PUBLISHED QUARTERLY BY THE COMMUNITY DEVELOPMENT DEPARTMENT OF THE FEDERAL RESERVE BANK OF ST. LOUIS
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X E D N I
BRIDGES
Why Did Young Households Lose so Much Wealth During the Crash?
Taking Financial Education to the Next Level
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w w w . s t l o u i s f e d . o r g
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Local and Regional Economic Development in Rural West Tennessee
Coming Together To Preserve Affordable Housing By Ross Clarke
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ccording to data rom the 2010 American Community Survey, Surv ey, more more than hal o all rental units in the St. Louis region are occupied by people who pay more than 30 percent o their income toward rent. Many are working amilies whose wages don’t stretch ar enough beyond rent payments to allow or savings, or to purchase health insurance or transportation.. A signicant transportation signicant number o these households are considered to be extremely low-income, paying more than 50 percent o their earnings toward housing costs. Recent trends also indicate heightened demand in the rental market and, in some areas, increases in rent prices. prices. There is a clear need or aordable rental housing in the region today. The Low Income Housing Tax Credit (LIHTC) is a
program designed to meet this need, providing a dollar-or-dollar credit against tax liability to encourage the private development o aordable housing. The program has helped nance more than 52,000 aordable units in Missouri since it began, and has brought considerable economic activity and job opportunities to the state and
the region. Today Today,, however, however, many o these aordable units ace uncertain utures. The LIHTC program requires an original compliance period o 15 years, ater which investors in properties are ree to exit partnerships. Those property owners who wish to continue oering rents at aordable rates ace tough
challenges as properties approach Year 15, including: •
•
•
restructuring ownershi ownership p when limited partners exit, nding capital or repairs and rehabilitation, renancing and restructuring debt, continued on Page 2
FIGURE 1
Number o Low-Income Units Approaching Year 15 in the St. Louis MSA 2,000 s t i n U1,500 e m o c n I w1,000 o L f o r e b m 500 u N
TOTAL: TOT AL: 13,541 units 1,775
1,326
1,308
1,419
1,751
1,313
1,164
1,090
1,024 826 545
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Year Y ear Units Arrive at Year Year 15 SOURCE: LIHTC Database, United States Departm ent of Housing and Urban Development. Retrieved from http://liht c.huduser.org/.
LIHTC BASICS
Affordable Housing continued rom Page 1
• Introduced as part o the Tax Reorm Act o 1986, LIHTC has helped fnance more than 2 million privately developed aordable housing units.
• Developers o LIHTC properties are awarded ederal credits, distributed by states in accordance with the rules laid out in their Qualifed Allocation Plan. Plan. Developers then sell sell credits to investors to receive capital up ront or development developm ent cost s.
• There are two types o LIHTC credit: A competitive 9 percent credit that awards credits equal to 70 percent o qualifed construction costs; and a noncompetitive 4 percent credit or projects fnanced with tax-exempt bonds and various other gap subsidies that provides credits equal to 30 percent o qualifed costs.
• A minimum o 20 percent o all units must be rented by tenants with incomes at or below 50 percent o the area median income (AMI). Alternatively, owners can opt to rent at least 40 percent o units to tenants with incomes at or below 60 percent o the AMI. In many cases, 100 percent o available rental units are aordable, especially in properties operated by nonproft organizations.
YEAR 15 • LIHTC requires properties to comply with restrictions or 15 years.
• Legislation passed in 1989 introduced a urther 15-year required extended-use period.
• Limited partners (investors) are not bound by extended-use restrictions and are ree to exit in Year 15.
• In some cases, general par tners (owners) exit; but to do so, they must allow the state housing fnance agency to attempt to fnd a qualifed buyer through their qualifed contract process.
• I a qualifed buyer cannot be ound, general partners are then ree to sell to any willing buyer.
• Certain nonprofts are given the right o frst reusal to purchase properties.
•
•
•
ongoing issues with physical and asset management o properties, high expenses and low levels o revenue and cash fow,, especially fow especial ly or smaller properties, and a general lack o preparedness or Year 15.
Another signicant signica nt challenge or LIHTC partnerships is competition rom newer aordable housing developments that open in close proximity to existing existi ng properties. Tenants with mobile Section 8 vouchers may leave older units and move to these newer accommodations, which can impact the nancial viability o older LIHTC developments. I these issues cannot be resolved, property owners may be let with little option but to look or a way out. Though LIHTC requires properties to continue operating at aordable rates or a urther 15 years, owners can request that the state housing nance agency search or a new buyer through their qualied contract process at any time ater the 14th year o the original compliance period. I one cannot be ound, owners are released rom all restrictions and are ree to sell properties to any willing buyers, who are only bound to keep rents aordable a ordable or a urther three years. Most properties do remain aordable
ater Year 15, especially in weaker housing markets, such as many parts o the Midwest. Nevertheless, the Year 15 process is lengthy and challenging, and requires a great deal o preparation. Between 201 2012 2 and 2022, more than 13,000 properties in the St. Louis region will arrive at Year Year 15. (See Figure 1 on page 1. 1.)) Recogn Recognizing izing the challenges at hand, the Community Development department o the Federal Reserve Bank o St. Louis convened a meeting o representatives representa tives o state and city agencies, and local organizations with extensive experience ex perience in the LIHTC eld. The goals were to clariy the t he issues related to Year 15 in the region; allow those involved to share successul strategies to negotiate this process; generate ideas or new, creative strategies; and plan next steps, both short- and longterm. Some o the most pressing issues were ound to be: •
•
•
•
•
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the reluctance o banks to renance debt on properties; the capacity and stability o some nonprot property owners; county-by-county variability regarding property assessment and the resulting property taxes imposed i properties are valued at market rate; declining external neighborhood conditions; a need or a city-wide plan or the spatial developm development ent o LIHTC properties; and
•
a need or improved communication at state, city and individual property levels.
