Keynote Address by Director Donna Gambrell at the CDFI Coalition's 2010 CDFI Institute

Thank you to all of you for being here. And thank you, Opportunity Finance Network, for sponsoring this conference and inviting me to speak.

The first OFN conference I attended was in 1991. Back then, there were about 200 people in attendance and there was no such thing as the CDFI Fund. The OFN Conference has become the premier annual gathering for our industry. It is an honor and a pleasure for me to join all 1,200 of you to celebrate the accomplishments of CDFIs across the nation and to prepare for the future that lies ahead.

As many of you know, this is my first year on the job as director of the CDFI Fund. Having started just after the CDFI Fund celebrated its 20th Anniversary, I have been focused on answering the question, what's next for the CDFI Fund's next 20 years? How should we build on our track record to create even greater access to capital for underserved people and communities? While CDFIs have strengthened their capacity measurably over the past decades, poverty has not gone away. In fact, wealth gaps have widened, and the communities we serve are still struggling to rebound after the Great Recession. So the mission of the CDFI Fund, to expand economic opportunity for underserved people and communities, is still very pressing even after 20 years of progress.

It is fitting for us to be here in Detroit, where the cutting edge of community development is currently being defined. Detroit is teaching us important lessons about how to increase the catalytic power of community development finance, and it presents us with the opportunity and the challenge to achieve equitable redevelopment.

Detroit holds a distinguished place in the history of American innovation. This is the Motor City that built one of the most dominant industries of the 20th century; that pioneered the Model T and the assembly line; that democratized access to the automobile and created well-paying jobs that helped hundreds of thousands of Americans rise to the middle class.

And this is Motown, the birthplace of a uniquely African American musical genre that, when it hit the scene in the 1960s, had far reaching appeal across racial lines and international borders. But even more importantly, the Barry Gordy business model broke apart the old rules and made it possible for African American artists to earn real equity from their own talent and labor. What happened here in Detroit in the 20th century transformed the way America thought about itself and the way the world thought about America.

But, like too many American cities, Detroit is a cautionary tale. The confluence of a globalizing economy that moved jobs away from the city and the suburbanization of America that fueled population loss on a massive scale, left high concentrations of poverty, and near financial collapse.

Many wrote Detroit off, but CDFIs have not. Of course, it is in the nature of CDFIs to turn towards the challenges that others turn away from. Where markets break down, where people are struggling to find or create pathways out of poverty, that's where our work begins. We are not daunted by the pessimism of others; CDFIs possess an undying belief in the inherent capabilities of all Americans to thrive if given the opportunity. We believe that every American deserves such opportunity. Our ultimate aim is to use the tools of finance to create it.

The public discourse on Detroit has shifted from mourning urban ruin to celebrating resilience and renewal. That uniquely American spirit of innovation and enterprise that led to the rise of Detroit in the 20th century has clearly been rekindled to help remake this great city. There is a hopeful feeling that the future will be a whole lot better than the recent past.

CDFIs can take credit for making a meaningful contribution to that new future. A few weeks ago I spoke with Lauran Hood, the freshly minted executive director of Live 6, a new planning and development organization that is dedicated to enhancing the quality of life and promoting economic opportunity in Northwest Detroit. Live 6 gets its name from its location at the intersection of Livernois Avenue and Six Mile Road. When I asked Lauran about how she saw the role of CDFIs in Detroit, she said, "They are financing so many developments that just would not have gotten done by conventional lenders. They make me feel optimistic."

Progress in Detroit is also being built on the the foundation of thousands of demolitions of vacant and blighted houses paid for by the Treasury Department's Hardest Hit Fund. From its inception, the Hardest Hit Fund strategy was to stabilize and revitalize neighborhoods by reversing the devastating impact of blighted property, so community organizations like Live 6 could build on the new momentum.

I am very proud that the CDFI industry is playing a central role in the rise of the new Detroit. Without a lot of fanfare and media attention, CDFIs have rolled up their sleeves and gone to work, just as countless other innovators and creators have done in Detroit for generations.

