slide1
Download
Skip this Video
Download Presentation
Module #9 – Funding Community Development

Loading in 2 Seconds...

play fullscreen
1 / 36

Module #9 – Funding Community Development - PowerPoint PPT Presentation


  • 109 Views
  • Uploaded on

Module #9 – Funding Community Development. Introduction & Overview. Connecting the Dots in Community Economic Development (CED) Build Wealth and Value Neighborhoods City State Prioritized Projects Strategic Planning Outgrowth Assigning Responsibility Identifying Resources

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Module #9 – Funding Community Development' - july


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
introduction overview
Introduction & Overview
  • Connecting the Dots in Community Economic Development (CED)
    • Build Wealth and Value
      • Neighborhoods
      • City
      • State
    • Prioritized Projects
      • Strategic Planning Outgrowth
      • Assigning Responsibility
      • Identifying Resources
    • Project Opportunities
      • Attract Investment
      • Debt and Equity
      • Better the Community
introduction overview1
Introduction & Overview
  • Finance: Fuel to Facilitate Programs & Projects
    • Programs
      • Longer Timeframes
      • Multiple Initiatives
    • Projects
      • Better Defined Time Horizons
      • Clearer Benchmarks
    • Focus for Leaders
      • Match Financial Resources With…
      • Project Opportunity
introduction overview2
Introduction & Overview
  • Finance: Fuel to Facilitate Programs & Projects
    • Mix of Resources
      • Private
      • Public
      • Nonprofit
    • Amount of Resource Intervention
      • Risk Profile of Opportunity
      • Feasibility and Value
      • Extent of Conventional Sources
      • Size of Funding Gap
framework of cd finance
Framework of CD Finance
  • Why Community Development Finance?
    • Project Life Cycle
      • Gestation
      • Growth
      • Maturity
      • Stabilization
    • Cycle Characteristics
      • Growing Risks
      • Differing Levels of Commitment
      • Different Players or Sources
framework of cd finance1
Framework of CD Finance
  • Why Community Development Finance?
    • Funding Gaps Inevitable
      • Frustration
      • Overwhelmed
      • Do Nothing
      • Procrastination
      • Missed Opportunity
    • Fundamental Truth About Community Development Lending and Investment
      • Financial Matter First
      • Not Social
      • Projects Must Pencil Out
      • Fundamentally Sound
framework of cd finance2
Framework of CD Finance
  • What is Community Development Finance?
    • Not Tool for Fixing Flawed Projects
      • Faulty Business Model
      • Dismal Location
      • Non-marketable Concept
      • “Lipstick on the Pig” Principle
    • Market Punishes Poor Projects
      • Financial Damage
      • Credibility Damage
      • Financial Partners Exit
      • Community Leadership Frustration
      • No-win Proposition
framework of cd finance3
Framework of CD Finance
  • What is Community Development Finance?
    • Sharp Pencil Due Diligence
      • Equity Already Committed
      • Collateral Value of Assets
      • Reliable Cost Estimates
      • Expertise and Capabilities
    • Focus of Community Development Finance
      • Fill Private Market Resource Gaps
      • Ensure Capital Available When Private Sources Unwilling or Unable
framework of cd finance4
Framework of CD Finance
  • What is Role of Finance in Community Development Process?
    • Finance Only One Component
      • Necessary But Not Sufficient
      • Other Elements Needed
    • Fundamentally Sound Local Economy
      • Growth Even if Slow
      • Demand for Goods and Services
      • Room for New Market Entrants
    • Availability of Suitable Workforce
      • Educated and Trained
      • Possible Misuse of Incentives if Lacking
framework of cd finance5
Framework of CD Finance
  • What is Role of Finance in Community Development Process?
    • Community Infrastructure
      • Physical
      • Technical
      • Educational
      • Financial
    • Infrastructure vs. Projects
      • Both/And Not Either/Or
      • Priorities/Choices/Trade-offs
      • Success and Sustainability
framework of cd finance6
Framework of CD Finance
  • Alternatives for Filling Funding Gaps
    • Adapting Existing Private Financial Institution Activities
      • Include Community Development as Part of “Normal” Business
      • Reduce Market Imperfections
      • Good Project and Market Information for Due Diligence
      • Regulatory Dilemma: Safety and Soundness vs. Community Reinvestment
    • Creating Alternative Funding Sources/Financing Entities
      • Public, Private and Nonprofit Sources
      • See Appendix A
      • Caution: Substitution of Capital
who are the major players in community development finance
Who Are the Major Players in Community Development Finance?
  • Public Sector
    • Broad Policy Goals
    • Promote Public Good
    • Regulations to Ensure Equity and Fairness
who are the major players in cd finance
Who Are the Major Players in CD Finance?
  • Federal Level
    • Department of Housing & Urban Development (HUD)
    • Economic Development Administration (EDA)