Several attendees remarked that this was the rst time all parties had gathered to address these issues, and the willingness to engage in constructive discussion about the challenges and possible moves toward action was evident. Perhaps most encouraging was the desire o many o the participants to orm a LIHTC working group to begin to address these challenges collaboratively; the group held its rst meeting in September. Similar working groups have had considerable success in other cities. In Portla Portland, nd, Ore., a group was ormed comprised o sta rom state and city housing departments, local and national nonprots, and other LIHTC property stakeholders. The group was tasked with assessing the risk o loss o aordable units approaching Year 15 and developing recommendations to avoid this loss. The results o the group’s meetings impacted the city o Portland’s Preservation Agenda and the state’s Qualied Allocation Plan. Another successul LIHTC working group is led by Novogradac & Company C ompany,, a San Francisco-based accounting and consulting rm with a wealth o LIHTC experience. They hold monthly conerence calls and meet annually to discuss best practices or the LIHTC industry and continued on Page 4
Why Did Young Households Lose so Much Wealth During the Crash? The Role of Homeownership By William Emmons and Bryan Noeth
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ecently released survey data related to household nancial conditions reveal large wealth losses in virtually every segment o the U.S. population between 2007 and 2010, the most recent years in which the Federal Reserve conducted its triennial Survey o Consumer Finances.1 Since the deepest economic recession in many decades occurred between December 2007 and June 2009, the 2007 and 20 2010 10 surveys eectively represent “beore and ater” snapshots o U.S. households’ balance sheets or a crosssection o American amilies.
As detailed in our recent article,2 the Survey o Consumer Finances reported that the wealth o the median U.S. household in 2010 was 39 percent lower than the median household’s wealth wealt h in 2007, 2007, adjusted or infat infation. ion. The amily headed by someone under 40 (henceorth, young households) in the middle o the 2010 2010 wealth distribution likewise had much less wealth than the corresponding median young amily in 2007. 2007. (See Figure 1.) 1.) The decline in the wealth o a young household measured at the median o the distribution in 2007 and 2010, 2010, respectively, respec tively, was 38 percent. The decline decline was 20 percent among young
households that were members o a historically disadvantaged minority, which we dene to be Arican-Americans and Hispanics, who may be o any race. The median wealth o young households that were not members o a historically disadvantaged minority (including non-Hispanic whites, Asians and other non-historically disadvantaged minorities) was 42 percent lower in 2010 than the median wealth in 2007. The very large loss o wealth among many young households is notable or at least two t wo reasons. First, many young households are nancially ragile. A serious nancial setback early in lie can have
lasting eects on amily members, including young children. According to the surveys, the homeownership rate (dened to include primary residences, vacation homes and timeshares) among young amilies declined about our percentage points between 2007 and 2010 (rom 50 to 46 percent). This almost certainly was due, in large part, to oreclosures and other distressed exits rom homeownership. The homeownership rate declined by only two percentage points among amilies headed by someone at least 40 years old but less than tha n 62 (rom 77 to continued on Page 4
FIGURE 1
FIGURE 2
FIGURE 3
Median Net Worth o Families Headed by Someone Under 40
Homeownership Rate o Families Headed by Someone Under 40
Share o Homeowners with Mortgages Among Families Headed by Someone Under 40
$50,000 $40,000
60%
100%
50%
90%
40%
80%
30%
70%
$30,000 $20,000 $10,000
20%
1989
1992
1995
2001
2004
2007
2010
60% 1989
1992
1995
2001
2004
2007
2010
1989
1992
1995
2001
2004
2007
2010
SOURCE: Federal Reserve Survey of Consumer Finance
Y E K
Families headed by someone who is under 40 but is NOT a member o a historically disadvantaged minority group (Arican-American or Hispanic origin)
All amilies headed by someone under 40
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Families headed by someone who is under 40 and is ALSO a member o a historically disadvantaged minority group (Arican-American or Hispanic origin)
Affordable Housing
Young Households Househol ds
continued rom Page 2
continued rom Page 3
address policy and technical issues related to the program. The group regularly provides comments to state and ederal government agencies on issues that impact the LIHTC eld, including recent comments regarding the implementation o the Volcker rule o the Dodd-Frank Act. Communication and shared knowledge are crucial in addressing the many issues that arise in the complicated, messy LIHTC eld. The clearer clearer the issues become, the better the strategies that can be created to to resolve them. Partnering and sharing resources to overcome common obstacles will only make the eld stronger and ensure that the region’s needs or aordable housing preservation preservat ion are addressed. By developing its own working group, the St. Louis region has taken a step closer to overcoming the challenges it aces. For more inormation about the working group, please contact Stephen Acree (Regional Housing and Community Development Alliance) Allia nce) at stephen@ rhcda.com. Ross Clarke is a graduate student in the George Warren Brown School o Social Socia l Work at Washington University in St. Louis and a practicum student in the Community Development Ofce o the Federal Reserve Bank o St. Louis.
