Tiffany Owens Reed  0:00  

Hi everybody. Welcome to another episode of The Bottom-Up Revolution podcast. I'm your host, Tiffany Owens Reed. One of the biggest hurdles with facilitating a shift towards greater resilience in our cities is navigating the financing mechanisms that can unlock creative ideas. So often, the change in our communities is driven by capital that's coming from outside, and that's not always aligned with the community's best interests. I have two guests today who are piloting something truly revolutionary, a model of community investing that focuses on empowering local residents to invest in their own city, and in doing so, to become a stakeholder in their community's future. Today, I'm joined by Jessica David. She is the founding president of Local Return, a nonprofit organization dedicated to building community wealth through ownership and investment in Rhode Island neighborhoods that have experienced historical disinvestment. For 20 years, she has been working at the intersection of people and place. She is a master of divinity candidate at Harvard Divinity School, where she is studying the intersection of spirituality and money. I'm also joined by Josh Daley. He's the co-founder and treasurer at Local Return. His background is in supporting entrepreneurs, helping them start and grow their businesses. He has developed several innovative partnerships to help meet small business needs. He is also the associate director of the Rhode Island Food Policy Council, where he wears many hats advancing the organization's mission of building a more just and resilient food system for the state. So two extraordinary guests, I'm really excited to bring you this conversation. Jessica and Josh, welcome to The Bottom-Up Revolution podcast.

Josh Daley  1:43  

Thanks so much for having us.

Jessica David  1:44  

Yeah, I'm excited to be here.

Tiffany Owens Reed  1:45  

I'm looking forward to this conversation. To start, I would love it if you all could share with us a bit about your professional background and how you came to Local Return. Perhaps within your answers, you can explain a little bit more about what Local Return is. I know we'll dive more into that next. But Josh, could I start with you?

Josh Daley  2:06  

Yeah, absolutely. In my career, I've done few different things, but I call it all under the umbrella of community economic development. As you said, helping entrepreneurs and small business owners start and grow, businesses get capital, all that kind of stuff. When Jess and I met, I was working at the state's Small Business Development Center, and Jess was working at the Rhode Island Foundation, the state's community foundation. We were working on various different projects together. And then we were starting to share about our love and passion for community wealth building and sort of building new models, and geeking out about things that are happening around the country, and thinking, "Why isn't that happening in Rhode Island?" And that was the spark of, "Well, I think we need to do it in Rhode Island."

Tiffany Owens Reed  2:59  

Jessica, I'd love to hear your story.

Jessica David  3:01  

Well, like Josh said, I was at the Rhode Island Foundation, our community foundation, for 13 years. So that was where I spent the bulk of my career, to date, in philanthropy. Before that, I actually worked in housing, affordable housing, homelessness services in the nonprofit sector here locally. So I very much come from a background of nonprofits, profit service work, community oriented work. Really I am interested in where money intersects with those things. And you know, how do we solve problems? How do we pursue opportunities? How do we bring money to bear in communities in ways that are respectful and empowering and actually useful? And that was really where the work with Josh and our other co-founders started. Just kind of dreaming, talking about that. Early in the pandemic, we felt there was a gap, we went ahead and created Local Return, and it's evolved from there.

Tiffany Owens Reed  4:07  

Yeah, well, we're going to jump more into the story of Local Return. Josh, I just want to come back to you really quick. You use this phrase "community wealth." for our listeners who maybe have never heard of that, what's your quick explainer for what you mean by that? Could you unpack that for us a little bit?

Josh Daley  4:24  

There's different types of wealth. There's certainly financial wealth that everybody thinks about, but there's other sorts of social wealth and community connected wealth. When I think about community wealth building, it's about all those different types of wealth and connections and the ways that we can provide enough for ourselves and enough to share. That's sort of what I think about when I think about community wealth building. It's sort of the flip side of the same coin of of local ownership and investment. Local ownership and investment builds community wealth. It builds the connections, the capital, the resources that make people able to do those creative things that you talked about, able to be more resilient in making their communities the places they want them to be.

Tiffany Owens Reed  5:15  

Jessica, would you add anything to that? Also, could you summarize the typical model for how financial health is evaluated in communities, and maybe how y'all are trying to reconfigure that?

Jessica David  5:35  

Yeah. We are really deliberate about using the term wealth and community wealth. It's tricky word because sometimes, when you talk about wealth and wealthy, you think of Jeff Bezos, which is not at all we're talking about. To us, community wealth is the assets within a community that are marshaled within that community, that can rotate and multiply within that community to benefit the people there and are deployed by the people there. So it's not something being done to them or being dropped in and landed on them, but it's assets from the people from the place, for the benefit of those people and that place. Josh used the word resilient. We really deliberately focused on wealth because, to us, that's where social resilience comes from. It's what allows people to bounce back. It's what allows places to bounce back when something bad happens. Wealth is a cushion. It can really be all of the difference for people, either when bad things happen or to take advantage of opportunities.

