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Minority Banks Shut Out of Federal Tax-Credit Program

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Industrial Bank's Georgia Avenue branch in Northwest D.C. (Courtesy photo)

Industrial Bank’s Georgia Avenue branch in Northwest D.C. (Courtesy photo)

Special to the NNPA from The Washington Informer

Minority-owned banks are crying foul about the federal government snubbing them for tax credits they say could generate economic development in the nation’s most needy communities.

The Community Development Financial Institutions (CDFI) Fund, an arm of the Treasury Department, issued in June $3.5 billion in New Markets Tax Credit (NMTC) allocation to 76 entities across the country to spur economic development.

However, none were awarded to the nation’s minority banks, despite those institutions claiming the longest track records of deploying capital in the nation’s most underserved areas.

“The NMTC program has great potential to be part of a comprehensive economic solution in America’s inner cities, most of which still have not recovered from the Great Recession,” said Preston Pinkett, CEO of City National Bank and chairman of the bankers association. “But the groups best equipped to make those investments, minority banks — many of which have been in service for over 100 years — have largely been shut out of the NMTC program. We need our CDFI Fund to do more; we need a real change that will allow us to receive allocations so we can use these resources to improve our communities.”

The federal tax-credit program provides a tax credit to investors who invest in projects or small businesses in those communities by funneling their investments through the recipients of tax credit allocation.

According to the CDFI Fund’s Award Book, only six awards — less than 8 percent — went to minority-controlled entities of any kind, and those groups received only $165 million, under 5 percent of the total dollar amount of allocation.

“The absence of a single minority bank raises much concern,” said Michael Grant, president of the National Bankers Association. “In 2009, the General Accounting Office issued a report detailing the disparity in NMTC awards to minority entities. The numbers have actually gotten worse, not better.”

A 2009 study by the Government Accountability Office indicated that only about 9 percent of minority entities were successful when applying for NMTCs, while non-minority entities had three times the success rate, winning 27 percent of the time. According to GAO, although the program is highly competitive, minority entities have less than a one in three chance of any other type of entity to receive an award.1 Minority banks have had even lower success rates than minority entities overall.

“By our estimates, less than 2 percent of the $450 billion in NMTCs issued over the past 12 years has gone to minority banks,” said Doyle Mitchell, CEO of Industrial Bank of Washington, D.C. and former chairman of the bankers association. “Some of our banks have been deploying capital in the poorest neighborhoods in America for over 100 years, and we think the CDFI Fund should review the program to ensure that applications by minority and other small CDFI banks are evaluated on criteria that reflects their position as regulated institutions operating in distressed areas, which is significantly different from non-regulated or larger institution applicants.”

Alden McDonald, CEO of Liberty Bank in New Orleans, said the imbalance would be even more pronounced had it not been for funds his bank received after Hurricane Katrina.

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California Warns Businesses, Landlords Using Felonies and COVID-19 to Discriminate

So far, the state has sent more than 500 notices to businesses informing them that they have violated protections put in place to protect people seeking work.  

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stock image of discrimination written in chalk on a chalkboard

The California state government has been reminding businesses across the state that it is illegal to discriminate against job applicants because of they have committed felonies or misdemeanors in the past.

Authorities in Sacramento have also taken steps to make sure businesses do not use COVID-related restrictions to deny entry to customers they do not want based on race or other factors.

So far, the state has sent more than 500 notices to businesses informing them that they have violated protections put in place to protect people seeking work.

“The California Department of Fair Employment and Housing (DFEH) announced a new effort to identify and correct violations of the Fair Chance Act, a pioneering state law that seeks to reduce barriers to employment for individuals with criminal histories,” a statement the DFEH released last week reads.

The Fair Chance act, which took effect on Jan. 1, 2018, was written to increase access to employment for Californians with criminal histories in an effort to reduce recidivism, among other goals. Employers with five or more employees are prohibited from asking a job candidate about conviction history during the hiring process or when advertising a vacancy.

The DFEH says it is implementing new technologies to conduct mass searches of online job applications that include unlawful statements. For example, some businesses explicitly state in hiring advertisements that they would not consider applicants with criminal records.

“Using technology to proactively find violations of the state’s anti-discrimination laws is a powerful strategy for our department to protect Californians’ civil rights,” said DFEH Director Kevin Kish. “DFEH is committed to preventing employment discrimination through innovative enforcement actions and by providing clear guidance to employers.”

DFEH also released a toolkit to aid employers in adhering to the Fair Chance Act guidelines. The toolkit includes sample forms and guides that employers can use to follow required procedures; a suggested statement that employers can add to job advertisements and applications to let applicants know that they will consider individuals with criminal histories; answers to frequently asked questions (FAQs) about the Fair Chance Act and an informational video that explains the Fair Chance Act.

