Capturing Community Strengths and Opportunities in Urban Markets

Transcription

1 Capturing Community Strengths and Opportunities in Urban Markets 2008 New Markets Tax Credit Symposium: Measuring Community Benefits in NMTC Transactions July 2008 W W W. S O C I A L C O M P A C T. O R G

2 Social Compact: A DC based nonprofit 1990: Recognizing successful partnerships Social Compact Awards acknowledge that the public and private sectors must work together creatively to achieve successful neighborhood development : DrillDown concept piloted in Chicago Social Compact tests new tools geared to surface hidden strengths and opportunities in underserved urban communities Accurate and actionable market analytics should be used to attract private sector investment and inform public sector decisions with the guidance of community partners.

3 Why Social Compact Tools? Response to three emerging themes in community economic development: 1. Inner cities have investment potential Problem: Deficiency-based profiles undervalue and cloud the investment potential of inner cities (Michael Porter). Solution: Develop an asset-based approach

4 Why Social Compact Tools? Response to three emerging themes in community economic development: 2. The information-gap as a key barrier to development. Problem: There is a lack of reliable and specialized market intelligence about emerging urban neighborhoods (Robert Weissbourd). Census and census-derived estimates undervalue inner city neighborhoods. Solution: Close the information gap

5 Why Social Compact Tools? Response to three emerging themes in community economic development: 3. Development begins with the neighborhood Problem: City-level information obscures neighborhoods market characteristics Solution: Neighborhood level indicators capture local intuitions

6 Examples of Information Led Development

7 DrillDown Market Profiles: Uncovering the Hidden Potential Reconstruction of Data to Positive Information Deficiency-based Analysis Asset-based Analysis Poverty and Unemployment Higher Market Density Profiles of Over-Crowding Spending Power Aging Housing Stock Low Home Ownership rates Prime Housing Stock High Levels of Crime/Frequent Media Focus Positive Presentation of Crime ALTERING NEIGHBORHOOD LENSES

8 A Tale of Two Neighborhoods: Better Data & New Indicators Community A Community B Population 17,303 Population 23,901 Avg HH Inc $42,246 Avg HH Inc $45,268 Avg HH Inc (HMDA) $43,179 Neighborhood Income $309 Million Neighborhood Income $443 Million Informal Economy Income $23 Million Homeownership (Unit) 54.1% Homeownership (Bldg) 83.4% Median Home Value $95,800 Median Home Sale Price $80,393 Perceived as high crime area Experienced significant decline in reported incidents of property and violent crime in recent years Source: U.S. Census Bureau, 2000 Source: Cincinatti DrillDown, 2007 What the census and traditional analytics don t tell you: 38% increase from Census 2000 population count 7% increase from Census 2000 average household income $23 million in informal aggregate income missed by traditional market estimates Income density of $298,000 per acre Rising home values and falling crime

9 Surveys: Underbanked populations in Los Angeles What services does a neighborhood need?

10 Daly Roughly half of neighborhood residents in both Vernon Central and Boyle Heights report that they do not currently have a bank account, representing a sizeable untapped market for potential new bank customers. Households currently without checking accounts Total Households* No current checking acct Potential Client HHs Vernon Central 32, % 17,030 Boyle Heights 25, % 10,465 *based on 2008 Los Angeles DrillDown Of those respondents who do not currently have a bank account, just over half of Vernon Central residents and over 40% of Boyle Heights residents, report that they are unaware of basic checking accounts with low fees and low minimum balance requirements. In addition a large proportion of respondents in both neighborhoods cite that they are unaware of altern ate forms of identification that can be used to open a bank account, a notable issue given that a significant number of respondents cited not having a social security number as a barrier to opening an account. Respondents lacking checking accounts % lacking account % aware of basic accounts % aware of alternate IDs Vernon Central 52.9% 57.6% 68.1% Boyle Heights 41.5% 50.9% 82.5% These findings indicate that existing banks are either not aggressively marketing these accounts, or their advertising campaigns are possibly unable to reach these markets. Households using check cashing services Total Households Banks per 10K % cash checks % cash checks at Households received supermarket Vernon Central 32, % 30.8% Boyle Heights 25, % 8.1% The lack of physical banks in Vernon Central has a direct impact on bank utilization rates. Of the three sites, Vernon Central has the highest number of people cashing checks very often or often at supermarkets (30.8%). Crenshaw Rodeo Arlington 3rd Wilshire Olympic Pico Venice Washington Banks Jefferson Full Grocer Persons per Acre 1 to 15Florence 16 to to 45 Van Ness 46 to Western Martin Luther King Jr Vernon Century 120th Los Angeles Co. Exposition Vermont Vermont DrillDown Study Area City of Los Angeles Vermont Miles Hoover Figueroa Alvarado Beverly Grand 8th Slauson Broadway Main San Pedro Avalon 8th Central 2nd San Pedro 5th 6th 9th 16th Sunset Compton Temple 3rd 41st Alpine 7th Hooper 103rd Wilmington El Segundo Mateo Center 7th 38th Spring Santa Fe Pacific Alameda 1st Whittier 23rd 37th Soto Main Mission Cesar E Chavez Long Beach Euclid California 4th Lorena Gage Tweedy Valley Wabash Olympic Bandini Abbott Atlantic 3rd Downey Washingto Florence This map depicting banks and full service grocers (not including smaller grocers, convenience stores and o ther food markets) may explain Vernon Central residents use of grocers for check cashing services: full service grocers alone outnumber traditional banks in the neighborhood.