75 percent), while the homeownership rate among amilies headed by someone 62 or older actually increased by one percentage point (rom 83 to 84 percent). percent). Thus, the housing and mortgage crisis appeared to hit young amilies especially hard and may have long-lasting impacts on their nancial positions or in other dimensions. The second noteworthy aspect o the large wealth declines among young households is that amilies who were not members o a historically disadvantaged minority experienced much larger wealth losses—in act, twice as large when comparing their respectivee medians—than did respectiv Arican-American Arica n-Americanss and Hispanics. This is unusual in the survey data; in virtually every other age and education group that we examined, historically disadvantaged minority amilies suered larger percentage wealth losses at the median. What was dierent about young amilies? It appears the source o this unusual pattern is related to homeownership and mortgage borrowing. In a nutshell, young amilies rom historically disadvantaged minorities had lower homeownership rates and less mortgage debt immediately beore the downturn in 2007. 2007. As the economy and housing markets deteriorated, amilies whose balance sheets were relatively more
concentrated in housing and those who had borrowed more to nance homeownership— both more typical o nonminority amilies—suere amilies—suered d greater wealth losses. 3 Figure 2 shows homeownership rates or amilies under 40. In 2007, 2007, the overall young-household homeownership rate was 50 percent. The rate or historically disadvantaged minority amilies was 36 percent, while the rate or non-minority non-min ority amilies was 56 percent. In 2010 2010,, the homeownership rate among all young amilies was 46 percent, with minority and non-minority homeownership rates alling to 32 and 53 percent, respectively. Figure 3 shows that the way homeownership was nanced played an ampliying role in the loss o wealth or nonminority amilies. In 2007 2007, 90 percent o all young homeowners had mortgage debt outstanding. Among historically disadvantaged minority amilies, only 85 percent had mortgage debt, while 92 percent o non-minority amilies had mortgage mortgage debt. debt. Because the value o mortgage debt does not decline when house prices do, the nancial eect o mortgage debt is to magniy the percentage loss o wealth suered by the homeowner. homeowner. This phenomenon phenomeno n is called “lever“ leverage.”” Just as a physical age. physical lever transorms a given amount o orce applied at one end into a greater orce at the other end, nancial leverage transorms a given percentage house-price
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decline into a larger percentage loss o homeowners’ equity. equit y. In sum, young non-minority households typically suered larger percentage declines in wealth between 2007 and 2010 than did young historically disadvantaged minority amilies. This was due to the relatively greater concentration o nonminority households’ balance sheets in housing as well as greater nancial leverage in the orm o mortgage debt. A higher homeownership rate and greater use o mortgage debt among young non-minor non-minor-ity amilies thereore turned out to have negative nancial consequences during the severe recession and housing-market decline o recent years. William Emmons is chie economist or the Household Financial Stability initiative and assistant vice president o Executive Special Projects at the Federal Reserve Bank o St. Louis. Bryan Noeth is a policy analyst or the Household Financial Stability initiative at the Federal Reserve Bank o St. Louis. REFERENCES 1. Bricker, Jesse; Kennickell, Arthur; Moore, Kevin; and Sabelhaus, John. “Changes in U.S. Family Finances rom 2007 to 2010: Evidence rom the Survey o Consumer Fina nces,” Federal Reserve Bulletin, 2012, Vol. 98, pp. 1-80. 2. Emmons, William; and Noeth, Bryan. “Household Financial Stability: Who Suered the Most rom the Crisis? Federal Reserve Bank o St. Louis Regional 11-17. 7. Economist, 2012, Vol. 20, pp. 11-1 3. Emmons, William; and Noeth, Bryan. “Why Did Young Families Lose So Much Wealth During the Crisis? The Role o Homeownership,” Federal Reserve Bank o St. Louis Review, 2013, Vol. 95, 95, No. 1, 1, orthcoming.
with all clients at intake and a subsequent 30-milestone and outcome evaluation tool. The Centers strive to understand the ull nancial picture o their clients regardless o the motivation or or the visit. Subsequent one-on-one counseling sessions include:
Taking Financial Education to the Next Level
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•
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•
By Mitchell Kent and I-Hsing Sun
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n 2006, New York City Mayor Michael R. Bloomberg charged the Department o Consumer Aairs (DCA) with bringing nancial empowerment services to those with low incomes as part o his broad antipoverty strategy. DCA ormed the country’s rst Oce o Financial Financia l Empowerment to take on the challenge. It quickly became clear that, while some existing nancial education services were being done well, the eld did not possess the level o proessionalized delivery, outcome-driven metrics and rigorous evaluation required or public programs. And one-on-one counseling, the gold standard o the eld, was largely unavailable. Even the best program providers lamented this lack o standards and accordingly suered rom undependable resources to support their work.