In addition, DFEH plans to release an interactive training and an online app in 2022.

The DFEH also released guidelines for businesses that will be implementing COVID-19 related entry restrictions to protect against discrimination based on race, sex, religious background and nationality.

While businesses have been encouraged to stay vigilant with mask mandates and vaccination verification for entry, the DFEH says it has also found it necessary to preemptively address refusal of entry that could be racially motivated masked as a COVID precaution.

“As Californians navigate the COVID-19 pandemic, the Department of Fair Employment and Housing has provided guidance to protect civil rights and mitigate risk of COVID-19 transmission in employment, housing, healthcare, and, in our guidance released today, businesses open to the public,” said Kish. “We can and must uphold civil rights while simultaneously disrupting the spread of COVID-19.”

DFEH encourages individuals to report job advertisements in violation of the Fair Chance Act or other instances of discrimination.

DFEH is also encouraging the public to report housing ads that include discriminatory language that exclude certain racial groups, immigrants, people with felonies, applicants with Section 8 or HUD vouchers; etc.

Visit the DFEH website to file complaints.

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Oakland Co-op Buys Historic Esther’s Orbit Room Space

The revitalization of Esther’s, and EB PREC’s mission, has a deep personal connection for Session, EB PREC’s executive director and a Black, third generation West Oaklander who has struggled to keep her childhood home.

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Noni Session, of The East Bay Permanent Real Estate Collective, stands outside the legendary Esther's Orbit Room on 7th Street in West Oakland, whose doors had been closed for about a decade. Photo by Zack Haber on October 12.

“It’s like life just stopped here,” said Noni Session, as we stood inside a large dusty room on Seventh street in the Lower Bottoms neighborhood of West Oakland on Indigenous People’s Day. The black, sparkly ceiling emitted a celestial vibe. Rows of liquor bottles sat partially full behind a 20-foot wooden bar while vinyl ’70s style stools rested in front. Gentle yellow light was omnipresent. A calendar opened to May 2010 hung in front of a mirror.

Words on a colorful but faded sign out front showed this place was once “Esther’s Orbit Room,” a vibrant cultural hub for Black Oaklanders that stayed open for about 50 years before it shuttered its doors shortly after its owner, Esther Mabry, died at age 90 in 2010. On September 30, the East Bay Permanent Real Estate Cooperative (EB PREC) closed on purchasing this space. They plan to revitalize it as an extension of their overall mission to help Black, Indigenous and people of color remain and thrive in the East Bay.

The revitalization of Esther’s, and EB PREC’s mission, has a deep personal connection for Session, EB PREC’s executive director and a Black, third generation West Oaklander who has struggled to keep her childhood home. In the ’80s she and her father stopped at Esther’s regularly before they would go fishing at a nearby pier. At that time, it wasn’t just a bar and restaurant but also a shop where her father could buy bait and she could get a treat.

Memories of Esther’s Orbit Room are still alive in the neighborhood. As Session and I talked, we were fortuitously interrupted two separate times by Black, long-term residents who just happened to be passing by and noticed the open door. They both briefly shared fond recollections of the place, and excitedly asked about the reopening. One of these people was 60 year old Pamela Brown.

“[Esther’s] was a happy place,” Brown said. “There were not that many places Blacks could go and be comfortable, but that was one of those places.”

Brown remembers Esther’s always being packed in the ’70s and ’80s and that “the vibe was just awesome and friendly.” She loved the southern comfort food they served: greens, pork chops, black eyed peas and hamburgers. Brown’s uncle, Nathaniel Harrison, remembers it being a great place to socialize around that time and that people were always dancing to the jukebox. Although Brown and Harrison were too young to experience it, legendary musicians like BB King, T-Bone Walker and Ike & Tina Turner performed at Esther’s in the 60s.

As I asked Session about what EB PREC’s revitalization project could look like, she told me about dreams she’s been having lately that place her inside Esther’s and wake her in the night to visions of “old school, Black church mixed with afro-futuristic aesthetics.” While several specific design ideas interest her, like installing colorful stained glass window art and putting a mural up of Maasai people walking across planets, she is excited that there is still a lot of uncertainty about the space. That uncertainty exists because its re-creation will be a massive collaboration involving many people who aren’t even in the EB PREC collective yet.