It is inspiring to see the innovative ways in which CDFIs are approaching their work in Detroit. I would characterize the approach as one that goes beyond transactions to transformation. Though just about any CDFI will tell you that transformation is always the goal of any transaction, it's a lot easier to talk about that than to accomplish it. Progress in Detroit has required much deeper levels of alignment and collaboration than has been achieved in the past. Perhaps because the scale of the problems in Detroit is so massive and the market dysfunction so deep, CDFIs realized early on that this is not a place to "go it alone."

While CDFIs have played a critical role in Detroit's neighborhoods, they have also been an important part of the redevelopment of the city's Woodward Corridor. Spurred on by projects such as the Living Cities' Integration Initiative and the Woodward Corridor Investment Fund, CDFIs have invested in building deeper relationships with the public sector, local community development organizations, private investors, and philanthropy. And those cross-sector actors did not have to work hard to see the value that CDFIs could bring to the table. Indeed, who else has the unique combination of pragmatism and optimism required to come up with the ingenious structuring that is necessary to make deals pencil out in this environment?

Importantly, CDFIs working in Detroit have invested in building deeper relationships with each other. This has brought a greater understanding of the comparative advantages organizations of different sizes, orientations, and capacities bring to each other. Building these relationships takes a commitment that can't always be directly compensated through the deal. For CDFIs coming in from the outside, acknowledging the value of local organizations, honoring their history and their hard won wisdom, is an important prerequisite. For local organizations, ceding turf on occasion can be painful, but adding new capacity really can expand the pie and multiply impact. Investing in relationships surely feels inefficient at times, but it is critical to creating the long-term, transformational outcomes we seek.

This map of Detroit shows CDFI and CDE activity from 2003 - 2013. I'd like to highlight a few things. First, you can see that CDFIs have been busy. Certified CDFIs, both in-state and out-of-state combined, made 295 loans in Detroit totaling $54 million through the core CDFI Program. Through the New Markets Tax Credit Program, local, state and national CDEs invested approximately $400 million in Detroit over the same period. When compared to other cities, Detroit ranks 4th in per capita investment through the NMTC Program and 15th in per capita investment through the CDFI Program.

Next, you can see a clustering of deals, especially NMTC transactions, along the Woodward Corridor. This shows the alignment of CDFI investments with the City of Detroit's redevelopment plan to anchor activity along a commercial corridor that connects downtown to Midtown and the neighborhoods radiating out from the core. The M1 Line, the light rail project that is a centerpiece of the redevelopment plan, received a boost from the NMTC Program with an investment made by the Local Initiatives Support Corporation, a CDFI and CDE.

Let's take a look at some of the other transformative investments CDFIs have made. One example is the renovation of the old Argonaut Building in Midtown.

Built in 1928, the Argonaut served as General Motors' automotive design centeråÌãthe first automotive design center in American historyåÌãuntil 1956, when the company moved its headquarters to the suburbs. The 11-story building housed other GM departments for another 30 years but stood vacant by 1999.

In 2007, GM donated the Argonaut to the College for Creative Studies, a leading institution for art and design education. Over the next few years, thanks to a partnership involving JP Morgan Chase, US Bank, Thompson Educational Foundation, Capital Impact Partners, Enterprise Community Partners, Local Initiatives Support Corporation, and the National New Markets Fund, the Argonaut was transformed into the Alfred Taubman Center for Design Education, which is home to several of the College for Creative Studies' undergraduate and graduate departments. The Taubman Center also houses a creative business accelerator, an auditorium, a dining hall, and a charter school, and has become one of the centerpieces of Detroit's new creative economy.

Another innovative partnershipåÌãthis one involving the CDFIs Invest Detroit, Partners for the Common Good, and Capital Impact Partners, as well as JP Morgan Chase, Living Cities' Integration Initiative, Ford Foundation, and Midtown DetroitåÌãhelped transform a vacant and blighted property into the Auburn, a new mixed-use commercial and residential development designed to meet the need for high quality, affordable rental housing in the heart of Midtown. The Auburn offers 58 market-rate rental units with on-site parking, as well as 9,000 square feet of ground floor retail space.

