Sunsites-Pearce Fire District is based out of Pearce, Arizona with a second fire station in Cochise, Arizona. The district provides fire and medical emergency response services, among other things.
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Snowbird Pasties
The first CIC sponsored microloan recipient was Sue Ann Hockman, whose business, Snowbird Pasties, sells meat, vegetable, and vegan portable pot pies, known as pasties (PAST-eez).
The idea for her business came about while sitting around the kitchen table with family. Pasties were a tradition in Hockman’s home, as they are in many “Yooper” households. “Yoopers” are the nickname commonly given to those living in the Upper Peninsula of Michigan, which is where this Tucson transplant was born and raised. Pasties were popular in this region because of the large population of miners that often took pasties down the mine shafts with them. Since the food was portable and could be reheated on their lanterns, pasties were a common mining treat!
Organizational Mission:
Hockman’s mission with Snowbird Pasties is to spread the love of pasties throughout the Southwest and bring a taste of home to her fellow “Yoopers”.
Use of Loan Funds:
The loan capital allowed Snowbird Pasties to purchase an electric warmer, a display case, and a health department regulated hot water sink for hand washing, a requirement for selling hot food.
Impact:
Without the loan from CIC, Hockman would have been unable to transition her business from frozen food sales to warmed, ready-to-eat meals. This has helped her branch out and begin selling her product at different events across Tucson.
In addition to growing her thriving business, Hockman lends a hand to her fellow food makers through her work at the commissary kitchen, Cook Tucson. She shares her learnings about health department regulations, licensing, permits, renting space, and getting into farmer’s markets, to give others a hand up as they embark down similar paths of starting food businesses.
For more information about Snowbird Pasties, or to place an order for food, visit
https://snowbirdpasties.com/index.html.
To read Sue Ann’s articles on Cook Tucson’s website, check out the following links.
Disruptors for Good
Mrs. Green’s World is a podcast that interviews “Disruptors for Good.” Last month, our director Danny Knee got together with Mike Peel of Local First Arizona for an interview. Danny and Mike discuss a wide range of topics, including their missions to help small businesses. Danny expounds on why we at CIC have chosen to make conservation and social entrepreneurship focal points in our lending portfolio. And then there’s the thrust of the interview: the SCALE UP program, which launched last summer to help local businesses implement conservation projects of their own.
Please visit Mrs. Green’s World to listen to our episode.
Image courtesy of SCALE UP Network
Sometimes A Little Loan Goes A Long Way
This article originally appeared in the October 26, 2018 edition of Inside Tucson Business.
By Danny Knee, Executive Director of Community Investment Corporation
I would hardly be the first person to declare that small businesses are the backbone of our economy. Considering that small businesses employ half of our nation’s workforce and have accounted for two-thirds of all net new jobs over the past two decades, it bears repeating. Often. And loudly.
It is not hyperbole to state that small businesses have as much impact on our economy as Google, Amazon, General Electric, and Starbucks. Billion-dollar mergers and acquisitions, the behavior of rock star CEOs, and quarterly earnings reports of large public corporations may dominate business news cycles, but small businesses generate 51% of U.S. GDP to relatively little fanfare. While near 75% of economic development funding nationwide is directed to large companies with over 500 employees, small businesses struggle with access to fewer resources they need to thrive and grow.
Most importantly for a nonprofit lender like my organization, Community Investment Corporation, we need to make debt capital more readily available and easier to access in the small amounts that small business owners need.
Unfortunately, the high transaction costs of small business loans relative to their limited opportunity for financial returns discourages investment from traditional lenders. This creates a gap in the marketplace where there are few, if any, reasonably priced loan products for the needs of small businesses. As a nonprofit organization with an economic development mission, we have the luxury of being able to dedicate parts of our loan portfolio to community impact rather than profit. It’s a good investment, too, with research showing that for every $1 in lent to small businesses, an average of $3.79 in gross output in their communities.
