General Industry Letters
Mortgage Banking Letters
Bank Partnerships with Childcare/Community Development Intermediaries
February 19, 2002
To the CRA Officer of the Institution Addressed:
Re: Bank partnerships with childcare/community development intermediaries
As you may recall, Superintendent of Banks Elizabeth McCaul issued a letter in September 1998 urging banks to take the lead in forming partnerships with childcare providers serving low- and moderate-income populations and communities. In connection with this initiative known as "Adopt-a-Center," banks receive "enhanced" CRA consideration in return for developing long-term, multifaceted relationships with childcare agencies. By effectively blending a variety of financial, technical and human resources to build a centers capacity to deliver services, this approach can create an impact greater than the sum of its parts, particularly when a banks investment is designed to leverage additional funding from other sources.
Institutions may also receive enhanced CRA consideration when they provide long-term, multifaceted support to childcare/community development "intermediaries" that provide financing and technical assistance to help build the long-term capacity of childcare agencies. This letter focuses on the critical work of intermediaries, particularly with respect to childcare facilities development and expansion, and outlines some of the ways that your institution may be able to support these efforts. Attached for your reference is a list of intermediaries and other important contacts for those institutions seeking to build childcare partnerships.
There is a significant need for expansion of childcare facilities in New York State, but a great many barriers as well, particularly in high-cost areas where space is limited and very expensive and construction cost are high. Most childcare agencies are characterized by thin profit margins and highly fragmented and sometimes unpredictable sources of funding, limiting their capacity to carry debt. Most projects, especially those attempting to reach the very low-income, require public subsidies for both capital and operating needs. Moreover, childcare operators typically lack experience in real estate development or even the business skills necessary to secure the financing they need to build, maintain, and expand a facility. Finally, the economic inefficiency of making relatively small loans to borrowers that require a great deal of "hand-holding" makes childcare lending a significant challenge.
Many of these issues can be addressed through collaborative ventures that draw upon the resources of many sectors, including lending institutions and intermediaries. This permits the pooling of funds from a range of sources to allow low-cost financing as well as technical assistance to be provided. There are several ways that banks support these efforts, including providing grants and/or loans to the intermediaries which can then be re-lent, or by providing technical assistance grants. Long-term loans that are priced below market are most responsive to these needs. The New Markets Tax Credit program, a new federal program provided under the auspices of the Community Development Financial Institutions Fund, may also provide an attractive mechanism by providing certain tax benefits to investors, while enabling specially-designated intermediaries to lend and invest more, to attract additional outside capital, and to bring even more private-sector engagement into this area.
In our travels around the state, we continue to learn more of the challenges involved in financing childcare expansion. The Banking Department will continue to serve as a catalyst to help public and private entities collaborate on developing new approaches for financing facilities serving low- and moderate-income communities, making capital financing more predictable and efficient and strengthening child care as a business by promoting technical support and financial management training for providers. If you have any questions or comments about the enclosed contact list and would like to tell us about a new program or partnership, please contact Gail Bernstein-Gold, Director, Community Affairs Unit, at (212) 618-6477. We will periodically update our contact list and would like to have the most updated information available (please visit our website, at banking.state.ny.us. for updates).
Edward B. Kramer
Deputy Superintendent of Banks
Consumer Services Division
ORGANIZATIONAL PROFILES AND CONTACT INFORMATION FOR CHILDCARE PARTNERS
The Child Care Expansion Consortium ("CHEX")
To help child care providers and lending institutions overcome barriers to financing facilities expansion, the Nonprofit Finance Fund (NFF)(see below) is leading a group of banks and Community Development Financial Institutions (CDFIs) in creating a program called the Child Care Expansion Consortium (CHEX). CHEX provides credit enhancement to individual childcare providers in New York State seeking to borrow. The CHEX pool of funds provides loan guarantees to spur investment by banks and other lenders in the expansion of these vital services and create more "slots" for children in day care.
