U.S. Senator Tina Smith leads Senate hearing on expanding economic development in underserved communities

The subcommittee discussed Senator Smith’s bipartisan legislation aimed at addressing economic disparities and revitalizing economically struggling communities

WASHINGTON, [1.5.22] – Today, U.S. Senator Tina Smith (D-Minnesota) chaired a productive hearing focused on addressing economic challenges and disparities in underserved communities. The hearing focused on two bipartisan bills drafted by Senator Smith that would expand financial services and capital investments in communities of color, tribal lands and rural communities. Senators heard from a number of witnesses who shared how Senator Smith’s legislation would make a difference for community development. Witnesses included:

  • Lakota Vogel – Executive Director, Four Bands Community Fund
  • Frank Altman – Founder and CEO, Community Reinvestment Fund
  • John Holdsclaw – Chair, Coalition of Community Development Financial Institutions

“Inequality in access to capital and financial services is a key driver of economic disparity in rural areas, communities of color and Indigenous communities,” said Senator Smith. “Today’s hearing has brought us closer to the passage of my bipartisan legislation, which will help address these inequities and jump-start economic development in Minnesota and across the country.”

“We support the Bond Guarantee Program Enhancement Act, which was introduced yesterday thanks to Senators Smith and Rounds,” noted John Holdsclaw, Chair of the Coalition of Community Development Financial Institutions “The permanent extension and other improvements contained in this legislation have the potential to further revitalize distressed communities.”

The Housing, Transportation and Community Development subcommittee hearing covered two of Sen. Smith’s bills, both co-sponsored by Mike Rounds (R-South Dakota). Both would strengthen and expand Community Development Financial Institutions (CDFIs), which play a vital role in bringing capital and financial services to a wide range of underserved communities – from urban areas to small towns and from rural communities to tribal lands.

The first bill, the CDFI Bond Guarantee Program Improvement Act, will expand and make permanent a successful program that provides CDFIs with access to stable, long-term funding. You can read more about the legislation here.

The second bill, the Native American Rural Homeownership Improvement Act, would help Native families living in rural areas access homeownership by expanding a program that supports mortgage access for Native Americans. You can read more about the legislation here.

Read Senator Smith’s full opening statement below:

HTCD Sub-Committee: Exploring How Community Development Financial Institutions Support Underserved Communities

Hello.

I declare open the Housing, Transportation and Community Development Sub-Committee.

Today we are going to look at Community Development Financial Institutions (CDFIs). Our audience will explore how the federal government can help support their innovative work and how we can work together to address some of the challenges underserved communities face in accessing capital and the financial system.

The COVID-19 pandemic has not been the great equalizer. He laid bare the disparities in our society. And too often, it is Black, Brown and Indigenous families who have faced the greatest burdens.

But the economic disparities didn’t start during the pandemic. According to the Federal Reserve, in 2019 the net worth of a typical black family was only 15% of the worth of a typical white family. The net worth of a typical Hispanic family was about 19% of that of a white family. And the typical net worth of Native American families is only a fraction of that of a typical white family.

While there are many causes for this great inequity, one factor is the lack of access to capital and financial services – for people of color, Indigenous communities, and in small towns and rural areas.

When the CDFI Fund – the federal agency that oversees CDFI programs – was created in 1994, there were about 80 CDFIs. Today, there are over 1,000 CDFIs, many of which have innovative designs that weren’t even imagined when the CDFI Fund was created. And they have played a vital role in bringing capital and financial services to a wide range of underserved communities – from urban areas to small towns and from rural areas to tribal lands.

For example, in Minnesota:

  • The African Development Center has helped fund two malls that have more than 450 small African businesses and more than 500 jobs.
  • The Indian Land-Capital Company (ILCC) provided a loan of nearly $1 million to the Lower Sioux to enable them to expand their land by about 10%. I appreciated the opportunity to visit them last summer and learn more about this project.
  • And in 2018, I visited University Enterprise Labs, which was funded in part by Sunrise Banks, which is a certified CDFI, with support from the New Market Tax Credit Program. These funds are being helped to develop a state-of-the-art life sciences incubator in an area currently shared by industrial uses and students on the border of St. Paul and Minneapolis.

Building on their successes in reaching underserved communities, Congress turned to CDFIs as effective community development organizations to implement programs. Let me share a few examples.

In 2000, Congress enacted the New Business Tax Credit, which provides tax incentives for CDFIs to work on economic development projects in economically distressed areas. This program has a proven track record, and I am happy to be a supporter of Senator Cardin’s and Senator Blunt’s bipartisan legislation to update and expand this tax credit.

During the Great Recession, Senator Menendez drafted legislation to establish the CDFI Bond Guarantee Program. The bond guarantee program provides a stable, long-term source of capital for CDFIs, without any taxpayer subsidy. Earlier this week, Senator Rounds and I introduced legislation to make this program permanent and adjust some of its loan requirements to make it more accessible to smaller CDFIs who might want to participate. I look forward to hearing from our witnesses how our bill will make a difference to community development.

In 2020, Congress earmarked $25 billion in PPP loans for CDFIs to distribute because CDFIs had connections in many communities that banks and credit unions were unable to reach. CDFIs have provided more than 100,000 PPP loans in the first months of this program, and this effort has been essential in helping thousands of small businesses stay afloat.

Additionally, in the year-end bipartisan funding package we passed in late 2020, Congress made a historic investment in CDFIs and minority depository institutions, providing rapid relief grants. As a result of this program, 27 Minnesota CDFIs have received grants totaling $38 million – funds that will be invested in our state to support new loans and services. Senator Warner has been instrumental in implementing this investment, and I know many of us have supported his work on this. I look forward to hearing from our witnesses how this funding is making a difference in their communities.

Before turning to Senator Rounds, I would like to thank him for being such a good partner in planning this hearing. I know we have a common interest in building strong communities, and in particular supporting economic development and access to capital for Indigenous communities in our states who often face unique challenges.

As I mentioned before, yesterday we came together to introduce legislation to update the CDFI Bond Guarantee Scheme to make it more reliable and help smaller CDFIs access this source of funding. stable and long-term that operates without taxpayer subsidies.

And we also have legislation together to support mortgage access for Native Americans through a partnership between CDFIs and the US Department of Agriculture.

I hope today’s hearing will help us identify other areas where we can work together and pave the way for the advancement of these important bills to bring much needed capital to the regions of our countries that need it.

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