Wednesday, November 28, 2018

Boon or boondoggle? Jury out on Opportunity Zones

Dark blue census tracts in Johnson City, Tennessee represent areas
of economic distress that aren't Opportunity Zones. That doesn't lessen
the need of residents there, nor ACFCU and partners' commitment.
“Boondocks and boondoggles,” indeed. This article in the latest issue of The Economist takes a closer look at “Opportunity Zones.” Created through the 2017 Tax Cuts and Jobs Act, Opportunity Zones (OZ) offer favorable tax status on unrealized capital gains if those gains are invested in OZ-designated census tracts.

Like “Enterprise Zones” and other well-meaning concepts that preceded them, OZs purportedly are designed to draw investment capital into economically struggling areas. That’s one reason Appalachian Community Federal Credit Union (ACFCU) helped drive the effort to establish OZs in appropriate census tracts within Northeast Tennessee’s eight counties.

As a mission-driven financial institution, ACFCU sees firsthand the overwhelming need for action and not just words when it comes to alleviating poor economic conditions in overlooked, underserved areas. “Opportunity” aptly describes an actual concrete thing that is sorely needed in many neighborhoods and census tracts in Northeast Tennessee and ACFCU’s other service areas of Southwest Virginia and Southeast Kentucky.
ACFCU provides opportunity here in rural Kentucky, where Opportunity
 Zones are in light blue and regentrification is just a really long word.

Yet as we have seen this fledgling concept evolve toward reality, some of us at ACFCU have developed the same concerns expressed in the Economist article. Plenty of OZ census tracts are experiencing pockets of regentrification. If capital linked to this program primarily flows into those areas, that concern will prove to have been justified as, per the Economist, “investors will pocket tax rewards for investments that they would have made anyway.”

As ACFCU’s Regional Community Development Coordinator, Adam Dickson, aptly noted, “the more I get into understanding OZs, the more concerned I am that the initial intent of the program is profit with limited regard to the interests of low-income communities.” Dickson also insightfully points out that, “OZs provide a prime opportunity to promote social enterprise, cooperatives, etc.”

Time will tell whether the areas most in need of opportunity benefit. The Economist noted that “place-based policies” are theoretically attractive, because many poorer parts of America find it increasingly difficult to catch up with wealthier ones. “In theory, geographically targeted tax cuts or subsidies could encourage new clusters of economic activity to form, thereby lifting depressed places,” the article states.

Will capital flow to Opportunity Zones like this tract in Kingsport,
where regentrification isn't likely in the cards? The need is obvious.
The Tax Policy Center’s Brett Theodos, Steven Rosenthal and Brady Meixell expressed similar concerns in a blog post published Oct. 23 after the feds released their first set of proposed OZ regulations.

ACFCU and its many partners will continue bringing opportunity to economically challenged areas that need it most and are unlikely to attract investment. Some of those areas are in Opportunity Zones, and ACFCU continues to lead efforts to bring OZ-eligible capital to such neighborhoods.

But we won’t wait to see how the new program turns out. We’ll try to steer a potentially impactful program in the right direction in our communities, including at an upcoming ACFCU-sponsored Opportunity Zone symposium, but we won’t pin our hopes on something that could, indeed, turn out to be a boondoggle. So I’ll take a slightly different tack than the Economist, which writes that when it comes to OZs, “for the moment, scepticism is in order.” Here in the mountains of Central Appalachia, where declines in coal and manufacturing make economic opportunity as badly needed as it’s been in a long time, I share my colleague Adam Dickson’s concern. But like Adam, I’ll choose “guarded optimism” over skepticism. After all, as folks like to say around here, “you can catch more flies with honey than you can with vinegar.”

 (Jeff Keeling is director of community relations for Appalachian Community Federal Credit Union.)

Wednesday, November 14, 2018

The good, the not so good, and the place for financial coaching

ACFCU works with many people who spend a high percentage
of income on necessities as our membership is primarily in Tennessee.
Low unemployment rates and rising wage levels across America sound great, and thank goodness for them. Other data out there, though, make clear the importance of financial coaching and other tools that can help families use their income more strategically. That importance is magnified in Tennessee and Kentucky, both of which are among the 13 states where renters spend more than 50 percent of their income on necessities.

Take this piece by GOBankingRates’ Cameron Huddleston. The Life and Money columnist reports on GOBankingRates’ study of the Consumer Price Index and of housing cost data. Rents are up 7.6 percent in three years, and other necessities have risen by 14 percent.

GOBankingRates surveyed 5,000 renters about monthly expenses, defining necessities as rent, groceries, transportation, utilities and health care. After figuring how much of median household income those expenses accounted for in each state, they used the “50-30-20” budgeting rule to determine what percentage of folks in each state can’t afford the cost of living. That budgeting rule figures 50 percent of income for necessities, 30 for nonessential costs and 20 percent toward saving.