The U.S. Government Accountability Accountab ility Oce similarly concluded in a 2011 2011 report that no consistent approach, delivery mechanism or technology stood out as a best practice in nancial education.1 Individuals and amilies in need o such services had little guidance when seeking them, which increased their vulnerability to predatory, costly and oten harmul actors. Most established models o nancial education ocused on long-term wealth creation, whereas whereas amilies with w ith low incomes typically wrestled with a number o immediate crises and underlying instability concerns that must be addressed rst. Increasingly complex comp lex nancial instruments or banking, borrowing and saving made sae and aordable choices, when available, dicult to identiy and access. DCA’s Oce o Financial Empowerment (OFE), thereore, began developing and delivering rigorous and proessional standards or counselor training,
service delivery quality control control,, and impact measurement and evaluation. evaluatio n. This article examines OFE’s delivery model, the collateral impacts we experienced as we integrated these programs into other services, and the repercussions or national replication. Proessional Financial Counseling in New York City
Mindul o vast need and standards o public accountaccountability, OFE developed and deployed best practices in content, delivery and evaluation to achieve proessional quality in this eld, employing a threepronged approach: 1. OFE standardi standardized zed an outcome-driven servicedelivery model, implemented through the city’s c ity’s now publicly unded Financial Financia l Empowerment Centers, which oer ree, proessional, one-on-one nancial counseling serv services. ices. The cornerstone o this approach is a comprehensive nancial health assessment completed
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Budget counseling Credit building and repair o credit reports and scores Debt management strategies Connection to sae and aordable banking products negotiated by OFE Guidance on appropriate and viable savings and assetbuilding opportunities Strategic reerrals to legal services, ree or low-cost tax preparation, benets counseling and other social services, as appropriate Longer-term nancial coaching geared toward assetbuilding goals
2. To ensure the quality and consistency o services oered to the public at the city’s Financial Empowerment Centers, OFE developed develope d a ormal training tra ining program with the City University o New York (CUNY) in 2009. This course is now available as a ull-semester ull-semester,, three-credit undergraduate course oered by CUNY’s CUNY ’s School o Proessional Proessional Studies through a Financial Studies Certicate Program. All Financial Empowerment Center counselors must take and pass continued on Page 6
Financial Education continued rom Page 5
the course. It is also open open to service providers across all elds and all CUNY students. Ensuring quality service serv ice providers is essential to make the case or public unding o the Financial Empowerment Centers and, most important, to enable the city and its partners to steer consumers into the hands o very capable nancial educato educators. rs. OFE also has partnered with the Columbia University School o Social Work (CUSSW) to integrate nancial counseling into the eld o social work through the graduate-l g raduate-level evel course, Personal Financial Management and Financial Counseling Skills. Skills. This course is now a prerequisite to a eld placement in nancial empowermentt and empowermen a nd counseling. 3. Finally, OFE standardi standardized zed processes and protocols across its Financial Empowerment Centers to ensure consistently high quality, regardless o the provider, and to meet the impact measurement demands o its initially private and now public unders. OFE customized an integrated database system used as both a case management tool to track client progress against our distinct service plans (banking, credit, debt and savings) saving s) and or ongoing perormance evaluation. The “Supervit amin” Eect
With the advent and track record o quality metrics, New York’s Yo rk’s nancial counseling eld experienced a demand
or nancial counseling that extended beyond counseling clients to include program providers in other antipoverty eorts. Because nancial instability is a common underlying circumstance, other program clients were nding it dicult to make improvements. Proessional nancial counseling, integrated into the delivery stream o other programs, began producing strong evidence o a “supervitamin” eect, helping those programs work aster and more eectively. This exciting development is studied in detail in OFE’s multi-report series, “Municipal Financial Empowerment: Empow erment: A Supe Supervitamin rvitamin or Public Programs.” The rst supervitamin report, released in December 20 2011 11,, ocused on Strategy #1: Integrating Proessional Financial Counseling (www.nyc.gov/html/ dca/downloads/pd/ SupervitaminReport.pd). The second supervitamin report, Strategy #2: Proessio Proessionalizing nalizing the Field o Financial Education and Counseling (www.nyc.gov/ html/dca/downloads/pd/ SupervitaminR Supe rvitaminReport2.p eport2.pd), d), documents the exciting approaches described in this article. The third report ocused on Strategy #3: Integrating Sae and Aordable Bank Accounts (www.nyc. gov/html/dca/downloads/pd/ SupervitaminReport3.pd), and uture reports will ocus on integrating targeted consumer nancial protections, and integrating asset-building and income-boosting strategies.
Replicating Success
Other city governments in the national Cities or Financial Empowerment Coalition, ounded and co-chaired by New York Y ork City and San Fran Francisc cisco, o, implemented citywide networks o nancial education providers, like San Francisco’s Smart Money Network and Seattle’s Financial Education Providers Network. Emphasizing the kind o quality control required by public accountability, other opportunities or integrated delivery arose, and the “supervitamin” approach began taking hold across the country. With the promise o quality, scale and public systems change came urther excitement. Through an initiative o the Cities or Financial Empowerment Fund (CFE Fund), a project o Living Cities, other cities soon will replicate the rigorous, standardized and integrated version o nancial education and oneon-one counseling pioneered by New York City’s Financial Empowerment Centers. As a measure o demand and interest, more than 48 cities, representing 30 million residents in 29 states and one U.S. Commonwealth, applied to oer—and publicly integrate—the proessional nancial counseling model with the CFE Fund. Finally, steps in the direction o greater ederal involvement are emerging. emerging. The ederal Financial Literacy and Education Commission, which convenes regularly at the U.S. Department o the Treasury, revised its National Strategy or Financial Capability in i n 2011, 2011,
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THREE YEARS OF FINANCIAL EMPOWERMENT CENTER ACHIEVEMENTS
June 30, 2012 Total client s ser ved:
17,160 Total counsel ing ses sions:
32,042 Total amount o s avings:
$870,296.72 Total amount o debt reduced:
$7,048,703.93 including a set o core competencies that should become part o general public nancial knowledge. knowledge. And the new Consumer Financial Protection Bureau has a dedicated Division o Consumer Education and Engagement, with separate Oces o Financial Education and Financial Empowerment. The eld o nancial counseling and education is clearly ripe or the public investment attendant to proessional delivery. And the public public need is arguably greater than it has ever been. Mitchell Kent is director o legislative policy and special counsel at the New York City Department o Consumer Aairs Aairs (DCA). I-Hsing Sun is assistant commissioner or fnancial empowerment empower ment programs at DCA. ENDNOTE 1 United States States Government Accountability Oce: Report to Congressional Committees; Financial Literacy: A Federal Certication Process or Providers Would Pose Challenges. June 2011. Executive Summary.
