The NMTCC is a national membership organization representing Community Development Entities (CDEs) and investors working with the NMTC program. The Coalition was formed in 1998 with the principal purpose of advocating for the enactment of a federal tax credit to spur economic development in underserved areas. The Coalition works to ensure that the NMTC program can effectively be used to attract private capital and generate economic development in poor communities.

This round of New Markets Tax Credit funding enables us to continue to invest in projects that support Ohio’s distressed communities. These projects help stimulate local economies through capital investment, job creation, and community development. You can read more about some of those projects here and here.

Join me in congratulating our team that has spent endless days and nights working on our NMTC application. Kudos to all of them in this successful effort that will benefit all Ohioans.

On the radio show hosted by former Sen. Fred Thompson, New York lieutenant governor Betsy McCaughey stated that the House’s proposed health care bill contained a provision that would institute mandatory counseling sessions telling seniors how “to do what’s in society’s best interest…and cut your life short.” Citing page 425 of the bill, McCaughey claimed that “the Congress would make it mandatory … that every five years, people in Medicare have a required counseling session that will tell them how to end their life sooner, how to decline nutrition, how to decline being hydrated, how to go into hospice care … all to do what’s in society’s best interest … and cut your life short.”

Here’s what the bill says, “An explanation by the practitioner of the continuum of end-of-life services and supports available, including palliative care and hospice, and benefits for such services and supports that are available under this title.” The accepted definition of end-of-life planning means thinking ahead about the care you would like to receive at the end of your life – which may include the choice to reject extraordinary measures of life support, or the choice to embrace them.  The section would require Medicare to pay for, not mandate, some end-of-life planning counseling sessions with a health care practitioner once every 5 years. It is clear that McCaughey’s distorted interpretation of the content of page 425 was offered not to stimulate debate but to frame an atmosphere of fear and mistrust.

Several television ads sponsored by Patients United Now claim that Canadian citizens survived serious illness only by leaving the country to get treatment in the U.S. because of the length of their wait for service in the Canadian health care system, claiming “Washington wants to bring Canadian-style health care to the U.S.” The reality is that no one is advocating for a government run health care system. The president and the leaders of both parties resound with the words of Sen. Max Baucus, Chair of Finance Committee, “single-payer (government run health care) is not going to get even to first base.” Yet the ads continue for what purpose? Not to stimulate debate but to frame an atmosphere of fear and mistrust.

There was a time in this country that I can remember when someone or some group publically making a misstatement or an outright lie, the journalistic community would stand up on their hind legs and demand accountability, and there was an American public that had not abdicated their role in the republic and given place to apathy believing everything we are fed. Naked again.

The most prevalent is the recently release GAO report “Minority Entities Are Less Successful in Obtaining Awards Than Non-Minority Entities” that attempts to identify reasons for the lack of success. I have some opinions but will do more on that later.

Then it’s lunch with Rapoza Associates Friday, getting ready for the New Markets Tax Credit Coalition Board meeting on Monday, and preparing for the NMTC Coalition Policy Conference on Tuesday and Wednesday. The Coalition is working on a five-year extension of NMTC, a House version of which has been introduced by Rep. Neil and Rep. Tiberi (HR 2628).

Sprinkled into the mix are a number of Hill visits in the House and Senate talking about the Child Care Facilities Finance Act (HR 1685) introduced by Rep. McCarthy and the Senate companion (S 1002) dropped by Senator Casey. It all comes to a conclusion with my testimony (thanks to an invite by Rep. Tiberi) to the Subcommittee on Select Revenue Measures of the Committee on Ways and Means and the Subcommittee on Domestic Monetary Policy and Technology of the Financial Services Committee. I’ll be talking about the GAO report. Busy trip!

Stimulus money gives a boost to small start-ups

A little-known provision of the massive $787 billion stimulus law recently passed by Congress doubles federal funding for so-called Community Development Financial Institutions (CDFIs) such as Community First Fund. That includes local thrifts, banks and non-profits that serve low-income neighborhoods often ignored by large institutions or exploited by high-cost predatory lenders. President Obama’s 2010 budget includes more money for the financiers, to help distressed areas hit hardest by the recession.

Overall, the stimulus law and budget plan allocate about $400 million over two years to community lenders, a huge increase from the roughly $50 million the Bush administration proposed in 2008.

That may seem like chump change compared with the trillions the Treasury Department and Federal Reserve have poured into large financial firms. But every dollar of CDFI funding should leverage $14 to $20 in economic activity, providing vital activity in low-income areas that were reeling even before the downturn.

