Special guest column by Bloomington Mayor John Hamilton, originally published by the Herald-Times on 1/2/18
What would Bloomington be like if significantly more financing were assembled to support affordable housing, community projects like day care, senior centers or health clinics, and mom-and-pop small businesses? We hope to find out soon. On Dec. 17, a new nonprofit organization launched in Bloomington to help scores of other nonprofits in town, and also nontraditional entrepreneurs. “CDFI-Friendly Bloomington” will bring new financing and new expertise to boost these vital and valuable local efforts.
Community Development Financial Institutions (CDFIs) are mission-oriented lenders certified by the U.S. Treasury as responsive, community-focused institutions that fund low-income neighborhood developments, social service providers and other projects that are typically hard to finance. Since the federal CDFI Fund began in 1994, more than 1,000 CDFIs have been rebuilding communities around the country.
Over the past couple decades, I worked in the CDFI field and saw how much difference they can make in neighborhoods and in people’s lives. The bank I helped found in DC has provided more than $1 billion in financing and supported many thousands of affordable homes and jobs.
But no CDFIs were active in Bloomington, until now.
CDFI-Friendly Bloomington is a new partner, newly capitalized with $4 million, half from public funds and half from private funds committed by four local banks. CFB will hire a local expert to be a matchmaker between local deals and outside CDFI financing.
Here’s how it will work:
First, the matchmaker will work with local projects or businesses needing financing, and in parallel encourage existing outside CDFIs to lend locally. (Already more than 20 projects have been identified as potential users of CFB with more than a dozen outside CDFIs interested.)
Next, with a potential connection established between a local project and an interested CDFI, CFB will partner with that CDFI to bring their low-cost, risk-tolerant financing along with technical expertise to help get the deal done. For example, suppose a developer in Bloomington needs $1 million to rehab 10 decrepit homes into decent, affordable housing. But a local bank can finance only half the need because of the risks and insufficient property value. CFB can partner with a mission-driven CDFI from, say Chicago, with each lending $250,000 to the deal. Together with the local bank, the team now can get the deal done. With this collaboration, more affordable housing projects, after-school facilities, or community health clinics — any project typically considered too risky to finance — can become reality.
And there’s extra incentive for these outside CDFI lenders to invest here in Bloomington. By putting ourselves on the map as the nation’s first CDFI-friendly city, Bloomington has caught the eye of prominent national CDFI supporters like Bank of America. Bank of America has pledged to match any CDFI loans made in Bloomington, dollar-for-dollar, with 10-year loans at 1 percent interest to the participating CDFIs. This extra boost should help accelerate interest in the Bloomington opportunities.
This CFB project has resulted from strong collaboration between the city administration, the community foundation, and local leaders over the past two years. Since its establishment, CFB has already attracted attention from national experts asking how to replicate the model of attracting multiple CDFIs to operate in a smaller market like Bloomington.
With CFB, Bloomington is poised to attract partnerships from CDFIs in our region and around the country, to help us finance up to $50 million over the next five years in investments that strengthen our safety net while growing jobs and wages — affordable housing, community facilities and small businesses. It’s a creative collaboration among the private, philanthropic, and public sectors, and it’s part of Bloomington’s bright future.