Appalachia Economic Development Initiative Archive

Program Description

The Appalachia Economic Development Initiative (AEDI) is a collaborative effort among three federal agencies – the Department of Housing and Urban Development (HUD), the Department of the Treasury - Community Development Financial Institutions Fund (CDFI Fund), and the Department of Agriculture – Rural Development (USDA-RD). The AEDI's goal is to increase access to capital for business lending and economic development in the chronically underserved and undercapitalized Appalachia Region. Specifically, it will provide investment and technical assistance to State community and economic development agencies that apply on behalf of local rural nonprofit organizations or community development corporations that focus on small business development to benefit the residents of the Appalachia Region.

Background

HUD, USDA-RD, and the CDFI Fund have all identified the lack of capacity among organizations serving the Appalachia Region and similar persistent poverty communities as a limiting factor in the effectiveness of federal programs. Inconsistent availability of limited public funding in any one region or community plays a role in this because organizations specializing in small business support cannot sustain themselves and grow. All of the agencies recognize that the targeted Appalachian communities and populations receive insufficient services because they lack organizations with the capacity to effectively respond to community needs. Conversely, higher-capacity organizations working throughout the Appalachia Region consistently cite lack of access to capital as a major barrier to expansion.

The Appalachian Regional Commission (ARC) is a regional economic development agency that represents a partnership of federal, state, and local government. The Appalachian Region, as defined in ARC's authorizing legislation, is a 205,000-square-mile area that follows the spine of the Appalachian Mountains from southern New York to northern Mississippi. The Region's economy, once highly dependent on mining, forestry, agriculture, chemical industries, and heavy industry, has become more diversified in recent times, and now includes a variety of manufacturing and service industries. In 1965, one in three Appalachians lived in poverty. In 2008, the Region's poverty rate was 18 percent.

The ARC has a variety of programs and activities in place to promote entrepreneurship and business development in the Appalachian Region. Such services include development of an overall policy framework for addressing capital and credit availability and establishment of training programs for businesses and entrepreneurs. ARC has also worked to create a development finance intermediary that will increase business lending in Appalachia by helping community lending and investment institutions access capital from sources that would otherwise not be available to them, such as regional and national banks, utilities, and national foundations. This intermediary program, called the Appalachian Community Capital (ACC) intermediary, will allow lending institutions to expand the level of business support they can provide in their local communities. However, ARC recognizes that areas within the Appalachian Region remain too underserved for these and other business development programs to be fully effective in meeting the economic needs of local communities. 

Roles of the Federal Partners

HUD will:

• Make grants available to State community and economic development agencies that apply on behalf of local rural nonprofit organizations or community development corporations serving the Appalachia Region, pursuant to a Notice of Fund Availability (NOFA)
• Provide points for rural and tribal Promise Zones under the President’s Ladders of Opportunity Initiative, should any be designated, pursuant to a (NOFA)
• Evaluate the outcomes of the AEDI in relation to other HUD grant-making approaches

The CDFI Fund will:

• Provide scholarships for AEDI grantees, allowing staff to attend CDFI Fund sponsored training workshops
• Provide AEDI grantees with technical assistance opportunities
• Sponsor webinars specific to the needs of AEDI grantees

USDA-Rural Development will:

• Where appropriate and permitted under program regulations, make efforts to award points in relevant program areas for AEDI grantees
• Engage other entities of USDA to assess capacity of AEDI grantees to help deliver programs supporting production agriculture businesses and business activities promoting fresh food access and distribution in the Appalachia region, and other policy priorities

Program Specifics

AEDI's goal is to increase access to capital for business lending and development in the chronically underserved and undercapitalized Appalachian region. Specifically, it will provide direct investment and technical assistance to community development lending and investing institutions in areas of the Appalachian Region that suffer from a lack of capacity to support business development. The AEDI will coordinate with ARC's economic development programs such as the ACC intermediary to identify areas within the Appalachian Region that are most in need of lending and investment capacity. The AEDI will provide funding and assistance to local rural non-profit organizations that will increase the capital and support available to businesses in underserved communities and enhance the effectiveness of economic development programs for these areas.

AEDI will focus on improving Appalachian communities and creating asset building opportunities for Appalachian residents by helping local financial institutions improve their capacity to raise capital from public and private sources, and to lend and invest it in local communities. Strengthening local community development lenders and investors will also widen the channels through which larger private institutions and federal agencies can reach small business owners and service providers who need their support.

Eligible Applicants: Applicants that are eligible to participate in this initiative are State community or economic development agencies that apply on behalf of local rural nonprofit organizations in the Appalachia Region. Applicants may serve markets other than Appalachia residents and communities, using other sources of financing.

Goals: Funds may be used to support eligible activities that serve the following goals:

• Expanding services in eligible Appalachia Region target markets (as defined below) by established lenders and investors in business development
• Securing new public or private capital sources for lending or investing in existing or new eligible target markets  

Eligible Target Markets: Eligible target markets for use of AEDI funds include geographic areas or populations, as described below. 

Geographic areas include the 420 counties in 13 states that make up the Appalachia Region, as defined by the Appalachian Regional Commission. Appalachian Regional Commission (ARC) is a federal-state partnership working to stimulate economic development. The ARC is composed of the governors of the 13 Appalachian states and a federal co-chair, who is appointed by the president. Local participation is provided through multi-county local development districts. The thirteen states that are included in the region are: Alabama, Georgia, Kentucky, Maryland, Mississippi, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, West Virginia, and Virginia. A full list of all 420 eligible counties can be found on the ARC website.

Eligible Activities: Innovative economic development uses, including but not limited to loan or investment capital, loan loss reserves, program staff costs, information systems, market studies, portfolio analyses, business planning, and other activities supporting the program goals.

Grant Amount and Term: The maximum amount of funds available for is $1,000,000. HUD will enter into a grant agreement with successful applicants for the performance period for up to 36 months.