“We are an organization that is not capitalized because our community is not capitalized. We have to try to negotiate money from the other part of town and bring it to this part of town,” says Carlos Graupera, executive director of the Spanish American Civic Association, surveying a block of tidy row houses built with a loan from Community First Fund. Across the street, 12 older homes are being renovated, also with CDFI dollars. Most are presold, bringing new life into what was once a notorious drug market.

Despite the bleak economy, Graupera and Community First Fund are pressing ahead with their most ambitious undertaking: a 5-acre commercial site with riverfront access — and toxic waste issues that have scared away private developers. They will bear the cost and risk of cleanup, on the bet it will make the site attractive enough that private funding will flow in to build housing and stores.

Because CDFIs see their primary role as stabilizing local economies, rather than generating big profits, they are eager to expand lending using stimulus funds. Some big banks, by contrast, have remained tight-fisted even with federal bailout dollars. Business lending at the largest U.S. banks plunged in February, the Treasury Department said. Demand has doubled at some of the nation’s 800-plus CDFIs as anxious borrowers seek financing.

“The federal money is more needed than ever because other sources of capital are in so much trouble,” says Julia Sass Rubin, assistant professor at Rutgers’ Bloustein School of Planning and Public Policy. With foundation money, state and local funding and capital from bigger banks drying up, the stimulus is “a multiple benefit. …You’re helping poor communities. You’re funding (lenders) that otherwise would have a challenging time finding capital, and it’s a time when banks are not lending like they were.”

Tightened lending standards

Community First Fund CEO Daniel Betancourt and his staff have seen a surge in calls from traditional clients and established businesses that haven’t been able to get loans as regular banks tighten standards or have less capital to lend against.

“We’re going to use this (money) to take more risks for our clients in this tough time,” says Betancourt, who is applying for $2 million in stimulus funding to supplement the $15 million fund. “People are coming up to us with sales that have gone down, with business that is eroding.”

Betancourt hopes to use the stimulus dollars to bolster the CDFI’s small-business and affordable-housing portfolio.

Community First Fund offers loans to underserved borrowers, mainly minorities and women, often with low credit scores or limited experience. It also finances affordable housing and commercial real estate loans to tonier projects, such as the high-end Lancaster Arts Hotel, if they fit its overall strategy for reviving urban neighborhoods and attacking concentrated poverty in 13 Pennsylvania counties.

Even with its riskier portfolio, Community First Fund held loan charge-offs to less than 2% in 2008, while some big, sophisticated banks took enormous financial hits and a slew of subprime lenders failed. Nationwide, loan losses at other CDFIs are comparable or even lower. But if the downturn is deeper than expected, community lenders could face wrenching choices.

“We have more demand than capital,” says Mark Pinsky, CEO of the Opportunity Finance Network, a consortium of CDFIs around the country. In the past 30 years, the so-called opportunity finance industry has lent more than $25 billion with net charge-offs of less than 1%.

“We have to make some hard choices,” Pinsky says. “We have to decide if we’re going to lend money to a struggling minority entrepreneur … or a more established business that’s important to the community, important to jobs, but that we think a bank should be doing. We can’t help everybody as much as we want.”

For now, Community First Fund is doing both.

Champ Hall turned to Community First Fund a decade ago after several banks turned down his request for a small loan to buy equipment for a barbershop. Hall, who also received help developing a business plan, now owns several shops and Champ’s Barber School in Lancaster. His former students have gone on to open more than 20 barbershops in Pennsylvania and other states — several financed by Community First Fund. Hall has stayed with the CDFI as he has expanded.

“I got denied. No bank would help with my project,” says Hall, whose office wall is covered with plaques and newspaper clippings attesting to his success and his community involvement.

Business remains busy in the midst of the downturn, and Hall plans further expansion, saying, “In spite of the economy, people still want to look good.”

John Painter and his partners recently turned to Community First Fund after trying for months to get conventional banks to finance their purchase of Kegel’s Seafood Restaurant, an eatery that has been a Lancaster landmark since 1941. They found the CDFI through the local Chamber of Commerce. The loan was approved after a thorough review of the partners’ equity and business plan, even though the dicey economy is hurting restaurants.

“We thought (financing) would be a snap, but it was one roadblock after another,” Painter says.

Back to basics

The community lenders are both old school and new wave. Their emphasis on character lending, credit counseling and holding loans in a portfolio seemed quaint during the past decade as subprime lenders and big banks loosened standards. Now many are returning to the basics.