CIC and nonprofit community partners such as the Community Food Bank of Southern Arizona, Local First Arizona, and the YWCA of Southern Arizona among others are collaborating to meet the capital needs of small businesses. Our goal is to expand opportunities for traditional and non-traditional entrepreneurs through an approach that has been used worldwide for over 40 years called microlending. Originating in Bangladesh in the 1970’s as a cost-effective public policy approach to fighting poverty in developing countries, in the early days microlending was the practice of providing small loans to support entrepreneurship by women in poverty. The approach is now showing promise as a means to catalyze “mom and pop” entrepreneurship. Different than the “swing for the fences” approach of venture capitalism, microlending represents the democratization of debt capital. It offers a way into entrepreneurship for a diverse population for whom being one’s own boss is often a greater incentive than the chance to become rich.
At CIC we have seen firsthand how microlending (the provision of loans from $500 to $10,000) reduces the barrier of entry for a wide range of entrepreneurs who would otherwise be on the sidelines of an improving economy – entrepreneurs like chef Erik Stanford of Pivot Produce whose business acts an intermediary between local farmers and Tucson restaurants that want fresh, locally sourced produce. Erik received a $5,000 loan through the Community Food Bank and CIC’s Food Entrepreneurship program partnership to expand his cold storage capacity and to purchase a large company delivery vehicle.
We are also working with the YWCA whose hands-on training courses help local entrepreneurs improve their business practices, launch new ideas, or expand their businesses. Raw juice company, Dish for Dosha, was referred to CIC through the Women’s Business Center at the YWCA. Owner, Cecilia Arosemena, used a small CIC loan for startup capital and to purchase an industrial juicer which allowed her to increase production capacity and hire some part-time help.
But we are also striving for more than individual success stories. We want to create systemic change which is why we are helping the YWCA launch their own microlending program. In addition to providing our lending expertise, we are investing in the YWCA’s brainchild of creating a virtual marketplace that will more efficiently link microlenders to micro borrowers and reduce the transaction costs for both parties. We know that we will have to rely on partnerships like this one if we hope to provide the resources needed by small businesses at scale.
It is important that we, as a community, enhance our small business ecosystem. CIC is working with partners to better connect aspiring entrepreneurs and small business owners to the resources they need, including business training, incubation, and acceleration, mentorship, networks, and more convenient access to capital. Admittedly, not everyone should be an entrepreneur or own their own business. Enterprise asks a lot of its creators and owners. But an entrepreneurial spirit is deeply ingrained in the American ethos and remains strong. It is something we need to nurture and harness.
Also, the gig economy is here to stay. Independent contractors and the self-employed now make up over 30% of the private workforce according to a study from MBO Partners. As part of that independent group, 12.9 million people are now supplementing a full-time job with part-time work. Trends suggest the proportion of independent workers as a part of our workforce will continue to steadily increase in the coming years. While these are not the traditional entrepreneurs we may be used to seeing, they are willing to rely on themselves while eschewing the security blanket of full-time wage earning which are traits of entrepreneurs.
The powerful notion of being one’s own boss and the associated benefits, including higher job satisfaction and better health, are alluring. 7 out of 10 American workers would prefer self-employment to wage earning according to a study of latent entrepreneurship. Roughly the same percentage identified being one’s own boss and increased flexibility as primary reasons for being self-employed. There is a strong pull for most people to explore entrepreneurship at some time in their lives. We need to have resources available to them. If we don’t tap into that passion and desire – and we don’t work to increase access through new pathways for nontraditional entrepreneurs – we are undoubtedly leaving innovation, value and community benefit on the proverbial table.
Limiting the Damage – The Rationale for an Alternative to Predatory Lending
By Nick Henry and Danny Knee
“No credit? No problem!” “Need fast cash? We can help!” These are the types of seductive tag lines you see all around town, or online when you search for a payday or title loan. But what are these loans, exactly? Let’s talk about payday loans.