Collectively the CHEX partners have made loans totaling approximately $11.27 million to over 30 child care providers, faith-based organizations, and community groups to support childcare initiatives, in and around New York City within the past five years. In the first year of operation, the CHEX credit enhancement pool has facilitated the closing of three childcare loans, totaling $1.075 million. The following is a brief description of the principal CHEX partners.
Child Care, Inc. (CCI)
CCI is a Child Care Resource and Referral Agency that has worked to expand childcare opportunities for families in New York City for more than a decade. Since 1989, CCI has been working to develop a facilities development strategy that maximizes the use of public and private funds.
CCI and LISC created the Child Care Facilities Development Program through which four early childhood centers were created. A partnership of CCI, NFF and the Lawyers Alliance for New York then created the Expanding Child Care Opportunities (ECCO) program. ECCO continues to provide training and technical assistance to day care, Head Start and Universal Pre-K programs as well as other organizations interested in developing new childcare capacity. Five agencies have received loans for facilities expansion through ECCO and several others have used the information and technical assistance providers to expand in variety of ways. CCI has also consulted extensively with several agencies to help them development early childhood programs with attention to facilities and program design, including The Womens Housing & Economic Development Corporation, the General Services Administration, the Mid Bronx Senior Citizens Council, Inc. and the Cypress Hills Local Development Corporation.
(See below for information on how to contact a Child Care Resource and Referral Agency near you).
Nancy Kolben, Executive Director
Judy Ennes, Coordinator of Special Projects
275 Seventh Avenue - 14th Floor
New York, New York 10001
Phone: 212 929-7604
Fax: 212 929-5785
The Enterprise Foundation works with partners to provide low-income people with affordable housing, safer streets and access to jobs and childcare. Enterprise connects and improves existing networks of childcare professionals by providing grants, loans, expertise and home-ownership opportunities.
Average loan size is $250 thousand but in some cases exceeds $500 thousand, maturing within five years. Interest rates start at six percent. Collateral for loans are determined on an individual basis, Centers normally need to be owned or operated by an experienced childcare operator. Enterprise has made $2.29 million in loans to faith based and community organizations, including childcare providers in New York State.
Patricia Magnuson, Director of Community Services
80 Fifth Avenue 6th Floor
New York, NY 10011
Phone: 212 262-9575
Fax: 212 262-9635
Rafael Cestero, Director of Upstate New York Office
183 East Main Street
Rochester, New York 14604
Phone: 716 454-2750
Fax: 716 454-3847
Leviticus 25:23 Alternative Fund
Leviticus 25:23 Alternative Fund, Inc is a community development loan fund that provides credit to community based organizations in New York, New Jersey and Connecticut. Loans of up to $150 thousand are available to not-for-profit and proprietary child day care facilities. Fifty per-cent of the day care facility client base must be persons/families of low-income (below 80% of median income by HUD calculations). Leviticus has made $1.8 million in loans to 14 childcare providers in and around New York.
Rates: 5% for self-amortizing loans of 2 to 10 years; 6 % for bridge/construction loans of 6 months to 2 years.
Local Initiatives Support Corporation (LISC)
LISC is the nations largest nonprofit community development organization providing both financial and technical support. With local programs in 38 cities and 66 rural areas, LISC has leveraged $3.8 billion in financial and technical support to help revitalize the nations distressed neighborhoods. In New York, loans are generally below market, starting at 6.5%. Terms are generally up to 7 years with 10- to15-year amortizations and no floor or ceiling on the amount. LISC will take second position to private financing. LISC also has a national child care initiative CICK which has secured a pool of flexible capital that can be used in New York. LISC has made $2.48 million in loans to four childcare providers in New York.
733 Third Avenue 8th Floor
New York, NY 10017
Phone: 212 455-9587
Fax: 212 687-1396
Low Income Housing Fund (LIHF)
LIHF is a national non-profit community development financial intermediary focused on four areas: increasing the supply of affordable and special needs housing; improving and expanding childcare facilities; assisting charter schools; and supporting workforce development groups. LIHF providers predevelopment, acquisition, construction, mini-permanent and permanent loans of up to $1.8 million for terms ranging from several months to 15 years. Depending on the nature of the deal, LIHF can make secured, subordinate and unsecured loans. LIHF administers the San Francisco Child Care Facilities Fund, which has financed more than 3,200 childcare slots in just over thirty months. LIHF has made $2.6 million in loans to three childcare providers in New York.
