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Community Developments Investments (August 2012)

A Look Inside ...

Barry Wides, Deputy Comptroller, Community Affairs, OCC

The PieLab, in Greensboro, Ala., which serves up homemade pies, conversation, and baker training, received a Healthy Food Fund loan from the Hale Empowerment and Revitalization Organization. The fund’s loan pool initially was funded by Regions Bank.
The PieLab, in Greensboro, Ala., which serves up homemade pies, conversation, and baker training, received a Healthy Food Fund loan from the Hale Empowerment and Revitalization Organization. The fund’s loan pool initially was funded by Regions Bank.

This issue of Community Developments Investments takes a look at the growing effort and opportunities to change low-income communities lacking grocery stores into thriving markets and how banks can assist the process with the right financing tools. These investments not only expand food options but also create jobs, help revitalize distressed communities, and, importantly, open new markets for farmers to sell their products, which can provide an economic boost to rural America. This is a broad area with diverse lending and investing opportunities that can benefit low-income communities and may qualify for Community Reinvestment Act consideration. By better connecting producers and consumers, we can build stronger ties between cities and rural areas and help create new opportunities for farmers and ranchers.

In 2004, local nonprofit groups in Pennsylvania noted that many low-income neighborhoods were underserved by grocery stores. Soon after, Pennsylvania’s state leaders also began to recognize the needs of these neighborhoods. As a result, the legislature allocated $20 million to establish the Pennsylvania Fresh Food Financing Initiative (FFFI) to improve the food landscape of such communities.

The FFFI was the first formal initiative created to increase food access by forming a public-private partnership. As a statewide financing program, the FFFI was designed to attract supermarkets and grocery stores to underserved urban and rural communities. It served the financing needs of operators located in or considering outlets in communities where infrastructure costs and credit needs could not be met by conventional financial institutions. The initiative relied on market analysis, leveraged capital, and the momentum of public policy to stimulate private investment that expands the availability of fresh food in low-income communities.

The scarcity of fresh produce, meats, and dairy products in some urban and rural communities is not unique to Pennsylvania. Recently, these areas have been identified as “food deserts,” and most are located in low-income areas. The 2008 Farm Bill describes a food desert as an “area in the United States with limited access to affordable and nutritious food, particularly such an area composed of predominantly lower income neighborhoods and communities” (title VI, sec. 7527). In addition to these areas’ lack of access to fresh produce and other nutritious products, the U.S. Department of Agriculture (USDA) has linked these locations to obesity and health problems among residents. In a paper titled “Can Low-Income Americans Afford a Healthy Diet?” (March 2009), Adam Drewnowski and Petra Eichelsdoerfer write that people eat foods that are readily available and affordable, even when that food is not healthy.

In urban areas, the lack of convenient food shopping and nutritious products is the result of multiple issues and barriers. The Reinvestment Fund (TRF) describes some of the barriers to bringing healthy-food outlets to urban food deserts in “Access to Supermarkets in Inner-City Communities” (Reinvestment Brief, Issue 5). Among the barriers are the increased costs for start-up, employee training, and security. In addition, assembling adequate property in densely populated areas is a challenge. You can read more about these barriers in our article by TRF.

In rural locations, food deserts seem to be the result of low population density, long distances, and limited transportation, all of which lead to limited demand and a lack of efficiencies of scale. To overcome the cost barriers, transit limitations, and long distances, the White House and Congress joined forces in 2010 to provide funding and encouragement that they hoped would prime the pump and stimulate private financing to support the expansion of fresh-food availability to food deserts. Based on the FFFI model, the federal Healthy Food Financing Initiative (HFFI) included $400 million to encourage grocery stores and other healthy-food retailers to move into underserved urban and rural communities across America.

The U.S. Department of the Treasury, along with the U.S. Department of Health and Human Services (HHS) and USDA, also supports healthy-food efforts. All three agencies provide loans, grants, or technical assistance to reduce the number of food deserts.

In 2011, the Treasury Department’s Community Development Financial Institutions Fund (CDFI Fund) received $22 million through an HFFI appropriation. An additional HFFI appropriation of $10 million went to the Community Economic Development Program at HHS. Both of these programs fund experienced CDFIs and nonprofit lenders and developers. In turn, the funded organizations offer banks opportunities to participate in healthy-food projects through new market tax credit (NMTC) projects and loan funds. By partnering with the recipients of CDFI and HHS funds, banks can invest in healthy-food initiatives and support the creation of jobs.

Helping retail food providers and produce suppliers reach food deserts requires flexible financing tools. NCB Capital Impact is a CDFI with three decades of experience in providing such tools. You can learn about its experience and innovative efforts in its article, which describes the management of the California FreshWorks Fund.

From a bank’s perspective, TD Bank, NA, shares  its experience in bringing healthy-food-related jobs to Newark, N.J., through NMTC financing. TD Bank’s project illustrates both the challenges and the rewards that an investment in healthy-food financing can bring.

Finally, we bring you “This Just In,” which describes new opportunities in the OCC’s districts, including several healthy-food opportunities.