Creates First State Fund to Support Full-Range of CDFI Activities
(July 9, 2007 – Albany, NY) On the eve of this year’s Independence Day, New York became the first state in the nation to promote financial independence by creating a state-level fund that supports the full-range of activities that community development financial institutions (CDFIs) engage in. On July 3rd, Governor Spitzer signed into law a bill that had been passed by the legislature with strong bipartisan support, thanks to the persistent advocacy efforts by the New York Coalition of CDFIs (NY CDFI Coalition).
CDFIs are community-based private sector financial institutions that make loans and investments, and provide other financial services, to persons and businesses that are not being served by traditional lenders. CDFIs include community development credit unions, community banks, community loan funds, micro-enterprise funds, venture capital funds and community development corporations.
The New York Coalition of CDFIs, has been staffed and operated by the National Federation of Community Development Credit Unions (the Federation) since the late 1990s after the establishment of the Federal CDFI Fund. The NY CDFI Coalition represents more than 110 CDFIs across the state with more than $1 billion in affordable loans currently outstanding with thousands of low-income households and community development projects.
The Steering Committee of the NY CDFI Coalition is made up of ten representatives from CDFIs representing all sectors of the industry, both Upstate and Downstate. The members include Alternatives Federal Credit Union (Ithaca, NY), Capital District Community Loan Fund (Albany, NY); Carver Federal Savings Bank (New York, NY); the Leviticus Alternative Loan Fund (Yonkers, NY); Neighborhood Trust Federal Credit Union (New York, NY); Nonprofit Finance Fund (New York, NY); and Rural Opportunities, Inc. (Rochester, NY).
This bi-partisan legislation, introduced by Senator Hugh T. Farley and Assemblyman Darryl C. Towns, first passed by the Republican-controlled State Senate on June 6 of this year, and soon after by the Democratic State Assembly on June 11. The bills are modeled after the federal CDFI Fund and provide for the creation of a full-fledged New York State CDFI program to be administered by the Empire State Development Corporation (ESDC).
The bills were signed into law on July 3, 2007 by New York Governor Elliot Spitzer as Chapter 186 of the laws of 2007.
A Look Back Through the Years
The legislation that passed last week has been more than ten years in the making, with concerted efforts from the NY CDFI Coalition, the New York State Credit Union League (NYSCUL); New Yorkers for Responsible Lending (NYRL); and other advocacy groups.
Historically, CDFI legislation was first championed by the State Assembly. In 2006 however, the NY CDFI Coalition scored a major breakthrough, bringing together representatives from the New York State Senate, the State Banking Department, and ESDC to craft a workable framework for the proposed legislation that was acceptable to all parties involved.
Based on those discussions, the new fund will be housed under ESDC, which has experience working with CDFIs through their operation of a small $1- to $1.5-million per year program for CDFIs providing financing to women- and minority-owned businesses. The new measure also gives ESDC the power to appoint its own advisory group to design and operate the fund.
“This legislation is a recognition of the effectiveness of CDFIs in providing much-needed financing for a wide range of projects that meet the financial needs of low-income persons and families,” said Federation Executive Director Clifford N. Rosenthal. “This new fund will bring much-needed resources to promote economic development strategies that target individuals, small-businesses, and low-income communities across the state. It’s very exciting to finally see our efforts pay off after all these years,” he added.
“We applaud Governor Spitzer for recognizing the importance of this legislation by signing it into law,” said William J. Mellin, president/CEO, New York State Credit Union League. “The signing of this bill enables community development credit unions to expand essential services to low- and middle-income New Yorkers. We also thank the bill’s sponsors, “Senator Hugh Farley, Assemblyman Darryl Towns, and the legislature for helping New York’s not-for-profit credit unions take an important step forward in community development finance.”
Next Step: Funding
The legislation creates the State CDFI Fund, but appropriations require separate action. “While we would have loved to see some money attached to the bill, we didn’t want to see the legislation blocked because of issues with funding,” explained NY CDFI Coalition Coordinator and Federation Public Affairs Officer, Rafael Morales. “We felt it was more important to have a workable program passed this year and then focus on appropriations next year,” he added.
Funding from the New York State CDFI Fund will help local CDFIs to leverage grants from the federal CDFI Fund, which requires a non-federal match, as well as from the private sector.
The national CDFI Coalition estimates that every dollar of CDFI funding leverages twenty-seven dollars in final project investment, so even a modest investment by the state could bring dramatic results.
“Having this state fund to match federal awards will help CDFIs leverage millions of dollars for low-income communities,” explained David Raynor, NY CDFI Coalition Steering Committee member and Executive Director of the Leviticus Alternative Loan Fund, a faith-based CDFI in Yonkers. “When used as a match [for the federal grants] and leveraged against private-sector investments, a modest $5-million appropriation by the State could enable CDFIs to greatly expand the scale and reach of their services to low- income New Yorkers, bringing innovative lending and individual development products that combat predatory lenders in our communities.