Detroit CDFI Coalition Case Study

I. CDFI Partnership Genesis and Structure

The seed of the Detroit CDFI Coalition (the Coalition) was planted in 2014 when Dan Gilbert of Bedrock Detroit worked with the Opportunity Finance Network (OFN) to convene local and national CDFIs operating in the city of Detroit; the purpose of this initial meeting was to critically examine potential property development in Detroit’s city center. This meeting crystalized into strategic action by CDFIs active in Detroit, and, together with OFN, 16 partner organizations created the Detroit CDFI Coalition in 2015. The group’s driving motivation was to coordinate activities and develop a comprehensive inventory of products and technical assistance available to target markets.

Throughout 2015, OFN set up meetings for the Coalition members with the state of Michigan, the city of Detroit, the Michigan Economic Development Corporation, the Michigan State Housing Authority and the Detroit Economic Growth Corporation. The primary focus for all of these meetings was for member CDFIs to learn about state and city priorities in the Detroit market and for CDFIs to advocate for additional resources and project collaboration. Also  in 2015, the Coalition released their CDFI Grid to collectively communicate the financing products and services of CDFIs serving Detroit.¹

At its genesis, the group established a five-member executive committee — which has now expanded to seven members — and in November 2016 it formalized its goals, funding structure, and member roles and responsibilities via a two-year Memorandum of Agreement (MOA). OFN provided technical assistance to the group throughout this time period, both by providing MOA template language and by helping the group explore the possibility of obtaining 501(c)(3) status. The group ultimately determined not to organize as a 501(c)(3) organization at this time and instead designated Local Initiatives Support Corporation (LISC) as the fiduciary agent through their Detroit office (Detroit LISC).

The Coalition is entirely funded by the member CDFIs. Each member pays annual dues on a sliding scale based on their balance sheet. A Detroit LISC staff member, Stephanie Inson, dedicates 25 percent of her time to the Coalition and the group is currently seeking a contractor for an administrative role. Key future responsibilities for this role include updating the Detroit CDFI Coalition website, creating branding materials for the Coalition and organizing programming.

As of 2018, there are 14 CDFI member organizations and three partner organizations (*) in the Detroit CDFI Coalition:

• Capital Impact Partners
• CEED Lending*
• Cinnaire
• Community Reinvestment Fund, USA
• CSH
• Detroit Creative Corridor Center*
• Detroit Development Fund
• Detroit LISC
• Enterprise Community Loan Fund
• First  Independence Bank
• Housing Partnership Network
• IFF
• Invest Detroit
• Michigan Community Capital*
• One Detroit Credit Union
• Opportunity Resource Fund
• Urban Partnership Bank

The group meets every other month, with committee meetings occurring on a monthly basis. The Coalition has three standing committees:

• Executive Committee: As previously noted, this committee governs the Coalition and provides strategic leadership.
• Policy Committee: The Policy Committee focuses on federal, state and local policy issues of concern to the Coalition and identifies key ways that Coalition members can help inform policy decisions.
• Neighborhood Committee: The Neighborhood Committee discusses real estate strategies in specific Detroit neighborhoods and looks for opportunities to align CDFI resources for neighborhood reinvestment.

II. Goals and Achievements

From its inception, the overarching goal of the Detroit CDFI Coalition has been to provide a collaborative space for member CDFIs, many of which had not worked together previously, to build alliances and engage in open conversations about projects, policy initiatives and concerns. The group also aimed to quantify and qualify the ways in which CDFIs are important to Detroit’s development, and to elevate the visibility of CDFIs operating in Detroit. To this end, the group determined and publicized early on that they had collectively invested more than $1 billion in Detroit. A secondary early goal revolved around knowledge-sharing and strategic alignment as the member CDFIs sought to understand how their work fit into the city of Detroit’s redevelopment priorities. Relationship-building was a third early goal of the group, particularly with the acknowledgement that both collaboration and competition are essential to the growth of a healthy and robust community development industry.

In addition to these three early goals, the Coalition defined the following specific goals via their MOA:

1. Strengthen existing relationships and forge new ones between CDFIs active in the city of Detroit in order to increase their effective deployment of capital and other resources in underserved areas.
2. Serve as an information-sharing forum with identified community stakeholders.
3. Determine and implement communications strategies to increase awareness in Detroit of CDFI resources and proactively connect those resources with targeted borrowers.
4. Identify and implement strategies to get individuals, businesses, projects and communities that are not yet financeable to a point where they are ready to borrow.
5. Work effectively with existing resources, such as OFN and the CDFI Coalition, to promote the work being done by Detroit CDFIs.
6. Strengthen ties with local, state and federal agencies to bring more resources to Detroit communities.
7. Address identified market gaps in consumer and commercial financial services.

