Investing in Strong Rural Communities

By Suzanne Anarde

When it comes to community development, 
rural America seems to have a bit of a split personality.

On the one hand, bucolic, tight-knit towns are lifted by hard work and resilience. On the other, communities torn by job loss and decline find themselves among the most difficult places to live in the country.

Building on the first to recover from the second can be a massive, long-term undertaking. It requires innovative partnerships that bring new housing, businesses and jobs to long-distressed areas, while also considering the health and education needs of the people who live there. This isn’t just about philanthropy; rural America needs the kind of lending and investing that is both good for business and good for communities.

Our job at the Local Initiatives Support Corporation is to help bring those pieces together, building the capacity of nonprofits to meet local needs, assembling capital to finance projects and offering expertise on a range of economic development issues to help local leaders create new opportunities for residents. To date, that has meant nearly $15 billion of community development investments nationwide, including $300 million for rural communities.

You don’t have to look far to see why this is so important. Start in New England, where amid the rolling hills of the Maine highlands, you come to the town of Dover-Foxcroft. It’s home to hot air balloon races and the state’s annual whoopie pie festival—and it has been hit hard by the loss of manufacturing jobs and the often-toxic land that industrial plants have left behind. Unemployment here approaches 12 percent.

Community leaders have worked tirelessly to revive the local economy. One of the largest investments to date sits on the banks of the Piscataquis River, where the long-shuttered Mayo Mill woolen complex is being transformed into rental apartments, retail shops, artist studios, a restaurant, a farmers market and a boutique hotel—all in a community of 4,200 residents. The plan is even restarting a nearby hydroelectric plant to serve as an energy source.

Work began on Mayo Mill several years ago. When the project stalled, the nonprofit Coastal Enterprises, Inc. teamed up with Rural LISC—our national program focused on rural development—to provide a $2.3 million construction loan that helped it move it forward. Bangor Savings Bank is following with an additional $1 million in permanent financing. Now, the project is nearly complete, and it is bringing a much-needed jolt of economic optimism to the area.

Can that be replicated in other towns? Certainly. We’re seeing projects like this all over the country. But, even in places where this model doesn’t quite fit, we see urgent efforts under way to draw on homegrown strengths.

If you head south to eastern Kentucky, for instance, you will find communities where poverty rates are high and economic mobility is fleeting. But you will also find Kentucky Highlands Investment Corporation nurturing a new brand of Appalachian opportunity.

Innovation here is making a difference—even earning the area one of the first-ever Promise Zone designations from the federal government. For instance, KHIC helped spearhead an initiative called Houseboat to Energy Efficient Residences, which tackles affordable housing needs and employment opportunity as part of the same whole. Based on a design idea from University of Kentucky students, HBEER puts idled houseboat manufacturing plants to work building green, modular homes that sell for $100,000 each. Support comes from a consortium of local lenders and CDFIs, and the effort both protects manufacturing jobs and relies on products made in Kentucky as a way to build economic stability. It’s a tremendous effort, and it all started with a small, recoverable grant from Rural LISC to help fine-tune how the idea would be implemented. We see this in our work every day—even modest financial commitments can make a major difference.

Increasingly, we’re seeing that health care investments can also be a catalyst for growth. In Warsaw, Mo., for example, the 23,000-square-foot Harbor Village—opened in 2013—brings together three health providers focused on primary care, elder care and mental health. The new facility created 20 new jobs, preserved more than 30 existing jobs at small, outdated clinics that were relocated to the new facility and created more than 50 construction jobs—all in a medically underserved area with above-average unemployment and below-average incomes.

The multilayered financing for Harbor Village included a $7.5 million allocation of LISC’s New Markets Tax Credits, with equity from Wells Fargo, as well as nearly $1 million in construction financing from Third National Bank (now Central Bank of Sedalia) that converted to term loan on completion. Another $3 million in funding from the U.S. Health Resources and Services Administration helped push the project forward.

In fact, health-related financing is driving increasingly creative projects. For instance, we’re working closely with Morgan Stanley, the Kresge Foundation and a range of other nonprofit developers and investors to connect better health care with better housing through the Healthy Futures Fund, launched in 2013. In some places, HFF is driving new housing developments that incorporate health care for residents—as in Menominee, Mich., where an abandoned department store has been transformed into 44 affordable apartments with ground-floor health services.

In other places, HFF is supporting new health centers with programs to reach out to nearby low-income housing residents, as is the case with a new family health center in Omak, Wash., which serves a large population of migrant workers and other disadvantaged people.

Those connections are important, and not just for health reasons. Study after study shows us that nearly every state in the country is sorely lacking enough decent affordable housing. That’s a particular problem in rural communities, which often find it difficult to attract developers and investors because of their smaller populations.

It hasn’t deterred the Garrett County Community Action Committee, however. The seasoned nonprofit is helping connect western Maryland’s increasing population of seniors to decent apartments within their means.

GCCAC is working in Mountain Lake Park, eight miles from the West Virginia border, to rehab two aging buildings with 58 apartments and construct an additional 32 units at the site—with all three buildings being connected and incorporating community space. The energy-efficient project is a model for Maryland’s Smart, Green and Growing policy and is designed to help older and disabled people age in place and maintain a high quality of life.

First United Bank and LISC are providing construction loans ($3 million and $3.2 million, respectively) and sharing first-lien position. And our affiliate, National Equity Fund, is taking out those loans with a $9.3 million investment in the project’s Low Income Housing Tax Credits through a fund capitalized by nearly a dozen banks and insurance companies. Subsidies from the U.S. Department of Agriculture will help keep units affordable, even for very low-income seniors.

All of that points to the critical intersection between public agencies, local nonprofits, CDFIs and traditional banks. Each has a role to play if we are to revive stagnant local economies. Rural communities all across the country need our combined financial creativity to help make sure they can flourish.

Suzanne Anarde is vice president at the Local Initiatives Support Corporation, where she leads its national Rural LISC program, which works in 43 states and more than 1,400 
rural counties.