Austin CDC

1
TexasCommunity Development Landscape Can We Do
More with Less?
Wall Street Without Walls An Orientation to the
Capital Markets May 19, 2005
2
Framework

• Current Environment
• Impact on CDCs
• Impact on CDFIs
• Vision

Texas Community Development Landscape Can We Do
More with Less?
3
Current Environment

• Funding moving away from community development
• Decreased federal support
• Proposed cuts to CDBG, CDFI Fund, and EDA
• Decreased bank support
• Relaxed compliance with CRA
• Industry consolidation leaves fewer funders
• Funder fatigue
• Effectiveness of CDCs CDFIs in question
• Remaining funders Grow the Good

Texas Community Development Landscape Can We Do
More with Less?
4
Current Environment

• Texas CDC/CDFI Field a few big fish lots of
  little ones
• 11 CDCs produced 76 of affordable rental units
• 33 CDCs produced the remaining 24
• 7 CDCs produced 63 of owner-occupied units
• 54 CDCs produced the remaining 37
• Less than 10 CDFIs in Texas with net assets in
  excess of 1MM
• Still only scratching the surface in terms of
  need and demand for products and services

Texas Community Development Landscape Can We Do
More with Less?
5
Current Environment
What does the future hold for community
development in Texas?
Texas Community Development Landscape Can We Do
More with Less?
6
Impact on CDCs

• Funding scarcity will force structural change
• The neighborhood-based, vertically integrated CDC
  model is broken
• Many traditional CDCs will struggle unless they
  adapt to the new environment
• Funders focus is shifting to organizations that
  are
• Getting to Scale
• Innovating or addressing an unmet niche market
• New CDCs will have difficulty obtaining funding

Texas Community Development Landscape Can We Do
More with Less?
7
Impact on CDCs

• To survive, CDCs must adjust
• Self-sufficiency ratio must increase
• Need to increase fee-generated income
• Need to decrease marginal costs
• Reevaluate fundraising strategies
• Many CDCs do not have fundraising plans
  beyond the short term
• Examine new lines of business commercial
  development?
• To scale or not to scale that is the question?

Texas Community Development Landscape Can We Do
More with Less?
8
Impact on CDFIs

• Funding scarcity will force structural change
• Microloans, as stand-alone products, no longer
  represent a financially viable business model
• Transactions costs too high
• Microlenders are beginning to move up market
• Funders focus is shifting to organizations that
  are
• Getting to Scale
• Innovating or addressing an unmet niche market
• New CDFIs will have difficulty obtaining funding

Texas Community Development Landscape Can We Do
More with Less?
9
Impact on CDFIs

• To survive, CDFIs must adjust
• Self-sufficiency ratio must increase
• Need to increase fee-generated income
• Need to decrease marginal costs
• Access other sources of equity and loan capital
• Capital markets, NMTC, high net worth investors
• Social entrepreneurship opportunities
• To scale or not to scale that is the question?

Texas Community Development Landscape Can We Do
More with Less?
10
Vision

• As CDCs CDFIs we must ask ourselves
• Are we meeting the community development needs
  of Texas underserved communities?
• Do we operate in environment of scarce resources?
• Are we deploying our limited resources in such a
  way that optimizes our community impact?
• Where in the transaction process do we add the
  most value to our clients?
• Are we willing to give up some control in
  exchange for greater impact?

Texas Community Development Landscape Can We Do
More with Less?
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Vision

• A Texas model for community development
  Components
• Pooling resources
• Outsourcing non-core functions
• Scaling up industry, as well as individual
  CDCs/CDFIs
• Stronger public-private partnerships
• Greater emphasis on measuring community impact
  performance metrics

Texas Community Development Landscape Can We Do
More with Less?
12
Vision

• A Texas model for community development
• Larger, more productive CDCs CDFIs
• Networked boutique CDCs CDFIs servicing
  underserved markets
• Proper balance between achieving benefits of
  economies of scale and maintaining high touch
• Strong collaborative framework

Texas Community Development Landscape Can We Do
More with Less?
13
Conclusion
Questions Answers?
Texas Community Development Landscape Can We Do
More with Less?