Legislation to be First State Fund of its Kind
(June 11, 2007 – Albany, NY) In an historic event that has been ten years in the making, the New York State Assembly today approved a bill, identical to legislation passed by the State Senate on June 6, 2007 which amends the State’s Urban Development Corporations Act to create the framework for the first-ever, full-fledged Community Development Financial Institutions (CDFI) Fund at the state level.
“What’s most exciting about all this is that the new program will link economic development for individuals and small businesses with the corporation’s large-scale economic development projects,” explained Rafael Morales, Federation Public Affairs Officer and Coordinator of the NY Coalition of CDFIs. “In essence, what the legislature has done is to mandate a comprehensive asset-building agenda that not only encourages entrepreneurship, but also promotes consumer protection against predatory lenders.”
Over the past 12 months, the New York Coalition of CDFIs has been working with the Chairmen of both the Assembly and Senate Banking Committees (Assemblyman Darryl C. Towns and Senator Hugh T. Farley) to reconcile and reintroduce identical legislation. The Senate acted first, introducing their bill (S3575) on March 9, 2007. Right on their heels, Assemblyman Towns introduced the Assembly’s bill (A6681) on March 16, 2007, just days after meeting with members of the NY Coalition of CDFIs. The bills were passed on June 6 and June 11 respectively.
Once signed into law by Governor Spitzer, the legislation will empower the Empire State Development Corporation (ESDC), which already runs a small CDFI program for women and minority business lending, to begin developing a larger-scale program that would attract substantial growth capital to CDFIs across the state.
“The Steering Committee of the Coalition deserves the credit for this success,” explained Coalition Coordinator, Rafael Morales. “They have been working on this for years, and the relationships they have been cultivating are the reason we were able to successfully navigate the complex legislative process.”
The New York Coalition of CDFIs also received significant support from Amy Kramer, Vice President of Governmental Affairs at the New York State Credit Union League, Juan Fernández Ceballos, Community Development Coordinator at the New York State Credit Union League, and from New Yorkers for Responsible Lending (NYRL) a state-wide coalition that seeks to curb abusive and predatory lending practices.
An Historical Perspective
Strengthened by its victory in Washington, D.C., with the creation of the Federal CDFI Fund in 1994, the Federation turned to building the New York Coalition of CDFIs, a group made up of community development credit unions, community development loan funds, community development venture funds, community development corporations, microenterprise funds, and community banks.
“Just a few years after the Treasury Department’s CDFI Fund was created, the Federation and our colleague CDFIs in the state began advocating for a New York CDFI fund modeled after the federal fund,” explained Federation Executive Director Clifford Rosenthal. “We hit the ground running and hired Cathleen Mahon, then fresh out of graduate school, to work specifically on this project,” he added.
Under Mahon, the Coalition’s membership grew and cultivated relationships with some of the key leaders in Albany, but for many years, the bills were unable to get too far in the polarized legislature. Although the Democratic State Assembly introduced CDFI legislation year after year, the program never made it past the Republican Senate, particularly because the funding mechanism for the program was tied to a promise by the previous governor, Mario Cuomo, for a trust fund that would have been capitalized by banks.
“The banking lobby has always been strong in New York, and they were obviously against any program which would have required funding to come from the banks,” said Rosenthal.
Despite these setbacks, the Coalition’s efforts paid off with a significant victory under Governor Pataki with the establishment of the women and minority business (WMB) lending program at ESDC, which provides between $1 and $1.5 million per year to CDFIs lending to women and minority small businesses in New York.
“The WMB lending program in definitely important, but this new program has the potential to leverage billions of dollars to help low-income communities, and that is terribly exciting,” added Rosenthal.
Another exciting development is the recent appointment of Cathie Mahon to head New York City Mayor Michael R. Bloomberg’s Office of Financial Empowerment (OFE). The OFE, like the proposed CDFI Fund, is the first of its kind in the nation, and having Ms. Mahon at the helm of that office should bring CDFIs into a leadership role as the city reworks its overall strategy for poverty alleviation.
With Adequate Funding, A Brighter Future for Low-income Communities
“The bills that were passed carry no funding,” explained Morales. “The Coalition steering committee came to consensus early on that we should just focus on getting the new program written into law and seek funding for it next year through the governor’s budget. We have been working on this project for so long, we didn’t feel it was worth risking the framework and have to start all over again.”
Since inception, the federal CDFI Fund has awarded CDFIs in New York with nearly $80 million in grants. The national CDFI Coalition, of which Rosenthal served as the first elected Chairman, estimates that every dollar of federal investment allows CDFIs to leverage an additional twenty-seven dollars of private investments. This means that the $80 million in federal investments to NY CDFIs has translated into more than $2.15 billion invested in low-income communities. “Imagine how much more CDFIs could do if the state gives even a fraction of that,” posed Rosenthal.