Twenty-five years ago this week, the Riegle Community Development and Regulatory Improvement Act of 1994, championed by former Sen. Don Riegle (D-Mich.), established the CDFI fund to encourage small businesses, affordable housing, the availability of commercial real estate, and human development. The legislation improved the supply of capital, credit, private investment, and development services in low-income areas.
CDFI Fund Programs are now a key instrument in struggling communities’ economic development toolbox. From the Fund’s grant programs, including Financial Assistance and Technical Assistance awards, the Native American CDFI Assistance Program, Capital Magnet Fund, and the Bank Enterprise Awards, to the CDFI Bond Guarantee and New Markets Tax Credit (NMTC) Programs, the agency has far exceeded its goals to revitalize low-income communities and assist Americans underserved by traditional financial institutions.
The NMTC, which was created in 2000 and administered by the CDFI Fund, is notable in that when it was established, it was the single-largest, federal community development investment in decades.
During the signing of the Community Renewal Tax Relief Act of 2000, President Bill Clinton said of the NMTC, “This is the most significant effort ever to help hard-pressed areas, both rural and urban, to lift themselves up through private investment and entrepreneurship. It is a triumph of bipartisanship.”
Over the 19 years since Congress passed the Community Renewal Tax Relief Act, over $95 billion in NMTC generated-capital has been put to work in underserved communities in all 50 states, the District of Columbia, and Puerto Rico. As a result, some 6,000 businesses have been started or grown and over 1 million jobs have been created —all in communities with high rates of unemployment and poverty.
Despite strong, bipartisan support from Congress and the conclusive success of the CDFI Fund and community development programs it operates, there still remain challenges to ensuring these tools remain available for the communities that need them most.
For the Fund’s financial assistance and grant programs, those hurdles have come from consecutive proposals to eliminate the funding in the president’s budget. Fortunately, Congress, having seen firsthand the impact the CDFI Fund grant programs have made in their communities, has continued to reject those proposals, making strong investments in the CDFI Fund, ensuring access to capital for small businesses, affordable housing, healthy foods, educational programs for children and other services CDFIs provide to communities continue. In the current fiscal year, the Senate marked up a bill to maintain funding for CDFI Fund Programs, and the House has proposed a $54 million increase.
The NMTC faces a different challenge in the form of short-term congressional reauthorizations. Despite operating in a “one foot on the gas, one foot on the brake” manner, the NMTC has achieved great success, exceeds its statutory requirement with around 80 percent of NMTC investments being made in severely distressed communities. What’s more, this is a highly competitive program, consistently receiving requests that far exceed the availability.
In 2015, Congress passed the PATH Act, providing a five-year extension of the NMTC. With a little more than three months remaining before the authorization expires, communities, practitioners and legislators are working to secure this important resource for distressed communities.
In March, Sens. Roy Blunt (R-Mo.) and Ben Cardin (D-Md.), and Reps. Terri Sewell (D-Ala.) and Tom Reed (R-N.Y.) introduced identical NMTC bills, H.R. 1680 and S. 750, to make the NMTC permanent and raise the allocation level from $3.5 billion to $5 billion in annual credit authority. In just seven months, the bills have secured record support from 31 senators and 101 representatives.
In proposing the Fund, President Clinton stated that “by ensuring greater access to capital and credit, we will tap the entrepreneurial energy of America’s poorest communities and enable individuals and communities to become self-sufficient.” During the bill signing at the White House on Sept. 23, 1994, the president opened his remarks by saying he “…had dreamed of this day for a long time, the possibility to sign this act into law, and more importantly, to unleash the energies of millions of Americans too long denied access to the mainstream economics of our country.”
The CDFI Fund has made that vision a reality—in the face of tough budgets, deepening partisan divides, and changes in political powers—all while retaining a record of bipartisanship. CDFI Fund programs, including NMTC, are making a tangible difference nationwide, growing businesses and local economies, creating opportunity and prosperity for those Americans left outside the economic mainstream.
Bob Rapoza is founder and president of Rapoza Associates in Washington, D.C., and spokesperson for the CDFI Coalition and the NMTC Coalition.