Local and Regional Economic Development Developme nt in Rural West Tennessee By Andrew A. Pack
B
etween Memphis and Nashville along the “Music Highway” (Interstate 40) rests the historic city o Jackson, Tenn. Like many larger towns between two major cities, Jackson serves as a regional hub or many o the smaller surrounding communities. The city is also the headquarters o the Southwest Tennessee Development District (SWTDD). Joe Barker is the director o the SWTDD and has been working on the issues acing rural areas throughout his career as a community and economic developer. Rural America is acing many challenges in the changing economy,, and many economy ma ny o those challenges are present in West Tennessee. Creating regional collaboration to work on issues such as population declines, low educational attainment and the shrinking o manuacturing jobs is no easy task. Barker has played various roles throughout his career as a community and economic developer— mayor o a small town, county mayor, state-level community and economic developer, and regional economic developer. developer. Each role has its own challenges and opportunities, but each has also given Barker a unique perspective. I sat down
with him to discuss how he views his role in economic development. Economic Development as an Elected Ofcial
As mayor o the small comcommunity o Savannah, Tenn., Barker conesses that while elected ocials may have a lot o enthusiasm or their communities, this passion isn’t always enough enou gh when trying try ing to increase an area’s economic opportunities. Not every person or potential company shares that same passion. Inrastructure needs, needs, proximity to other markets, available workorce and cost o property are just some o the actors a prospective company may be ocused on. Elected ocials must work beyond their sense o community pride. Barker believes that educating mayors in many aspects o economic development development is cr itical, but the mayor should not be the sole leader in this area. Resources in small towns may be limited, but it is important to have a proessional economic developer who is ocused on the long-term impact o community and economic development. Mayors are an essential part o the team, but as elected ocials they work in our-year cycles. Barker says that programs such as the University o Tennessee’s County Technical
Assist ance Service (CTAS) and Municipal Technical Assistance Service (MTAS), along with the state’s economic development basic course (through the International Economic Development Council) were very helpul in increasing his and other mayors’ knowledge o economic development.
CDAC Member Spotlight
JO E BA RK ER is executive director
Community Assets Oten Get Overlooked
o the Southwest Tennessee Devel-
Another issue that Barker said took a bit o time to realize is how to really identiy and ocus on a community’s assets. This helped him to shit some o the economic development ocus rom manuacturing recruitrecr uitment in Savannah and Hardin County to a plan that was a better t with their local assets (e.g., (e. g., tourism). According to Barker, local elected ocials oten do not ully realize their community’s assets and opportunities because many communities also overlook them. In the report, “Small Towns, Big Ideas,” the University o North Carolina ound that “small towns with the most dramatic outcomes tend to be proactive and uture-oriented; they embrace change and assume risk.” risk.” Barker agrees with this statement because he believes it is imperative
planning and economic develop-
opment District (SWTDD), a regional ment organization that serves eight Tennessee Tennessee counties. Barker has also served as a mayor and the assistant commissioner o the Tennessee Department o Economic and Community Development. Development. He represented the governor on the Appalachian Regional Commission, Delta Regional Authority and Tennessee-Tombigbee Tennessee-Tom bigbee Waterway Authority. Barker is also also a member o the Community Development Advisory Council (CDAC) or the Federal Reserve Bank o St. Louis. CDAC members members are exper ts in community and economic development and fnancial education. They complem ent the inor mation developed through outreach by the District ’s Community Development sta and suggest ways that the Bank might support local eort s. A list o current members
continued on Page 8
is available at www.stlouised.org/ community_development.
