History of the Community Development Movement in North and South Carolina
North Carolina
CDCs in North Carolina date back to the late 1960s, but most of the state’s CDCs were created in the late 1980s. In 1963, Governor Terry Sanford introduced a plan to reduce poverty in North Carolina through improvements in education and economic opportunity. “When Sanford took office in 1961, North Carolina’s factory workers earned some of the lowest industrial wages in the nation; 37 percent of the state’s residents had incomes below the federal poverty line; half of all students dropped out of school before obtaining a high school diploma; and of adults twenty-five years of age and older, a fourth had less than a sixth-grade education and were, for all practical purposes, illiterate.”5 Governor Sanford’s legacy is his goal of self-sufficiency and sustainability, and the creation of entities to address community issues at the local level, outside government. The North Carolina Fund became the first statewide antipoverty organization in the country and was supported financially by philanthropy. In 1963, the Ford Foundation provided a $7 million grant, the Z. Smith Reynolds Foundation provided a $1,625,000 grant, and the Mary Reynolds Babcock Foundation granted $875,000.6 The North Carolina Fund served as the pilot project for President Lyndon Johnson’s “war on poverty.”7 Around 1967, it was decided that funds should be extended to organizations led by African-Americans through the Foundation for Community Development (FCD). In 1973, FCD provided funds for infrastructure, housing, economic development and the accumulation of wealth in the African-American community for the Wilson Community Improvement Association and United Durham Incorporated (UDI).8
As a result of the 1966 amendments to EOA, additional community development programs emerged in the urban poverty areas of Charlotte, Durham, Greensboro and Salisbury through the creation of the North Carolina Low Income Housing Development Corporation (NCLIHDC).
In the early 1980s, Legal Services of North Carolina dedicated one fourth of its Resource Center budget to community economic development advocacy and training. The mission was to revitalize and help build the capacity of local organizations to engage in community economic development. And, in 1985, the North Carolina Legal Services Resource Center filed the state's first challenge under The Community Reinvestment Act (CRA) of 1977 for noncompliance. By 1986, CRA agreements were signed with several banks, and the lending institutions funded and implemented community needs assessments in response to the CRA. New capital derived from the agreements led to more formal community development corporation efforts in North Carolina.
Z. Smith Reynolds and Mary Reynolds Babcock Foundations funded a capacity-building project for the CDCs, and during its short session in 1988, the North Carolina General Assembly appropriated money for Minority Economic Development Project Grants and for the North Carolina Institute of Minority Economic Development. One-third of the appropriated $1.5 million was to go to CDCs to demonstrate how the CDCs, organized under Chapter 55A of the General Statutes, could improve the lives of residents of underdeveloped minority communities through business, commercial revitalization and housing development activities.9
During the 1988–2012 period of public funding from the state of North Carolina, the CDCs acquired housing, commercial, residential and main street assets for small business development, rental housing, single family home sales and commercial development. It was no coincidence that nearly all of the CDCs engaged in housing-related activities given the North Carolina Fund’s emphasis on housing as a key to wealth creation.
South Carolina
The South Carolina CDCs were assisted in their early stage by the North Carolina CDCs. The Mary Reynolds Babcock Foundation and Branch Bank and Trust (BB&T) were the early funders. As North Carolina CDCs sought and received state appropriations, beginning in 1988, South Carolina attempted to follow suit, even taking legislators from South Carolina to North Carolina to see longer-tenured CDCs.
In 1998, BB&T and the Mary Reynolds Babcock Foundation provided initial funding that was supplemented by the Southern Rural Development Initiative (SRDI). SRDI, located in Raleigh, North Carolina, was founded in 1994 by rural and community-based stakeholders, who developed partnerships with six historically black colleges and helped establish statewide CDC associations in Louisiana, Arkansas and South Carolina. In 2008, SRDI announced a more focused, intentional and streamlined long-term strategy for community asset development. This revised strategy had implications for South Carolina’s CDCs because by this time, SRDI was their sole source of funding. The motivation behind SRDI’s streamlined approach stemmed from their original connection to the National Network of Grantmakers (NNG), which works within philanthropy to increase resources for social and economic justice. NNG intended to restructure and sustain funding in these traditionally under-funded geographies. The restructure period means CDCs needed new sources of funding.
