OCC’s Outlook Live Webinar on Interagency Questions and Answers Regarding Community Reinvestment

Staff members from the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and the Office of the Comptroller of the Currency (OCC) (collectively, the agencies) are hosting a discussion of the revisions to the “Interagency Questions and Answers Regarding Community Reinvestment” (Q&As) that were issued on November 15, 2013, and the revised interagency “Large Institution Community Reinvestment Act Examination Procedures” (CRA examination procedures) that were issued on April 18, 2014. The revisions to the Q&As and the revised CRA examination procedures primarily address community development issues.

This webinar will cover new Q&As that

  • – clarify how the agencies consider community development activities benefiting a broader statewide or regional area that includes an institution’s assessment area.
  • – provide guidance related to CRA consideration of, and documentation associated with, investments in nationwide funds.
  • – clarify the consideration of certain community development services, such as service on a community development organization’s board of directors.
  • – address the treatment of loans or investments to organizations that, in turn, invest those funds and use only a portion of the income from their investments to support a community development purpose.
  • – clarify that community development lending performance is always considered in a large financial institution’s lending test rating.

 

The deadline for registration to join the live session is July 17, 2014.

Please follow this link to OCC’s website for more details.

 

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CDVCA Takes General Partner Role in $45M New York State Fund

CDVCA serves as the General Partner for New York State’s “Innovate NY Fund, L.P.,” an economic development Fund of Funds, consisting of limited partnership investments into eight New York State-focused, early-stage venture funds.   The $45 million fund is a seed stage business equity fund to support innovation, job creation, and high growth entrepreneurship throughout the state. The Innovate NY Fund is supported with $35 million in State funds (allocated from the US Treasury’s SSBCI Program) and $10 million from Goldman Sachs Urban Investment Group, and will leverage up to $450 million in additional private investment.

The purpose of the Innovate NY Fund is to promote technology-led economic growth in the state through targeted investments by regional venture fund managers (the “Seed Funds”) into over 100 seed and early stage companies; and to encourage additional private sector investment across the state.  Unique among state-funded venture capital programs, Innovate NY Fund recognizes that effective statewide growth must include its lower income populations.  The Fund’s investment criteria include a requirement to invest a portion of proceeds in businesses located in lower income communities, or to meaningfully employ individuals from these communities.

New York’s approach has been to collaborate with private investors, which includes Goldman Sachs as a limited partner, and through an effective matching investment requirement for the participating funds.  As part of the Small Business Jobs Act signed into law in September 2010, the State Small Business Credit Initiative (SSBCI) was created under the US Department of the Treasury to provide direct support to states for use in programs designed to increase small businesses’ access to credit.

Empire State Development President, CEO & Commissioner Kenneth Adams has said, “Access to seed money is essential to building the vibrant small businesses that are the foundation of a strong Upstate economy. This program addresses … high growth firms that are the backbone of an innovation economy. With this program, we can make critically needed seed-stage capital available to spur job creation and stimulate our economy from the ground up.”

NY ESD


Still Time to Ask Your Senators to Weigh In on Tax Reform and Support the NMTC, LIHTC, and HTC

Earlier this month, Senators Max Baucus (D-MT) and Orrin Hatch (R-UT), the Chairman and Ranking Member of the Senate Finance Committee, wrote to their Senate colleagues asking for comments and feedback on tax reform. In the letter, Senators Baucus and Hatch describe the “blank slate” approach they will take in reforming the tax code and the only provisions, credits, or deductions that will be continued after tax reform are those that meet: “(1) help grow the economy, (2) make the tax code fairer, or (3) effectively promote other important policy objectives.”

Senators have been asked to submit their comments or recommendation letters to the Finance Committee by Friday, July 26th and the submissions will not be made public by the Finance Committee.

It is important that Senators hear from CDFI about the tax provisions that are critical to the community development and economic revitalization efforts in their home states – particularly the impact of the New Markets Tax Credit, the Low Income Housing Tax Credit, and the Historic Tax Credit.

In an effort to encourage Senators to comment on the these tax provisions that help fuel the work of CDFI – the Coalition has drafted language on the New Markets Tax Credit, the Low Income Housing Tax Credit, and the Historic Tax Credit that CDFIs can encourage their Senator(s) to include or reference in comments they submit to the Finance Committee.