    • Department of Agriculture (USDA)
    • Environmental Protection Agency (EPA)
    • Small Business Administration (SBA)
    • U.S. Treasury
      • Community Development Financial Institutions (CDFI)
      • New Markets Tax Credits (NMTC)
      • Historic Tax Credits (HTC)
      • Low Income Housing Tax Credits (LIHTC)
who are the major players in community development finance1
Who Are the Major Players in Community Development Finance?
  • State Level
    • Piggyback Conduits for Federal Programs
    • Revolving Loan Funds (RLF)
    • Equity Capital and Subordinated Debt
    • Targeted Tax Credits
    • Industrial Revenue Bonds
who are the major players in community development finance2
Who Are the Major Players in Community Development Finance?
  • Local Level
    • Piggyback Conduits for State and Federal Programs
    • Revolving Loan Funds (RLF)
    • Technical Assistance
    • “One-Stop Shops”
    • Municipal Bonds
      • General Obligation Bonds
      • Revenue Bonds
    • Tax Increment Financing
    • Tax Abatements
      • Full or Partial
      • P.I.L.O.T.’s
who are the major players in community development finance3
Who Are the Major Players in Community Development Finance?
  • Private Sector
    • Primary Motivations
      • Make Profit
      • Create Value
      • Build Wealth
who are the major players in community development finance4
Who Are the Major Players in Community Development Finance?
  • Commercial Banks and Thrifts
    • Community Vested Interests
      • Attract Deposits
      • Make Loans
      • Declining Community Damages Balance Sheet and Profitability
      • Good Business
      • Community Reinvestment Credits
who are the major players in community development finance5
Who Are the Major Players in Community Development Finance?
  • Commercial Banks and Thrifts
    • Business Decision Framework
      • Continued Evolution
      • Globalization of Finance
      • Cycles of De-Regulation/Re-Regulation
      • Tough Competition
      • Tight Margins
      • Limited Latitude for Mistakes
      • Balance Sheet Management
who are the major players in community development finance6
Who Are the Major Players in Community Development Finance?
  • Individual Investors
    • Usually with Local Vested Interests
    • Individuals or Groups
      • Providing Equity
      • Legal Entities (LLC’s, Partnerships, etc.)
    • Institutional Investors
      • Linked to Local Wealth or Institutions
    • Property Owners
      • Strategic Parcels or Buildings
      • Possible Resistance
        • Legal Impediments
        • Tax Liability
who are the major players in community development finance7
Who Are the Major Players in Community Development Finance?
  • Nonprofit Sector Players
    • Mission Not Profit-Driven
      • But Must Make Money
      • Operating Excess
    • Not Extensions of Government
      • Facilitated by Tax Exempt Status
      • Conduits for Federal, State and Local Government Funding
      • Prolific Growth Particularly in Community Development Sector
who are the major players in cd finance1
Who Are the Major Players in CD Finance?
  • Nonprofit Sector Players
    • Community Development Corporations (CDC’s)
      • Housing and Commercial Revitalization Focus
      • Improve Quality of Life, Attract Jobs and Private Investment
      • Entrepreneurial CDC’s Create Profit-Focused Subsidiaries
    • Bank CDC’s
      • Special Form Sanctioned for Nationally Regulated Banks
      • Profit or Nonprofit Status
      • Co-Labor with Community-based CDC’s
who are the major players in cd finance2
Who Are the Major Players in CD Finance?
  • Nonprofit Sector Players
    • Faith-based Organizations (FBO’s)
      • Partner with Bank CDC’s in Housing and Commercial Revitalization Projects
      • Provide Financial and Technical Assistance to Build Sustainability
    • Foundations
      • Privately Endowed
      • Corporate Endowed
      • Mission Focused Programs
      • Highly Competitive Grants Process
      • Program Related Investments (PRI’s)
        • Direct Equity Investment
        • Below Market Subordinated Debt
        • Not Grant But Discounted Return Investment
structuring community development finance opportunities
Structuring Community Development Finance Opportunities
  • Debt and Equity Mix
    • Both Expect Returns
    • Both Take Many Forms
    • Driven by Nature and Value of Assets Financed
    • Pure Equity Has No Fixed Return
      • Cash
      • Ownership Interest Contribution
      • Tax Credit Purchase
structuring community development finance opportunities1
Structuring Community Development Finance Opportunities
  • Debt and Equity Mix
    • Debt Has Fixed Cost by Contract
      • Repay Principal Plus Interest
      • Structured: Term vs. Amortization
      • Pledge of Collateral as Security
        • Additional Guarantees May Be Necessary
        • Credit Enhancements
      • Default to Foreclosure
      • Performance Covenants
structuring community development finance opportunities2
Structuring Community Development Finance Opportunities
  • Value: The Underlying Criteria, What Drives It and Measuring It
    • Market Value of Assets Important
      • Funding Decisions