This new development is located a block west of Woodward Avenue. The neighborhood is home to Wayne State University and the College for Creative Studies, as well as three major hospitals and several museums and entertainment venues. The Auburn has become a neighborhood hub, providing services to the young people and students who are making Midtown one of the city's most vibrant areas.

Both of these projects were financed in part by using the New Markets Tax Credit Program, and they are just two examples of the great work that CDFIs are doing in Detroit in collaboration with each other.

The revival of Downtown and Midtown is absolutely inspiring and transformative. But, that cannot be where this story ends. There is still so much more to be done, so much for us to get right, especially in terms of equitable development. The theory of change in Detroit holds that the redevelopment of Downtown and MidtownåÌãthe urban core, the spine of the cityåÌãwill ripple out into the neighborhoods. But we cannot assume that such an outcome is bound to happen. So CDFIs have to put two questions on the table: 1) Is momentum from economic development in the core enough on its own to spur development in neighborhoods like the North End and Southwest Detroit? If not, what more must be done? 2) Is opportunity being created for the people in those neighborhoods that have lived through the hard times, or will they be displaced by new developments?

These are fundamental questions. For CDFIs, just revitalizing a place is not enough if the opportunities created don't accrue to the people who have survived the tough years in the neighborhoods hardest hit by economic collapse. CDFIs work at the intersection of people and place, and if our work results simply in the redevelopment of a place without also alleviating poverty and creating upward mobility for people, we will not accomplish our mission.

Revitalization without displacement is no easy task; there is a dearth of effective models and there is certainly no rule book to follow. In my recent conversation with Lauren Hood of Live 6, she posed the question, "whose job is it to ensure that displacement does not occur?" This is a profound question for all of us to ponder.

Recently, I had the great pleasure of meeting Dr. Raj Chetty, a Professor of Economics at Stanford University, a recipient of a MacArthur "genius award," and a path-finding researcher whose work combines empirical evidence and economic theory to help design more effective government policies. His work offers some valuable insights for those of us working to create change at the intersection of people and place.

Dr. Chetty's most recent research focuses on equality of opportunity, specifically on how neighborhoods affect upward mobility and how government can create policies that give children from disadvantaged backgrounds better chances of succeeding. He is co-author of a national quasi-experimental study of five million families using big data, as well as a recent re-analysis of the Moving to Opportunity experiment. Both studies found causal effects between where one lives and how much economic mobility one experiences.

Many of you are probably familiar with the Moving to Opportunity experiment. In the 1990s, the U.S. Department of Housing and Urban Development offered randomly selected families living in high poverty housing projects housing vouchers to move to low-poverty neighborhoods. Original research showed positive mental and physical health impacts as well as improvements in personal safety for those who moved; however, it did not show significant impact on earnings and employment rates of adults. Dr. Chetty's re-analysis parsed the data further and found positive, causal effects for children who move to higher income neighborhoods before the age of 13. Specifically, he found that every year of exposure improves outcomes such as college attendance and long-term earnings.

Dr. Chetty and his colleagues found that the five strongest correlates of upward mobility are:

1. Segregation: racial and economic concentration reduces mobility,

2. Family structure: A higher number of single parents in a community affects the economic mobility of children in the area;

3. Income inequality: the bigger the gap, the harder it is to create mobility;

4. Social capital: the more the better; and

5. School quality: the higher the better.

Dr. Chetty's work provides empirical evidence that confirms that place matters and that mixed income communities create economic opportunity. The first thing Dr. Chetty said when I met him was, "of course we can't all move to opportunity and we can't just abandon places. What this work shows is that place matters."

Those insights define the challenge for our industry. If we know that these things do in fact matter, we must design integrated solutions that address them. So far, there is no evidence that the market, left to its devices, will produce the kind of equitable outcomes we seek. Which brings us back to Lauren Hood's question, whose job is it to ensure that displacement does not occur? Certainly, policymakers and community development practitioners must be intentional about creating economically and racially diverse places.

While we may have yet to discover the full solution to equitable development, an important first step is to ensure that our work connects to the efforts of local civic organizations, like Live 6, that share our community development goals. Let's ensure that community leaders are at the table, that their voices are heard and that the solutions we design include them. Otherwise, we risk that our efforts here in Detroit and elsewhere across the country will end up being a frustrating game of whack-a-mole. We will achieve transaction-level success without accomplishing the ultimate mission of social and economic transformation.

