April 4, 2018; Next City
In Bloomington, Indiana, a mid-sized college town with roughly 84,000 people, Mayor John Hamilton was looking for a way to attract investment capital to his city, reports Emily Nonko for Next City. In itself, this is nothing remarkable, but what is unique is the focus on attracting community development financial institution (CDFI) capital, rather than providing tax abatements for corporations like Amazon. Last week, Bloomington announced that it aimed to become the nation’s first self-described “CDFI Friendly City.”
Hamilton, prior to being elected mayor, had served as president of City First Enterprises, a CDFI based in Washington, DC. After his election in 2016, Hamilton was looking for ways to bring the kind of community finance infrastructure that exists in DC to Bloomington. Brett Theodos, who was a co-author of a December 2017 Urban Institute report on how state and local policy can support CDFIs, notes that CDFIs, despite mostly being nonprofit, need to be able “to recoup a good part of their expenses from their lending activity,” and that this means CDFIs find it more cost-effective to operate in big cities than in smaller cities like Bloomington. So, local policy support for community investment can be important.
According to the city, the CDFI Friendly City program aims to encourage and incentive CDFI investment in Bloomington by building a supportive infrastructure that includes a nonprofit agency that can manage projects, with the city co-investing with CDFIs on specific projects.
The city’s press release adds that, “Several local projects have already been identified as potential recipients of outside CDFI financing, including a number of affordable housing projects…and facilities such as child care centers and community-oriented businesses. Several CDFIs have expressed interest in expanding their portfolios in the city.”
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Hamilton says the city will commit $2 million to attract CDFI co-investment. Specifically, Hamilton is tapping the city’s Redevelopment Commission to earmark $1.5 million for affordable housing support—and the BUEA [Blooming Urban Enterprise Association] to earmark up to $500,000 to support small business development.
A number of partners have been responsible for the effort. One leading partner has the been the Community Foundation of Bloomington and Monroe County, which provided seed funding for working groups and the feasibility study, along with Bloomington Urban Enterprise Association and PNC Bank. The Community Foundation has also agreed to serve as a temporary fiscal sponsor. President Tina Peterson notes that the role of the foundation goes beyond providing money. According to Peterson, this role has also involved “working on getting a better understanding of what this community needs in the way of creative financing and introducing the idea to the broader community.”
Mark Pinsky, who served as executive director for 21 years at the Opportunity Finance Network and now runs the advisory firm Five/Four Advisors, conducted the feasibility study, which resulted in a white paper that outlines his vision both of the project—and the broader concept of a “CDFI Friendly City” that emerged from the Bloomington working group meetings.
Pinsky, who envisions more cities following Bloomington’s lead, identifies the following eight key principles: 1) completion of an evaluation and planning process; 2) the use of local funds (“skin in the game”) that can induce CDFI lending (such as loan guarantees); 3) creation or designation of an operating entity, either a standalone nonprofit or part of a larger organization; 4) a local governing body with broad representation; 5) a public strategy statement; 6) explicit goals and a method for tracking results; 7) a designated person independent of local government to lead the work; and 8) a public declaration of the city’s intent to support CDFIs.—Steve Dubb