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Economic Development continued rom Page 7
that small towns think about creative economic development opportunities that may be dierent than past strategies, which may require some degree o risk. Once Barker ully realized how big o an asset tourism was to Savannah’s economy economy,, he did something dierent than many people would do. He took a risk and called the National Association Associ ation o Intercollegiate Athletics (NAI A) to pitch bringing their championship ootball game to the city. Savannah was successul in hosting the NAIA ootball championship or 12 years, and the city was mentioned on the ront cover o Sports o Sports Illustrated. Illustrated. Hosting this game not only had an immediate impact on Savannah, but it was also a perect t with the small town’s other tourism assets, including the Tennessee River, Lake Pickwick and the nearby historic battleeld o Shiloh. Shiloh. Barker says, “It’s much more than a ootball game and national TV exposure. It’s about economicdevelopment tourism and the experiences players and others have at the game. Outsiders who have a positive experience in Savannah may one day be in a position to bring jobs to the city or the surrounding region. Their positive experiences may lead to uture uture economic opportunities.” Elected ocials can be helpul when they are integrated appropriately into the
economic development development process proces s and work with proessionals to help develop the community’s assets. Regional Economic Development
Economic development challenges at the regional level may oten be dierent than those in individual communities, such as getting local and elected ocials rom various communities to cooperate. Each community has its own characteristics and local pride that may create a dicult climate or regional collaboration. Barker says regional economic development can be very challenging, but collaboration is especially critical in rural communities because they are stronger working together as a whole. In most cases, more economic opportunities or rural areas exist at a regional level than at the local level. The SWTDD works on regional collaboration by promoting education and workorce development, technology and online jobs that t into rural areas, capacity building to build leadership throughout the region and working to promote entrepreneurship. Barker says that regional development works best when each community is willing to invest nancially in the collaborative eort. There are a lot o entities recruiting manuacturing in West Tennessee, so Barker and the SWTDD have developed other types o economic development developm ent programs, program s, such as digital actories that prepare workers or online jobs, college
career coaches or high school students and entrepreneurship programs. They are currently working to create a business incubator. Barker acknowledged that there is no template or rural and regional economic development because every area is dierent. But there are good examples o economic opportunities created in rural America (e.g., (e. g., North Carolina Carolin a and other areas ocused on by the Appalachian Regional Regiona l Commission). Barker believes believes there are three advantages that rural communities share. share. They have: 1) a sense o place, 2) people with a strong work ethic, and 3) strong social ties that could help to create more jobs in the uture. To create more opporopportunities, Barker believes that rural communities need to better understand their assets and liabilities, direct resources to these strengths, and take advantage o regional economic developmentt opportunities. developmen opportunit ies. Andrew A. Pack is a community development specialist at the Little Rock Branch o the Federal Reserve Bank o St. Louis. REFERENCES The University o Tennessee Institute or Public Service (oe (oers rs educational training or elected ocials), ocials), ww w.i w.ips. ps. tennessee.edu/ Lambe, W.: “Small Towns, Big Ideas: Case Studies in Small Town Community Economic Development,” School o Government, University o North Carolina at Chapel Hill, 2008, w ww. sog.unc.edu/programs/cednc/stbi/ pds/stbi_nal.pd
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TOP 10 THINGS ELECTED OFFICIALS SHOULD KNOW ABOUT ECONOMIC DEVELOPMENT
1. Your local economic strengths and weaknesses. 2. Your community’s place in the broader regional economy. 3. Your community’s economic development vision and goals. 4. Your community’ community’ss strategy to attain its goals. 5. Connections Connect ions between economic development and other city policies. 6. Your regulatory environment. environment. 7. Your local economic development developm ent stakeholders and partners. 8. The needs o your your local business community. 9. Your community’s economic development message. 10. Your economic eco nomic development developm ent sta. SOURCE McFarland, C. and Seeger, K.: The Role o Local Elected Ofcials In Economic Development: 10 Things You Should Know, International Economic Development Council/ National League o Cities/Center or Research & In novation, http:// http:// iedconline.org/Downloads/NLC_ IEDC_EconDevelop10things.pd
A Matter of Degrees Increasing College Attainment—Workforce Development Strategy #1 By Kathy Moore Cowan
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arly in 2012, in an eort to develop a deeper understanding o the complex actors creating longterm unemployment conditions and identiy promising work work-orce development solutions, the Federal Reserve held 29 roundtables across the country, countr y, including our in the Eighth District. Distr ict. One common theme heard during these meetings was that the American workorce lacks the skills needed by present and uture employers. It is estimated that 68 percent o all jobs created between 2010 and 2018 2018 will require a college degree. However However,, only 40 percent o America’s current adult population (age 25 and older)) are college graduates. older America ranks 10th 10th in the world world in college attainment, trailing countries such as Canada (56 percent), South Korea (56 percent) and Japan (54 percent). The Tennessee Higher Education productivity team predicts that by 2018 more more than hal h al o all jobs in Tennessee will require some orm o postsecondary credentials. Only 29.9 29.9 percent o Tennessee’s adult population holds an associate’s degree or higher, compared to the national average o 37 37.2 .2 percent percent.. While there is some debate about
whether a our-year college degree is worth the cost, many people believe that the uture o American prospe prosperity rity relies relies on a better-educated workorce. It is not surprising, then, that the president has set a goal or the U.S. to reclaim the lead in college graduation rates by 2020. Tennessee’s governor governor aims to doublee the number o the state’s doubl residents with a college degree or certication by 2025 2025.. And the Memphis metropolitan area intends to raise the college completion rate by 1 percent (8,002) by September 2014. 2014. Here is how the Memphis metropolitan area is working to reach this goal. Metropolitan Memphis, Tenn.