How EB PREC Works

Session is just one cog in a wheel that keeps EB PREC spinning. Well over 400 people currently form the collective in a complex process of communal ownership. While Esther’s will be EB PREC’s first commercial business, it’s not their first project. In 2019, and 2020, they purchased two East Bay homes that currently house 13 resident collective members, almost all of whom are BIPOC.

These residents all pay less than $900 per month toward costs required to secure and maintain the homes. At the end of the year, residents can get paid back any surplus if their payments exceed these costs. It’s all part of EB PREC’s process of replacing landlords with communal ownership and permanently taking housing and land off the speculative market in order to keep it affordable.

“There’s no supply and demand issue when it comes to housing; the demand comes from the demand for investment assets,” said Ojan Mobedshahi, EB PREC’s Finance Director. “Our move is to de-commodify land and we never consider putting it back on the market to profit from it.”

One way EB PREC has raised the capital to make these affordable homes accessible and the Esther project possible is by also including community owners in the collective who live in the area and each pay $10 a week, a year, or a month, depending on what they can afford. The community owners offer feedback and guidance on EB PREC’s projects and also have a direct role in electing some of EB PREC’s board members.

Individual investors also play a crucial role in EB PREC by buying shares of the collective for $1,000 each. None of them will strike it rich. EB PREC offers these people a targeted 1.5% yearly return on shares, about what one would expect to secure from a savings account and much lower than what one would expect from a typical real estate investment.

The collective’s website stresses that a key boon in becoming a shareholder is the ability to “feel good about your money being invested in community.” But unlike community owners, investors don’t share an active role in decision making. EB PREC also gets loans from foundations that are aligned with their vision and offer low to no interest loans.

The work and/or money of EB PREC’s five-member staff, 13 owner residents, and hundreds of community owners and investors has made it possible to secure two Bay Area homes and start revitalizing Esther’s, a project they see costing around $5 million. To finish the Esther’s project though, EB PREC needs a new classification of people to join them called commercial co-owners. They see the large indoor spaces hosting a bar and café that they hope will have music performances as well as a healing arts center while the backyard will host a farmers’ market. They’re seeking BIPOC people with expertise in those areas to run and take communal ownership of those spaces with EB PREC.

“Even in my dreams many of the walls are just prepped for art instead of having art on them,” Session said, pointing around to the spaces in Esther’s. “It’s not like how can we cover all the walls with our ideas but how can we prepare a palette that holds our mission and also holds space for other people’s creativity and control?”

Session sees the symbol of the palette in her dreams as the space that commercial co-owners and the community can help to fill. She has many questions like: What kind of cafe will be in the place? What kind of plants can the backspace have? What kind of music will be played in the space? What kind of healing arts practitioners will come? What kind of food will be served?

“We know we can’t be totally clear on what this space will be until it has its humans,” Session said. “Right now, we’re sort of its steward humans.”

As EB PREC searches for BIPOC commercial co-owners, they’re again seeking more resident collective members as the Esther’s property also has residential units that can house at least six people. They hope to build a community of BIPOC business owners and residents to bring vibrant life to Esther’s once again.

Building from Seventh street’s vibrant Black past 

To look back at how the original Esther’s Orbit Room was founded in the early ’60s could likely read as a fairy tale to the modern reader as the economic conditions, particularly for Black people, were radically different at that time. Esther Mabry, a Black woman who came to West Oakland from Palestine, Texas at age 22, in 1942, worked as a waitress at Slim Jenkins Supper Club, a legendary Seventh Street jazz and blues club, and was able to save enough from tips to start her own restaurant in 1950.

She named it Esther’s Breakfast Room. By the early ’60s, just around the time Slim Jenkins Supper Club and other similar establishments were closing, Esther and her husband William, a worker at the now closed Alameda Naval Air Station, had enough capital to buy a new space and open Esther’s Orbit Room.

Esther’s and William’s ability to open their business was likely aided by World War II and its subsequent postwar economic boom of the ’40s and ’50s that brought decent paying jobs, disposable income and homeownership to much of West Oakland’s Black population. Seventh Street was lively at that time and full of Black-owned businesses, including dozens of Black-owned jazz and blues clubs.

“It was the place to be,” Mabry said in an interview from 2002. “They used to have music playing and the hot tamale man. They would have shows and dances and theaters. You could just go from one club right to another. But no one’s there anymore.”

Writer Jennifer Soliman briefly and poignantly shows much of the complex reasons for the demise of these economic and social conditions in her historical essay “The Rise and Fall of Seventh Street.” They included federal urban renewal projects and the creation of BART, both of which lead to the destruction of Black-owned homes and the displacement of much of the Black population. In the same 2002 interview, Mabry lamented that there were no longer Black business owners in that location and said, “I’m the only one that’s left.”

