Welcome to the Finance Fund Blog!

Last week I attended the CDFI (Community Development Financial Institution) Institute held in Washington, DC. The Institute is “the” meeting for the various parts of the CDFI industry. It is put on by the CDFI Coalition which provides opportunity for CDFIs and their many partners, including the full spectrum of community development finance funders and researchers, to create a unified voice in support of the position of CDFIs in the nation’s financial services spectrum. It primarily focuses on education, advocacy and leadership efforts on federal legislative and policy matters.

Jennifer Deuber (Director of Communication) and Valerie Heiby (Director of Development) were with me on the trip and in spite (or because) of their best efforts I was re-elected to the Coalition’s board of directors. In addition the board, through some slip-up in procedure, ended up electing me as Treasurer of the board. Though I ran a covertly non-existent campaign that backfired, I am honored to accept this role.

It is an exciting time for CDFIs. They are being identified and recognized as a part of the nation’s financial services industry that has long been a stable and credible provider of community lending. That recognition is resulting in additional resources and confidence as a player in economic recovery of the country. We heard at the Institute that the Obama administration believes that CDFIs have a key role in recovery and ongoing community stability. It is our hope that Congress will come to the same conclusion.

On Wed., Feb. 3, Secretary of the Treasury Timothy Geithner announced that CDFI (Community Development Financial Institution) banks, thrifts and credit unions may now access funds from the Troubled Asset Relief Program (T.A.R.P.). This is part of the Obama Administration’s movement to support business lending by community development banks and development credit unions.

Mark Pinsky, President & CEO of Opportunity Finance Network, the nation’s CDFI network, hailed this move as a step in the right direction, but stressed that CDFI loan funds should share in this money, too:
Community development banks and credit unions deliver capital and services where other financial institutions don’t. This program is a capital lever that can lift up thousands of businesses that need credit to thrive. The CDFIs that participate will make capital flow where it’s not flowing today. Last October, the President expressed a desire to support non-depository as well as depository CDFIs. The next step is clear: extend support to CDFI loan funds and venture funds.

At Finance Fund, we echo this position and advocate for a similar program for non-regulated CDFI loan funds. Why? Because Finance Fund is a certified CDFI, which provides us with access to financial and technical award assistance from the federal CDFI Fund. Since its inception in 1994, assistance has totaled more than $500 million for community development. As a CDFI, we’re recognized as a financial organization with a primary mission of promoting community development in under-served communities in the United States, through credit, capital, and financial services.

CDFIs are a vital way that under-served communities achieve economic development and neighborhood revitalization. And considering the recessionary climate we’re in today, now is the time to bolster business and economic development by providing CDFIs (like Finance Fund) with the resources to leverage more capital to resurrect strong businesses and communities. This ruling is positive, but CDFIs need the financial covering of T.A.R.P. funds, too.

Finance Fund is proud to join an esteemed, knowledgeable panel of experts on the Early Childhood Advisory Council’s Early Childhood Financing Workgroup. The workgroup, commissioned by Gov. Strickland, will develop recommendations that explore the implementation of a single financing system for early care and education programs. This will provide a new and consistent way to provide funding to all early care and education programs whether they are based in schools, non-profit agencies or for-profit and family child care businesses. Much work as been done regarding the financing of early care and education but this a great opportunity to plan for possible implementation.

Finance Fund is honored to be part of this group as a trusted state leader and visionary in the realm of early childhood care centers and schools and financial assistance. In addition to myself, the group includes professionals from Miami Valley Child Development Centers, Inc., Ohio Department of Job & Family Services, Federal Reserve Bank, Ohio Office of Budget & Management, the Ohio Department of Education and others.

The workgroup will provide insights and recommendations to Gov. Strickland by the end of this April – in time for consideration in the development of the next biennial budget.

After 23 years serving Ohio’s under-privileged and low-income neighborhoods and communities, we’ve set ourselves apart as a trusted financial intermediary that is considered a state leader and visionary. Since 1987, Finance Fund has invested more than $96 million in housing, economic development, childcare and Head Start projects throughout Ohio, leveraging more than $759.9 million. This investment was accomplished through more than 2,457 awards to community-based organizations throughout the state as part of Finance Fund’s core programs. Partnerships have enabled low-income people access to more than 15,312 units of affordable housing, 8,991 full-time jobs, and 3,033 early care and education spaces (classrooms) for 69,377 children benefiting the lives of more than 116,000 Ohioans.

Recently, we helped fund two child care centers by providing grants and loans for re-construction and overhaul.

Noble Learning Center – Caldwell, Ohio
Availability, cost, safety, quality, and accessibility all added to the frustration of finding the right place – the comforting place to care for Noble County children. Finance Fund provided a grant for planning and for facilities improvement for Noble County’s newest (and only) child care center. The overhaul supported 20 construction jobs and the resulting child care center services 135 children and employs 15. Read more here.

MVCDC Kings Highway Head Start – Kings Highway
The Miami Valley Childhood Development Centers (MVCDC), encompassing Clark, Madison and Montgomery Counties, was in great need to purchase, update and improve their Kings Highway Head Start facility. Finance Fund stepped in with $1.05 million in New Markets Tax Credits funding toward the renovation, and an additional $429,000 federal grant. Today, more than 225 children are enrolled at the MVCDC Kings Highway Head Start, with a capacity of 240 students. Read more here.

Check back here for my updates on Early Childhood Financing Workgroup meetings. I look forward to sharing our progress.

