Community Development Corporations: Discussion
I will start out with a few remarks to let you know about the Local Initiatives Support Corporation (“LISC”). I will then discuss my own experiences and objectives and conclude by introducing my colleagues. Following a description of our backgrounds, we will discuss the direction we feel Community Development Corporations (“CDCs”) will take in the coming years. Our perceptions of the future of CDCs will, of course, be informed by our respective experiences in the field.
The projects that CDCs can carry out will be greatly affected by recent and impending changes in our federal programs and tax laws. Shifting tax burdens will alter the types of projects that we may undertake by limiting our ability to raise private investor equity. Public contributions to CDC-sponsored projects may be drastically reduced by the deferral or elimination of Community Development Block Grants (CDBG) and the shrinking or elimination of the Urban Development Action Grant (UDAG) program.
What does this mean for CDCs? Jan Stokley, from the National Economic Development and Law Center in Berkeley, and I will offer a national perspective on these issues. We complement each other by offering both West and East Coast perspectives. We also have two local specialists on the panel, Mr. William Wallace IV, Executive Director of Latimer-Woods Economic Development, Inc. from Brooklyn and Mr. John Wang, Deputy Executive Director of the Chinatown Planning Council of New York City.
To introduce the topic, I would like to point out that a wide variety of organizations have names similar to “Community Development Corporations.” These organizations are actually quite diverse, and their differences should be understood.
In different states, CDCs are incorporated under different statutes. In New York, for example, a special section of the not-for-profit corporation law sets up local development corporations. In other states, such as Pennsylvania, development groups have no such statute under which they are incorporated. Some groups have a strong base of neighborhood members, while others may be only physically located in a community, but controlled by outsiders. Hospitals and universities have also set up community development corporations as part of their larger institutional infrastructures. If we try, to discuss all these different entities simultaneously under the rubric of Community Development Corporations, we will fail to answer any of the questions before us.
One should keep in mind that different CDCs have different political constituencies and bases and that this will affect their agendas and capabilities. Some CDCs have a membership comprised of a particular community or ethnic group. Others may be tied into particular organizations or political parties. These are very important distinctions. Finally, one should realize that the name: local development corporation, economic development corporation, community development corporation, or revitalization corporation may have nothing to do with the actual characteristics that distinguish the groups.
What ties all these entities together is that each is a response to a particular history and set of circumstances. In general, one must view CDCs in light of the urban renewal efforts of the last twenty-five years. A great deal of money flowed into low income neighborhoods in what some consider the golden era of the 1960s. The first CDCs emerged during that era, under programs sponsored by the federal government and the Ford Foundation. Although these “Title VII CDCs” were well funded in comparison with the smaller CDCs of today, they were but one of the federal government’s redevelopment programs targeted at poor urban neighborhoods, which included urban renewal and model cities.
Most of the communities that government programs were designed to revitalize remain as devastated as they were when the programs were instituted. In fact, many of them have deteriorated even further. In many areas, however, good neighborhood organizing took place. When large, centralized government intervention failed to help poor neighborhoods in any significant way, smaller organizations were created. Many neighborhood organizations have evolved into a new generation of CDCs. In New York City, for example, borough presidents’ offices set up economic development corporations to confront urban decline.
Before introducing the next panelist, I will explain my own involvement with CDCs. LISC, the Local Initiatives Support Corporation, is a nationwide funding intermediary. The Ford Foundation created LISC in 1980 to attract funds from corporations for use in the redevelopment of deteriorated urban neighborhoods. LISC retains no formal connection with Ford, although the Foundation remains a significant source of financial support. Since our creation six years ago, we have raised nearly a hundred million dollars and funneled it into depressed urban neighborhoods. LISC operates in about thirty sites throughout the country. LISC selects sites by locating areas where the local private sector, composed of corporations and foundations, agrees to help fund a program. In New York City, for example, LISC operated in Brooklyn until early 1985, and it has an ongoing South Bronx program which was one of its earliest and strongest projects.
LISC’s support for CDCs has focused primarily on real estate development. There are two reasons for LISC’s emphasis on real estate development. First, CDCs have generally been able to carry out real estate projects most successfully, thereby bringing about tangible improvements in their neighborhoods. This contrasts with CDCs’ very limited success with starting businesses directly. In real estate development, CDCs have the ability to develop a thorough understanding of their local market conditions and they thus have an excellent opportunity to create workable projects which make a real contribution to the area.
The second and more practical reason LISC focuses on real estate is thatit was set up primarily to be a lending organization and it must get back the funds it lends. Given the greater success rate of real estate ventures, it has made more sense to focus on that area. LISC has been accused of “creaming,” that is, choosing only the most promising projects rather than the most challenging or high risk ones. But LISC has provided support to over three hundred and seventy diverse organizations around the country. This is a broad and expanding base which certainly includes more than just the strongest, most established organizations and the least risky projects.
Now that I have provided background information, Jan Stokley will continue by presenting her perspective on the role of CDCs in our cities’ economic development.
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