Local Initiatives Support Corporation
Report date
June 2022
What has been most instrumental to your progress?
Shifting to broadened capital source exploration, to Impact Investing: Opportunity Zone linked capital did not play out as envisioned in the 2019 legislation. There was great enthusiasm early on for Opportunity Zones (OZ) and the related new access to capital gains investments. Many entities in Minnesota tried to create ways to assist in access to that new form of capital. However, they abandoned the work after finding it was too difficult and too expensive to build the necessary legal and administrative systems. There were also low levels of investor interest in using aggregated funds; investors chose specific local projects that had their own OZ mechanisms instead. That change significantly limited the accessibility of OZ linked capital gains reinvestments for smaller scale or lesser-experienced developers. In the end, we are aware of only one Duluth based project that used that kind of capital. With that awareness, and our consultants' expertise, LISC staff shifted focus to build knowledge about the broader and faster growing impact investment source of capital. Then they educated local institutions as well as developers about it as well as about possible local sources.
Reflections on the community innovation process
The process of iteration visualized in the diagram is a good reflection of our experience. We did experience the ideation, testing, issue refining and testing again shown in the diagram. Much of this stage revisiting was stimulated by changes in the environment that blocked traditional ways of engaging community, such as in-person group planning and collective innovation thinking. Since we knew this work was intended to be an innovation process, all during the work we were able to pivot, try again and explore new approaches rather than abandoning it because our assumptions in the beginning were not right. That approach of trying, rethinking, and trying again became part of the way LISC engaged with its partners, enabling communities to explore ways to gather and communicate information.
Progress toward an innovation
Our work on this grant positioned us as a trusted intermediary to strategically meet new and existing needs and resulted in the following successes that we will continue to drive forward:
1. LISC’s roles were better understood by all the actors in economic development work in Duluth. We are seen as a community convener, a resource for developers, an information bridge between disconnected sectors.
2.The Duluth Housing Trust Fund, formed at the end of 2021, was strongly informed by this work. This is an $18M fund that will combine public and private resources to generate 400-800 units of housing.
3.Community priority projects that addressed empty or underutilized buildings, like the Duluth Armory, are being addressed by developers who are committed to neighborhood revitalization.
4.We received a $1.3M DEED Grant to revitalize economic corridors hit hard by the COVID-19 pandemic. LISC was seen as a trusted partner lead this multifaceted change effort. Impact investing will be an important part of our work.
5.LISC strengthened its organizational commitment to diversity, equity, and inclusion.
1. LISC’s roles were better understood by all the actors in economic development work in Duluth. We are seen as a community convener, a resource for developers, an information bridge between disconnected sectors.
2.The Duluth Housing Trust Fund, formed at the end of 2021, was strongly informed by this work. This is an $18M fund that will combine public and private resources to generate 400-800 units of housing.
3.Community priority projects that addressed empty or underutilized buildings, like the Duluth Armory, are being addressed by developers who are committed to neighborhood revitalization.
4.We received a $1.3M DEED Grant to revitalize economic corridors hit hard by the COVID-19 pandemic. LISC was seen as a trusted partner lead this multifaceted change effort. Impact investing will be an important part of our work.
5.LISC strengthened its organizational commitment to diversity, equity, and inclusion.
One last thought
Ultimately, we expanded our approach from being OZ specific to focusing on social impact investing, or investing that yields financial return and greater community good. Exploring OZs has led to LISC being able to work strategically with investors on projects like bringing the Duluth Armory back to life (an initiative that is currently underway, though technically not an OZ project); working with Family Rise Together on their housing program; informed our work in creating the Duluth Housing Trust Fund; and led to a more formal way to incorporate community input into development projects. We created a process to identify and work with neighborhood leaders in under-invested parts of the city to better understand community needs and wants. Based on our neighborhood-level work, we developed a tool to match-make communities and developers. Zeitgeist, Eco3, and community leaders of the Riverfront neighborhood have been our partners in this; and work is ongoing.