CDFI Friendly Bloomington a Prototype for Successful Community Development in Small Markets August 16, 2021

Since March, IFF’s real estate team has been engaged in a project in Bloomington, IN, to assess the energy efficiency of nonprofit facilities and to provide the organizations operating in the facilities with a roadmap to make their spaces more environmentally friendly. The fact that the project is taking place in Bloomington represents a significant achievement in unlocking the full potential of CDFIs to support community development throughout the United States.  

CDFIs are proven, versatile partners capable of strengthening communities, but financial realities mean that the mission-driven work of CDFIs isn’t always feasible in every location. Smaller markets, in particular, face a unique challenge assembling enough projects to attract CDFI capital and technical assistance. Communities to which this applies have traditionally found themselves in a chicken-or-egg situation. CDFIs could be an effective vehicle for growth, but until the community reaches a threshold that makes it financially viable for CDFIs to operate in the community, investment is limited.  

In a Nutshell

What: An overview of the CDFI Friendly model piloted in Bloomington, IN, which attracts CDFIs to smaller markets that would not otherwise be viable to operate in, and how the model facilitated nonprofit facility energy assessments conducted by IFF’s Indiana real estate team 
Sector: All 
Location: Bloomington, IN 
IFF Staff Leads: Bryan Conn, Senior Project Manager – Indiana & Donna Sink, Senior Owner’s Representative 
Impact: 10 energy assessments provided to nonprofits, helping them increase economic sustainability while reducing the local carbon footprint 

Five years ago, Bloomington was one of these cities. A college town with approximately 85,000 residents, the city needed outside investment but wasn’t getting it. Though Bloomington’s circumstances mirrored that of many other communities facing similar challenges, its response was unique. Rather than simply writing off CDFIs as a tool for development because of its demographics, Bloomington shifted the paradigm.  

Led by Mayor John Hamilton, whose background includes founding the first certified CDFI in Washington, D.C., a working group was formed to explore how the city could attract much-needed capital from CDFIs. This effort was supported by the Community Foundation of Bloomington and Monroe County and the Bloomington Urban Enterprise Association. One of the group’s first steps was to hire CDFI industry leaders Adina Abramowitz and Mark Pinsky to guide its efforts. With that, the group got to work. 

“We explored different options to bring capital to the region, including starting a new CDFI based in Bloomington or franchising an existing CDFI and opening an office here,” says Brian Payne, then the Assistant Director of the Economic & Sustainable Development Department for the city. “But after meeting with stakeholders and having extensive discussions with folks in town, it became clear that this market wasn’t well suited for a single CDFI to serve the community. We have a broad microcosm of needs like a larger city, but we don’t have the portfolio to support just one direct lender. We also recognized that recruiting a single CDFI to open an office in Bloomington would likely result in a limited scope for lending because of the specialization inherent to many CDFIs.” 

Instead, the group developed a strategy that hinged on organizing the city’s resources to proactively encourage and incentivize CDFIs to finance opportunities and provide technical assistance in Bloomington. The strategy was formalized in 2018 with the establishment of CDFI Friendly Bloomington, a nonprofit organization led by Executive Director Brian Payne dedicated to identifying and developing opportunities for CDFI investments, marketing those opportunities to CDFIs, providing enhancement financing through its own fund to incentivize CDFI capital deployment, and working with potential borrowers and CDFIs to provide technical assistance and coordination. 

“The basis of our existence is as a helper and active partner to the CDFI industry,” Payne explains. “If a CDFI is interested in the region but doesn’t have the local infrastructure in place to feel comfortable underwriting loans or offering technical assistance, we provide the on-the-ground touch. We’re making introductions, connecting people and, when necessary, deploying our own capital in partnership with CDFIs when there are gaps to ensure that projects get funded.”  

Bloomington’s creation and implementation of the “CDFI Friendly” model was a novel approach, and it immediately paid dividends. In its first year, CDFI Friendly Bloomington tripled what CDFIs had invested locally in the previous 15 years, bringing in more than $15 million in capital. The success of the initiative has continued since then, with six CDFIs – including IFF – now actively working in partnership with CDFI Friendly Bloomington to support a 13-county area in Indiana.  

