More money. More mission.

For much of the past decade we at Finance Fund, continue to strategize about how to address the problem of stability in resource generation and flexibility in capital deployment. Numerous meetings, workgroups and consultants have always led us back to the same place – more assets mean more resources for those in need.

We are characteristically small business lenders and have been for more than 23 years.

Our mission is to move resources into low-income communities. We have experienced growth in assets (from $50,000 in 1989 to $160 million in 2009) and have funded more than 2,400 projects that have resulted in significant impact and dramatic increase in demand.

Due to this demand, Finance Fund has begun the careful exploration to purchase a national bank charter. The bank would be an affiliate of Finance Fund and will maintain the mission of Finance Fund, which is to invest in distressed communities. Its purpose will not be to compete with other local, regional and statewide banks. Simply, the purchase of a bank will enable us to maintain our altruistic mission and collaboration with a bank’s profit mission.

On Feb. 18, 2010, the inaugural meeting of the BISC (Bank Initiative Steering Committee) was held.  This group of experienced, mission-focused individuals debated at length, the pros and cons of types of banks, timing and potential obstacles to this endeavor.  It was unanimously decided that a professional consultant would be sought-out to guide the BISC through the process of potential bank identification, and acquisition.  To that end, an official RFP has been issued.  The RFP, which can be found here, details the scope of work and minimum requirements desired of prospective candidates.

This begins yet another exciting chapter for Finance Fund.  As this exploration unfolds, look for further details of our progress.

CDFIs Key to Economic Recovery – Honored to Accept Role as Treasurer of CDFI Coalition at this Year’s CDFI Institute

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.

Treasury Continues to Support NMTC Program

On February 19th I participated in a conference call in which senior Treasury officials provided remarks preceding a press release and fact sheet further supporting the inclusion of a New Markets Tax Credit program extension for 2010 & 2011 in the President’s proposed budget. “As part of the Administration’s strategy to restore prosperity and create an economy that works for small businesses and for all Americans, Treasury Secretary Geithner today announced new steps to extend and expand the New Markets Tax Credit (NMTC) to support investment in hard‐hit communities.” The release announced three specific steps the Administration is taking to expand support for the program.

  1. Funding authority to catalyze high levels of private investment in distressed communities. The Administration proposes to authorize NMTC at $5 billion in 2010 and 2011.
  2. Improving overall competitiveness, attractiveness and effectiveness of the NMTC.
    1. Allowing Alternative Minimum Tax (AMT) taxpayers to claim NMTC.
    2. Review passive activity rules, which is a rule that limits the use of losses and credits for business in which a taxpayer does not materially participate.
    3. Qualification of certain types of investments for the credit, which seeks to clarify what types of loans constitute a qualified investment.
    4. Improvement of NMTC rules to spur additional investment in small business.
      1. Re-examining “substantially all” requirements, which requires an awardee (CDE) to have a specific portion of their funds invested at all times.
      2. Supporting greater investment in institutions that invest in small businesses by supporting new rules to promote more investment in Community Development Financial Institutions (CDFIs).

In addition to the “formal” proclamation of the press release, on the conference call Treasury officials made concerted effort to point out that NMTC has Secretary Geithner’s support and is a high priority for the Administration. Bob Rapoza, representing the NMTC Coalition, expressed the industries appreciation that Treasury is moving aggressively on these issues that will strengthen the program.

It’s good to hear good news once in a while.

PRESS RELEASE and FACT SHEET:

http://treas.gov/press/releases/reports/nmtc%20fact%20sheet.pdf

Finance Fund Calls for Share of T.A.R.P. Funds to Bolster Business and Revitalize Communities

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 Believes in Ohio: After 23 Years, Still Charging the Path of Economic Development and Job Creation

“Never awake me when you have good news to announce, because with good news nothing presses; but when you have bad news, arouse me immediately, for then there is not an instant to be lost.” – Napoleon Bonaparte

It was a busy week for our government leaders. President Obama made a stop here in the Buckeye State at the Lorain County Community College (LCCC) to talk jobs and the economy; Gov. Strickland delivered the State of the State address highlighting more of the same, and finally, Obama outlined strategies for healthcare, clean energy and – you guessed it – jobs, jobs, jobs.

Clearly our country and our state are in a time of economic hardship. We have an unemployment rate hovering at 10% – give or take – and large and small businesses alike are “trimming the fat,” so to speak, by laying off workers and stretching their current employees thin to cover business demands.

So what can a state and a nation that’s been stuck under the dark cloud of a dismal economy do? Just as Gov. Strickland said, we must believe in Ohio. Finance Fund continues to believe in our great state. We’re doing all we can to be a bright spot in the doom and gloom of the financial crisis.