Last week’s Washington, DC trip was a fitting cap on 2009. Finance Fund has increased its exposure in public policy and public relations over the year, and these series of meetings were in line with that strategy.

Tuesday was spent on Capitol Hill visiting with thirteen members of the Ohio Congressional delegation about extension of the New Markets Tax Credit program. NMTC is included in the tax extender package that, on Tuesday, had not yet moved to the floor of the House of Representatives. Our encouragement to members was to increase the amount of tax credit allocation from $3.5 billion to $5 billion as it has been funded in the 2008 and 2009 rounds and to exempt NMTC from the Alternative Minimum Tax as all other community tax credits are thus incenting more investor participation.

Wednesday began with an early breakfast with Congressman Pat Tiberi (R-OH) who is one of the principle sponsors of the NMTC five year extension bill (HR 2628), a NMTC Coalition board meeting, and the beginning of the NMTC Coalition annual conference. The conference opened with a luncheon at which Michael Barr, Assistant Secretary for Financial Institutions at the Treasury Department, spoke about his involvement in NMTC. He was one of the original individuals that developed the NMTC concept in the Clinton administration and has now come back into public service in the Obama administration to find NMTC a developed program with a robust and successful process of moving capital into distressed communities.

(NMTC Coalition, 2009) The Credit contributes to the economy of underserved and distressed communities and is an engine for job creation. Thus far, some $15 billion in NMTC financing has found its way to eligible low income communities. Our research indicates that this financing is usually paired with other sources of capital on a dollar for dollar basis — meaning some $30 billion in capital has been invested in low income communities for financing businesses, community facilities and mixed use projects. Using the Recovery Act standard of 1 job for every $92,000 in financing, that $30 billion converts to 326,086 jobs having been created in low income communities. (EDITOR’S NOTE: Factoring in the 39% tax credit this means the cost of these jobs to the federal government was $6 billion, which if directly appropriated would have been $30 billion)

It was my pleasure to introduce Congressman Tiberi to the attendees as a principal speaker at the Thursday session. The Congressman spoke of his work with Finance Fund in moving NMTC funding into his district and all of Ohio and of the need to extend the program as evidenced by his sponsorship of the five year extender bill. He emphasized the bi-partisan nature of the program and suggested that it may be time to talk about making it permanent. It was also a pleasure to have a board member accompany us on this visit. Reggie Johnson, Huntington National Bank, was asked to present on the Thursday investor panel. This was a great opportunity for exposure and to get board members engaged in the “larger world” of the NMTC industry.

Thanks to the amazing work of Finance Fund staff and board (Jennifer Deuber, Communication Manager; Moniqua Spencer, Chief Program Officer; Reggie Johnson, Board Director)  it was a good week with more relationship building than time and space permit me to report. But the frosting on the cake was that, on Wednesday, the House of Representative took up and passed the tax extender package with an increase of $1.5 billion to the $5 billion level we were asking for. The bill now moves to the Senate which may not deal with it until after the holidays.

Finance Fund has been “hanging around” Ohio for twenty some years and has provided some tangible value to distressed communities and inspired changes that, but for its presence, would not have happened. Ohio is proud of what Finance Fund has done but continues to ask the question “Is this all you can do?” It is that constant question that drives us to spend time staring at the mission, searching for the “raison d’être” that moves us again toward the next metamorphic improvement. We aspire to be at the front of the pack, empowering and innovatively bringing resources to low-income communities. It must be acknowledged, whether in strategic agreement or not, that we have dramatically done that over the past 22 years.

Finance Fund’s vision and mission are quite straight forward yet allude to a dramatically different approach, a strategic construct in which systems not symptoms are targeted. This approach births a philosophy that puts emphasis on growing sustainable resources appropriately scaled for the demands of the market. It precipitates a strategy that demands innovation to tackle the challenges of economically distressed communities beyond the inadequate resources offered by public programs or the yield incentives that drive private sector investment.

Our “trademark” has been innovation, looking at things differently and responding “why not” instead of just “why.” From inception our legacy has evidenced this entrepreneurial approach. The Linked Deposit Fund was a groundbreaking innovation inciting bank participation in local projects. The Predevelopment and Economic Development grants have proved to be an innovative model for facilitating leveraged investment into local markets. The New Markets Tax Credit program, Intermediary Relending Program, the creation of Finance Fund Capital Corporation, CDFI certification, and a covey of innovative products are vivid evidence of our movement to fulfill our vision and mission for low-income people.

And now it is time to innovate again. At the September meeting Finance Fund’s Board of Directors approved a resolution authorizing the establishment and funding for the Bank Acquisition Steering Committee (BISC). BISC will implement a process to bring about the acquisition of a bank charter. This means we are moving toward being the majority stockholder of a commercial bank and as such become a bank holding company. This will mean we have to do some changing, some evolving. There will be some challenges, however we have decided we will not back away just because it is hard to do. The benefits to our clients will far out weight the difficulties. An affiliated commercial lender will allow us to bring some stability into the generation of capital, give us access to public sector guarantee programs, provide more flexibility in development of products, and expand growth potential and deployment opportunity not previously possible for Finance Fund. Notice I did not say it will allow us to change our purpose, our vision, or our mission. We will still be providing the same type of products and services to the same market and clients. With a very natural and intuitive repositioning we will be able to offer clients more without much change at all.

Over the next couple of years you can follow the progress of this and other Finance Fund initiatives right here.