More resources for national banks
Community Developments Investments (August 2012)
Federal Agencies Support Financing Efforts to Improve Access to Healthy Food
Mark Kudlowitz, Associate Program Manager, Community Development Financial Institutions Fund, U.S. Department of the Treasury
Produce baskets at the 2012 farmers market at the U.S. Department of Agriculture in Washington, D.C., display the types of healthy foods that many low-income communities lack.
The U.S. Department of the Treasury, through the Community Development Financial Institutions Fund (CDFI Fund), is part of a coordinated federal effort to increase access to healthy, affordable food in low-income communities that lack healthy food options. The U.S. Departments of Health and Human Services (HHS) and Agriculture (USDA), which have programs to improve public health and open new markets for farmers to sell their products, are partners in the effort.
These programs also can help create jobs and revitalize distressed communities through investments in anchor institutions, and each program brings a unique approach for accessing healthy foods. The programs utilize a full range of financing tools—grants, loan guarantees, tax credits, and technical assistance. The CDFI Fund’s programs also will leverage public-private partnerships, with banks playing a key role. For more information about HHS and USDA programs, see “Taking Care of Business and Health” and “USDA Support for Healthy Food Access.”
The CDFI Fund leads Treasury’s Healthy Food Financing Initiative (HFFI). Established in 1994, the CDFI Fund’s mission is to increase economic opportunity and promote community development investments for underserved populations and in distressed communities in the United States. It makes financial and technical assistance awards to Community Development Financial Institutions (CDFIs) and administers the New Markets Tax Credit (NMTC) Program. The NMTC Program provides tax incentives for investors to finance businesses and real estate projects in low-income communities. The CDFI Fund’s initiative focuses on
- providing training to CDFIs to establish or expand their healthy-food financing programs;
- awarding grants to CDFIs to directly support healthy-food investments; and
- encouraging private sector investments, including tax credit investments, in healthy-food projects.
Expanding the Capacity of CDFIs
The CDFI Fund’s Capacity Building Initiative provides training and technical assistance to CDFIs undertaking healthy-food financing activities. The training is centered on a series of eight workshops, held in different locations across the country in fiscal year 2011 and fiscal year 2012. The last workshop was held at the end of June in Seattle. The series features three approaches to healthy-food financing: (1) farms and food production, (2) mid-food chain enterprises (such as food aggregation, food processing, and food distribution), and (3) food retailers. At each session, trainers with practical experience and expertise taught participants the specifics of the fundraising, underwriting, and loan management required for successful healthy-food projects. This training was developed and managed by the Opportunity Finance Network (OFN), under contract with the CDFI Fund. OFN is a national association representing a nationwide network of CDFI Loan Funds.
Providing Capital for CDFIs
In September 2011, the CDFI Fund awarded grants totaling $25 million to 12 CDFIs for healthy-food financing programs. Awards ranged from $500,000 to $3 million, and each recipient has a unique approach to healthy-food financing.
The 12 recipients are pursuing various strategies in their efforts to finance healthy-food projects. Six recipients will serve major urban areas; four will serve minor urban areas; and two will serve rural communities. Some of the CDFIs will focus mostly on supermarkets, while others will focus on food co-ops, community-owned stores, and other, smaller retailers. The recipients intend to offer several financial products, including predevelopment loans, subordinated debt, bridge loans, and grants. All will provide technical assistance in conjunction with their lending.
A list of the 12 recipients, profiles of their HFFI strategies, and organizational contact information can be found on the CDFI Fund’s Web site.
No matter what the CDFIs’ approach or market needs are, they will be looking to traditional lenders, particularly banks, for support. Bank support can take several forms, including credit enhancements, capital for a revolving loan pool, first-lien financing in conjunction with the CDFI’s subordinated debt product, and take-out financing for construction loans.