11 Respondents in both Boyle Heights and Vernon Central cited not needing a bank account as the most important reasons for not having one, and not having sufficient funds as the second most important reason. Accordingly, residents in Vernon Central cited lower fees to open an account and in Boyle Heights, lower fees to maintain an account, as the most important motivating factor. A notable number of residents in Vernon Central also said more convenient bank locations would encourage them to open accounts, while in Boyle Heights, the use of alternate forms of identification was important. most important motivating factor to open account 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Vernon Central Boyle Heights Lower fees to open 28.7% 13.6% Lower fees to maintain 4.3% 34.5% Other IDs 12.2% 15.5% Easy access to money post-deposit 6.1% 8.5% More convenient ATM locations 8.7% 1.9% More convenient bank locations 13.0% 1.9% Personnel that speak my language 10.4% 15.9% Seventy-one percent of all survey respondents (and over 60% in both Boyle Heights and Vernon Central) do not use the internet. These findings signal important ramifications for financial service providers who intend to use online banking as an outreach strategy to currently underbanked markets. Respondents use of the internet Don t use of respondents who use internet internet 1 to 5 hours 6 to 10 hours 11 to 15 hours 16+ hours Vernon Central 63.6% 47.3% 37.5% 34.8% 3.0% Boyle Heights 60.9% 23.4% 23.2% 29.1% 26.3% While the majority of respondents claim they have never participated in a financial workshop, nor are they interested, roughly 30% of respondents from both Boyle Heights and Vernon Central indicated that they had never participated in a financial workshop but are interested in doing so. In addition, numerous respondents expressed interest in several financial products. The tables below ranked these products from those in which respondents expressed the most interest to less interest. Vernon Central Respondents' Interest in Other Financial Products Health insurance 44.7% Savings account 35.7% Checking account 31.4% Bill payments 31.2% Money transfers to other countries 28.4% Tax preparation 28.3% Personal loans/alternatives to payday loans 25.4% Money orders 21.9% Business insurance 19.4% Small business loans 17.3% Mortgages 16.5% Prepaid cards 12.5% Debt counseling 3.8% Boyle Heights Respondents' Interest in Other Financial Products Savings account 53.8% Checking account 46.7% Health insurance 43.5% Tax preparation 33.6% Money transfers to other countries 33.3% Bill payments 25.2% Mortgages 24.7% Personal loans/alternatives to payday loans 21.4% Money orders 21.1% Small business loans 18.1% Business insurance 15.0% Prepaid cards 13.2% Debt counseling 9.0%

12 What is Missing in the retail mix? Grocery store access in the City of Baltimore What it means for a city to be underserved?

13 Baltimore City DrillDown $217 million 1 The DrillDown analysis reveals sizable unmet demand with respect to full service grocers. 83 An estimated $217 million in grocery leakage could support an additional 600,000 square feet of grocery retail space in Baltimore City Grocery Leakage Freeway System (State) 695 ($98,491,625) - ($6,069,166) ($6,069,165) - $23,686,443 $23,686,443 - $50,952,344 $50,952,344 - $73,511,926 $73,511,926 - $115,250, Miles The grocery leakage in Baltimore amounts to more than $217 million, or 1 out of every 4 dollars.