Tiffany Owens Reed  6:44  

That's so helpful. Thank you all for diving into that with me a bit. I know that was not our second question, technically, but it is helpful to think about that. For me, it sounds like you're saying that you're looking for ways to activate the resources and assets that already exist in this community from the people who live there, put them in a position to put those talents, those assets, to productive use in a way that actually benefits the community. So they're improving not just their own personal resilience, but the resilience of the city and community that they live in. To me, this feels very different from, like, parachute wealth? You know, exploitive, where it's coming in. And I think this is just interesting to think about. How do we define a wealthy community? And I think a lot of people think, "Well, there's a lot of rich people that live there that we can tax, and so we have money to provide services." That's not the same thing as "We have a lot of citizens whose talents have been put to productive use." Very different way of thinking about what a wealthy community is.

Jessica David  7:49  

We actually had an intern one summer who spent the entire summer trying to figure out how to define and measure a community's wealth. And we had a dashboard, she did an amazing job of 20 plus indicators, I think. So it isn't easy, and I think that's why, in the economy, we default to these very simple measures like GDP or stock return, because they're easy to measure. It's easy to fit into our head and understand. Is it going up or down? And the reality is, you know, community wealth is exactly what you said. It's all of those things. It's different kinds of capitals. It's how people feel about their community, how they feel about each other and themselves. So it's a complex thing to just sum up.

Tiffany Owens Reed  8:37  

It's also not always transactional or financial. It can also have to do with how easy it is for someone to put their ideas into practice, right? I think there are a lot of communities that have latent wealth that's not activated because no one has time to run around and comply with a billion rules about selling a croissant.

Jessica David  8:56  

Absolutely yes.

Tiffany Owens Reed  9:00  

So let's talk about Local Return. Jessica, can you share a bit about what Local Return is? What's its backstory? What's your mission?

Jessica David  9:09  

Sure. So we started to pre-answer this question, I guess. But early in the pandemic, I had left the foundation, Josh was still at the SBDC. We have four other co-founders of Local Return. We just started meeting and talking about what we felt was really missing from the response and the conversation. And this wasn't unique to covid, but it covid kind of exacerbated it, and it really was that focus on wealth and resilience. So not just meeting immediate needs, but doing it in a way where people have ownership. They're taking advantage of those assets and those strengths, and they have ownership of what's out there, so that it's their decisions that are shaping the future and they can take those assets where they want. So we felt like there was a gap. We started meeting and talking about what that would look like. Formed a nonprofit. Local Return is a 501 c3 organization. The two strategies we wanted to focus on in the very beginning were community investment and community ownership, which are really two sides of the same coin. So how do we generate investment from and within communities in ways that are respectful and fair and just, and how do we make sure that assets continue to be owned or are re-owned by people who live there? So that's the path that we've taken since our forming four years ago.

Tiffany Owens Reed  10:36  

So it's basically creating mechanisms for local residents to play the role of investor, but also be able to be invested in. Would that be a helpful way of putting it?

Jessica David  10:48  

Yeah, and we talk a lot about building the ecosystem for community wealth, because it's doing all of that at the same time. It's the supply and the demand side. It's the investment pipeline and the investment fund and resources, the entire environment.

Tiffany Owens Reed  11:09  

So if I understand correctly, y'all have two kind of programs or emphases. One is building up a cohort of small scale developers. So I believe Local Return does have a slight emphasis on real estate and also on small businesses, right? So helping cultivate that missing middle, that incremental development side of the development ecosystem. So, you have this program where you're building up a cohort of small scale developers, then you're also building up this local investment fund to provide the funding that those developers will need for their projects to launch, and you're also supporting small businesses on main street. Josh, could you walk us through those programs and give us the lay of the land about how you all are putting putting your ideas into action?