Supporting Private Sector Investments Through the NMTC Program
The NMTC Program attracts investment capital to low-income communities by permitting investors to receive a tax credit against their federal income tax return in exchange for making equity investments in specialized financial institutions called Community Development Entities (CDEs). A CDE is an organization certified by the CDFI Fund that acts as a financial intermediary through which investment capital flows from investors to qualified businesses and real estate projects located in low-income communities. The CDFI Fund allocates tax credits to CDEs through an annual competitive application process and awarded $3.6 billion during its 2011 allocation round.
In support of the HFFI, the CDFI Fund made changes to its 2011 NMTC application materials to encourage discussion of healthy-food projects, to identify the applicants that intend to engage in these types of activities, and to identity the amount of healthy-food investment that will likely be made by each recipient. By changing the materials, the CDFI Fund hoped to identify CDEs around the country that intended to invest significantly in HFFI activities through their 2011 NMTC awards. The awards were announced on February 23, 2012, and a complete list of all the CDE awardees is available on the CDFI Fund’s Web site so that banks and other NMTC investors can readily identify the CDEs that may be interested in partnering in such transactions in their service areas.
Treasury’s CDFI Fund programs, HHS’ Community Economic Development Program, and the USDA’s Rural Development and Agricultural Marketing Service Programs can offer assistance at key points along the food supply chain. As well‐respected state and local healthy-food efforts have shown in recent years, federal programs are often most effective when federal agencies leverage their resources and capabilities.
Coordination at the federal level and among community organizations, businesses, and state and local governments is essential in reaching underserved communities. Because federal programs target different types of recipients, coordination is critical if eligible recipients are to be reached. All three federal agencies want intermediary organizations to establish successful partnerships and deliver broad-based solutions that address food access problems in underserved communities.
Capable intermediaries have a unique understanding of their markets, have solid relationships with private lenders and philanthropic organizations, have strong project pipelines, and are adept at leveraging federal funding from various programs to advance their mission. It is through these partnerships that the full array of financing can be made available to address the specific food-access needs of a community.
For more information on the CDFI Fund’s HFFI efforts, please see the CDFI Fund’s Web site. Mark Kudlowitz, Associate Program Manager for the CDFI Program at the CDFI Fund, can be reached at email@example.com or (202) 927-9910.
Taking Care of Business and Health
The U.S. Department of Health and Human Services (HHS) has pursued its Healthy Food Financing Initiative (HFFI) through the Community Economic Development (CED) Program operated by the Administration for Children and Families. This annual discretionary program funds projects that work to address the economic needs of low-income individuals and families through the creation of employment and business opportunities. For fiscal year 2011, the CED program focused on projects that created jobs and were designed to improve access to healthy, affordable food for people living in food deserts, particularly because local grocery stores often serve as anchor institutions in commercial centers.
In 2011, the CED program provided $16 million in grants to 25 community development corporations across the country. Of these, 16 recipients in 11 states received $10 million to develop grocery stores, small retailers, corner stores, farmers markets, and other initiatives, including produce distribution hubs, cafes, and community kitchens, to help revitalize communities and increase access to healthy, affordable food.
Spotlight on CED Fund Recipients
The Reinvestment Fund (TRF), a community development corporation and community development financial institution (CDFI) in Philadelphia that has projects in the mid-Atlantic area, is using a $759,374 CED grant to create a ShopRite supermarket in the Howard Park area of Baltimore, Md.
This project supports the development of a supermarket, the construction of a commercial kitchen for community use within the supermarket, the enhancement of the Howard Park Farmers Market, and various community outreach and nutrition education programs.
Klein’s Family Markets and Brown’s Super Stores have formed a partnership to build and operate a 67,000-square-foot supermarket under the ShopRite banner in Howard Park. This project will create 80 full-time and 200 part-time jobs for the community and eliminate a food desert. TRF will lend $460,000 to the developers, Liberty Heights Shopping Center and Liberty Heights ShopRite, which will use the money to fund the predevelopment costs of the $18.5 million grocery store, including architectural and engineering soft costs. The jobs that TRF is creating include dairy clerks, meatcutters, cashiers, baggers, runners, and grocery managers. The ShopRite in Howard Park is scheduled to open in early 2013.