Tennesseans’ average monthly cost for necessities totals 60 percent of median income – third highest behind Delaware and New Mexico. And with Northeast Tennessee median incomes lower than the state average, the folks Appalachian Community Federal CreditUnion (ACFCU) and its partners serve fight even more of an uphill battle to balance their budgets.

Financial coaching has helped Kayla Cabe improve
her financial health tremendously.
That’s why at ACFCU we continue to feel very fortunate to work with people like Kayla Cabe, an aspiring nurse who wants to carve out a good life for her sons Adarius, 8, and Kamari, 1. Cabe learned about ACFCU’s financial coaching resources during an ACFCU workshop at Adarius’s after-school program.

In less than a year working with Financial Coaching Specialist Adam Taylor, Cabe’s credit score has increased by more than 100 points. She’s paid off predatory debt and delinquent school debt and is poised to start LPN school next year. “I want to eventually have my bachelor’s in nursing but I’m taking it step by step because I have two kids,” Cabe said.

Through the process, Cabe’s income hasn’t fluctuated much – she’s learned to make the most of it. She’s gained financial knowledge and “learned to wait on things.”

So long as the cost of living remains problematic for many Americans, there can’t be enough partners out there working together to help families use the resources they have more knowledgeably and strategically. And as Cabe said, many don’t realize they can benefit.

“I think people think they know, and that ‘there’s nothing they can tell me that I don’t know.’ I kind of felt that way at first.”

Now Cabe is saving $100 a month in a sinking fund and another $80 a month for school fees “and a house eventually.” She’s bucking the trend GoBankingRates found in their study. Despite a modest income, the fact Cabe has any savings puts her ahead of a third of Americans.

“I think you guys really want to help people be successful,” Cabe said of ACFCU. She’s right.

 (Jeff Keeling is director of community relations for Appalachian Community Federal Credit Union.)

Monday, November 5, 2018

Home is where the difference is

Carla Strickland and her daughter Caira, 5 -- at home.
“I came back home from Georgia and had (daughter Caira), my dogs, a pocketbook and a diaper bag and started over. If you had told me I would be where I am now with her 5 and a half years old I wouldn't have believed it.”  Carla Strickland


One could tell right away that Caira Strickland felt secure on a pretty fall night in the Northeast Tennessee mountain town of Erwin. The kindergartener sat at her kitchen table with mom Carla’s full attention as she ran the “drive-through” on a tabletop toy. Later she’d help Carla feed their chickens, then mom and daughter would lay and read before Caira got tucked into her own bed, in her own room, in her mom’s own home. “She’s a mama’s girl for sure,” Carla said.

Caira will grow up in her own home largely because of Carla Strickland’s hard work and determination. Without Appalachian Community Federal Credit Union’s involvement in the “Project Reinvest” down payment assistance program, though, Carla would probably still be trying to save for her own place.

Caira holds "Bo" on the Stricklands' front porch.
“I feel like this assistance really allowed me to make the numbers work,” Carla said. Those numbers working mean the world to Carla, who grew up mostly in rented housing and wanted something different not just for herself, but for Caira. Carla slept on her dad’s couch so she could afford to save money and pay Caira’s daycare.

The National Association of Realtors compiled information from numerous studies about homeownership’s benefits in this 2016 study. Those benefits accrue to people like Carla, Caira and the 199 other families ACFCU helped through Project Reinvest and the $10,500 in down payment assistance it offered each participant.

Determination keys the turnaround

Carla Strickland did most of the work herself. ACFCU, Neighborworks America and other Project Reinvest partners just offered a hand up. After Caira was born, Carla declared bankruptcy and moved back home.

“I’m sitting there with a newborn kid thinking, ‘what am I going to do?’” Carla said. What she did was put her dental hygienist credentials to work and research how to rebuild her credit. Carla established a savings account and opened a secured credit card. “It was a super low limit, $500. It just went from there. I made sure everything was paid on time, kept my usage below 30 percent and just kept doing that. My score started going up fairly quickly.”

Carla has seven different accounts to escrow money for everything from her house payment to Christmas. “That way there’s no dumb decisions being made,” she said.

Carla admitted it isn’t always easy. It took a lifestyle change when it came to her spending and budgeting habits, and even now, she said, “every once in awhile I splurge and buy a $25 mascara.”
Lying with Caira as read together at night, and knowing the discipline she must maintain to keep her life on best trajectory for her and her daughter keeps Carla focused. In turn, life-changing stories like Carla’s keep ACFCU and its partners focused. It’s a huge part of what puts the “Community” in Appalachian Community Federal Credit Union. We hope to be part of many more such experiences in the months and years to come.

(Jeff Keeling is vice president of communications and community relations for AppalachianCommunity Federal Credit Union.)

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