These days, starting a successful business on Seventh Street based solely on the capital two people earn who don’t have deep generational wealth may seem like a pipe dream. But in one instance, a cooperative model has worked. The BlPOC worker owned Mandala Grocery Cooperative, which sits across from West Oakland’s BART station, employs seven people and has been open over a decade.

Session hopes EB PREC’s new collective project will help bring some of the vibrant Black life Seventh street once had back to the area by creating an economic and artistic anchor point around Esther’s. For that to happen, Session said she realized more than just housing was needed for BIPOC people, but an economy that they co-create. She hopes the Esther’s project can contribute to that and serve as a model for others.

In the meantime, Pamela Brown eagerly awaits what’s to come from the rebirth of a place that brought her so much joy decades ago.

“This is such a good idea,” Brown said. “It’s a great place to be revitalized.”

The Oakland Post’s coverage of local news in Alameda County is supported by the Ethnic Media Sustainability Initiative, a program created by California Black Media and Ethnic Media Services to support community newspapers across California.

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Coming Soon to California: A ‘Zero-Fee’ Public Banking Option

Proponents of public banking in California say Wall Street banks have failed low-income communities, particularly people of color. They also say the public banks will provide easier access to capital that will be critical to helping small businesses and neighborhoods rebound after the pandemic.

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A woman sits at her dining room table with laptop and financial reports doing her monthly budget. She is smiling at the ease of use as she works on her smart phone banking app to do monthly finances, pay taxes and save money for the future.

On October 4, Gov. Gavin Newsom signed legislation paving the way for a new public banking system in California.

AB 1177, known as the ‘California Public Banking Option Act,’ creates a zero-penalty, zero-fee, and zero-minimum-balance platform for basic financial services.

These services include direct deposit from employers and public benefits, automatic bill pay to registered payees, recurring payments and donations to account holders’ organizations or charities of choice, and an infrastructure to support account holders in building credit.

“AB 1177 will help Californians stay protected from overdraft fees and penalties and give them an opportunity to save money and build wealth while fighting the racial wealth gap,” said Assemblymember Miguel Santiago (D-Los Angeles), lead author of the bill.

“California is leading the nation’s public banking movement and we must keep working to provide no-fee banking services to all Californians,” he added.

Santiago wrote the bill with the intention to help close the financial services gap that leaves 1 in 4 Californians unbanked or underbanked. Modeled after the state’s public retirement program CalSavers, the bill forms a commission of representatives from the Treasurer’s office, the Department of Financial Protection and Innovation, financial access experts and community members to oversee market analysis on how the program should be implemented.

Proponents of public banking in California say Wall Street banks have failed low-income communities, particularly people of color. They also say the public banks will provide easier access to capital that will be critical to helping small businesses and neighborhoods rebound after the pandemic.

“Financial exclusion and scarcity have been a tool for oppression, discrimination and systemic inequity for too long. Public banking options such as BankCal, along with new technology that allows for free exchange over the internet, are urgently needed to decentralize power, privilege and financial control,” said Briana Marbury, executive director of the Interledger Foundation, a non-profit that advocates for standards and technologies that support an open and integrated global financial system.

Opponents of the bill believe that government-owned banks open the door for corruption and that the cost of any mismanagement of funds will come out of taxpayers’ pockets.

A 2015 article published by the Cato Institute critiques past public banking projects, highlighting shortcomings and failures.

Mark A. Calabria, who was chief economist to former Vice President Mike Pence and former director of the Federal Housing and Finance Agency authored the article.

He cites devastating losses Germany’s public banks suffered during the sub-prime mortgage crisis of 2008.

Calabria also points to public banking failures closer to home.

“The recent history of Fannie Mae and Freddie Mac, quasi‐ public banks at the federal level, illustrates that mismanagement and corruption are alive and well at the intersection of the public and private,” he wrote.

However, Trinity Tran, co-founder of the California Public Banking Alliance, argues instead that AB1177 does not create a new bank but “creates a statewide retail banking option through which every California worker can access zero-cost services.”

While California is known for its groundbreaking legislation, it will not be the first state with a banking system like this. North Dakota’s public banking system was founded back in 1919.

Marbury believes that the bill is only the first step toward a broader initiative that would revolutionize accessibility to financial growth and equality.

“This is an exciting development, but not far-reaching enough. Public banking initiatives should be introduced in other states across the U.S. to ensure equal access to financial services for the most vulnerable sectors of our population while elevating the economic health of society as a whole,” she said.

In addition, global financial inclusion should encompass both “brick and mortar” bank access for everyone and a more inclusive internet,” she added.

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