The Economic and Community Development Institute (ECDI), a nonprofit community development corporation and CDFI in Columbus, Ohio, is using its $759,370 in CED funding to implement the Food Desert Community Outreach and Jobs Creation Program. ECDI is using a three-pronged approach for this program, which ultimately will create 60 full-time jobs for low-income individuals in the Columbus area. First, ECDI is creating a revolving loan fund, which will help expand several successful food-related businesses. Using lending and financing, ECDI is creating jobs through a stable group of first-tier partners consisting of established for-profit and nonprofit businesses that know how to buy, process, distribute, and deliver fresh, local foods.
The second piece of the program is the development of the FCI Plaza Market grocery store. When completed, this establishment will help ease the food desert of Columbus while creating critically needed jobs for the community. In addition to selling fresh, local, and healthy foods, the FCI Plaza Market grocery store is partnering with the Cooking Matters program, a national nonprofit that gives families the skills, knowledge, and confidence to prepare healthy and affordable meals, which will offer healthy cooking and eating classes.
The final part of the ECDI program is the expansion of ECDI’s Food Commissary, an incubator for food-based businesses and the base for community-wide fresh-food distribution. The Food Commissary originally was funded by a CED grant of $765,838 in 2009. The expansion will allow the commissary to support ECDI’s Growing Entrepreneurs Initiative. A major part of this initiative involves a food-cart commissary that will enable emerging entrepreneurs to test the market with food-cart rental and leasing options and will create jobs in the fields of warehousing, food preparation, food delivery, customer relations, consumer education, and grocery store distribution.
The CEN-TEX Certified Development Corporation (CEN-TEX), a community development corporation and CDFI in Austin, Texas, is using a $341,718 CED grant to create 18 full-time jobs in the olive oil industry. CEN-TEX has partnered with Jim Henry, owner of the Texas Olive Ranch, and Karen Lee, owner of Cowgirl Brands, to expand a “special label” olive oil bottling operation.
This new olive oil corporation will be called Salud Texas. The 18 new jobs range from line workers to salespeople to bookkeepers. Using CED money, CEN-TEX will make an equity investment in Salud Texas to purchase highly mechanized equipment and offer state-of-the-art milling services to olive growers throughout Texas. Currently, there are no other commercial olive oil processing and servicing facilities in Texas. According to market share analysis and crop futures, Salud Texas anticipates having a 95 percent share of the olive milling and bottling market in Texas.
In addition to the olive oil business, CEN-TEX is working with local food banks serving rural Texas to promote nutrition education and emphasize the important role that olive oil can play in a healthy and well-balanced diet.
For more information, see the CED Web site or contact Karen Harris, Office of Community Services, Administration for Children and Families, Department of Health and Human Services, at Karen.Harris@acf.hhs.gov or (202) 205-2674.
USDA Support for Healthy Food Access
The U.S. Department of Agriculture (USDA) is working with the U.S. Department of the Treasury and the U.S. Department of Health and Human Services (HHS) to expand the availability of nutritious food through the establishment of healthy-food retail outlets. The USDA has supported healthy-food retail outlets such as farmers markets, mobile markets, community kitchens, food hubs, and grocery stores. It has also funded infrastructure systems such as trucks, food hubs, and storage facilities to facilitate the distribution of healthy food to underserved communities. The USDA supports education and outreach initiatives that help small towns and big cities across the country obtain healthy food for their communities. Increasing access to nutritious food can promote our country’s health, improve the connection between producers and consumers, build stronger ties between cities and rural communities, and foster economic opportunities in rural America.
USDA Rural Development
The USDA’s Rural Development (RD) mission includes several programs and funding opportunities that support efforts to expand access to healthy food. These programs include:
Business and Industry Guaranteed Loan Program (B&I): This loan guarantee program is administered by the Rural Business-Cooperative Service and is designed to help new and existing businesses in rural areas gain access to affordable capital. Through fiscal year 2012, in accordance with its statutory authorities, USDA reserved (until April 1 of each year) at least 5 percent of the funds made available to the program for entities that establish and facilitate the processing, distribution, aggregation, storing, and marketing of locally or regionally produced agricultural food products. The program also requires that funding priority within this set-aside be given to “underserved communities,” defined as an urban, rural, or Indian tribal community with limited access to affordable, healthy foods and with high rates of food insecurity or poverty. Over the last three fiscal years, the B&I program has awarded $77.2 million to 44 local and regional food projects.