Now, I have spoken about what the CDFI industry needs to do to achieve this kind of transformation. But what about the CDFI Fund? What are we going to do to deepen our commitment to achieving greater outcomes in underserved communities?

Of course, one of the first things we are going to do is to continue administering all of the programs we provide to build the capacity of CDFIs. To that end, we have had a very busy year. In FY 2015 the CDFI Fund:

• Awarded $202.3 million in awards to 195 CDFIs through the CDFI Program, including the Healthy Food Financing Initiative, and Native American CDFI Assistance awards. This was the 20th round of the CDFI Program, the flagship program of the CDFI Fund.

• Awarded $18.1 million to 83 FDIC-insured financial institutions through the Bank Enterprise Award Program for increasing lending and providing vital financial services in low-income communities across the nation.

• Allocated $3.5 billion in New Markets Tax Credit authority to 76 organizations to stimulate investment and economic growth in low-income urban neighborhoods and rural communities.

• Guaranteed $327 million in nine new CDFI bond loans under the CDFI Bond Guarantee Program, which is making available much needed long-term, fixed rate capital for projects in low-income communities. Congratulations to OFN for the role you played as the issuer of $227 million of those proceeds, and for expanding access to the program to a greater diversity of CDFIs - from rural to urban to native American, as well as organizations with assets below $100 million.

We also:

• Awarded a contract to National Community Investment Fund to provide training and one-on-one technical assistance to Minority CDEs on the various opportunities to participate in the New Markets Tax Credit Program. Trainings will begin later in 2016.

• Launched a brand new website that we will use to feature successful and innovative CDFI activities in addition to robust information about the CDFI Fund's programs.

• Launched a new technology platform, the Awards Management Information System (AMIS). AMIS is a modern platform that will support all CDFI Fund programs through each phase of the programs' life cycle, including certification, program awards and allocations, data analysis, and reporting.

• Prepared for the relaunch of the Capital Magnet Fund. Though we do not expect to see funding for the program until next spring, we expect to open the funding round soon. Keep an eye out.

These are all very important accomplishments. But the even bigger story is that we also have been focused on the future and have been working hard to create a pathway for the CDFI Fund.

The CDFI Fund is currently creating what we are calling a Framework for the Future. The Framework is a five-year strategy for accelerating the CDFI Fund's pace of progress toward achieving its mission.

The first step in building the Framework has been to understand the world from the point of view of our stakeholders. To that end, this spring we gathered together the CDFI Fund's Community Development Advisory Board in Washington, D.C., to begin a discussion around six areas of inquiry. They were:

1. Program Effectiveness: Are our programs effective and working optimally for communities?

2. Innovation and Scale: How can we best support CDFIs to continue to innovate? What will it take to scale solutions that we know work?

3. Access: What more can we do to reach communities that need CDFIs but are either not being served by them or have limited access to CDFI Fund support?

4. Data: How can the CDFI Fund support the use of data to strengthen the industry and increase our impact?

5. Customer Service: How are we doing? What needs to be improved?

6. Blind Spots: What issues should be on our radar screen but are not?

The minutes of that meeting are on the CDFI Fund's website.

From there, we took our questions on the road for a five-city national listening tour this summer. More than 320 people attended the tour, representing CDFIs, funders, investors, local and state government officials, researchers and other community development practitioners. More than 70 others joined me on two conference calls for those serving rural communities in the continental U.S. and in Hawaii, Alaska, and the territories. We also put our questions out in the form of an electronic survey and nearly 300 additional individuals and organizations responded online. To all of those who participated in the process, THANK YOU!

Here's a preview of what we heard for each of the six areas of inquiry:

1. Regarding Program Effectiveness: First and foremost, we heard that the CDFI Fund's tools work on the ground, that our programs are effective and very much needed. We also heard that CDFIs appreciate the flexibility of our programs, especially financial assistance awards. Enterprise level funding is still the hardest funding to source.