Investors’ Circle Members move $1M in 1 Month

Following Investors’ Circle’s Spring Venture Fair, IC members made a record-breaking $1MM in investments in the last month! 

IC is proud to announce investments in the following companies: California Safe Soil, DR2, Indow Windows, and SunFunder.  These investments bring Investors’ Circle’s 2013 year-to-date investment total to $4MM!

Registration is open for IC’s FIRST Beyond The Pitch Event, October 22nd in Washington, DC!

We know that  opportunities to connect, engage, and build relationships in-person are the building blocks for scaling the innovations and enterprises we need most. Our Beyond The Pitch full-day event is open to Investors’ Circle members and accredited investors interested in making early-stage investments into high-growth, high-impact companies.  The event will feature presentations from 15 promising impact enterprises, ample time for networking among investors, and facilitated meetings that dive into the due diligence process!  Special thanks to our host sponsor  Greenberg Traurig!

Help us spread the word!  Please forward this email to any high-impact companies in your network that you think would be a fit for our October 22nd Beyond The Pitch event in Washington, DC!  Entrepreneurs can find more information about our criteria and application process here.  Our application deadline is August 23rd.

Call on Your Senators to Support Tax Reform and the NMTC by July 26th

Earlier this month, Senators Max Baucus (D-MT) and Orrin Hatch (R-UT), the Chairman and Ranking Member of the Senate Finance Committee, wrote to their Senate colleagues asking for comments and feedback on tax reform. In the letter, Senators Baucus and Hatch describe the “blank slate” approach they will take in reforming the tax code and the only provisions, credits, or deductions that will be continued after tax reform are those that meet: “(1) help grow the economy, (2) make the tax code fairer, or (3) effectively promote other important policy objectives.”

Senators have been asked to submit their comments or recommendation letters to the Finance Committee by Friday, July 26th and the submissions will not be made public by the Finance Committee.

It is important that Senators hear from CDFI about the tax provisions that are critical to the community development and economic revitalization efforts in their home states – particularly the impact of the New Markets Tax Credit, the Low Income Housing Tax Credit, and the Historic Tax Credit.

In an effort to encourage Senators to comment on the these tax provisions that help fuel the work of CDFI – the Coalition has drafted language on the New Markets Tax Credit, the Low Income Housing Tax Credit, and the Historic Tax Credit that CDFIs can encourage their Senator(s) to include or reference in comments they submit to the Finance Committee.

Suggested Language for Senators Drafting Tax Reform Comment Letters:

NEW MARKETS TAX CREDIT

The New Markets Tax Credit (NMTC) is an established program that has made significant contributions to local economies in low income urban and rural communities across the country and any tax reform legislation developed by the Senate Finance Committee should include the provisions included in the New Markets Tax Credit Extension Act of 2013 (S. 1133):

1. a permanent, or indefinite authorization of the NMTC;

2. an increase in NMTC credit authority indexed to inflation; and

3. an exemption for NMTC investments from the Alternative Minimum Tax.

Between 2003 and 2011, NMTC investments directly created some 350,000 jobs at a cost to the federal government of $19,500 per job and leveraged $55 billion in capital investment to credit starved businesses in communities with high poverty and unemployment rates.

Of the $55 billion in capital investment made in NMTC qualified businesses between 2003 and 2011, $27 billion was direct NMTC investments and $28 billion from other sources. During the same period, the program cost the federal government $7 billion, translating into a return on investment to the federal government is 8 to 1.

The impact of the NMTC goes beyond direct job creation. NMTC investments promote investment and economic growth in underserved communities. A 2012 report issued by the NMTC Coalition found that the income taxes paid by NMTC financed businesses and generated by the direct and indirect jobs created offset the cost of NMTC to the federal government.

The principal policy objective of NMTC is to increase the flow of private sector capital to communities long overlooked by market forces. The program was authorized in 2000 as part of the Community Renewal Tax Relief Act (P.L. 106-554) and while today’s economy differs significantly from the 2000 economy, the challenge of attracting investment capital to underserved areas persists. This lack of capital stifles entrepreneurs and impedes economic growth leading to urban decay and stagnation in small towns and farming communities, despite opportunities for investment. There is substantial evidence that the NMTC has effectively encouraged private sector investment in underserved low income areas. A 2007 report published by the U.S.