Christopher Browne, Loan Officer
Mathew Kelly, Director NY Office
Suzanne Reisman, Program Officer
120 Wall Street, 32nd Floor
New York, NY 10005
Nonprofit Finance Fund (NFF)
NFF provides financial and advisory services to nonprofit and community-based organizations, including both center-based and family-based childcare providers. NFF makes loans of up to $760 thousand over 5 to 7 years at a fixed rate of 8.5%, generally without requiring collateral or security. As the coordinator of CHEX, NFF will only apply for credit enhancement as the lender of last resort. NFF has made $2.1 million in loans to 10 childcare providers in New York.
Clara Miller, President
Norah McVeigh, Vice-President, Financial Services
Chris Jenkins, Program Director, NY
Denise De Maio
70 West 36th Street 11th Floor
New York, NY 10018
Phone: 212 868-6710
Fax: 212 268-8653
United Neighborhood Houses Childcare Development Fund
Settlement houses are significant providers of affordable, subsidized child care, but like other nonprofit organizations, have had difficulty expanding or starting new centers to meet growing demand because of the complexity of the development process and difficulty in accessing financing. The UNH Child Care Center Development Fund (CCCDF) helps UNH member settlement houses overcome these obstacles by providing the following assistance:
- Technical assistance in determining the feasibility of childcare center projects, in project planning and in accessing construction and long-term financing.
- Small grants and loans for pre-development costs including 0project management, planning, legal and architectural services.
CCCDF has helped ten settlement houses prepare applications to the New York State Dormitory Authority for start-up and expansion construction grants and is working with these settlement houses to access other financing.
Charles Wang Director, Child Care Center Development Fund
70 West 36th Street 14th Floor
New York, New York 10018-8007
Phone: 212 967-1763 Ext. 346
Fax: 212 695-8519
Other Intermediaries, Programs and Useful Contacts:
Capital District Community Loan Fund
The Capital District Community Loan Fund, Inc. (CDCLF), is a locally based non-profit intermediary certified as a Community Development Financial Institution (CDFI) by the federal CDFI Fund. CDCLF promotes sustainable community development throughout the Capital Region by providing accessible, flexible and affordable capital pooled from individuals and public and private organizations. Founded in 1985 by a coalition of potential lenders, borrowers and technical assistance providers, the Community Loan Fund addresses the need for financial services and development credit in economically disadvantaged and undeserved communities.
The Community Loan Fund has invested over $7.5 million and helped to create affordable housing, non-profit community facilities, daycare, healthcare, recreation and economic opportunities for thousands in our region. Serves metro Albany region; includes loans for housing, business and community facilities. Early this year, CDCLF expects to roll out a new program specifically for childcare that will provide technical assistance, small grants and loan products.
Bob Radliff, Fund Manager
Capital District Community Loan Fund
255 Orange Street, Suite 103
Albany, NY 12210
Childcare Resource and Referral Agencies
Many communities have free or low cost services, which can help parents locate quality childcare centers or childcare home providers in their areas. Commonly known as Childcare Resource and Referral Agencies, these organizations can also be a valuable source of information for banks that are seeking information about childcare needs and opportunities in their areas, including other potential funding partners.
NY State Child Care Coordinating Council
130 Ontario Street
Albany, NY 12206
Fax: 518- 427-6603
The Community Development Corporation of Long Island
The Community Development Corporation of Long Island (CDC) is a private not-for-profit multifaceted housing, community development and economic development corporation. CDC's mission is to serve the needs of Nassau and Suffolk Counties' low- and moderate-income families and individuals and businesses not served by traditional sources. Currently, CDC finances home-based childcare facilities that enables the providers to expand from 6 children to 12 and in one case to 24. Additionally, CDC also provides business loan programs to those that meet the credit guidelines for-profit child care providers.
