Community development nonprofits are working diligently to revitalize neighborhoods and promote economic advancement for members of marginalized communities, but they need more backing from the state, leaders of several such organizations in Lancaster told state lawmakers last week.
“We’re not asking for a handout. We’re asking for an investment,” said Jonathan Encarnacion, a board member with nonprofit lender Community First Fund.
He and colleague Alba Fernandez, Community First Fund’s director of lending, joined representatives from Assets and the Spanish American Civic Association to testify at a Sept. 8 hearing of the House Democratic Policy Committee. It was held at the Thaddeus Stevens College of Technology’s Greiner Advanced Manufacturing Center in southeast Lancaster.
The nonprofit leaders called on lawmakers to maintain and enhance programs like the Neighborhood Assistance Program, which gives businesses tax credits for investing in local nonprofits and community programs; and to provide more direct assistance.
It will pay off, Encarnacion said: Over time, every dollar the state provides to promote economic opportunity will come back several times over in the form of higher tax revenues.
“You’re going to have a multiplier effect,” he said.
CDFIs
Community First Fund and Assets are CDFIs, community development financial institutions, a category of nonprofit lender that provides financial services in underserved areas.
Traditional banks, aiming to maximize returns, tend to steer away from small loans and loans to borrowers with limited collateral, imperfect credit or other risk factors. Assets CEO Jaime Arroyo described the incentives he faced in his previous career as a mortgage loan officer: When he arranged for a large loan to an affluent homebuyer, it would yield a sizeable commission for a routine amount of work, but when he went the extra mile to secure a mortgage for a first-time home buyer with modest credit who needed extra handholding, the payoff would be far less.
CDFIs fill that gap. Encarnacion described them as “financial first responders.” Their scale and nonprofit structure allow them offer more flexible loans on easier terms, and to provide the counseling, training and support that their clients need.
During the pandemic, Fernandez said, Community First Fund worked one-on-one with its clients to access the Paycheck Protection Program, helping them to stay afloat.
The work of banks and CDFIs is intertwined. CDFIs can receive financial support from banks through the federal Community Reinvestment Act, or CRA; moreover, banks will send startup clients to CDFIs, and CDFIs whose clients outgrow them will send them to banks, Arroyo, Encarnacion and Fernandez said.
Assets provides three types of microloan, ranging from $1,000 to $50,000, Arroyo said. Its Small Business Loan provides up to $10,000 for working capital with minimal requirements. Its Impact Loan offers up to $50,000, but obliges borrowers to evaluate their social and environmental impact. Lastly, the ROC Loan, developed through the Philadelphia Federal Reserve’s Reinventing Our Communities program as part of a local initiative to support minority-owned businesses, provides up to $10,000 at 1% interest, along with a 30% grant match.
Additionally, Assets provides an extensive suite of business consulting and coaching services.
“Everything that you just said is what first time business owners need to be successful,” State Rep. Danielle Friel Otten, a businesswoman and former retail shop owner, told Arroyo. “… How do we do more?”
The more support that CDFI’s have, the more they can achieve, Arroyo answered. Prioritizing them in the state’s Neighborhood Assistance Program would be “huge,” he said.
SACA and Tec Centro
While SACA, the Spanish American Civic Association, is not a CDFI, economic development is central to its mission. Its affiliate SACA Development Corp. builds affordable housing and develops commercial properties such as Plaza Centro at the corner of South Duke and Chesapeake Streets. Meanwhile, its Tec Centro program provides bilingual workforce training in high-demand occupations.
Tec Centro has two locations in Lancaster and the Tec Centro Workforce Network is developing sister programs in nearby cities. The network is headed by Carlos Graupera, SACA’s founder and recently retired CEO, who attended the hearing but did not testify.
There is more demand for Tec Centro’s services than it can meet, Director Marlyn Barbosa said: It has 1,400 people on its waiting list in Lancaster.
Across all of SACA’s programs, demand “continues to outpace the resources we have,” Lopez said in the written testimony provided to the committee.
In 2022-23, for the first time, the state budget included $5 million for the Tec Centro Workforce Network. It is vital to the small cities that the network serves, Barbosa said in her written testimony.
For 2023-24, the appropriation has tentatively been increased by 60% to $8 million. However, additional language must be provided in the fiscal code bills before it is finalized. SACA and its partners are hoping the issue is addressed when the House convenes Sept. 26, Graupera told One United Lancaster.
State Rep. Greg Scott noted Gov. Josh Shapiro’s recent executive order No. 18, intended to improve small and diverse businesses’ ability to compete for state contracts. He asked what else can the state do to enhance opportunity.
Further streamline the process and provide more direction, Francesca suggested. Encarnacion recommended more encouragement for mentorship programs to ensure prime contractors are providing opportunity to subcontractors and promoting participation.
The committee met in Lancaster at the behest of state Rep. Ismail Smith-Wade-El. He said he wanted his colleagues to see the diverse, thriving community here, and to understand the importance of funding small, grassroots initiatives.
When it comes to economic development, lawmakers’ attention is often captured by snazzy, big-ticket items, he said: “I want us to be just as aware of the guy who wants to go from delivering pizzas to owning the building where his pizza shop is.”
