was a gap in that type of financing . . . There were a number of groups that were really looking to use arts as a central part of rebuilding their communities, but there was a lack of capital.”
So, about three or four yeas ago, NJCC and the Kresge Foundation began talking about arts and culture, and foundation representatives helped the CDFI broaden its thinking about the sector, Yuen says. Some of the discussion revolved around the fact that creative placemaking projects are tricky to fund because they are often small nonprofits that require a lot of technical assistance. Also, interest rates need to be “ridiculously low because these projects can’t support a lot of debt,” Yuen says. “But given all of that, we still think those are important projects. We still think it is an important piece of community revitalization.”
In 2015, the Kresge Foundation provided NJCC with a three-year, $300,000 grant to support technical assistance and product-development related to the Creative Placemaking Fund. It also invested $2.5 million for a 10-year PRI (program-related investment), which is basically a longer term, lower interest-rate product. (NJCC is targeting a 5.5 percent interest rate for CPF borrowers, according to a prospectus.)
How It Works
In order to qualify for the loan, a project must be part of a community or neighborhood plan and there has to be local stakeholder input driving it, Yuen says. “We don’t want to parachute in [a neighborhood] and try to impose a vision.”
Arts-related projects that don’t support community plans to improve economic development, diversity, and livability won’t qualify for the Creative Placekmaking Fund, Yuen says.
For example, a theater that’s in need of updates or repairs wouldn’t qualify for the loan on its own, but if arts and culture is identified as a key component of a community plan, like it is in the Valley District in Orange, then any projects that support that are something NJCC could finance. “Maybe it’s a grocery store that’s also a key component [of a community plan] . . . and so I think we’re a little bit broader than just saying we’re only going to [give loans to] arts institutions,” Yuen says.
If a project doesn’t fit the Creative Placemaking Fund’s criteria, NJCC has other products that can be utilized. And the same goes for projects that do fit the criteria.
The fund is just one tool in NJCC’s arsenal, according to Meyer. NJCC will typically have three or four other capital sources they’ll align financially to help an applicant access a loan amount that is needed, he says.
For instance, the CDFI is certified by the U.S. Treasury to be a Multiple New Markets Tax Credits Allocate. In May, NJCC used $6.7 million of its credits to support the Millville Arts and Innovation Center. While those monies don’t count toward the Creative Placemaking Fund, Meyers said NJCC will use tools like the New Markets Tax Credits and the U.S. Department of Education Credit Enhancement Fund to supplement creative placemaking projects. (Depending on the proposal, of course.)
“One of the things we committed with our partnership with the Kresge Foundation is we would bring our other tools to the table,” Meyer says.
He wants the fund to help revitalize neighborhoods not just to make them vibrant places to live and work, but also to make them places where opportunity is provided to low- and moderate-income families. And hopefully, NJCC can show other financial institutions that they too can offer similar products and provide affordable loans to creative placemaking projects.
“For us, I think the dream would be that we continue to revitalize urban communities not just by changing the physical landscape but by connecting people and opportunity,” Meyer says.
(Photo credit: The Parlor Gallery in Asbury Park. NJCC provided a $20,000 working capital loan after Superstorm Sandy to help the organization stay afloat. Courtesy of New Jersey Community Capital)