Josh Daley  11:57  

Yeah, as Jess mentioned, it's ecosystem building. So there's a lot of different pieces to the puzzle. We have Local Return, the nonprofit that does education and network building around community wealth. And then we also, out of Local Return, incubated this Diversified Community Investment Fund to have both the resources, network, support for small scale developers, as you mentioned, and small businesses, and then also the funding pathway for them. They connect on both the supply and demand. So building up the pipeline. There's a program called Jumpstart that started in Philadelphia that listeners may be familiar with. That does cohort training for new small scale real estate developers doing that sort of missing middle, incremental development that your listeners will be well aware of. They graciously made many of the resources related to that open source for other places to take it and build on it. So we took that and built on that for Providence and for Rhode Island, and we're building out the fund to fund those small scale, early stage real estate development projects. And then the other use case is around small businesses owning their own real estate. This was actually one of the other things that was part of what gestated Local Return. When I was at the Small Business Development Center and Jess was at the foundation, we were especially looking at the ways that small businesses that we love, that so many people loved, were often in precarious positions because they didn't own their real estate. And that came to a real head during the pandemic, where there was a lot of precarity. Yet, I was seeing in my work that I was helping a number of small businesses access capital to buy their real estate and thereby create stability for themselves and the neighborhoods that they were in, the main streets that they were in. And they could then potentially use some of that real estate for additional commercial units or residential units, and they can become anchors in their community. So we're building up supports and resources for small businesses doing that, and then also a funding source for that as well. We can get deeper into what the funding looks like, but those are the two types of uses. Training, resources, and education on one side, and that the funding on the other side.

Tiffany Owens Reed  15:00  

So I'd like to jump into the Community Investment Fund side a bit more. Jessica, could you share with our listeners a bit of what a Community Investment Fund is and how it works? And then just tying it back to our earlier conversation, how is this connected to the overall goal of building community wealth?

Jessica David  15:17  

Sure. It is complicated, as we've learned over the last couple of years. So Tiffany, tell me if I'm going off track. To start, one of the first things we did as Local Return is we brought Michael Schumann in to do a series of workshops around local investment. So if you have a little bit of money and you want to invest it in your community, what are the ways to do it? And we learned that it's actually really hard, because the way regulations and laws set up, it doesn't encourage or easily facilitate that. So we had about 35 or so people who went through these workshops who got super excited about the idea and were like, "Okay, we're ready. We've got a little bit of money." And we all looked around and realized that there was no pipeline of local investments here. There weren't any businesses doing crowdfunding raises at that time. There wasn't an investment fund that was open to the everyday, average Rhode Islander. So that led us to creating a pooled fund where we can come together. None of us have to be super wealthy, because we're combining our money. We're increasing the impact that we can have, we're decreasing the risk. We felt like that was the best way for us to start that ecosystem building towards community wealth. And then we realized that's actually really hard, because securities law does not make it easy to do that kind of community investment. So we had to work with a lawyer who really specializes in this. It took us about three years to put this together. Bottom line, we came up with a structure that we feel really good about and that does the things that we want it to do. There were three things we really felt strongly about. One, we wanted it to be an investment fund. So we wanted there to be a financial return. It may be a below-market return, it wasn't about just getting the highest financial return for folks, but we were trying to prove a model here. Two, we wanted everyday people to be able to participate. So it's not just for accredited investors, but for the rest of us who are not super wealthy or work in finance all the time. Three, we wanted to have a community governance structure. So we wanted the decisions made by people as close to the ground as possible. So those were our non negotiables. We ended up with a legal structure called the Diversified Community Investment Fund, which means that at least 60% of our portfolio will be in non security investment securities, which is essentially real estate. We really liked that because it suited the place-based aspect of of our work. You know, wanting to invest in communities that have experienced generations of either bad investment, the kind of exploitative, extractive investment that you talked about, or just none. And so real estate, when you're thinking about assets and asset building, is so tangible, and it made a lot of sense to us. So we went with that structure. We created three levels of stock. So we have a Series A, which is open to Rhode Islanders who meet a low income threshold. They can invest for a minimum of $500 and they will get the highest rate of return. Then we have a Series B, which is for like my peers, it's a $2,500 minimum. They get a slightly lower rate of return, 85% of dividends. Then we have a Series C, which is for accredited investors, and that's a higher minimum, $5000 if you're just an individual, $25,000 if you're an institution, and 70% of the dividend is the return. So we tried to flip that risk-return structure from what you would normally see, recognizing that folks who are lower income tend to be in the communities we're investing in. Proportionately, they're investing higher percentages of their own assets and we really want to preserve a higher return for them. The last piece in terms of our structure, to get at that governance piece, we are doing the offering through a direct public offering, which means we can raise money from any Rhode Islander. We had to get that approved through the state. We're also doing a 506c offering for accredited investors who are not from Rhode Island. And we're a cooperative, so every investor into the fund is an owner. They get one vote, regardless of if they put in a million dollars or they put in $500. They get the same seat at the table and they'll be able to run for the board. We're hoping within the next eight months or so, we'll be able to hold an election to expand the board. The idea is that investors will govern the cooperative going forward, and then we have an investment committee. So per our bylaws, the Investment Committee has to be made up primarily of residents of the neighborhoods that we've identified and prioritized for investment. And we certainly have folks on the committee who have finance and real estate experience, but majority probably not. Really, we're working together to build all of our capacity around how we think about this kind of investment. How do you make judgments when it's not just about financial risk or financial return? What are you looking for? What's a fair process? We want people to go through this process and leave stronger than they came in, whether they get the funding or not. So that's a high level overview. I hope that made some sense.

