Highlights Great Need for Affordable Financing in Economic Downturn
(May 14, 2008 – Albany, NY) Nearly 80 community-based lenders, bankers, advocates, regulators and legislators travelled to the New York state capital on Thursday, May 8 for the first-ever New York Coalition of Community Development Financial Institutions (CDFIs) Statewide Conference, organized by the National Federation of Community Development Credit Unions (Federation), the Coalition’s long-time sponsor and a federally-certified CDFI intermediary.
The New York Coalition of CDFIs is led by a steering committee of CDFI practitioners representing all sectors of the CDFI movement and geographies in New York. The current steering committee includes Leni Hochman, CFO of Alternatives FCU (Ithaca, NY); Bob Radliff, CEO of the Capital District Community Loan Fund (Albany, NY); Gina Bolden-Rivera and Greg Gamble from Carver Community Development Corporation (New York, NY); David Raynor, Executive Director of the Leviticus 25:23 Alternative Loan Fund (Elmhurst, NY); Justine Zinkin, CEO of Neighborhood Trust FCU (New York, NY); Kristin Giantris, Northeast Vice President of the Non-profit Finance Fund (New York, NY); and Dana Brunett and Hubert Van Tol from Rural Opportunities, Inc. (Rochester, NY).
The conference was made possible thanks to major sponsorship from Capital One Bank and HSBC Bank, USA, with additional support from Deutsche Bank and JP Morgan Chase Bank. The program also received foundation support from the F.B. Heron Foundation and New York Community Trust.
Participants from all corners of the state came to highlight the important work of CDFIs and to voice their support for the New York State CDFI Fund, a recently expanded program administered by the Empire State Development Corporation (ESD) that will support the full range of activities CDFIs engage in.
“CDFIs are needed now more than ever amid this subprime crisis,” said the Federation’s President / CEO Cliff Rosenthal. “It’s not just about housing, the problems in the financial system have translated into a contraction of credit for all sorts of enterprises and all sorts of lending. That says to us that the diversified funding that CDFIs provide, whether it’s for housing, micro-enterprise, or small businesses, is more critical than ever,” he added.
“I’m tremendously excited to be here today,” said Rosenthal. “We’ve never had a gathering like this of New York State CDFIs in one room at one time, and the diversity of work, and financing, and reinvestment provided by CDFIs in attendance is really impressive. It’s been really gratifying to be making such progress and enjoying so much support from CDCUs, loan funds, venture capital funds, microfinance funds, and others in New York.”
Especially significant was the attendance of New York Assemblyman Darryl Towns and Senate Banks Committee Director, Peter Edman, both of whom addressed conference attendees. Towns, a Brooklyn Democrat and Chairman of the Assembly Banks Committee, sponsored the New York CDFI Fund legislation. In his presentation he praised the work of CDFIs.
“Because you’re small, and lean and mean, you’re able to get products out there that are needed, without having to go through months of shareholder meetings in order to come up with these ideas,” said the Assemblyman. “You’re there on the ground floor and we appreciate you for that. We hope that over these next months and as we face the next budget, that we will be able to reach your targeted goal to create a pool of $15 million over the next three years [to support CDFIs].”
Peter Edman who coordinates the Senate Banking committee for Senator Hugh Farley, the sponsor of the New York CDFI legislation in the Senate, expressed the Senator’s support for the vital work of CDFIs in extending affordable financing to residents of low-income urban and rural communities across New York.
| (From left to right) Cliff Rosenthal, Federation President/CEO; Bob Radliff, CEO of the Capital District Community Loan Fund; Leni Hochman, CFO at Alternatives FCU; Donna Gambrell, Director of the U.S. Treasury Dept. CDFI Fund; Justine Zinkin, CEO of Neighborhood Trust FCU; David Raynor, Executive Director of the Leviticus 25:23 Alternative Loan Fund; and Rafael O. Morales, Federation Public Affairs Officer and Coordinator of the NY Coalition of CDFIs.
Donna Gambrell, Director of the U.S. Treasury Department’s CDFI Fund, was the keynote speaker at the conference. Ms. Gambrell, a career government administrator who formerly worked at the Federal Deposit Insurance Corporation (FDIC) in the area of community development, has come to lead the federal CDFI Fund at a time when its federal appropriations have been restored to $95 million, near its all-time high under President Clinton.