2. Regarding Innovation and Scale: We heard that there is ambivalence about scale. Many CDFIs see a tension between building scale and serving their target markets. CDFI business models require "high-touch" approaches which are not easily scaled. Still, the problems we seek to solve are so much bigger than our solutions that we have to consider how we can scale our impact.

3. Regarding Access: CDFIs recognize that there is still a lot of work to be done to expand access to retail financial products and services to individuals, families, and small business owners in low income communities.

4. Regarding Data: CDFIs expressed a desire for the CDFI Fund to find more ways to share its own data in forms that are consumable and help CDFIs tell their story.

5. Regarding Customer Service: We heard that CDFIs appreciate the responsiveness and knowledge of the CDFI Fund's staff. This was heartwarming to hear because I can tell you that the CDFI Fund staff work really hard. They are motivated by the mission and committed to communities. It would be easy for that to get lost in translation, given that we are a federal program. But I was delighted to learn that the competence and professionalism of the CDFI Fund staff are coming through to you. We also heard that our help desk system does not work well, and that people get lost if they don't know to whom they should reach out.

6. Regarding Blind Spots: Some participants expressed that financial inclusion should get more attention from the CDFI Fund. They noted that the NMTC Program and the Bond Guarantee Program are well suited to real estate development and that, therefore, the CDFI Program should place greater emphasis on supporting access to affordable financial products for consumers and small businesses. We also received requests for the CDFI Fund to pay greater attention to racial equity and the struggles of minority-run CDFIs and CDEs.

I would like to share with you a brief story about what was for me and my CDFI Fund colleagues a very poignant moment on the listening tour. We were at our first stop, in San Francisco. If you attended one of the listening sessions, you know that we designed them to be very interactive and to allow the participants to do most of the talking. There were lots of small group discussions and report outs organized around the six areas of inquiry.

During this session in San Francisco, a participant from East Oakland stood up to report his table's comments on the topic of access. His organization, Allen Temple Housing and Economic Development Corporation, is a faith-based CDC and a CDE but not a certified CDFI. He talked about the struggles in his highly distressed African American community to gain access to capital and he clearly felt disconnect from the CDFI world. This participant said, "All the CDFIs that said you are located in Oakland, we don't know any of you...We're serving the low-income community and I just don't see you." The comment caused me to think more deeply about the importance of connecting with local community leaders, especially in minority communities. Our business is driven by relationships.

I know that many CDFIs do connect their strategies with many community stakeholders, but let's make sure we aren't leaving out the important voices of the people who live in the communities we serve. If we are to deepen our impact and increase economic opportunity, we must know and serve our target markets from the bottom up.

So what are we going to do with all the input we've gathered? We are in the process of shaping strategic objectives en route to developing our Framework for the Future. While it will take us a little more time to finalize the strategic objectives, I can give you a sense of the themes we are working with:

1. Impact: We want to increase the impact of the CDFI network by supporting the growth, reach, and performance of CDFIs. We want to see robust diversity in terms of CDFI institution types, sizes, use of funds, and geographic coverage.

2. Performance: To increase our impact, we need to more closely align past performance with future funding. If you are a repeat applicant, expect to see the bar raised on implementing the statutory requirement for expanding target markets, creating new products and services, and increasing transaction volume.

3. Data: To increase our understanding of performance, we need better data. And, we want to make data a strategic asset for the CDFI Fund and for the industry.

4. Transparency and ease of use: Our certification, award making, and compliance processes will become more user friendly and transparent.

5. CDFI Brand. We want to protect and promote the CDFI brand.

We expect to have the Framework for the Future completed in early 2016. Stay tuned!

The work you are doing to create an inclusive economy for those on the margins and those in need of greater opportunity ennobles this country. As you are doing here in Detroit, CDFIs have always led the way, demonstrating to mainstream investors that there are opportunities in communities that have been overlooked, or judged to be too risky. If mainstream financial institutions move into markets behind us, we must continue to blaze new trails, to find the next community that is even harder to serve than the last one. Let's move forward together until we achieve our collective vision of an America in which all people and communities have access to the investment capital and financial services they need to thrive.

Thank you again for giving me this opportunity to speak. And thank you, Detroit, for showing the world what it means to be resilient.