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CDFA “Defining the Food System Asset Class” Project September 24, 2018 2018 Ohio Food Policy Summit: Developing and Financing Food Systems

Introduction Covering: Introduction of the Council of Development Finance Agencies Understanding development finance History of CDFA’s engagement in food finance Defining the food asset class Resources

What is Development Finance? Development finance is the efforts of local communities to support, encourage and catalyze expansion through public/private investment in physical development/redevelopment and/or business/industry. It is the act of contributing to a project/deal that causes that project/deal to materialize in a manner that benefits the long term health of the community.

What is Development Finance? Development finance requires programs and solutions to challenges that the local environment creates. Economic developers are the bridge between government and business and often direct the vision of a sound financing toolbox. Regional advantages can enhance development finance efforts through partnership, cooperation and mutually advantageous programming.

Why is DF Important? Businesses need working capital and the ability to invest in themselves Developers need assistance to achieve an acceptable ROI Communities need infrastructure and amenities Citizens need opportunities for advancement – jobs, small business, education, etc. Regions need economic prosperity

Development Finance Agency (DFA) Development finance agencies (DFAs) can be either public or quasi-public/private authorities that provide or otherwise support economic development through various direct and indirect financing programs. DFAs may issue tax-exempt and taxable bonds, provide credit enhancement programs, and offer direct lending, equity investments, or a broad range of access to capital financing mechanisms. DFAs can be formed at the state, county, township, borough or municipal level and often times have the authority to provide development finance programs across multi-jurisdictional boundaries.

DFA Examples Industrial development authorities, boards or corporations Economic development authorities, corporations or councils Special purpose authorities (port, transportation, parking, development, energy, air, water, infrastructure, cultural, arts, tourism, special assessment, education, parks, healthcare, facility, etc.) Local and community development authorities, corporations or institutions Departments of development or commerce and finance authorities, divisions, or departments within state and local government Business development corporations, centers or districts Development and redevelopment authorities, commissions or districts

Landscape of Tools – 100s of Them Microlending New Markets Tax Credits Tax Increment Finance Grants Municipal Bonds 504 Loans Linked Deposit Programs Collateral Support EB-5 Community Reinvestment Act Impact Investing Revolving Loan Funds Historic Tax Credits Property Assessed Clean Energy Seed & Venture Capital Special Assessment 501(c)3 Bonds Industrial Development Bonds Credit Enhancement Mezzanine Funds Tax Abatements

The Toolbox & Financing Spectrum 5 Practice Areas Practice Area 1: Bedrock Tools Bonds and the Basics of Public Finance Practice Area 2: Targeted Tools Tax Increment Finance, Special Assessment Districts, Government Districts, Project Specific District Financing & Tax Abatements Practice Area 3: Investment Tools Tax Credits, EB-5 Practice Area 4: Access to Capital Lending Tools Revolving Loan Funds, Mezzanine Funds, Loan Guarantees and Microenterprise Finance, Seed & Venture Capital Practice Area 5: Support Tools Federal Funding

Energy as an Analogue There is a correlation between how the renewable energy sector emerged and how the food sector is emerging today. Over a decade ago, the clean energy/energy efficiency sector was characterized as risky, volatile, fragmented and poorly defined. Measuring the relative reward versus the reciprocal risk of investing in clean energy/energy efficiency was difficult due to a lack of data, impact metrics and portfolio performance. Fast forward to 2017 and the clean energy/energy efficiency sector has been redefined and is now one of the most sought out investment classes in the development finance space. Through collaboration and the development of risk reducers, metrics and performing investments, the clean energy/energy efficiency space has blossomed into one of the nation’s strongest investment asset class. This did not happen by accident.

Energy as an Analogue Instead of seeing clean energy/energy efficiency as group of fragmented partners, players, projects and potential investors, the sector collaborated to build general consensus and strong performance measurements to prove that an investment in clean energy/energy efficiency is as solid as an investment in traditional projects such as municipal bonds for infrastructure, loans for small businesses, or tax credits for community development. Instead of fighting as individual sectors – renewables, weatherization, generation, technology, markets, institutions, etc. – the industry deliberately coordinated to send a message that in its totality, clean energy/energy efficiency is not only safe but is a reliable and return driven investment opportunity.

Defining the Broader Food System Through research, and for the overarching goal of creating a broad food asset class, six distinct and highly important areas of financing within the food system have been identified. In order to understand this perspective, individual actors within the food system will need to take a step back and look at the whole of the system. As such a new definition of the food system has been offered by us….