For example, in November 2011, RD issued $5 million in B&I loan guarantees to help a grocer expand his facilities into an underserved area of Winnsboro, La. An 80 percent loan note guarantee was issued to Centric Federal Credit Union, and the financing is being used to construct a new 19,500-square-foot grocery store. The store will provide rural areas in northeast Louisiana with access to fresh produce, including navel oranges, strawberries, and sweet potatoes grown in nearby communities.
In New Haven, Conn., where one in four people lives in poverty, a 2011 B&I guaranteed loan from the USDA helped support construction of the Elm City Market, the first full-service grocery store in the inner city. Webster Bank, NA, in New Haven, the lender for the market, received an 80 percent loan note guarantee. Elm City Market created 100 new jobs for local residents, with pay starting at twice the minimum wage, and the market is obtaining more than half of its products from rural farms within 200 miles of the city. The store reports brisk business and serves residents who previously lacked access to products grown just miles away.
Community Facilities Grant, Direct Loan, and Guaranteed Loan Programs: These programs support rural communities by providing loans, loan guarantees, and grants for the construction, acquisition, or renovation of community facilities, or for the purchase of equipment for community projects. The Community Facilities (CF) program has funded 115 local and regional food projects, ranging from food banks to farmers markets, since 2009. The projects served 2.9 million rural residents and were funded with more than $22 million in loans and $5.6 million in grants. The CF program can assist in financing local food systems in rural areas with populations of fewer than 20,000 people.
CF loans have been used for a wide range of projects, including the purchase of buildings (for farmers markets, greenhouses, or food banks), walk-in refrigerators, commercial-grade freezers, and refrigerated trucks. The program also has provided funding to schools, school districts, and boys and girls clubs to purchase and install cold-food storage units, renovate cafeteria kitchens, and expand the ability to prepare nutritious meals and snacks onsite. The CF program has also financed refrigerated delivery trucks for food banks, enabling them to include fresh produce from local farmers in their food deliveries.
USDA Agricultural Marketing Service
Farmers Market Promotion Program grants (FMPP): The USDA’s FMPP grants help improve and expand market opportunities for farmers while increasing access to healthy food. On April 5, 2012, the USDA opened a request for proposals for approximately $10 million in FMPP grants for direct producer-to-consumer marketing operations, including farmers markets, community-supported agriculture, mobile markets, and roadside stands. The grants, which are administered by the USDA’s Agricultural Marketing Service, are available through a competitive application process. Project awards increase access to local foods for low-income consumers, expand opportunities for farmers and growers to market their products directly to consumers, and raise customer awareness of local farm products through promotion and outreach. Nearly 150 farm-to-consumer marketing projects received funding under the program in 2011, representing a $9.2 million investment to support direct marketing and to increase consumer access to healthy food. Increasing access to fresh produce in underserved communities—especially by extending the ability to use the Supplemental Nutrition Assistance Program (SNAP, which was formerly known as food stamps) in farmers markets—was a priority for last year’s awards and is a priority again for the 2012 cycle. More than 40 percent of the projects funded by the FMPP in 2011 are based in one or more underserved communities, and another 20 percent of the projects are being implemented in areas with a poverty rate of 20 percent or higher. Additionally, improvements in transportation and delivery methods, the purchase of refrigeration equipment, and improvements to packaging and storage that facilitate food access make up nearly a third of the projects funded.
USDA’s additional programs with broad mandates: The USDA has several other programs that can provide funding for projects that increase access to healthy food. Although these programs have mandates that are broader than healthy-food access, they can provide critical support to improving such access. These programs also support key missions of the USDA, including improving economic opportunities for rural communities and farmers.