Government Accountability Office (GAO) indicated that 88% of investors surveyed would not have made the investment in the low income community without the Credit. Exempting NMTC investments from the Alternative Minimum Tax will further expand the NMTC investor market bringing in more corporations and smaller regional banks.

The importance of the NMTC is underscored by trends in federal community development spending. According to Congressional Budget Office (CBO), federal community development spending measured as a share of GDP has fallen by 75% since 1980. In many rural and urban communities, NMTC is one of the few financing sources available for community revitalization.

Data from the CDFI Fund, along with the NMTC Coalition’s annual surveys of NMTC activity, shows that 100% of NMTC investments go to economically distressed communities and more than 70% go to communities in extreme distress. The program is reaching communities that far exceed the statutory requirements for poverty and economic distress.

Furthermore, the NMTC accomplishes this at a relatively low cost to the federal government. While the nominal rate on NMTC investments is 39%, there is, in effect, an exit tax for investors at the end of the 7-year compliance period. This tax reduces the cost of NMTC to federal government to 26%.

 

House Appropriation Committee Approves $221 Million for CDFI Fund

The House Appropriations Committee met today to mark-up the FY 2014 Financial Services and General Government Appropriations Bill. The bill approved by the Appropriations Committee includes $221 million for the CDFI Fund, which while $3.9 million less than requested in the President’s budget would allow the CDFI Fund to operate at its FY 2013 pre-sequester funding level.

Of the $221 million provided for the CDFI Fund, the Committee sets aside $189 million for financial and technical assistance grants, $12 million for CDFI Native Initiatives, and $20 million for administrative expenses. The Committee does not set aside funds for Bank Enterprise Awards (BEA), Bank on USA, Healthy Foods Financing and the Committee did not include the CDFI Bond Guarantee language requested by the President.

The Committee Report filed by the Financial Services and General Government Appropriations Subcommittee includes the following instructions urging the CDFI Fund to extend the reach of CDFI programs to “distressed communities” and to support qualified “minority participation” in the New Markets Tax Credit program:

Territories and Rural Communities.—The Committee notes the lack of CDFIs serving the territories and rural communities. The goals of the CDFI programs apply equally to distressed communities located both near and far from financial centers. The CDFI Fund, however, establishes goals based on the composition of financial institutions that apply for grants and loans in a given year, rather than the needs of the communities in distress. Consequently, some communities in distress are not supported by the CDFI Fund because no certified financial institution serves that community. The Committee expects the Department to extend the reach of CDFI programs to distressed communities. New Market Tax Credits.—The Committee supports qualified minority participation in the New Market Tax Credit program to increase entrepreneurship.

The FY 2014 FSGG Bill now heads to the House floor for consideration by the full House of Representatives. The Senate Financial Services and General Government Appropriations Subcommittee, now chaired by Senator Udall (D-NM) has not marked up its FY 2014 bill but they are expected to meet before Congress recesses for August.

CDFI Recertification Update

The CDFI Coalition sent a letter to the CDFI Fund regarding the certification/recertification process on March 21, 2013. The Coalition requested that the CDFI Fund take steps to ensure that no CDFI was de-certified without notice of potential deficiencies in their recertification applications and an opportunity to cure deficiencies. As stated in our letter, which can be found here, there could be serious and potentially irreparable harm in de-certifying a group, such as putting the group in default of Financial Assistance, Technical Assistance or New Markets award agreements, or in default of other agreements that require the entity to be a certified CDFI.

In response to the Coalition’s concerns, the Fund published a Frequently Asked Questions document yesterday. The key element of that document is the Fund’s commitment to contact any applicant for recertification at least once during the review process if there are documents or materials that are deemed necessary to complete the review. The Fund has set a 90- day timeframe for the 2013 recertification process – during such time a CDFI could cure whatever the deficiency might be. However, the Fund has indicated that, in its discretion, it may not allow a cure period for certain deficiencies, such as inability to demonstrate legal status at time of application; inability to demonstrate primary mission of community development, and/or evidence of government affiliation or control.