“Having a specific NY CDFI Fund will help to further supplement and address the capital and credit needs of New Yorkers that the CDFI Fund may not be able to address through its funding award rounds,” said Gambrell. She also had the opportunity to hear first-hand accounts from CDFI practitioners about the impact the federal CDFI awards have had on their organizations. Unlike most foundation and government grants that support specific projects, CDFI Fund dollars are used as institutional growth capital, enabling CDFIs to expand into new communities and serve people in need.
In New York City, the Brooklyn Cooperative FCU is opening its second branch later this month in Bedford-Stuyvesant, a very low-income neighborhood in northern Brooklyn. The credit union, chartered in 2000, is opening its second office and doubling its footprint thanks to nearly $400,000 it received from the Federal CDFI Fund last year.
“Our credit union would not have been able to expand into Bed-Stuy without support from the CDFI Fund,” explained Jack Lawson, Brooklyn Cooperative FCU’s CEO. “We would be able to reach so many more people if New York had a similar fund to support our efforts. This is what this Coalition has been advocating for more than a decade and this is why we’re here.”
The event agenda also included a presentation by Cathie Mahon, a former Federation program officer who served as the first coordinator of the New York Coalition of CDFIs. Mahon remained active in the work of the Coalition throughout 2006, until she was named Executive Director and Associate Commissioner of the New York City Department of Consumer Affairs, Office of Financial Empowerment (OFE).
“Over the past year, the National Federation of Community Development Credit Unions and the New York CDFI Coalition have played an essential role as partners in many of New York City’s aggressive anti-poverty initiatives, such as Opportunity NYC, our conditional cash transfer program, and Mayor Bloomberg’s Earned Income Tax Credit Coalition Campaign,” said Mahon. “We are delighted that our partnerships with CDFIs, and other financial institutions, have helped more than 1,500 New Yorkers, many of whom were unbanked, obtain safe and affordable accounts and look forward to continuing to offer new programs and products that will help increase financial stability for all New Yorkers.”
Under Mahon’s watch, OFE is setting precedents as the first city agency in the nation devoted to alleviating poverty and promoting asset-building in low-income communities. It is increasingly reaching out to CDFIs and other community organizations to develop partnerships and collaborations to combat poverty and increase consumer protections.
In addition to the keynote presentations, the event also featured two practitioner panels that addressed the state of community development finance in New York and showcased the impact of CDFIs in their communities. The panels framed the urgent need for increased consumer protections and access to affordable financing in low-income communities, while providing concrete examples how CDFIs are already making a difference.
In the final session of the day participants heard from Jennifer McCormick, Vice President of Policy and Programs at Empire State Development Corporation. McCormick spoke about the complicated process involved of getting legislation enacted and funded and applauded the persistency of the New York Coalition of CDFIs.
After hearing from McCormick attendees were treated to an open dialogue with ESD, which will operate the expanded CDFI program. During this session, participants identified ways that the new CDFI program could be made more accessible to different types of CDFIs.
Justine Zinkin, CEO of Neighborhood Trust Federal Credit Union (New York, NY), and a coalition steering committee member, was pleased with the participation at the event. “I wasn’t sure how many folks would come to Albany for this event, but the turnout has been great! We’ve been at this for a really long time and to have this kind of excitement is really encouraging.”
Presentations from the New York Coalition of CDFIs Statewide Conference are available by clicking here.
A Historical Perspective
“Our involvement in this project dates back more than 20 years,” explained Rosenthal, whose original concept paper to create a New York Corporation for Community Banking in 1985 failed to gain traction in New York, but eventually became a reality as the U.S. Treasury Department’s CDFI Fund in 1995. “We intensified our efforts in the mid-90s after the federal CDFI Fund was signed into law by President Clinton, but it took more than 10 years of work for both chambers of the New York State legislature for everyone at the state level to see eye to eye.”
For years, CDFI legislation was championed by the State Assembly under the leadership of Aurelia Greene (D-Bronx). While previous CDFI bills consistently passed in the Assembly, they tended to stagnate in the Rules Committee on the Senate side.
