Detroit, MI, November 10, 2015 (CDFI Connect)—This week Opportunity Finance Network (OFN) hosts the annual OFN Conference in Detroit, MI. With more than 1,200 CDFI practitioners, funders, investors, and policy makers in attendance, a high-quality, practitioner-driven curriculum, strategic dialogues, and incredible networking opportunities, the 2015 OFN Conference is the largest and most influential gathering in the industry. This year’s theme is Opportunity. Made in America. With Detroit as the host city, it has never been more apparent than today that CDFIs and CDFI allies, like The Kresge Foundation, are a large part of shaping that opportunity.
CDFI Connect sat down with Rip Rapson, president and CEO of the Detroit-based Kresge Foundation to hear more about the great work taking place in Detroit.
On Oct 14, The Kresge Foundation announced a $5MM initiative to fund Detroit-based nonprofits in transformative projects. How did this initiative come about?
Over the last four to five years, there has been an enormous amount of energy and capital flowing into both the central business district and the Woodward corridor. The Kresge Innovative Projects: Detroit (KIP-D) initiative, was designed to help light up a map of revitalization activities going on all across the city. The way that it is set up, the initiative comprises relatively small grants with near immediate impact on the residents and on the physical form of these neighborhoods.
In many ways, the KIP-D came about to help the community continue the essential pivot toward deeper investment into neighborhood activity. We tailored the program against the Detroit Future City program, which is a land use framework launched in early 2013 to transform our perception of vacant land as an asset to use by residents.
The guidelines for the initiative elevate the importance of thinking through how we could most effectively help people think differently about blight and abandoned property
What has been the result of this initiative and who are you partnering with?
This particular initiative is designed so that any number of different kinds of financial intermediaries can play a role. Anytime you move capital into community you need to build the capacity to structure deals that are meaningful. These planning grants are small, ranging from $25,000 to $150,000, so the focus is getting the money directly into the hands of community-based organizations.
What were the major successes from the 2014 funding?
We had more than 100 applications in the very first rollout, and we could only fund about 17. This response suggests an enormous appetite for small-scale transformative projects that can really hit the ground quickly and create immediate change in neighborhoods.
A great example is Central Detroit Christian CDC [this year’s OFN Justice Grant Awardee] who created fitness pocket parks, which are neighborhood parks with fitness equipment and walking path. They took seven vacant lots and created a network of pocket parks focused on helping people get out and engage in fitness. It was a small idea, but very visible and popular going out of the box.
Another project was through Black Family Development, a local community-based organization whose proposal was a vacant land cleanup and lawn transformation. They orchestrated a six-day cleanup in the Osborn neighborhood (which is in northeast Detroit) and it brought thousands of volunteers into the neighborhood, creating dramatic transformation. The grant, through these 6 days, identified a number of these lots to clean up and put them into shape for the use of the owner. Our entire staff of 90 participated in one of the six day cleanups. We cleaned and painted and removed a fence. It’s a wonderful small program that is an excellent example.
This program involved both direct implementation grants and a handful of grants for planning – one of the fun planning grants was through Heritage Works. Heritage Works designed a project that involved community residents in arts and planning activities to figure out how to design a park on the West side of the city. They used our funds to make sure more than 1,000 people were involved in the creative process, resulting in a plan to take one major park that had been abandoned and neglected to position it to be opened in the spring of 2016.
What types of projects seem to have the greatest revitalization impact?
The Heritage Works project is a great example of immediate impact. Parks are the kind of thing that are so central to a community. It will have a huge impact once construction gets going and the park is dedicated. These are projects that turn around quite quickly. It’s interesting to think about the different ways Detroit is coming at this incredibly complicated question of land use. And this is one response.
Then there is the level of investments that I think CDFIs get involved with, and they are the larger housing projects, things that take time and complex financing. These have huge impact on a more intermediate time scale.