Defining the Broader Food System Social Enterprise (addressing scarcity) – Within the food system, an organization or initiative that works to support social objectives such as increasing access to healthy affordable food, sustainable food, or other socially beneficial food objectives. Agriculture (rural & urban) – Within the food system, all of the steps and systems which include the cultivation and harvesting of primary consumable food products (plants, animals and their byproducts). The acquisition and management of agricultural land, research & development, production, support, operations, etc. regardless of physical location or scale are part of the agricultural sector. Entrepreneurs – Individuals who create and operate businesses in the food system, such as creating or expanding capacity in culinary, technology, distribution, agriculture or processing businesses, in order to meet market needs and gain profits from the business. * Research assistance provided by The Ohio State University, Knowlton School, City & Regional Planning 5890 course of Spring 2017.

Defining the Broader Food System Industry – In the food system, industry is the broad range of actors who contribute to/facilitate the process of food production and distribution to consumers. This may include food retailers, food service, processors, packagers, distributors, producers of related inputs, and more Institutional Buyers – Public or private institutions, such as schools, universities, hospitals, prisons, etc., that purchase (often wholesale), prepare, and serve large amounts of food to meet internal demand within the food system. Infrastructure – Within the food system, infrastructure is the physical facilities and organizational, technological, and relationship networks that allow for the production, processing, storage, distribution, transportation, transfer, and retail of food. * Research assistance provided by The Ohio State University, Knowlton School, City & Regional Planning 5890 course of Spring 2017.

Project Overview With funding from the W.K. Kellogg Foundation, CDFA is researching how DFA’s can become more engaged in developing localized food systems through traditional finance approaches such as bonds, tax increment finance, tax credits, and revolving loan funds. The premise of this project is to suggest and then prove that, if organized and defined properly, the food system can become a defined asset class worthy of traditional investment.

Project Deliverables The project officially began on January 1 Four main deliverables: Food Systems Finance Research Food Systems Finance Case Studies Food Systems Finance Advisory Council (FSFAC) Convenings Food Systems Finance Pilot Projects

Food Systems Finance Research

Food Systems Finance Case Studies The research will then be turned into six case study white papers. Each case study will focus on one of the development finance categories and how it is/can be used in the food system Bedrock: bonds Targeted: tax increment finance & special assessment Investment: tax credits Access to Capital: revolving loan funds, microenterprise lending, crowdfunding

Food Systems Advisory Council CDFA is hosting regular, ongoing and substantive convenings of CDFA’s Food Systems Finance Advisory Council over the grant period to establish this cohort within both the food and finance industries. Members include top professionals in the fields of finance and food systems who work in: DFAs Foundations Banks Federal & State Government Private Organizations

Food Systems Advisory Council David Armstrong, GreenStone Farm Credit Services Jim Barham, USDA Agricultural Marketing Service David Beck, Self-Help Credit Union Deborah Bentzel, The Food Trust Matthew Brown, Franklin County Economic Development and Planning Laura Canter, MassDevelopment Mike Catsi, Alaska Industrial Development & Export Authority Virginia Clark, Sustainable Agriculture & Food Systems Funders Bea Covington, King Conservation District Tim Crosby, Cascadia Foodshed Financing Project Linda Jo Doctor, W.K. Kellogg Foundation Bridget Dobrowski, Sustainable Agriculture & Food Systems Funders Tim Dolan, Colorado Housing and Finance Authority Mary Donnell, Capital Impact Partners Andrew Dumont, Federal Reserve Board Brian Estabrook, Franklin County Economic Development and Planning Patrick Evans, Illinois Finance Authority John Fisk, Wallace Center at Winrock International Will Gray, Wallace Center at Winrock International Caroline Harries, The Food Trust Oran Hesterman, Fair Food Network Bob Heuer, Heuer & Associates Heather Jamerson, Pyramid Peak Foundation Ryan Kozak, The Huntington Investment Company David LeZaks, Delta Institute Michael Lufkin, King County, WA Gary Matteson, The Farm Credit Council John Mitterholzer, George Gund Foundation Donna Leuchten Nuccio, Reinvestment Fund Rich Pirog, MSU Center for Regional Food Systems Nessa Richman, Rhode Island Food Policy Council Steve Saltzman, Self-Help Credit Union Meredith Storton, RSF Social Finance Cam Turner, United Fund Advisors Jazmin Varela, The Conservation Fund

Pilot Projects Philadelphia/The Food Trust Collaboration between TFT and state and local leaders to issue bond to reestablish the HFFI fund in PA. Rhode Island Food Policy Council Collaboration between RI FPC and state, local and public and private sector partners to finance seafood processing facility using tax-exempt bonds. Seattle/King County Collaboration between local, private and state leaders to finance a specialized food processing and distribution center using tax-exempt bonds. Columbus/Franklin County CDFA will research the sources of financing available in Central Ohio for food related projects and put together a food financing toolkit.

Food Systems Finance Resource Center

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