More recently in 2006, the New York Coalition of CDFIs scored a major breakthrough by bringing together the New York State Banking Department with the State Senate and the Empire State Development Corporation to work out some of the issues with previous CDFI bills. With support from the Senate Banking Committee Chairman, Senator Hugh Farley (R-Schenectady), the new legislation made its way through the Senate and in June 2007 identical CDFI legislation was passed by both chambers of the legislature and signed into law, by then-governor Elliot Spitzer.
Despite this major victory, the legislation that passed in 2007 did not contain a specific appropriation, so additional action is required to secure dedicated funding. Governor Paterson has long been a supporter of CDFIs, particularly those serving women and minority-owned businesses, and combined with strong bi-partisan support from the Senate and Assembly Banking Committee chairmen, CDFI practitioners in New York are hoping to see an initial appropriation of at least $5 million to help expand their activities as allowed by the new law.
Why a New York CDFI Fund?
CDFIs are financial institutions with a lending focus, who invest in primarily in low-income and underserved urban and rural communities, assisting small-businesses and low-income individuals. CDFIs include community development credit unions (CDCUs), community loan funds, facilities and non-profit lenders, micro-enterprise funds, community banks, community development venture funds, and community development corporations.
Since the mid-90s, the federal CDFI Fund has provided more than $80 million in equity capital to CDFIs in New York. Those funds have a required 1-to-1 non-federal match, but in practice CDFIs leverage the funds many times over with private sector partners. CDFIs then lend the funds to low-income consumers, small businesses, facilities, and community institutions at affordable rates and terms. Unlike project-specific investments, this lending capital revolves year after year as the loans are repaid and new loans are made. According to the Treasury Department’s estimate, with final project leverage included, CDFIs leverage each dollar of government investment at a ratio of 27 to 1.
| Ron Ehrenreich, Treasurer of Cooperative Federal CU (Syracuse, NY) explains how his CDCU has been able to expand to new underserved communities thanks to grants from the federal CDFI program.
“Nationally there are more than 800 federally-certified CDFIs, and New York State is home to nearly 110 of them,” explained Rafael O. Morales, Public Affairs Officer at the Federation and Coordinator of the NY Coalition of CDFIs. “We have a critical mass of these institutions working in low-income urban and rural New York communities, and CDFIs are experts at leveraging limited funds. If CDFIs are able to take NY CDFI Fund grants, match those with federal CDFI Fund dollars and then leverage that with private investments, the impact on low-income communities will be huge.”
“This coalition understands the difficulties of the fiscal crisis in New York; however, our data shows that a $5 million dollar investment by the state would allow CDFIs to leverage over $135 million in end-user financing. Our efforts going forward will focus on helping our legislators understand that there is simply no better use of these funds in terms of impact,” Morales added.
“At the federal level it looks like the Fund is here to stay,” said Rosenthal. “Combined with the major breakthroughs we had in working with the state legislature, a new governor with a track record of supporting these issues, and the current economic downturn and mortgage crisis, the time is right for New York to provide systematic support for the economic development efforts of CDFIs.”
Conference organizers hope the conference will help educate legislators on the important work of CDFIs and encourage more CDFIs to become involved in reaching out to their local representatives in support of the program.
CDCU Leaders Focus on the Long Term
Following the New York Coalition of CDFIs Statewide Conference, thirteen credit union leaders met in Albany to discuss the future of community development credit unions. Organized in conjunction with Alternatives FCU (Ithaca, NY), this summit was an opportunity for affiliated credit unions in the Federation’s Northeast Region to begin creating a structure for future collaborations.
Tristram Coffin, CEO of Alternatives FCU, came to the Federation with the idea of organizing this meeting because, “there are so many things that are common to all credit unions, and spending less time and money doing some of those things will allow all of us to be much more successful.”
Attendees were interested in collaboration on a variety of fronts, including staff training, marketing, and data processing. The group determined that their goal is to “perpetuate the survival of community development credit unions through innovative collaborative solutions.”
The group plans to continue meeting in the future and will invite more credit unions to participate through the Federation.
Participants included CDCU leaders, Federation staff, and the Federation’s Community Development Partner, Paragon FCU (Montvale, NJ).
© 2008 National Federation of Community Development Credit Unions.