“The mortgage broker that was across the street from the CDFI is no longer there,” says James Ballantine, vice president of the American Bankers Association, who sees the lenders as complementing mainstream banks. “The financial institution remains that was there all along, providing a good source and a traditional source of banking.”

Among other Community First Fund projects: Chestnut Hill Café, a Lancaster coffee shop run by two female first-time business owners, and a loan to architect Gene Aleci to renovate two historic buildings downtown. One of the more dynamic is House of Clarendon, a high-end bakery selling wedding and other special occasion cakes designed by Martine Cajas, a former model who says, “These cakes are my models. I put them on the catwalk.”

To be eligible for federal aid under the CDFI program, started in 1994, lenders must meet stringent criteria, including making community development a primary mission, providing financial counseling and remaining accountable to local areas. A separate program is aimed at Native Americans. The Treasury Department’s CDFI Fund also runs the New Markets Tax Credit Program, created in 2000, which has generated $12.6 billion in investments in underserved areas.

Most CDFIs are loan funds, like Community First Fund, that also get capital from foundations and charities. About a fifth are credit unions. Big banks can invest in local lenders to comply with the Community Reinvestment Act, requiring certain banks to invest in underserved areas.

Ellen Seidman, a senior fellow at the New America Foundation, says local lenders have been having a tougher time getting funding under the Community Reinvestment Act as big lenders have merged or pulled back.

Though CDFIs must normally raise private capital to match federal dollars, that provision was waived in the stimulus bill in recognition of the tough economy.

Seidman suggests that as CDFIs become larger and more important, the Treasury Department should consider closer regulation. Many CDFIs are already regulated by the government as banks or thrifts. The industry has developed oversight standards.

Donna Gambrell, director of the Treasury Department’s CDFI Fund, sees the proposed expansion not only as a way to help stabilize low-income areas during this deep recession, but as a tool to help rebuild ravaged neighborhoods in coming years. The Treasury program now reaches just a sliver of eligible CDFIs.

“Even after the water is calm, there’s a lot more work for us to do,” says Gambrell. “This program fills a void for at-risk borrowers in the financial mainstream.”

The stimulus funding will soon wend its way to local communities, with Betancourt’s application due in a few weeks. Obama’s 2010 funding proposal is still in the first stages of congressional debate.

“In the last two to three weeks, we have started to see a surge in calls. I don’t know if it’s (the improving) stock market, but people are getting confidence back again,” Betancourt says, but adds that the economy and financial sector are not out of the woods. “Credit is still tight. While there’s some indication of things improving, nobody really knows.”

What if we spent just a little air time or political sound bites
around the relatively minimal increases in strategies that put dollars
directly on the street. The New Markets Tax Credit program will see a
$3 billion temporary increase and the Community Development Finance
Institution program a $100 million one year increase and a $200
million administrative budget increase enabling funds to flow directly
to main street America. These programs and others like them are a
small but critical part of doing what some of us have been doing for
some time, revitalizing the economy. Yet I’ve not heard a minute of
press time or political air time to focusing on what could work. It is
good to remember you can’t believe everything you hear.

It is my opinion that we can not afford to continue moving to the poles because it is just plain counter productive. The ideological battle has left collateral damage, a world that is neither safer nor better off than it was two decades ago.

This is the time our children will talk about. My hope is that they will say good things.

Also, CDFIs, a key player in local credit availability, have not yet been factored in to the equation. It is my opinion that the solution to our economic malstrom will come from the bottom up not the top down. Small business & small banks

There does seem to be a silver lining as Chairman Frank (Financial Institution Committee) starts hearings this week on stimulous funding for small business and consumers. Watch this one.

But before, in haste, I fall on the sword of rhetoric I remembered another inaugural address from eight years ago. This administration will embody “a new commitment to live out our nation’s promise through civility, courage, compassion, and character.” We will “show purpose without arrogance…Civility is not a tactic or a sentiment. It is a determined choice of trust over cynicism, or community over chaos.” Even as these uplifting words were being delivered eight years ago, that new administration was in the process of demonstrating that its intentions were less than compassionate and more than conservative.

It’s with sadness that I withhold judgment of this new set of lofty ideals. The proof is in the “putting” our money where his mouth is.

To steer this effort, a comprehensive, bipartisan group with adequate representation from individuals/groups that have some knowledge in tax credit financing supplemented by a resource group of experts; i.e. accountants, attorneys, practitioners, investors. I am not suggesting commissioning a study of the feasibility of the proposal. The steering committee should have the authority to make recommendations, craft the model, draft legislation, identify and solicit champions and sponsors. It should, as a goal, solicit the full endorsement of the administration and General Assembly.