Eileen Anderson, Vice President
The Community Development Corporation of Long Island
2100 Middle Country Road, Suite 300
Centereach, NY 11720-3576
Committee for Hispanic Children and Families (CHCF)
The Committee for Hispanic Children and Families, Inc. was founded in 1982 by a group of Latino health and human service professionals in response to the need for culturally sensitive and linguistically appropriate services in the foster care and adoption system. Subsequently, CHCF has developed and implemented programs that meet the needs of low-income families and children in such critical areas as family violence, foster care, youth development, teen pregnancy prevention and childcare.
Existing initiatives were developed to address the growing issues in our community. Currently, we provide child care training and referral services, youth services such as family counseling and after school care, health education addressing AIDS/HIV, domestic violence prevention and education, and public advocacy.
Committee for Hispanic Children and Families, Inc
140 West 22nd Street, Suite 301
New York, New York 10011
Community Preservation Corporation (CPC)
CPC is a private mortgage lender specializing in financing low-, moderate-, and middle-income housing throughout New York and New Jersey. The organization lends for large and small apartment buildings, occupied or vacant, and for new construction developments. Sponsored by 94 banks and insurance companies, CPC has, since 1974, financed more than 85,000 affordable housing units, representing an investment of more than $2.8 billion. The organizations mission is to stabilize, strengthen, and sustain low- and mixed-income communities.
CPC is currently piloting a program with the State of New York Mortgage Agency (SONYMA) to provide SONYMA insurance in connection with financing of childcare facilities in New York State. CPC will originate loans and assist with the development process.
Michael Lappin, President
Eddie Jauregui - Assistant to President
and Policy Analyst
5 West 37th Street 10th Floor
New York, New York 10018
Steven Hunt, President
Michael Friedman, Vice President
State of New York Mortgage Agency
641 Lexington Avenue
New York, NY 10022
The Federal Home Loan Bank of New York Childcare Advance Program
In conjunction with the Banking Departments childcare efforts, the Federal Home Loan Bank of New York (FHLB) is launching a Childcare Facility Advance program. This unique program supporting childcare expansion throughout New York State provides low-cost financing to Home Loan Bank members. The requirements are:
- Project-specific financing for facilities located throughout New York State
- Eligible Centers must primarily benefit low or moderate income families
- The FHLBNY will provide amortizing advances for periods of up to 30 years.
- No set limit on the size or number of advances (subject to the FHLBs discretion); and
- Advances made at the FHLBs own cost of funds at a fixed rate.
This advance program is available to banks with or without the involvement of SONYMA.
Donald J. Wolff, Senior Vice President
Community Investment Administration
200 Park Avenue
New York, N.Y., 10166-4193
Phone: 212- 294-1800
The Rochester's Child initiative is a unique collaborative effort of the Rochester Area Community Foundation and the United Way. The program was created to expand the availability of high-quality early childhood education in the greater Rochester area. Toward that end, Rochester's Child provided funding assistance to various childcare centers to assist them in obtaining accreditation. Additional grants during the past fiscal year supported United Way's Alpha Project for quality in-home care, and the Smart from the Start program, sponsored by the Rochester Area Children's Collaborative to guide parent selection of quality child care.
Rochester Area Community Foundation
500 East Avenue
Rochester, New York 14607-1912
Success by Six
Since 1989, United Ways across the country has been investing in early childhood through Success by 6, an early childhood initiative that originated in Minneapolis in 1988. United Ways convene community leaders to coordinate the efforts of business, government, labor, education, health and human service providers. Key Success By 6 strategies are: raising awareness about early childhood development, improving access to critical health and human services and advocating for public policy that supports all children. Success By 6 is not a human service provider, a fund raising mechanism, or just for at-risk children. Successes By 6 community collaborations facilitate public-private partnerships focused on prevention & early intervention. There are currently over 300 local Success by 6 initiatives and 8 statewide initiatives in the United States and Canada.
United Way of America
701 N. Fairfax Street, Alexandria, Virginia 22314-2045
Phone: 703-836-7100 or 800-411-8929