Traditionally, the way payday loans have worked is that someone in need of cash finds a payday lender storefront and gets a cash advance—usually a few hundred bucks or so—to pay off an unexpected expense or help ends meet. In return, they write out a check future-dated to their next pay day, generally two weeks away. Because it’s a short-term loan, they’ll need to pay off the full amount, plus interest when it comes due. In the immediate term, of course, the borrower can meet their pressing expense, whether it’s food, auto repair, medicine, or rent. But it’s extremely unlikely a borrower can, in two weeks’ time, come up with the cash to pay off their debt in full. This means they’ll likely have to renew or “roll over” their loan, thus incurring more charges and continuing to pay exorbitant interest rates.
According to Megan Leonart, who recently wrote about payday loans for CNBC, the national average on payday loans is 400% interest (APR), and while the loans are meant to be short-term, most end up taking much longer to pay off. The Consumer Financial Protection Bureau (CFPB) reports that the average borrower takes 5 months and $520 in interest and fees (together known as “finance charges”) to pay off their payday loan.
The industry’s argument is that they are providing a much-needed service to economically vulnerable populations because nobody else will lend to them in their times of need. To some extent, they have a point. It is socially and economically beneficial for working class and the working poor to have access to emergency capital when an unexpected expense or loss of income jeopardizes what can sometimes be a very fragile economic balance they are maintaining. And few traditional lending institutions will lend to individuals they consider risky borrowers.
The problem is, as Leonart reports, that payday lenders’ business model depends not on individuals understanding what they are getting into and paying back their loan in a timely manner, but rather, on a process of repeated rollovers and additional finance charges known as the “debt trap.” Rather than providing a much-needed service, payday lenders prey on the economically vulnerable by targeting borrowers who they know cannot pay back their loans in an initial term, thus setting them up for failure. This has been the model from the beginning, and with the rise of the internet and online automatic payments, payday lenders have only gotten more efficient at trapping their borrowers in debt and extracting money from them.
After years of work, the CFPB proposed rules that would require lenders to consider a debtor’s ability to repay their loan before issuing it. The rule was set to go live in 2019, but certain aspects of the rule are being reconsidered. CFPB is under new leadership and the federal government has been under considerable pressure from the payday lending industry, which has a powerful and well-heeled lobby. Starting in 2009, just after the beginning of the Great Recession, all the way through the stabilizing of the recovery through 2015, the lobby spent over $35 million lobbying for less regulation and higher or no interest caps on payday loans. Not coincidentally, just as the Great Recession was taking hold, the payday lending industry doubled its expenditures on lobbying. Far from being a solution to the country’s or individual’s economic problems, the industry saw an opportunity to cash in on the devastating financial struggles of others. Today the payday loan industry is a $38.5 billion market. In states like Arizona—one of 16 to outlaw payday lending—payday lenders have turned to a related, and in some ways more insidious, cousin: auto title lending. (But more on that in a future blog post.)
The payday lending industry doesn’t grow GDP or provide jobs in the aggregate. Nor are they even a zero-sum game. Payday lending takes away from our economy. Only the owners of and investors in payday lending operations benefit, while local economies and community members already in economic distress suffer. It is an example of one of the most egregious forms of wealth redistribution imaginable and one the Sheriff of Nottingham would revel in—taking from the poor at their greatest time of need and giving to more wealthy investors and owners. Parsing numbers from a 2011 study by the Insight Center for Community Economic Development, CNBC reports that “the burden of repaying the loans resulted in $774 million in lost consumer spending and 14,000 job losses. Bankruptcies related to payday loans numbered 56,230, taking an additional $169 million out of the economy.”
At Community Investment Corporation, we believe in the power of the marketplace and in individual choice for consumers and business owners. But we also believe that any legitimate successful business will ultimately have a positive effect on the economy. As a non-profit, alternative lender we are on the side of responsible capitalism. The question is not whether people at lower-incomes and with some credit history issues should have access to capital – on that, we and the payday lending industry agree that they should. The question is should the people with less financial security and often in incredibly difficult circumstances have to pay such a heavy price for access and assistance? According to the “Americans for Fairness in Lending” website, Usury laws have been around since colonial times in America (and date back to the ancient civilizations of Hammurabi and Plato), and until the early 1900s caps on interest rates in the United States were kept at or near 10%. The question of whether there are interest rates too high to be ethical or “right” was long ago settled – except perhaps in the minds of the most zealous free-market advocates – that interest rates above a certain threshold are too high to be ethical regardless of whether people are willing to pay them when faced with a menu of untenable choices (such as being evicted for failure to pay rent or risking job loss because they cannot afford an auto repair and can’t get to work). While payday lenders may not be breaking any laws, we don’t believe what they are doing is in the best interest of our local economy. We need to do better as a community. We need to find a better way that is fair to both the borrower and the lending partner.