14 Baltimore City DrillDown 1.78 sq ft 1 Residents of Baltimore County are served with 2.76 square feet of grocery per person. In contrast, the City of Baltimore is significantly underserved with only 1.78 square feet per person Square Foot per Person 695 Square Foot Per Person BaltimoreMSA Miles

15 Baltimore City DrillDown 87% underserved 570,000 people or 87% of Baltimore City s population, have access to less than 3 square feet of grocery retail space and are underserved. Furthermore, around 160,000 people in Baltimore (or 24 % of the total population) have access to even less than half this amount (1.5 square feet per person).

16 Measuring the impact of financial services for individuals in LMIs

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19 Foreclosure: Impact Tool and Mapping

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21 Carolina Valencia July, 2008 W W W. S O C I A L C O M P A C T. O R G

22 NEW MARKETS TAX CREDIT MEASURING COMMUNITY BENEFIT NH&RA Summer Institute Kermit S. Billups, Managing Director July 23, 2008

23 Discussion Outline Alliance for Economic Development (AFED) Presentation to U.S. Department of Treasury Community Impact Study

24 Alliance for Economic Development NMTC industry advocacy group consisting of private capital providers Advantage Capital Capmark Key Bank National City US Bank Wachovia Goal: Support use of private capital, efficiency and fiscal compliance in NMTC industry

25 Capmark Round-One Allocation Analysis Excerpt from 11/30/06 Presentation to Department of Treasury Program Goal: Improve flow of capital into low-income areas Capmark financing activities in low-income communities increased from 23.8% ( 99-03) to 30.1% ( 04-05) Capmark is not a CRA lender Round-one allocation: 100% deployed into CDFI Fund special areas (only 60% required) Substantially all test: 100% 25

26 Capmark Round-One Allocation Analysis Excerpt from 11/30/06 Presentation to Department of Treasury Focus on short-term products and mezzanine debt $75 million of allocation leveraged $360 million of investment (approximately 5:1) Recycled $20 million of allocation to date 26 (11/2006)

27 Capmark Round-One Allocation Analysis Excerpt from 11/30/06 Presentation to Department of Treasury Initial direct impact of $75 million allocation 365 construction/renovation jobs 4,618 permanent jobs created retained $39 million per year of federal and social security taxes $4 million per year of state and local taxes Capmark investments are 2-3 years in duration Assuming capital is recycled, the economic impact will be 2-3 times initial projections 27

28 Capmark Round-One Allocation Analysis Excerpt from 11/30/06 Presentation to Department of Treasury One direct job created per $16,240 of NMTC allocation Additionally, one construction job per $205,000 of allocation One direct job created per $6,330 of actual tax credits utilized Assuming $ million of actual credits (39% of $75 million) HUD standard for good program - $22,000 subsidy cost per job (Source: Nixon Peabody LLP) Recycling will create 2-3 times initial job benefits 28

29 Capmark Round-One Allocation Analysis Excerpt from 11/30/06 Presentation to Department of Treasury Direct tax impact: $39 million increase in federal and social security taxes $4 million net state and local tax increase Each tax dollar contributed creates $1.3 in additional federal tax revenue and 13.5 cents of additional state/local revenue Recycling will create 2-3 times initial tax benefits 29

30 AFED Economic Impact Study Conducted economic impact study using 280 NMTC investments completed by members One of the first studies to apply consistent modeling across multiple CDEs Study analyzed $3.9 billion of investment in low income communities $1.4 billion of NMTC allocation funding $2.5 billion of non-nmtc funding 30

31 AFED Economic Impact Study One direct job created per $45,605 of NMTC allocation One direct job created per $17,786 of actual tax credits utilized Tax credit represents $0.39 per dollar of allocation HUD standard for good program - $22,000 per job (Source: Nixon Peabody LLP) Recycling will create 2-3 times initial job benefits 31

32 AFED Economic Impact Study Annual direct personal income tax impact: Federal: $238 million increase State: $68 million increase Each tax dollar contributed creates annually $0.42 in additional federal personal income tax revenue and $0.12 of additional state tax revenue Recycling will create 2-3 times initial tax benefits 32

33 Alliance for Economic Development Study Conclusions: NMTC program is working to stimulate job creation and increase tax revenue Tax credit payback in 2.4 years without assuming recycling of credits into multiple deals Federal government should receive tax revenue far in excess of program costs 33