The CDFI Friendly Model in Action

Saving Energy, Saving Money

Energy efficient facilities can make a meaningful difference in nonprofits’ bottom lines. Let’s break that down using a hypothetical example:  

A nonprofit with a 208,000-square-foot facility would need to spend approximately $81,000 to install a photovoltaic system with solar panels capable of producing the energy needed to power the building. The system would result in an average return on investment of 6 to 10 percent once installed ($4,860 to $8,100), achieved through the energy production of the solar panel system and net metering. Cost savings derived from this could be used to service any debt taken on to pay for the upgrade. 

The organization could also pay for the system with agency cash or by fundraising, and the ROI increases if any subsidies are available (as they are in Bloomington through the SEEL Program). Taking inflation into account and assuming no subsidies, it would take the nonprofit 12-14 years to recoup its investment if it financed the project. After that, cost savings derived from the system could be used for operational needs, freeing up money that wouldn’t have existed otherwise.  

As CDFI Friendly Bloomington established itself, its focus expanded to develop programs that target specific needs in the community. The Solar & Energy Efficiency Loan (SEEL) Program that IFF’s Indiana-based real estate team is currently supporting is one example of this. 

The SEEL Program reduces both local carbon emissions and local nonprofits’ costs. CDFI Friendly Bloomington developed the program in partnership with IFF and the City of Bloomington’s Department of Economic & Sustainable Development. By providing local nonprofits and other community institutions (e.g., schools, libraries, grocery stores) with third-party energy audits, the SEEL Program identifies opportunities for building modifications like weatherization, solar panels, and appliance and lighting upgrades; these changes reduce utility costs and save energy.   

Audits are conducted by IFF Senior Project Manager Bryan Conn and Senior Owner’s Representative Donna Sink, who visit the facilities to inspect HVAC systems, lighting, water heaters, air/duct sealing, insulation, windows, and appliances. After the site visit, Conn and Sink analyze 12 to 24 months of the nonprofit’s utility bills to better understand energy usage and prepare a report that identifies site-specific measures that can be taken to reduce energy costs, with projected cost savings by order of magnitude. Recommendations are then shared with the nonprofit and the City of Bloomington.  

IFF Senior Project Manager Bryan Conn during a SEEL Program facility walkthrough in Bloomington, IN

The energy assessments are provided free of charge to SEEL Program participants, with costs covered by the city, and upgrades recommended by IFF are incentivized through city grants of $2,500-$10,000 that help offset costs associated with facility modifications. The grants are also designed to provide participating nonprofits with a source of equity that can be used to secure a flexible loan from IFF to cover remaining project costs. By bringing together multiple teams at IFF to support the program, and coupling that support with funding from the city, small nonprofits that would otherwise struggle to address facility needs have the opportunity to become more economically sustainable organizations.  

“Bloomington is unique in that we have a really high nonprofit per capita ratio, but many of them are small organizations that aren’t able to easily afford things like energy assessments,” Payne says. “We want to help them upgrade their facilities because they can reap the economic benefits of a more energy efficient facility in the same way an individual homeowner can. And by saving that money, it’s easier for them to focus on their missions. The fact that it reduces the carbon footprint locally at the same time makes it a real win-win. This program is a great proof of concept for meeting a need that wasn’t being met previously.”  


Creating Nationwide Opportunity

Bloomington, IN, is the nation’s first CDFI Friendly city, and the model it created has already been replicated in nearby South Bend, IN. What’s more, Bloomington’s success led to the formation in 2020 of CDFI Friendly America, which seeks to replicate the model nationally. Founded by Adina Abramowitz and Mark Pinsky, who supported Bloomington as it became the country’s first CDFI Friendly city, CDFI Friendly America is now working to bring more of the $222 billion in capital managed by the country’s CDFIs to communities like Bloomington that would benefit from flexible, affordable financing and extensive technical expertise concentrated in the CDFI industry.
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