Tiffany Owens Reed  20:56  

That was great. Thank you for walking us through that. Josh, I know that we kind of touched on this already, but maybe this is a chance to go into a little bit more in depth. So, Jessica just walked us through how you're building out this fund. Can you walk us through a little bit more about how you're going to use the money? We mentioned small skill development. We mentioned coming alongside small businesses. Can we talk a bit more about the small scale development side and what you all were noticing about the housing landscape in Rhode Island, and why this really stood out as a meaningful area of investment?

Josh Daley  21:39  

We saw a lot of things that are true in a number of cities and places around our country. That housing is not being built at the level that it's needed to keep up with the demand, and that's creating an affordability crisis. And we'll talk more about that in a little bit. There's money out there if you're a big developer with connections doing huge units, and that's often super contentious. And I think we saw this groundswell of a movement in Rhode Island, of folks who are thinking differently and advocating on the policy side and starting to think grassroots about how we can do different types of development, different patterns of development that are more aligned with historical patterns of development in our cities. So again, that's all stuff I think people in the Strong Towns world know way better than we do. We wanted to come in with the fund. We knew we wanted to be place-based, as Jess mentioned. So that felt right in line. We wanted to also come in a place where there wasn't capital available in typical ways. Banks and credit unions and lenders often won't touch those small scale developers, certainly for the first two to five years of their projects, or two to five projects, or whatever else. There's a need for that kind of patient capital, what we call possibility capital. And we saw that, in Jumpstart model from Philly and other jumpstart programs, they have loan funds connected to the programs to meet the needs of the folks who are doing that development. So that naturally grew from the different things that we were focusing on, and from seeing that there was this need that was bubbling up.

Tiffany Owens Reed  23:50  

Yeah, it's a side to the housing conversation that I think can kind of fly under the radar. Because part of it is zoning reform, part of it is finding people who want to work as in commercial developers, but a huge part of it really is the finance and getting the capital to actually make these projects a reality. Jessica, can you share a little bit more about the goals around the fund? Like, what are you all aiming for, in terms of what you're hoping to raise? Where are you in that journey? And just anything interesting you've noticed. I'm mostly curious about what conversations are like when you're talking to people, especially ordinary people, about the opportunity to invest in the community in this way. What have y'all heard? What have you learned? What are maybe some challenges you're thinking about as you continue to reach for your goal?

Jessica David  24:36  

Absolutely. Well, our goal is three and a half million dollars, and we always expected it was going to take us about three years to raise that. People ask a lot like, "Why three and a half million dollars?" And it's just because we felt it was the right middle point of enough of a stretch, but not too much of a stretch, and it sort of fit the criteria of what we were looking for. Our plan was to really start with community investors, so that people like us, that Series B level, could come in. We wanted to prove that there was real interest and appetite and commitment from the average community member for this fund. And then we would start reaching out to larger financial institutions, philanthropic institutions, more of those institutional investors, and also to lower income investors. So this past year, that's pretty much what we've been focused on. We have 27 investors at the community investor level. We've raised $290,000 from them so far. So we're continuing to raise from that group. This summer, we've been doing a tour of local coffee shops in Rhode Island, just going out and talking to people. So we're hoping we have a few more investments coming down the pipeline quickly from those conversations. And we're starting to reach out to some of the larger foundations, banks, credit unions, just higher net worth folks at the same time. As you can imagine, it's a pretty traditional structure, kind of the pyramid structure, where we want to get a lot of community members mathematically. We also need some larger investors to come in as well. I have to say, the reception have been great. And it could be that we're still starting with that community member level. So, some people, of course, are just not interested in this. They're only interested in investments that have the highest rate of return. And that's easy to say, "Okay, we're not compatible." But most people, when you engage with them and say, like, "Where's your money invested? What do you actually know about that? What kind of impacts is it having?" They start to be like, "Oh, I don't actually know. It's in some fund in Wall Street. And I don't know what all these words mean that show up in really small print." So we have found there's a lot of appetite for putting money into local investments and wanting to see a financial return, of course, but also those other community benefits. People have been enthusiastic about the idea. There's definitely a huge learning curve for all of us around this. Finance and investment is, I think, actually purposely developed and evolved to make people feel like they don't understand it, and to intimidate and to exclude people. I like to say that we can be the dumbest people in the room. I have no problem doing that and inviting other people into learning about it with us along the way. So certainly, there's been a learning curve for all of us as we're doing this work, but I've been really heartened and excited. I had some amazing conversations with people who I never would have expected who really come out and literally put their money where their mouth is, and put it into this fund.