State appropriations to support CDCs did not pass in South Carolina, but in 2000 the state provided $10 million in grants, loans and tax credits to certified CDCs, enacting a Community Economic Development Act for certification of entities as CDCs and community development financial institutions (CDFIs) through the South Carolina Department of Commerce.10 From 2000 until 2004, the State of South Carolina committed $5 million in state tax credits and $5 million in appropriations; the funds were authorized but not released. In 2005, the CDCs received the first million dollars of appropriated funds in the form of grants from the South Carolina Department of Commerce, which contracted with the statewide CDC association and later became known as SCACED, to manage and train CDCs through a certification program.
Currently, funding options for CDCs in South Carolina include the following:
- The South Carolina Association for Community Economic Development’s (SCACED) statewide Individual Development Account (IDA) program funded from the U.S. Department of Health and Human Services and the South Carolina Department of Social Services. The IDA program is a 3:1 matched savings account program that allows individuals to use their savings and match money toward any of three productive assets: a home, a small business or post-secondary education. Participants are required to save their funds, participate in financial literacy education and asset based training before having access to their match funds.
- The Community Impact Fund (CIF) is funded by the Mary Reynolds Babcock Foundation. Its purpose is to make competitive grants available to member organizations for capacity building initiatives, development of affordable housing and/or other economic development projects.
- The Community Economic Development (CED) Fund was created by the General Assembly in 2000 (through the South Carolina Community Economic Development Act) to support certified CDC and CDFI sponsored projects in the state to create small businesses, commercial opportunities and jobs in underserved/rural communities.
- The CD Tax Credit Program was established in the Community Economic Development Act of 2000. Businesses, corporations, insurance companies, financial institutions and individual residents are eligible for a 33 percent credit against state tax liabilities for every dollar invested in or donated to certified CDCs and CDFIs.
- The Microenterprise Program launched in 2014 to ensure that South Carolina’s smallest businesses have the capacity to create jobs, build skills and enhance the self-sufficiency of low-income households through matching grants to community organizations to offer loans.
The South Carolina Department of Commerce requires organizations that are state certified as a community-based development organization to take courses as part of the certification process in order to receive state funds through the Community Economic Development Act appropriations of the South Carolina General Assembly.
The S.C. Community Development Institute is the current capacity building program created by SCACED to offer state-required certification. The Institute is designed to give low-wealth communities the capacity to implement community economic development programs and projects and has fostered the creation of a sustained community development infrastructure in rural and urban areas of the state.
The Institute’s precursor, the Community Economic Development studies program, was funded by the Federal Home Loan Bank of Atlanta in 1998.11 The Institute offered a broad training curriculum on community economic development strategies and nonprofit excellence and includes courses focused on new visions and directions for sustainability. Programs offered by the Community Economic Development studies program focused primarily on housing and commercial real estate development. New training programs at the Institute now feature a broader training curriculum, which includes instruction on governance, financial sustainability (fee for service, social impact bonds (SIBs), impact investment and tax credits), board development, staff development, marketing, volunteer management, real estate and property development and management. This curriculum better addresses the new funding environment that CDCs must navigate for their financial survival. Programs are offered annually for organizations to maintain knowledge and training on new strategies and tools.
The next section is a sample of community development strategies among CDCs in North and South Carolina. Through the Richmond Fed’s work with the organizations in both states, we have endeavored to provide an initial description of the new business practices employed by these organizations whether a start-up or experienced CDC. Future analysis will focus on outputs, outcomes and financial viability of the engagement sustainability practices of CDCs in North and South Carolina.