U.S. Senator Tina Smith Leads Senate Hearing on Expanding Economic Development in Underserved Communities

WASHINGTON, [1.5.22] – Today, U.S. Senator Tina Smith (D-Minnesota) chaired a productive hearing focused on addressing the economic challenges and disparities in underserved communities. The hearing covered two bipartisan bills authored by Sen. Smith, which would expand financial services and capital investment in communities of color, Tribal lands, and rural communities. Senators heard from a number of witnesses who shared how Sen. Smith’s legislation would make a difference for community development. Witnesses included:

  • Lakota Vogel – Executive Director, Four Bands Community Fund
  • Frank Altman – Founder and CEO, Community Reinvestment Fund
  • John Holdsclaw – President, Coalition of Community Development Financial Institutions

“Unequal access to capital and financial services is a key driver of economic disparity in rural areas, communities of color, and Indigenous communities,” said Sen. Smith. “Today’s hearing has moved us one step closer to passing my bipartisan legislation, which will help  address these inequities and jumpstart economic development in Minnesota and around the country.”

“We support the Bond Guarantee Program Improvement Act, that was introduced yesterday thanks to Senators Smith and Rounds,” said John Holdsclaw, President of the Coalition of Community Development Financial Institutions “The permanent extension and other improvements contained in that legislation have the potential to further revitalization in distressed communities.”

The Subcommittee hearing on Housing, Transportation, and Community Development covered two of Senator Smith’s bills, both of which are co-sponsored by Mike Rounds (R-South Dakota). Both would strengthen and expand Community Development Financial Institutions (CDFIs), which play a critical role in bringing capital and financial services to a wide range of underserved communities – from urban areas to small towns and rural communities to Tribal lands.

The first bill, the CDFI Bond Guarantee Program Improvement Act, will expand and make permanent a successful program that allows CDFIs to access long-term, stable funding. You can find more about the legislation here.

The second bill, the Native American Rural Homeownership Improvement Act, would help Native families living in rural areas achieve home ownership by expanding a program that supports access to mortgages for Native Americans. You can find more about the legislation here.

Read Senator Smith’s full opening statement below:

HTCD Subcommittee: Exploring How Community Development Financial Institutions Support Underserved Communities

Good morning.

I call the Subcommittee on Housing, Transportation, and Community Development to order.

Today we’re going to take a look at Community Development Financial Institutions (CDFIs). Our hearing will explore how the federal government can help support their innovative work, and how we can work together to address some of the challenges faced by underserved communities when it comes to accessing capital and the financial system.

The COVID-19 pandemic has not been the great equalizer. It has laid bare the disparities in our society. And too often, it is Black, Brown, and Indigenous families who have faced the most significant burdens.

But, the economic disparities didn’t start during the pandemic. According to the Federal Reserve, as of 2019, a typical Black family’s net worth was just 15% of a typical white family’s worth. A typical Hispanic family’s net worth was about 19% of a white family’s. And the typical net worth for Native American families is also just a fraction of that of a typical white family.

While there are many causes of this great inequity, one factor is a lack of access to capital and to financial services – for people of color, Indigenous communities, and in small towns and rural places.

When the CDFI Fund – the federal agency that oversees CDFI programs – was established in 1994, there were about 80 CDFIs. Today, there are more than 1,000 CDFIs, many with innovative models that weren’t even imagined when the CDFI Fund was first established. And they’ve played a critical role in bringing capital and financial services to a wide range of underserved communities – from urban areas to small towns and rural places to Tribal lands.

For instance, in Minnesota:

  • The African Development Center helped fund two malls that have more than 450 African small businesses and over 500 jobs.
  • The Indian Land – Capital Company (ILCC) made a loan of nearly $1 million to the Lower Sioux to allow them to expand their land by about 10%. I appreciated the opportunity visit with them last summer and learn more about this project.
  • And in 2018, I visited University Enterprise Labs, which were funded in part by Sunrise Banks, which is a certified CDFI, with support from the New Markets Tax Credit program. Those funds are helped expand a cutting edge life sciences incubator in an area current shared by industrial uses and students on the border of St. Paul and Minneapolis.

With their successful track record of reaching underserved communities, Congress has looked to CDFIs as effective community development organizations to implement programs. Let me share a few examples.

In 2000, Congress enacted the New Markets Tax Credit, which provides tax incentives to allow CDFIs to work on economic development projects in economically distressed areas. That program has proven successful, and I’m glad to be a supporter of bipartisan legislation from Sen. Cardin and Sen. Blunt to update and expand that tax credit.

During the Great Recession, Sen. Menendez authored legislation to establish the CDFI Bond Guarantee Program. The Bond Guarantee Program provides a stable, long-term source of capital for CDFIs, without any subsidy from taxpayers. Earlier this week, Sen. Rounds and I introduced legislation to make that program permanent and adjust some of its loan requirements to make it more accessible to smaller CDFIs who might want to participate. I’m looking forward to hearing from our witnesses about how our legislation will make a difference for community development.

In 2020, Congress set aside $25 billion of PPP lending for CDFIs to distribute because CDFIs had relationships in many communities that banks and credit unions weren’t able to reach. CDFIs made more than 100,000 PPP loans in the first months of that program, and that effort was critical in helping thousands of small businesses stay afloat.

In addition, in the bipartisan, year-end funding package we enacted at the end of 2020, Congress made a historic investment in CDFIs and minority depository institutions, providing rapid relief grants. As a result of that program, 27 Minnesota CDFIs received grants totally $38 million – funds that will be invested in our state to support new lending and services. Sen. Warner played an important role in getting this investment enacted, and I know many of us supported his work on it. I’m looking forward to hearing from our witnesses about how that funding is making a difference in their communities.

Before I turn to Sen. Rounds, I’d like to thank him for being such a good partner in planning this hearing. I know we have a shared interest in building strong communities, and especially in supporting economic development and access to capital for the Indigenous communities in our states that are often uniquely challenged.

As I mentioned before, yesterday, we joined together to introduce legislation to update the CDFI Bond Guarantee program to make it more reliable and to help smaller CDFIs access this long-term, stable source of funding that operates without a taxpayer subsidy.

And we also have legislation together to support access to mortgages for Native Americans in a partnership between CDFIs and the U.S. Department of Agriculture. 

I’m hopeful that today’s hearing will help us identify additional areas where we can work together and pave a path to advancing these important bills to bring much-needed capital to parts of our country that need it.