In 2008, CEOs or Cities introduced extensive research that outlined three vital areas— talent, poverty and the environment—that could have a tremendous economic impact on every every city in America. The research showed that educational attainment is the biggest predictor o success or cities and metropolitan areas today. Specically, it showed that 58 percent o a city’s success, as measured by per-capita income, i ncome, is attributable to the percentage o the adult population with a college degree. Rankings o 51 metropolitan metropolitan cities placed Memphis at #48
in college attainment, with only 23.7 percent o the adult population earning a college degree. degree. Recognizing the challenge—and the opportunity—or the metro area, Leadership Memphis launched the Memphis Talent Dividend (MTD), a collaborative o more than 100 stakeholders rom the eight-county region who are working together to increase the percentage o college attainment in the area by 1 percent. I this goal is met, met, CEOs or Cities estimates a $1 billion economic impact or the region. MTD is ocusing on three strategic areas: 1) helping students prepare or and successully enroll in college; 2) 2) helping students stay in college and complete their studies; and 3) helping helping workers return retur n to college to earn a degree. The group has organized six specialized collaboratives—youth organization, community, aith, business, media and higher education— that are open to anyone who wants to work toward reaching the goal. Each collaborative collaborative has an individual ocus and is working to increase ve key areas: 1) high school graduation rate, 2) college enrollment rate, 3) college continuation rate, 4) college completion rate, and 5) college graduate retention rate. David Williams, president/ CEO o Leadership Memphis,
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FOR MORE INFORMA INFORMATION TION
CEOs or Cities www.ceosorcities.org Leadership Memphis www.leadershipmemphis.org Memphis Talent Dividend www.memphistalentdividend.com Graduate Memphis graduatememphis.org/about Kresge Foundation www.kresge.org/programs/education Lumina Foundation www.luminaoundation.org TNAchi eves and Memphis/Shelby Achieves www.tnachieves.org
said, “When you look at the top 51 largest metro areas, Memphis is ranked #1 in poverty and #48 in college attainment. The correlation is obvious. Over 200,000 people in the Memphis metro area started but never nished college. Leadership Memphis and our 100 Memphis Talent Dividend partners know we can make a dierence by helping them nish their postsecondary education and improve our workorce at the same time.” That’s where Graduate Memphis comes comes in. Housed in Memphis’ Benjamin Hooks Central Library, L ibrary, Graduate Memphis Memphis continued on Page 10
SPANNING
THE REGION The region served by the Federal Reserve Bank of
Fall Results o Community o Community Outlook Survey Coming Survey Coming Soon
The all 20 2012 12 edition o the t he semiannual Community Outlook Survey o low- and moderateincome (LMI) communities across the states that comprise the Eighth Federal Reserve District will soon be released on the St. Louis Fed’s web site: www.stlouised.org/community_development/communityoutlook-survey/.. The survey outlook-survey/ inorms the St. Louis Fed and its branches in Little Rock, Louisville and Memphis about the current conditions o the District’s LMI communities and is shared with policymakers at the Federal Reserve Board o Governors in Washington, D.C. I you don’t already participate in the survey but would like your voice to be heard in uture rounds, send us an e-mail at communitydevelopment@stls. rb.org. New 1:1 Fund Will Boost College Savings or Low-Income Mississippi Kids
The 1:1 Fund, launched in November, is an innovative new program that matches lowincome students in Mississippi with donors who help them maintain and build college savings accounts. In its rst year, 1:1 1: 1 aims to provide matching unds or nearly 9,000 children in two test markets—Mississippi and San Francisco—with plans to expand nationally
and reach as many as 100,000 100 ,000 chilch ildren by 2015. Mississippi ranks second to last in the percentage o residents with a our-year college degree (19.5 percent) and 47th in those with two-year degrees (2 (27 7.9 percent), according according to CF ED’s 2012 Assets & Opportunity Scorecard.. The 1:1 Scorecard 1:1 Fund will match donors with nearly 700 children already saving or college through the Mississippi College Savings Account Program. For more inormation, visit www.1to1und.org. New St. Louis Fund Pairs Community Investment with Engagement
A new grassroots charitable ch aritable und dedicated to community development in the St. Louis region gives individual donors a say in which organizations to support. The und—inveSTL—raises money through donations and event proceeds to build a oundation ocused on neighborhood development. developm ent. When the und reaches specic undraising goals, it will grant 25 percent to an organization and retain 75 percent to build up the endowment. Donations are accepted in all amounts, and donors who contribute $100 or more in a given unding cycle are able to vote on the organizations that receive unding.
St.. Louis encompasses all of Arkansas and parts of Illinois, St Indiana, Kentucky, Mississippi, Missouri and Tennessee.
To learn more, contact Karl Guenther at guentherk@umsl. edu or ww w. w.invest.org. invest.org. Save the Date! Resilience and Rebuilding or Low-Income Communities Conerence
The Federal Reserve System will host its eighth biennial community development conerence on April 11–12, 2013, in Washington, D.C. This event will eature multidisciplinary, action-oriented research to inorm strategies and policies that orge vibrant and resilient communities. To learn more, visit www.rbatlanta.org/news/ conerences/13resilience_ rebuilding.cm. Glenda Wilson Retires
Ater 36 years at the Federal Reserve Bank o St. Louis, Glenda Wilson retired Wilson on Nov. 30. Wilson,, the Bank’s assistant Wilson vice president o Community Development, Developm ent, was hired at the St. Louis Fed in 1976 as an assistant bank examiner. She worked worked in various departments throughout the Bank beore landing in
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Community Development in 1990, when the department’s ocus was on assisting communities with issues related to the Community Reinvestment Act (CRA). (CRA). Altho Although ugh today’s Community Development department still provides CRA inormation as part o its mission, that mission has expanded expa nded to also ocus on areas such as community and a nd economic development as well as access to credit—with a goal o helping to improve communities and the lives o their residents. “Over time, we have evolved into looking more closely at community issues such as aordable housing, and taking more o a holistic approach to community and economic development,”” Wilson development, Wil son says. Such an approach, which oten involves working directly with community organizations and neighborhoods, has made Wilson’s winding career path especially rewarding, she says. “We get to work with all o these people and organizations who do such good work and who are trying so hard to make lie better or their communities,” she says. “It’s been really rewarding to play a part in helping to make those eorts successul.”
