Transit Route Development

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Two local non-profits have received $30 million in federal funding to help develop business and housing near transit routes. Local Initiatives Support Corporation (LISC) and Raza Development Fund (RDF) received the money. Terry Benelli, executive director of Phoenix LISC, will tell us more.

TED SIMONS: Coming up next on "Arizona Horizon," we'll hear about an effort to help disarranged areas along transit routes. A Casa Grande company is using a desert plant to make rubber tires. And we'll check out a music program for students created by a high schooler. Those stories next on "Arizona Horizon."

VIDEO: "Arizona Horizon" is made possible by contributions from the Friends of Eight, members of your Arizona PBS station. Thank you.

TED SIMONS: Good evening, and welcome to "Arizona Horizon," I'm Ted Simons. A number of education groups gathered today at the state capitol to urge of governor to call a special session of the legislature. The groups want lawmakers to vote on using surplus state revenue to settle a lawsuit over inflation-adjusted school funding. The five-year-old lawsuit alleges the state failed to fund adjustments. The state now owes schools $337 million a year effective immediately.

VIDEO JULIE ERFLE: They have been fighting this in the courts for more than four years, the voters decided many years ago through prop 301 they owed this money. Let's honor the voters and pay our debts to schools.

TED SIMONS: Some lawmakers say they are for a special session but there's been no comment from the governor's office.

TED SIMONS: Two local nonprofits have received $30 million in funding to help develop housing and business near transportation routes in disadvantaged areas. Here to tell us more is Terry Benelli, Executive Director of Phoenix LISC.
TED SIMONS: Good to see you, thanks for joining us.
TERRY BENELLI: Good to see you too Ted.
TED SIMONS: What is Phoenix LISC?
TERRY BENELLI: Phoenix LISC is Local Initiative Support Corporation. We're a national community developing financial institution that runs 30 different programs across the United States and we're headquartered in New York.

TED SIMONS: The program we're talking about tonight is Transit Oriented Development. What is that?

TERRY BENELLI: It is transit oriented development, it is the target area that LISC Phoenix works in. It's areas that are a mile either side of the light rail line.

TED SIMONS: It's basically a platform kind of for community development? Am I getting that right?

TERRY BENELLI: It is, yeah. We believe the biggest opportunity for low-income people to create assets to buy a home, to further their education, to increase their income, is around the transit line, it reduces the transportation costs. That's a monthly cost to families and to individuals besides housing costs. So the research has shown that to have a vehicle costs about $800 a month. If you can reduce those costs by living next to the light rail and the transit system, we think it helps people build assets.

TED SIMONS: Attracting new Housing and businesses to low-income communities, how do you do it?

TERRY BENELLI: We do it by filling the gap. So developers want to build, developers want to build housing. We believe there should be products for housing that are suitable for low-income families as well as higher income families. It's more difficult to build housing for lower income families or workforce housing, because the cash flow kind of doesn't work. When there's a gap in a project that a developer needs funding for, we come in. Developers typically use low-income housing tax credits. And LISC which is also our partner in this development fund help fill that gap with our funds.

TED SIMONS: You're talking about creating affordable housing and also preserving, as well?

TERRY BENELLI: Yes. It's always easier to keep what you have than to build new.

TED SIMONS: We've got housing taken care of. What about like revitalizing retail? How would you go about funding this, how would you do that to revitalize retail?

TERRY BENELLI: It's kind of the same story. Banks will lend a new business or expanding business maybe 80% of the dollars they need. We'll come in with the last 20% to help a business get open or expand, all around the opportunity of job creation for people that are lower income.

TED SIMONS: Is there a big process involved here? Do you have to look over the businesses or housing developments first and say you qualify, you look a little sketchy?

TERRY BENELLI: Uh-huh. We underwrite just like a bank. We're a little more -- not as adverse to risk as a traditional bank, not because we think we're going to lose our money, but just because these project are riskier projects because banks aren't comfortable either funding around the transit -- although that's becoming a little more palatable for the traditional financial institutions -- but we know it's a comprehensive look at the transit alignment. So we take into factor how many jobs are created, how many units of housing are going to be created, knowing there is some kind of tax credits or subsidies that go into a project.

