Equity Capital for CED
To make a real difference, community economic development organizations (CEDOs) have to own productive pieces of the local economy. But finding the capital to make such investments is only part of the issue. A CEDO also requires technical skills (competence) and managerial ability (capacity) that are equal to the task. Unfortunately, the funders most capable of supplying capital are also the least likely to blend that money with programs to boost an applicant's competence and capacity.
Happily, that blend was basic to New Hampshire's Community Development Finance Authority (CDFA). Donors of cash or real estate to CDFA received a credit of 75% of the value of their donations against state taxes. The donations go to CED projects specified by the donor, with 15-20% held back for operating expenses, for other capital-starved CED projects, and to support core funding, training, and technical assistance for CEDOs.
The response of banks and businesses has been enthusiastic. Over the years 1994-98, CDFA-funded projects accounted for 26% of all affordable housing units built in the state. It is a model that Canadian jurisdictions should consider emulating. They will have to resolve several issues first: the relative incentive power of tax credits and tax deductions; the importance of appealing to individual as well as corporate donors; how to connect donors with community projects in remote regions that have little corporate presence; and how much tax revenue the government is willing to forgo.