This is why, in response to the payday lending crisis, we began brainstorming with our partners at Catholic Community Services and Pyramid Federal Credit Union. The culmination of our efforts has now come to fruition in the form of a new loan product that we are offering as an alternative to predatory loans. We call it “A Better Loan Experience (ABLE),” and while we are only rolling it out as a small pilot at this point, we believe it is a step in the right direction. We encourage you to learn more by visiting our ABLE webpage.
Nick is Community Investment Corporation’s (CIC) Director of Community Lending and Economic Impact while Danny is CIC’s Executive Director.
Mortgage Credit Certificates are a blessing! – Leslie A.
“My lender added the MCC when I was closing on my house because she knew about the benefits of signing me up for the program. I’ve saved thousands over the years. One year, I used the money toward the purchase of a car – it’s so hard to save for big purchases like that. I’m surprised that some tax preparers don’t know anything about it. I try to share what I know with CPA’s because the MCC is a complete blessing!” – Leslie A.
The Mortgage Credit Certificate helped me with my house upgrade! – Rodney B.
“The tax credit is great – the refund definitely helps with big things like bills and home improvement projects. One year, my tax person asked how I got the MCC because he said it was like finding gold for homeowners. The best part about the MCC though is how helpful it was when I first purchased my house. The MCC allowed me to qualify for a better mortgage so I able to buy in the community where I wanted to live.” – Rodney B.
The Mortgage Credit Certificate helped me pay off my debt! – Denise B.
“I found out about the Mortgage Credit Certificate from a peer at work. With the program, I save an extra $500 to $1,200 every year on my taxes. With this savings, I’ve been able to pay off my debt faster. For me, it’s not just about the discount, though. When I got in the program, I went through classes for first time homeowners. Being able to educate myself before buying was very beneficial. I recommend the MCC program to anyone I know who is looking to buy a house.” – Denise B.
Mortgage Credit Certificate is simple to use!- Howard B.
“My realtor told me about the MCC program when I was buying my house. Every year I use it, I end up owing less money at tax time. The program is simple, especially if you do your own taxes like I do. It’s really not very difficult given the benefits you receive. I have and will continue to recommend the program.” – Howard B.
AZ Charter Schools Set the Pace for Academic Improvement
The scores released April 10, 2018 from the National Assessment for Educational Progress show charter students significantly outperforming district and private school peers across the state.
The results show significant gains over the last eight years, with public charter students outperforming their district and private school peers in every grade level and on every subject tested. This trend is most evident in the scores for eighth-grade reading and math. When separated and measured as if they were their own state, Arizona charter students rank first in the nation in eighth-grade math, and second for eighth-grade reading.
“These results reinforce what thousands of Arizona parents, families, educators and school choice champions have known for years: when it comes to academic performance, Arizona’s public charter school students are setting the pace,” said Eileen B. Sigmund, Arizona Charter Schools Association President and CEO.
The National Assessment of Educational Progress, known as the Nations Report Card, is the only national look at academic achievement across states.
“While there will always be room for improvement when it comes to educating our students, these NAEP scores are further validation that Arizona charter schools are raising the bar and improving public education statewide,” said Sigmund.
About Public Charter Schools
Arizona is home to 556 charter schools serving about 180,500 students. That’s nearly 30 percent of Arizona’s public schools. Signed into law in 1994, Arizona’s charter schools are public schools that are innovative while still being held accountable for improved student achievement.
By the Numbers
Below is the rank of Arizona students combined and broken out by charter students and the corresponding bar graphs.
Story provided by the AZ Charter School Association: https://azcharters.org/charter-students-top-national-results/