The Coalition has made steady progress on all of its goals, particularly its collaboration and project goals. Its work has blossomed into several co-lending projects, including work by Detroit LISC, Opportunity Resource Fund and One Detroit Credit Union with the city of Detroit and Bank of America to provide small dollar home repair loans to new homeowners who have occupied their homes for six months or less. Invest Detroit is also currently working with the Kresge Foundation and the city of Detroit on a Strategic Neighborhood Fund that brings resources to targeted neighborhoods. This initiative will be formalized and moved into seven additional neighborhoods over the next five years.² Tahirih Zeigler, executive director of Detroit LISC, also noted that a significant operational goal of the Coalition at this point in time is to determine whether 501(c)(3) status would benefit the Coalition.

III. Financing and Nonlending Activities

As previously noted, there are ample examples of Coalition members working together on individual projects, particularly those that involve NMTC. While Coalition partner CDFIs do not formally pursue projects collectively, collaboration develops organically in ways that make good business sense for the participating CDFIs. In a similar way, the Coalition itself does not maintain features to support financial sustainability — such as a loan loss reserve fund — but these features may be built into individual lending projects.

IV. Impact and Assessment

The Coalition has provided data to the Federal Reserve Bank of Chicago on lending projects, funding gaps and other metrics to better understand the full range of resources the Coalition makes available in Detroit. In terms of policy impact, the Coalition helped to successfully advocate for a local inclusionary housing ordinance and participated in federal advocacy days organized by OFN.

Within the Coalition, each meeting includes time for the member organizations to communicate their work and impact to each other. Furthermore, when member CDFIs submit their annual dues, they also submit individual statistics that are aggregated to assess the full activity and impact of the group. These statistics show that the Coalition’s lender members invested $105 million in Detroit in 2017 and have invested a grand total of $1.2 billion in the City on a cumulative basis from each CDFI’s inception.

In terms of communicating their work and impact to external entities, the Coalition engages with the mayor’s office to keep the mayor of Detroit informed of their activity. As a concrete example of this impact, the mayor’s office is currently using the Coalition as a focus group to help inform future community development in the city.

V. Challenges, Opportunities and Leading Practices

Although an effective partnership, the Coalition faces operational and leadership challenges. In recent years, the executive committee has lost representatives prior to the annual executive committee elections, which has caused a void in the group’s governance. The Coalition is currently in the process of developing operating standards to help handle this type of organizational inconsistency. The Coalition is also developing term limit standards to facilitate leadership transition, as well as exploring the process of becoming a 501(c)(3) organization — as Zeigler noted, the absence of this designation limits the Coalition’s effectiveness.

While the Coalition does not currently have a strategic plan, developing one is a key objective for 2019. The challenge of developing a strategic plan is how to craft the Coalition’s mission so that it truly facilitates collaboration, rather than introducing a competing entity into the market. Similarly, the Coalition does not have a formal leadership succession plan beyond any succession planning by the individual partner CDFIs. This type of critical strategic planning may be a key opportunity for the Coalition to solidify its effectiveness and role in the Detroit community development space.

An additional opportunity for the Coalition revolves around bringing resources to scale in the market, as well as increasing the authentic partnerships within the Coalition. The solid examples of authentic, effective partnerships that exist between Coalition members can serve as good examples for future partner projects, particularly larger-capital development.

The Coalition does have a strong recruitment strategy: As they approach all new CDFIs that enter the Detroit market, a committee member is assigned to continue outreach with the new potential member. In addition, Coalition members are asked to bring business contacts to the table, either as member CDFIs or other partner organizations. This relationship-based growth allows the Coalition to have a wider and deeper reach in Detroit’s community development.

With regard to leading practices, Zeigler noted that OFN was instrumental in shaping the way in which the partner CDFIs approached coalition-forming. Participation in OFN research during the Coalition’s early days allowed the member organizations to think critically about organizational structure, policy work, available state resources, legal status and market solutions. Zeigler also remarked that it was critical to obtain buy-in from both long-term CDFIs and newer CDFIs early in the Coalition development process, in addition to developing clear operating guidelines and a dues structure that promoted inclusivity and diversity. Coalition members emphasize the importance of communication and collaboration to the success of the group. In addition to their collaborative work within Detroit, Coalition members have traveled to Baltimore, Chicago, Cleveland and Toledo, Ohio, Kansas City, Missouri, Minneapolis and Maine to share their experience with other CDFI groups looking to establish similar coalitions.