An essential tool for Community Development Corporations (CDCs) is the Community Economic Development (CED) program administered by the Office of Community Services in the Department of Health and Human
Services. CED direct grants to CDCs and are used to finance business and job opportunities in
low income communities. CED grants are the ‘glue’ that holds deals together. CDCs operating in
low income urban and rural communities have found CED grants an important tool for attracting
other capital.
Section 680(a)(2) of the Community Services Block Grant (CSBG) Act of 1981, as amended,
authorizes the Community Economic Development (CED) grants. CED grants are made on a
competitive basis to private, nonprofit Community Development Corporations (CDCs) and are
used to provide technical and financial assistance for private business enterprises and other
economic development activities designed to address the economic needs of low-income
individuals and families.
CDCs almost always use CED funds with other sources of public and private capital to finance
commercial and industrial facilities, small businesses, and mixed use projects. The emphasis of
the program is on job creation and the standards required by the Office of Community Services
(OCS) are among the most stringent in the federal system.
The Community Economic Development program is the only federal program available to
Community Development Corporations that exclusively targets low income communities for
economic development assistance. What’s more, in this highly competitive program, CDCs must
target job creation at no higher than $20,000 per job and leverage project funding from other
sources. This is the lowest standard among federal agencies.
A typical project will be in a community with poverty and unemployment rates well above the
national average. These communities are places with low levels of economic activity. In
addition, there are often few services and facilities available to residents. As a result of such
economic conditions, businesses and projects in these communities encounter a myriad of
obstacles that often prevent them from securing the financing they need from conventional
sources. These hurdles include low loan-to-value ratios, uncertain and transitional markets,
owners with limited credit, and limited understanding on the part of investors of the business
opportunities in these areas. Many of these communities have a strong potential for economic
growth, especially with the right blend of technical support and private sector investment. The
American Recovery and Reinvestment Act estimates that it costs about $92,000 to create one
job, yet OCS requires job creation at no more than $20,000 per job. At least 75% of the jobs
created under CED are targeted to low income individuals.