In January, I kicked off the Integrating Program and Capital series by interviewing Living Cities’ Robin Hacke and Marian Urquilla about the development of The Integration Initiative, and what they learned during its first year. (You can read the piece here.)
My discussion with Robin and Marian provided a lot of helpful background, but it also surfaced a lot of new questions, particularly about work the site teams are doing in their own communities. Namely, what is The Integration Initiative like for a site team charged with doing the work of integrating program and capital work? And how have the folks on the ground been using the Initiative’s framework– building a new civic infrastructure, driving private markets to work on behalf of low-income people, focusing on transforming systems and not delivering programs, and replacing obsolete systems with innovative approaches—to achieve their goals in their communities?
My first step in answering these questions was in late 2011 when I sat down with the Baltimore Integration Partnership’s Kurt Sommer, (project director) and Dana Johnson, (finance lead from The Reinvestment Fund (TRF)) to learn about their experiences integrating program and capital, and connecting community development and workforce development efforts in Baltimore.
Alison: What is the goal of the Baltimore Integration Partnership from a programmatic standpoint, and from a capital standpoint?
Kurt: From a programmatic standpoint, the Baltimore Integration Partnership is about unifying capital investment with human capital. We are connecting people to jobs that are available through our projects on a small level, and at a larger systems level making changes in public policies to foster economic inclusion particularly by connecting capital investment and workforce development.
Dana: The program and the capital are part of the same goal. In addition to providing connections to the local workforce, we are also working to make possible community development projects that have other outcomes like affordable housing, charter schools, fresh foods and other retail, and other community amenities.
Alison: What’s your process for selecting projects?
Kurt: In our early discussions, we were trying to find a balance between capital projects and workforce goals. How do you interweave the two through a transaction? The idea evolved that we would do a two stage screening process. One on the capital side to determine if the project that BIP would be financing would meet the criteria of a catalytic project—do they provide services, amenities, jobs, opportunities to build equity through affordable housing or address blight?
The second stage is about marrying the workforce goals into the project. We developed policies with key members of our group–the workforce chairs, capital committee and staff–to identify goals and processes as to how to make this happen. We learned about our partners’ policies, and adapted the East Baltimore Development, Inc.’s (EBDI) inclusion goals for our lending process. The BIP governance body has adopted a minority business contracting requirement of 27%, and a local workforce goal of 15% for commercial projects and 20% for residential projects. During the underwriting stage, we work with the developer to define their goals and commit to track their activities.
Dana: We’re getting lots of recognition as the first to close our loans [with Living Cities Catalyst Fund and the senior lenders], and the first to deploy capital. It’s a tribute to the time and energy we spent in the first few months putting all these policies in place. But, while we were slogging it out in all those meetings figuring out the program details, my TRF colleagues were closing on the funding. My colleagues, in anticipation of The Integration Initiative award, had been out in Baltimore marketing and identifying potential borrowers before I was even hired. That first deal was actually closed by a colleague of mine in Philadelphia.
Alison: How did you build the relationship across program and capital?
Kurt: Dana and I are partners in crime. Betsy Nelson [President of the Association of Baltimore Area Grantmakers] emphasized this structure by co-locating us and it is at the heart of connecting various elements of our initiative. It has developed into a very strong partnership.
Dana: Kurt and I have worked to understand each other’s worlds and pressures. But, there was definitely a moment I was on the train swapping emails with some of our partners and it dawned on me that they had no idea what language I was speaking. And to be honest, I have to admit the same. I had no experience with the workforce vernacular and the system, and who all the players are and what they do.
I think there was a real disconnect with the workforce players understanding how real estate development works, how long it takes, all the uncertainties that come into that, and what role the BIP capital is playing and not playing in those projects. We put together a community development finance 101 session and opened it up for anyone BIP-related to attend. Don Hinkle-Brown (President & CEO of TRF) and I led it together. I think getting on the same page took longer than we expected, in part, because there was education that had to happen for all of us.
Alison: How has your education on the workforce side come along?
Dana: I think that has been a little less structured, but in being part of these meetings, I have come to learn who the players are and what they do and what the frustrations are. And now that we’re working through projects with borrowers-not just in theory-the education continues. It’s lovely to have a concept and theory about how these systems can work, but it needs to match the realities of the communities and projects we’re working with. So the question is how to adapt without throwing the whole idea of creating a better system out the window?
Alison: What are the pros of marrying community development and workforce development with community development finance?
Kurt: The pro is certainly connecting the elements of public programs that are serving the same residents. It doesn’t make sense that you have these two systems that have similar goals-particularly in the community development field. The BIP approach deals with the built structure and the people, and you have to do both.
Dana: Having a more holistic approach means more than trying to move around money and getting it out the door. In all of our work, TRF is a mission-driven institution; we don’t put our money into projects that don’t already provide community value. At the same time, on the local level, it makes sense to tap into these workforce and other community resources to get as much benefit out of the social mission of these projects. The BIP pushes us to figure out the limits of such connections.
Alison: What advice would you give to others trying to do the work of integrating program and capital?
Dana: Be prepared to spend time walking in the shoes of your partner. The program side needs to learn the capital side, and the capital side needs to learn the program side. You need to be sure you have the time and patience to do that.
Alison: What has been your greatest surprise in bridging the worlds of community development, workforce development and community development finance?
Kurt: I’ve been surprised by how much the developers we’re working with embrace the goals of the BIP and want to make it work. It’s great to see that there are actors out there who want to make this happen.
Dana: I’ve learned already how difficult connecting these systems can be. I didn’t know the workforce world at all, and I have been surprised by how disjointed it is. We’d have meetings about very big projects going on around town, and someone would ask how to do local hiring and tap into the local community. I was struck that that it was something so hard to answer. I think a goal of the BIP initiative is to make that question easier to answer. But, there’s a long way to go to get from A to B.
_In the coming months, the staff at Living Cities will continue to share what we and The Integration Initiative site teams are learning about the integration of program and capital, the capital absorption ecosystem, importing CDFIs and building different types of financial structures, and their connections to community and workforce development. We’re excited to share these insights as this work develops, with the caveat that our thinking continues to evolve and these ideas represent our thinking at a specific point in time in complex multi-year work. _