Features | August 17, 2020

Creative financing to unlock COVID aid in Alabama

Amy Cortese
ImpactAlpha Editor

Amy Cortese

ImpactAlpha, August 17The financial strains the COVID pandemic has caused in many cities and states can be seen in sharp relief in Alabama’s Black Belt, a swath of 18 counties originally named for the area’s once-rich soil. 

Even accessing federal relief funding is a challenge in the Black Belt, which contains some of the state’s most persistently impoverished communities and accounts for a disproportionate share of Alabama’s COVID cases. Tax receipts have plummeted while spending on public health has soared.

Alabama will only distribute the nearly $19 million in federal CARES Act funding allocated to Black Belt towns and counties as reimbursements for COVID-specific expenses. Many struggling rural towns don’t have the money to make much-needed purchases up front. The purchases must also be made by year-end.

Without an innovative collaboration between Black Belt Community Foundation, Hope Credit Union Enterprise Corp. and several local foundations, many towns and counties in the Black Belt would not be able to access the full amount of funds available to them. 

“We are the one region that cannot afford to leave money on the table,” said Felecia Lucky, executive director of the foundation, which was founded in 2004. “We were hearing from communities that it was going to be difficult.”

Guarantee pool

The workaround devised by the local organizations to ensure that places that most need the federal aid can get it offers a potential model for streamlining aid in a pandemic that looks certain to persist for months, if not longer. 

The Black Belt Community Foundation’s COVID-19 Access Program will lend up to $50,000 to towns and municipalities for personal protection equipment and other public health purchases. The local governments pay the money back when they are reimbursed by the government, and the funds go back into the lending pool. The loans, in the form of recoverable grants, are funded by Hope, which will provide a $1.6 million line of credit to BBCF. 

The program is backstopped by $825,000 in loan guarantees from several local foundations, including the Alabama Power Foundation. The power company’s philanthropic arm has been laying the groundwork for exactly this type of collaboration by convening local stakeholders to create an ecosystem of place-based funders.

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The BlackBelt foundation will also provide technical assistance to towns and counties and is working with the state to get broader pandemic-related spending, such as updated ventilation, heating and cooling systems that can slow the spread of the virus and improved broadband access, covered.

Creative response

“It was a really great opportunity to make sure that these two organizations that do great work have what they need to serve their communities,” said Alabama Power Foundation’s Myla Calhoun. The program, she adds, “could be a model for how we can creatively address problems like this should they arise.” 

Other backers include Regions Foundation, The Educational Foundation of America, Altec/Styslinger Foundation, Medical Properties Trust, Protective Life Foundation, Mike and Gillian Goodrich Foundation. The backstop came in the form of guarantees, money on deposit at Hope that is pledged to cover potential losses, and grants. 

“The response was overwhelming,” says Kendra Key of Jackson, Mississippi-based Hope, which is active across the Southeast. “It was so heartwarming to see how the corporate and philanthropic funders came together to help.”  

One early beneficiary is Uniontown, Alabama, a town of 2,500 about 30 miles west of Selma, which, like many communities across the country, has seen tax revenues take a hit during the COVID-related shutdowns and sheltering in place. The unexpected COVID-related expenses have strained an already tight budget.

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“We did not have extra money in the budget to go out and buy PPP,” or personal protection equipment, said Uniontown mayor Jamaal Hunter.  Had it not been for BBCF, Hope and their partners stepping up, he said, “many communities in the Black Belt would be left behind, just because of our zip code.”

Hope, a Black-owned community development financing institution, or CDFI, based in Jackson, Miss., this summer received $10 million from Netflix in 0.1%-interest “transformational deposits.” Earlier, the family office Ceniarth deposited $750,000 in Hope Credit Union to help the CDFI make small business loans under the federal Paycheck Protection Program.

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The COVID aid program was based on a similar model Hope used last March after a tornado leveled much of Lee County, Alabama, killing 23 residents. The Federal Emergency Management Agency, or FEMA, offered to reimburse homeowners in the area for 75% of the cost of a storm shelter. Many residents could not afford the upfront cost, so Hope extended bridge loans, while another local foundation provided grants for the remaining 25% of the purchase price. 

For Lucky, it’s an example of the creativity that the foundation has long pursued to meet the challenges of the area – and a growing open mindedness among local funders to participate. “There are solutions to the Black Belt,” she says. “They may look different, but that doesn’t mean they don’t exist and they don’t have value.”