Environmental Assessments: Community Development Trends around the District

When state governments begin their legislative sessions in January, lawmakers will be confronted with massive budget shortfalls and declining revenue. As states grapple with the task of balancing their budgets, social services and community development projects will be vulnerable to cuts. With limited funds available for these types of services, it is clear that individuals working in this field need to pursue a more holistic approach to community development. Through their conversations with community members and visits in the field, the Community Development staff of the Federal Reserve Bank of St. Louis understands how unemployment, workforce development, community development financing and foreclosures are affecting residents throughout the Eighth District, as well as how communities are approaching these issues.

Unemployment

A continuing challenge for state governments is unemployment. The hit to the manufacturing industry has severely impacted communities in the District, pushing unemployment up to 9.5 percent in the St. Louis and Memphis Metropolitan Statistical Areas (MSA), 9.8 percent in the Louisville area, and 6.8 percent in Little Rock.1 These unemployment rates, while high, would be worse without the funding that states received from the American Recovery and Reinvestment Act (ARRA) of 2009. ARRA provided states with funding for job creation and retention, a fact reflected in the Congressional Budget Office’s report stating that between 1.4 million and 3.6 million individuals around the country have been employed or have remained employed as a result of ARRA funds.2 This aid from the federal government is expected to run out next year, making the budget even tighter for state governments.2

Workforce Development

In response to the high rates of unemployment, state governments and local organizations are pursuing alternative paths to retrain the workforce. There is particular interest in green job development around the Eighth District. St. Louis, for example, has added 1,000 green jobs in the past two years and has promoted job creation in the “adaptive” green economy—jobs in businesses that are greening their operations.3 The St. Louis region was also one of four metropolitan regions recently selected as a pilot for the Rockefeller Brothers Fund’s Climate Prosperity Project, which connects environmental factors with economic development. These are the kinds of innovative practices that are coming into play to bolster the region’s workforce.

Community Development Financing

Financing is a major challenge facing community development. There is a small number of experienced community development financial institutions (CDFIs) in the Eighth District providing funding for practitioners to expand their work. However, local organizations consistently tell community development specialists that there is a need for more CDFIs, which would expand access to credit, capital and financial services to underserved communities, especially as small businesses and nonprofits are having difficulties receiving loans from traditional funding sources.

Nonprofits have seen their funding from corporations, private foundations and state governments significantly decreased or cut altogether. Financial institutions, too, have adopted more traditional underwriting standards, reducing the availability of credit for small businesses and nonprofits. CDFIs report that in light of banks’ new underwriting standards, the CDFIs are now getting more and more requests for loans. Currently, with limited funding available from states, the small number of CDFIs in the District, and tightening of available funds from financial institutions, there is a greater need for collaboration and creativity among community organizations in their attempts to develop sustainable initiatives to catalyze economic growth.

Foreclosures

The foreclosure crisis remains one of the main issues in the Eighth District. In neighborhoods already struggling to remain stable, the high concentration of foreclosures has further limited development possibilities. Even suburbs that have traditionally been considered very healthy and stable are showing signs of vulnerability. With few existing safety nets, these healthy suburbs are struggling to maneuver through the early stage of risk they are experiencing. Over the past year, community development specialists have held meetings and dialogues throughout the District to better understand the crisis and to work with local partners on issues of abandoned housing and foreclosure-related scams, among others.

Focus on the Future

The staff of the Community Development Office of the Federal Reserve Bank of St. Louis is connected to and working in the field on these issues. They
recognize that a holistic approach to community development is needed in the upcoming months of state budgetary crisis and a declining pool of capital, and will strive to be an ally and resource to organizations around the District. Moreover, the staff’s understanding of these challenges will help guide the department as it establishes its focus for 2011.

Endnotes

1. Bureau of Labor Statistics (2010). Retrieved from www.bls.gov/web/metro/laummtrk.htm [back to text]
2. Leachman, M. (2010, November 29). New CBO report finds up to 3.6 million people owe their jobs to the Recovery Act. Washington, D.C.: Center on Budget and Policy Priorities. Retrieved from www.cbpp.org/ [back to text]
3. St. Louis Regional Chamber & Growth Association. (2010, July 9). St. Louis region green economy profile is “roadmap” for region’s green industry cluster. Retrieved from www.stlregionalchamber.com [back to text]