TED SIMONS: You're also concentrating as well on better access to health services and even going as far as saying access to a better lifestyle and healthy food.

TERRY BENELLI: Yes, We are attempting to bring in fresh grocers to the lower income areas. Potentially a smaller footprint than our traditional grocery stores that we look at, to help keep costs down. Those areas typically aren't as dense as traditional grosser would put, a Fry's or Albertsons or whatever. We look at them with capacity building; helping them figure out their performance, helping the businesses figure out what products they would want to put in their stores to make them successful.

TED SIMONS: How does this work not in competition, but in relationship with general development? Maybe the idea is you're going put something over there on location X and it's fine for now. But in five years location X could be prime property. How does that work?

TERRY BENELLI: We still hope the people that are in workforce jobs, entry level professionals, would still have a place in those areas where the land values may rise. A typical tax credit project is there for 15 years and then the preservation happens with the tax credit projects, not necessarily historic, where we hope they go in, rehab the development and then it's again 15 years where the rents are capped and it's still available for those people, underserved populations.

TED SIMONS: So there is a relationship with the cities involved?

TERRY BENELLI: Yes, oh, yes. Cities get federal funding called home dollars and they put money into our projects also to help make the deal's cash flow.

TED SIMONS: Now the $30 million dollars you're getting i's not federal money, where is this money coming from?

TERRY BENELLI: This money comes from the banking institutions. The traditional banking institutions where you and I have accounts, they provide loans at a very low interest rate to us, so that we can re-loan the money, do capacity building within the nonprofits and the developers that we work with, so that we can make sure that their projects actually go and they are successful. And banks get what is called community reinvestment Act credit for these loans they make to LISC and RAZA.

TED SIMONS: This could include acquisition funds, construction costs?

TERRY BENELLI: Every dollar you can get from a bank you can get from us.

TED SIMONS: As far as pre-development activities, I know that that's included here. What do you mean by pre-development activities?

TERRY BENELLI: Those are the costs that happen with a development project prior to the first shovel being in the ground. Architectural costs, environmental costs. Those kinds of dollars that potentially could be lost by a developer, if they don't get their tax credits, to get their project out of the ground. We work with an Arizona community foundation, a fund the local banking community has put together, so developers can access some costs for their pre development. It attracts them more to get into this line of business.

TED SIMONS: Now, $30 million infusion, that's pretty impressive. The last time we had you guys on her about four years ago, $10 million was kind of like seed money to get things started. How was that money spent, what are the results?

TERRY BENELLI: The $10 million is what LISC put into the development fund. RAZA came to the table with another $10 million. We loaned $22 million and it leveraged $355 million worth of additional development, or that was the leverage on our $22 million. We built 2,044 units of affordable housing, 200,000 square feet of commercial space. You may be familiar with the Newton, which used to be the Beefeaters, that was one of the developments we did, federally qualified health care center on the light rail, Adelante in Mesa. So our dollars stretched for housing, business and health.

TED SIMONS: And when stretched that way, living standards, the idea that is living standards improve. Have living standards improved?

TERRY BENELLI: We think that they have, we know that they have for the units we built along light rail, we helped to build along light rail. And for the projects that were rehabbed and that families can still live in them. You know there are good quality projects that you can't tell the difference between a tax credit project and a regular apartment complex, or a multifamily housing unit. To have a safe and comfortable home to live in certainly takes the stress off of a family so they can go out and be dedicated to their jobs, their children can be educated and potentially move up in the world.

TED SIMONS: And I would guess potentially an expansion as far as money and opportunity is concerned with the expansion of the light rail.

TERRY BENELLI: So the last time we thought it would take us about five years to get this $20 million out of door, it took us four. With the announcement, I think the vote was three days after our announcement. We're thinking this $30 million is going to be easily spent in three years.

TED SIMONS: My goodness. Good luck, congratulations on the success so far and continued success.

TERRY BENELLI: Thank you Ted.

TED SIMONS: Thank you.

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Terry Benelli: executive director of Phoenix LISC

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