Economic and Sustainable Development: CDFI-Friendly Bloomington

The Challenge

Even in a strong economy, financing can be difficult for disadvantaged groups or for invaluable community projects that do not have a high rate of return or are too risky for traditional banks. While conventional lending works for many, there are projects vital to our community like daycare facilities, affordable housing, and recreational facilities often left behind because of higher risk and lower profit margins. How can communities overcome these inherent financial barriers to build the future? One solution gaining popularity across the United States is using a community development financial institution (CDFI) to invest in these vital projects.

The only challenge with CDFIs is that they typically ingrain themselves in large markets with a high concentration of low-income communities and community development needs. In fact, many CDFIs are specialized into certain markets, such as affordable housing, to stay competitive. Bloomington’s smaller market means that fostering our own CDFI to would be next to impossible. How, then, can we generate this community-focused investment in a city of  our size?

The Idea

Mayor Hamilton has experience with CDFIs and proposed making Bloomington a “CDFI Friendly City,” or cultivating a city that proactively seeks to attract and facilitate CDFI investment. This partnership model works by having an independent, community-led organization dedicated to promoting capital investment eligible projects in the area to CDFIs nationwide.

The organization cementing this partnership, called “CDFI Friendly Bloomington,” reaches out to CDFIs across the country and presents local projects that fit their specialized lending scope. Interested CDFIs then work with the local borrowers and CDFI Friendly Bloomington to make the project a reality.

This is the first time a system like this one has been developed. The CDFI community, investors, local economic development stakeholders, and cities around the country are interested in the new market potential of CDFI-friendly cities.

The Cost

The groundwork for the CDFI-Friendly Bloomington organization took two years of employee time to establish interest from stakeholders such as banks, donors, citizens, and developers.  The official organization “CDFI-Friendly Bloomington” is now an independent 501(c)(3) corporation with its own Board or Directors (of which Mayor Hamilton is a member).

The Benefit

CDFI financing encourages projects such as affordable housing, sustainable community buildings, child care services, and community oriented buildings. Without this organization, investment in  high-social-value-low-financial-return projects in Bloomington is far less likely to happen. From the outset, Mayor Hamilton asked that $2 million in public funds be dedicated to affordable housing and small business growth and used to leverage $4 million from outside lenders. CDFI-Friendly Bloomington (the organization) hopes to attract more than $50 million in regional CDFI investment in our community over the next five years.

Metadata

Department(s): Economic and Sustainable Development

Department Point(s) of Contact: Alex Crowley

Partner(s): CDFI-Friendly Bloomington

Partner Point(s) of Contact: Brian Payne

Type of Innovation: Brand New Service

Date Implemented: October 2019