Finance Fund is an organization that’s been making strides for Ohio development and job creation since 1987 – with no “red” or “blue” strings attached. In fact, we’ve leveraged more than $759 million to Ohio small businesses, nonprofits and Head Start programs, which has created thousands of jobs and benefitted the lives of countless Ohioans. Here are some vital stats:

- FF has granted more than 2,457 awards to countless community-based organizations
- FF has enabled access to more than 15,312 units of affordable housing for low-income people;
- More than 8,991 full-time jobs
- Over 3,033 early care and education spaces (classrooms) for 69,377 children

For 23 years, we’ve identified needs and put our money where our mouth is:

- We supported the Heritage Marketplace/Save-a-Lot grocery store revitalization, with a $1 million New Markets Loan, resulting in 18,900 square feet of redeveloped space, 46 full- and part-time jobs, and access to affordable groceries for 25,000 people.

- Additionally, Finance Fund loaned Ohio Basic Minerals $2.45 million for a site renovation of the manufacturing plant. Thirty-five renovation jobs were created, seven in-house jobs were maintained and 30+ jobs will be added by 2012.

We truly believe that in order to grow and cultivate a strong economy and business climate, we must believe in our businesses and provide them with essential resources and guidance to flourish.

Our outlook is strong – we’ve got more funding available to eligible businesses and nonprofits this year, and we’re enthused to begin lending in order to create more jobs and stimulate economic and community development. We have more than $75 million in loan funds and nearly $3 million in grants and linked deposits to place into Ohio’s distressed communities in the next 12 months. Obama talks change; Strickland keeps believing and both plan for more small business stimulus programs. But Finance Fund continues to “make action happen” by lending to businesses, creating jobs and fostering revitalization.

Gov. Strickland Taps Finance Fund CEO for Early Childhood Finance Workgroup

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.

Reflections on a good 2009

Adversity is the first path to truth. (Lord Byron)

In the midst of clamor, distress, insecurity, and despair, 2009 was a good year for Finance Fund though it was, by most accounts, unique and demanding. William Shakespeare said “Is it not strange that desire should so many years outlive performance?” If 2009 were to judge us by performance and not desire my characterization might not stand. From investor fatigue, credit anxiety, client frustration, and employment turmoil there wasn’t much that the year didn’t throw at us. But, despite the challenges confronted I stand by my declaration. “What doesn’t kill you makes you stronger.”

This was a year of staging for the next step. Though not necessarily sought, it provided and opportunity to examine, scrutinize, and calibrate a response to the dramatically changed market conditions. This realignment of staff and strategy has resulted in a stronger staff, new approaches at deploying resources, renewed enthusiasm for engaging staff and board, and an invigorated passion for new initiatives that help distressed communities. We’ve gone back to check our values, vision and mission, held them up against our strategies and recharged our batteries. Finance Fund’s renewed circumstance is due primarily to the growing strength of our people and their ability to embrace change by making it work for us not against us.

2009 has positioned us to explode into 2010 with a new fervor for mission and accomplishment as yet un-experienced by Finance Fund.  We have more than $75 million in loan funds and nearly $3 million in grants and linked deposits to place into Ohio’s distressed communities in the next 12 months. This is five times more resources than ever before. We have a number of initiatives that are moving forward with deliberate speed; i.e. “Wisely, and slow. They stumble that run fast.” (William Shakespeare) These, like the bank initiative and the CDFI funding initiative, will be “blossoming” in 2010. To say we are excited is to significantly underestimate our sense of expectancy.

One man’s remorse is another man’s reminiscence. (Ogden Nash)

Final Trip to DC for 2009

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.

Kicking off the New Market Tax Process

The announcement of the New Market Tax Credit (NMTC) award has certainly enhanced the level of excitement and activity at Finance Fund. The 2009 award of $50 million added to the $20 million remaining from the 2008 award gives us a total of $70 million in NMTC to place in Ohio communities in 2010. Our NMTC funding has typically gone to non-profit or for profit clients creating jobs or economic impact in distress communities, and 2010 will be no different. Though this sounds like a substantial “chunk” of money, compared to the demand that we see in Ohio’s distressed communities the challenge will be deciding who gets to play with us.

The capital is targeted to either metropolitan and non-metropolitan counties or more specifically census tracts in those counties. For the NMTC program, a non-metro county is any county that DOES NOT have a contiguous border with a metropolitan service area. Finance Fund will invest $30 million in non-metro census tracts and $40 million in metro tracts.

Finance Fund has established a NMTC Strategic Investment Group (NSIG) that meets weekly to strategize, assess, and move the investment process forward. NSIG is comprised of staff from program, finance, and internal auditing divisions and is actively examining projects ready for investment. The expectation is that the metro capital will be deployed by the middle of the second quarter of 2010 and the non-metro by the end of the year.

To do this NSIG is resorting to one of Finance Fund’s core competencies, talking to people we know and making sure as many as possible are aware of the potential for investment in their communities. If you have an interest in this funding or want to talk to us, contact Chief Program Officer Moniqua Spencer at mspencer@financefund.org.

Is that all we can do? Certainly not.

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.