      • Funding Gaps
      • Finance Interventions and Enhancements
    • Four Determinants of Value
      • Demand
      • Utility
      • Scarcity
      • Transferability
    • Quantifying Value
      • Appraisal
      • Market and Economic Feasibility Analysis
structuring community development finance opportunities3
Structuring Community Development Finance Opportunities
  • Measuring, Compensating and Pricing Risk
    • Risk Avoidance vs. Risk Mitigation
      • Avoidance Impossible
      • Mitigation By Strategic Structuring
      • Sharing vs. Shifting Risks
    • Credit or Business Risk
      • Revenue Shortfalls to Cover Operating and Financing Costs
      • Net Operating Income (N.O.I.)
      • Debt coverage Ratio (DCR)
structuring community development finance opportunities4
Structuring Community Development Finance Opportunities
  • Measuring, Compensating and Pricing Risk
    • Liquidity or Marketability Risk
      • Convert Loan to Cash
      • Secondary Markets
      • Loan Participations
    • Maturity Risk
      • Long vs. Short Loan Repayment
      • Value Erosion Due to Inflation
      • Increased Default Risk
      • Term vs. Amortization Period
structuring community development finance opportunities5
Structuring Community Development Finance Opportunities
  • Measuring, Compensating and Pricing Risk
    • Interest Rate Risk
      • Loan Value Decrease Due to Market Interest Rate Changes
      • Floating or Variable Rate Loans to Mitigate
    • Cost of Debt
      • Risk Free Rate
      • Plus: Risk Premiums
      • Market Competition
      • Compressed Risk Compensation
putting community economic development projects together the strategic business plan
Putting Community Economic Development Projects Together: The Strategic Business Plan
  • Define Strategic Intent and Goals
    • Guides Entire Process
    • Goals and Objectives
    • How Achieved?
    • By Whom?
    • By When?
    • Plan “B”?
putting community economic development projects together the strategic business plan1
Putting Community Economic Development Projects Together: The Strategic Business Plan
  • Describe Organizational Plan and Identify Key Personnel
    • Invest in People First; Opportunities Second
    • People’s Gifts, Talents, Abilities Make Projects Happen
    • Identify Strategic Players
      • Why on the Team
      • What They Will Do
      • What They Will Bring
    • Legal Structure of Deal
      • Ownership Interest of Players
      • Controlling Players
      • Key Individuals
slide31
Putting Community Economic Development Projects Together: The Strategic Business Plan
  • Provide Analysis of Project’s Market Dynamics
    • Market-driven Rationale for Project
      • Does It Fill a Niche?
      • What Is Market or Business Risk Profile?
    • Sources of Market Demand
      • How Deep?
      • Where Are They?
      • How Will They Support Project?
    • What is the Competition?
      • Pricing Structure
      • Observed Demand
      • Strengths and Weaknesses
      • Existing and Future Competitors
putting community economic development projects together the strategic business plan2
Putting Community Economic Development Projects Together: The Strategic Business Plan
  • Describe and Fully Document Project’s Financing Structure
    • Detailed Start-up Capital and Operating Costs
    • Five-Year Operating Budget and Cash Flow Statement
      • Sources and Uses of Funds
      • Funding Schedule By Source
      • Maximum Initial Commitments
      • Willingness, Ability and Cost to Increase Commitment
    • Quantify Returns for Investors
      • Cash-on-Cash
      • Internal Rate of Return
      • Non-Financial Returns
putting community economic development projects together the strategic business plan3
Putting Community Economic Development Projects Together: The Strategic Business Plan
  • Describe and Fully Document Project’s Financing Structure
    • Estimate Cash Burn Rates
      • Strategies for Filling Cash Needs
    • Indentify Exit Strategies
      • Take-out Permanent Loans
      • Refinancing
      • Disposition of Assets
slide34
Putting Community Economic Development Projects Together: The Strategic Business Plan
  • Describe Project Implementation and Stakeholder/Participant Risks and Rewards
    • Key Questions for Stakeholders
      • Why Are We Doing This?
      • What Are We Getting Out of This Project?
      • How Do We Get Out of This Project – Successfully?
    • Establish Periodic Benchmarks
      • Voluntary vs. Contractual Deadlines
      • “Drop-Dead” Dates
        • Non-Performance Penalties
        • Who Is Held Responsible?
putting community economic development projects together the strategic business plan4
Putting Community Economic Development Projects Together: The Strategic Business Plan
  • Describe Project Implementation and Stakeholder/Participant Risks and Rewards
    • Identify Project Rewards for Stakeholders
      • Private Investors: Returns and Value Appreciation
      • Private Lenders: Interest Earnings and Regulatory Compliance Credits
      • Local Economic Developers: Job Creation and New Capital Investment
      • Local Government: Tax Revenue Growth and Infrastructure Enhancements
ad