Then there are the large, comprehensive projects we have just begun to explore in Detroit. The Orleans Landing Project is an example that involves a comprehensive network of lending from nontraditional and traditional markets into the residential along the riverfront.
How are CDFIs playing a role in shaping the new Detroit?
CDFIs have been front and center in the Detroit recovery. And we have worked very closely with a half-dozen CDFIs to increase their capacity to be able to work at the granular level. One of the highest values CDFIs have played in Detroit is that they came into the market when others were not willing to or were even pulling out.
For instance, on Tuesday, Nov. 10, there is a scheduled ribbon cutting for a 58-unit housing development for New Center area. Capital Impact Partners has been the lead partner in this development, which is called the “Regis Houze.” This is one of the first investments from the Woodward Corridor Investment Fund, which is a $30 million investment
Another great example is the Detroit Boxing Gym, which is an after-school program that uses boxing to teach kids life and academic skills. It is so popular there is a 450-person waitlist. Because of this demand, they really needed to renovate and expand, and IFF provided the financing for this.
I also have to say that another great partner in Detroit’s revitalization is the Goldman Sachs 10,000 Small Businesses initiative. They have worked very closely with the Detroit Development Fund, and as a result they have been involved in underwriting scores of entrepreneurs.
In the last five years, when traditional banking activities disappeared, we had around six CDFIs ramp up their activities and in some cases come to Detroit for the first time. By doing so, they demonstrated that the kind of activity we are seeing now is possible, and that you can actually finance these projects. This has been a hugely transformative experience for Detroit. Not only does the capital move into places that more conservative capital won’t, but the CDFIs end up pulling in key partners. There are so many examples of the kinds of partners a strong CDFI can pull into a deal. This cannot be underestimated.
You can move at different paces with different forms of intervention. You can do some things that realize success almost immediately. You can do more complex deals and then you have to anticipate the longer term plays. If you focus on any one of those segments you end up being disappointed. What has converged in Detroit is projects at all three of those scales moving forward, pretty much all with the help of CDFIs.
Philanthropy serves its role as a broker or bridge. Four to five years ago we convinced Living Cities to select Detroit as one of five communities to combine grants and loans to create greater impact on some dimension of a community problem – to help us build out the capital capacity of a city. There was not sufficient community development lending capacity. That’s when Capital Impact Partners came to Detroit, for the first time. They took a huge leap of faith to come to a place they had never worked before and be effective. What has been surprising is how they have shown such a deep commitment, not coming in for the moment but creating deep roots and a body of work in Detroit. Capital Impact Partners broke that mold of expectations, and other CDFIs fell into place: some were home grown and some that weren’t. They really helped the community blaze a very different trial of convincing markets of all kinds to reenter the city.
The Kresge Foundation is on the ground in Detroit; you’ve seen the city decline, but what’s great is that you’re part of the city’s triumphant rise. What lessons does Detroit offer to the CDFI industry and other industries dedicated to community & economic development about how we best serve communities that face unique challenges and have immense opportunity?
First: don’t be deterred by the possibility of failure. There was no guarantee that this would be a successful model when Capital Impact Partners came to town. Taking risks commensurate with the magnitude of the challenge is something CDFIs are good at
Second: You can actually search out assets and neighborhoods that go beyond the traditional way of securing financing. When you look at the possibility of open space conversion or more robust human services support, there is always some way to make capital work, quite possibly by opening the capital into nontraditional uses.
CDFIs have been very good about not being deterred by the quick and superficial look at existing conditions. You can could take a tour of the city and still see all the blight, and throw your hands up and say “too hard!” But one of the things CDFIs have done is refused to be boxed in by this. They searched out solutions to find acupuncture points. They pinpoint where it make sense to move capital and energy to (overtime) transform those conditions. The CDFI community did a real service to Detroit by helping reinforce there was something beyond the immediate difficulties of what you see when you travel around Detroit.
What’s your favorite Motown classic?
I have to say, anything by Diana Ross and anything by the Supremes.