College Attainment continued rom Page 9
is a ree ree college resource center designed to increase postsecondary attainment att ainment among adults. Funded by a $1.7 million grant rom the Plough Foundation, it is staed by a coordinator, three sta college advisors, and college advisors on loan to the center by local colleges and universities. Counselors meet one-on-one with prospective students, and telephone counselors are available. Workshops on relevant topics are held monthly, and a web site provides links to resources ocused on the needs o adults returning to school. Since its opening in July, Graduate Memphis has reached more
than 400 potential students, and 20 participants have enrolled in a local college. MTD is also attempting to win $1 million or the t he metropolitan area as part o the National Talent Dividend contest sponsored by CEOs or Cities and the Kresge and Lumina oundations. More than 50 cities have registered or the competition, including three additional cities in the Federal Reserve’s Eighth District—St. Louis, Louisville and Little Rock. The prize will be awarded in September 2014 to the metropolitan area with the greatest increase in the number o postsecondary degrees granted per capita over a threeyear period. I all registered cities are successul in raising
RESOURCES New Scorecard Data on the Strength o State Policies CFED has released new data on the strength o 12 state policies (http://scorecard.assetsandopportunity.org/2012/ policychange.php) that help amilies create fnancial security and opportunity. T hese data capture policy changes that occurred in the 2012 state legislative session, or or which data became available available ater all 2011. For more inormation, visit http://assetsandopportunity.org/scorecard/.
Kathy Moore Cowan is a senior community development specialist at the Memphis Branch o the Federal Reserve Bank o St. Louis.
New Podcast Series on Workorce Development How might we rethink workorce development to best respond to current and uture economies? economies? Experts rom industry and academia provide their thoughts on this and other related topics in Economic Development podcasts. Recent podcasts ocus ocus on jobs and unem unemplo ployment yment,, and eatu eature re speake speakers rs rom rom the nati national onal conerence, Future o Workorce Develop Development: ment: Where Research Meets Practice, co-sponsored by the Federal Reserve Banks o Kansas City and Atlanta. •
Bank Branches rom the FDIC Visualize the location o bank branches across the nation, overlay them on top o market indicators like income, households, racial composition and more. Learn about each bank’s assets and total deposits and see how bank branch locations compare rom one part o the country to another. This public public dataset dataset is now now available available on PolicyMap PolicyMap under “Banking” in the “Add Sites” menu (let navigation bar) or ree (www.policymap.com/maps).
college attainment by 1 percent, CEOs or Cities calculates a $124 $1 24 billion increase in national earnings per year. Other programs are helping Memphis reach the collegeattainment goal goa l (e.g., (e.g., Memphis/ Shelby Achieves). Achieves). The area is preparing or its uture and by all indications the uture is here. It will take the collective work o all communities across the country to create the “talent” that is required to meet the challenging and ever-changing needs o the t he global economy.
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Metrics or Success: Critical Elements or Workorce Development Programs Elizabeth Weigensberg, Weigensberg, University o Chicago, discusses recent research on key components o the most successul workorce development programs and provides recommendations or how existing programs can be more eective. Collaborative Eorts: Colleges and Nonprofts Partner to Enhance Workers’ Skills Maureen Conway, Aspen Institute, discusses the results o the Courses to Employment project, which analyzed how community colleges and nonprofts worked together to help lowincome adults succeed in the classroom and labor market.
To view transcripts or play play the audio MP3 fles, visit www.rbatlanta.org/podcasts/economicdevelopment/
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BRIDGES Bridges is a publication o the Community Development Oce o the Federal Reserve Bank o St. Louis. Louis. It is intended to inorm bankers, community development organizations, representatives o state and local government agencies and others in the Eighth District about current issues and initiatives in community and economic development. development. The Eighth District includes the state o Arkansas and parts o Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee. Glenda Wilson Assistant Vice President and Managing Editor 314-444-8317 Yvonne Sparks Community Development Ocer 314-444-8650 Daniel Davis Manager 314-444-8308 Maureen Slaten Senior Editor 314-444-8732 Community Development Staff St. Louis: Matthew Ashby 314-444-8891 Jeanne Marra 314-444-6146 Ross Clarke 314-444-6148 Memphis:
Kathy Moore Cowan 901-579-4103 Teresa Cheeks Wilson 901-579-4101
Little Rock: Drew Pack Pack 501-324-8268 Louisville:
Lisa Locke 502-568-9292 Faith Weekly 502-568-9216
The views expressed in Bridges are not necessarily those o the Federal Reserve Bank o St. Louis or the Federal Reserve System. Material herein may be reprinted or abstracted as long as Bridges is credited. Please provide the editor with a copy o any reprinted articles. Free subscriptions and additional copies are available by calling 314-444-8761 or by e-mail to communitydevelopment@ stls.rb.org.
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ONLINE ONLY www.stlouisfed.org/ publications/br In addition to the print version, each issue of Bridges offers information that is exclusively online. This content content expands on topics in the current or a past issue. For this this issue: issue: Underwater Mortgages in the Eighth District By Julia Maués