The recertification timeframe could have a negative effect on individual CDFIs with pending Financial or Technical Assistance applications in the FY 2013 funding round. The Fund cannot make awards to groups that do not meet the certification requirements at the time of the award. Accordingly, any deficiencies identified by the Fund must be handled in sufficient time for the Fund to complete the certification process before the Financial and Technical Assistance awards are completed. If the issues cannot be resolved by that time, the organization will not be eligible to receive a financial award.

Many CDFIs participating in the New Markets Tax Credit (NMTC) program, took advantage of a provision in the NMTC statute that permits CDFIs to create CDEs automatically. Loss of CDFI certification could mean that the CDE’s certification is also at risk. Loss of certification as a CDE is an event of recapture of the tax credits under the NMTC statute, an extremely serious matter. The Fund has indicated in the FAQ that there will be an opportunity, if it is not possible to recertify the CDFI, to submit an application to separately certify the CDE. Please review the Frequently Asked Questions document for details.

State Budgets Overcome Deficits through Major Cuts, But Have No Plans for Reinvestment?

A National Public Radio Broadcast by Greg Allen highlights the bait-and-switch technique of massive budget cuts used only for further tax cuts (Michigan, Ohio), though some states (e.g. Florida) with upcoming gubernatorial elections plan politically strategic investments.

Paul Beck, a professor emeritus of political science at Ohio State University, says that meant less money for schools and local government.

“They were pretty massive cuts,” Beck says. “Local governments and school districts were basically having to tighten their belts considerably. There was a substantial downturn in government jobs in Ohio, particularly at the local level.”

Now that Ohio has a budget surplus, the discussions between Kasich and lawmakers aren’t about restoring spending to schools and local governments. Most of the money is earmarked for tax cuts.

Florida — like many states — is putting much of the surplus into education. After cutting education spending by more than a billion dollars in his first year, Gov. Scott is proposing a $2,500 across-the-board raise for teachers. Scott, by the way, is running for re-election next year.

To read or hear the full article: http://www.npr.org/2013/04/29/179762891/after-belt-tightening-some-states-are-back-in-the-black?ft=3&f=127088100&sc=nl&cc=ph-20130501

Nineteen Senators Request $225M Appropriation for CDFI Fund FY ’14

Senator Robert Menendez (D-NJ) and eighteen of his Senate colleagues signed a letter to the Senate Financial Services and General Government Appropriations Committee today asking that $224.9 be provided for the CDFI Fund in the Fiscal 2014 Appropriations bill.

The letter was submitted to the Appropriations Committee today with the following Senators signed on: Menendez (D-NJ); Gillibrand (D-NY); Schumer (D-NY); King (I-ME); Sanders (I-VT); Hagan (D-NC); Johnson (D-SD); Stabenow (D-MI); Wyden (D-OR); Tester (D-MT); Baucus (D-MT); Landrieu (D-LA); Franken (D-MN); Klobuchar (D-MN); Durbin (D-IL); Schatz (D-HI); Reed (D-RI); Boxer (D-CA); Merkley (D-OR).

Read the full letter here: http://www.cdfi.org/wp-content/uploads/2012/06/FY14-CDFI-Fund-letter-Menendez-plus-18.pdf

Community Development Investment Review Highlights New Social Impact Bonds – “Pay for Success”

Social Impact Bonds (Pay for Success) offer an attractive alternative to the status quo of paying for programs instead of results. Despite our best efforts, the poverty rate today is roughly what it was when the War on Poverty began in 1964. We are winning important battles but losing the war. A new social policy paradigm is needed. Pay for Success financing has the potential to improve the social sector’s effectiveness by rewarding programs that work, encouraging innovation, validating progress, and attracting private capital to the anti-poverty cause. As George Overholser and Caroline Whistler write in the latest issue of The Community Development Investment Review, it would “redirect and refocus our abundant resources, relentlessly, toward the innovations that demonstrate an ever-improving ability to deliver the results our communities need.” Certainly, important questions remain about Pay for Success. Equally important, however, is can we afford to pay for anything less?

For full content: http://www.frbsf.org/publications/community/review/vol9_issue1/index.html