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Job Seekers
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
USDAProduce 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."
Treasury Department
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
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.