Tiffany Owens Reed  28:05  

It does feel very revolutionary, as I'm hearing you all explain it, just this idea of an ordinary person being able to invest their community, right where they live,  right in their own backyard, and be part of the conversations about the future of their community in such a tangible way. Josh, going back to housing, what is your vision of how these funds could be used to support small scale developers? How does that overlap with the zoning conversation in Rhode Island around housing? And maybe you can tell us a little bit about the housing landscape in Rhode Island as it pertains to trying to find more creative ways to put more housing out there on the market that's affordable in this sustainable kind of way.

Josh Daley  28:55  

So we are not trying to be everything to everyone. There are some fantastic housing advocates and organizations in the state that we've been partnering with. In fact, there's a great newer housing advocacy organization called Neighbors Welcome, and they just had some great successes at our state house, advancing some some great legislation to get zoning reform around accessory dwelling units, around dividing up lots fromsingle family into multifamily, that sort of thing. So there's real energy around that. I think it comes out of a recognition that we have a real affordability crisis in in Rhode Island, in particular, throughout the state. I mean, in the last 10 years, I think the average home price has has doubled. It's gone from like $250,000 to $500,000. And really, the drive for that is a supply and demand thing, right? So we just need more housing. And when you need more housing, what you don't need is more sprawl. What you do need is more patterns of development that look like the communities that you are part of and want to be a part of. So that just all made sense and it's been driven home, too in the work that we've done with the Jumpstart community. We had our first cohort of of folks who are interested in becoming small scale real estate developers. We've been connecting them also with some of the national networks, like the Strong Towns chapter here, and Incremental Development Alliance and the Jumpstart network. It's seeing the other side. One hat that I wore some time ago in my community was being on the affordable housing collaborative for the municipality and then on the planning board for a short period of time. Seeing the ways that there are antagonistic relationships between developers and municipalities, because it's like, here's the developer, here's the residents, here's the community, and they're at odds with one another. What if, instead, the people in the communities were the small scale developers who do the kind of development that they want to see in their neighborhoods? I think that has been eye opening in this process for those folks who went through Jumpstart and for the municipal folks that we've been talking to as well. It's like, if you start to think about it as development isn't a bad word, and if you start to think about it as these developers need to make pro formas and projects that work, and based on current zoning laws around setbacks and parking and variety of different things, those pro formas are not workable without variances, so we need to change zoning to make those types of projects workable. Rhode Island, in Providence in particular, is known for a housing type, the triple decker. So it's three floors, and it has a rich history in our state. Extended families sort of famously lived on each floor. There's that history, and that type of development fits the pattern of our communities. But it's not the type of development that we're set up to do more of without resources, without the zoning changes, without the financing to make that happen.

Tiffany Owens Reed  32:39  

I can imagine that it's really exciting to present a new paradigm for what development could look like that's much more positive and collaborative and healthier. Like what you're getting at with this collaborative, truly local model of people who live here becoming the developers and being able to work in collaboration with people who are in government or city staffers to figure out what makes the most sense for their community, and how they can make projects move forward. That just sounds really exciting, really neat, that that y'all are able to present a vision of what healthier development could look like.

Josh Daley  33:22  

Yeah, it is exciting. I think it's similar to the Strong Towns vision, right? People are afraid of it, because they're afraid of change. They're afraid of it going wrong. They're afraid of sprawl. But when you go on vacation, you like to be in places that are walkable, you're staying in a neighborhood where you can walk around and go to great shops and you want those things. You don't know you want those things. So if we can show people, this is the vision, and these are the ways that we can get there together, I think that's the exciting thing.

Tiffany Owens Reed  34:06  

It feels like the conversations around participating in something like this could be like, "What's the vision you want for your community? Participating as an investor, no matter the scale, is a way of helping bring that vision to life, or getting a chance to be part of shaping that vision." I think for so long, we've been disconnected from any conversation about vision in our communities. It's always been something happening to us, someone else's vision buried in a document in a random meeting in city hall.

Jessica David  34:43  

Yeah, absolutely. You used one of my favorite phases, "new paradigm." I think that is ultimately where we want to get. Why do we have these paradigms for wealth, for money, for development, for the structures that they're allowed to grow into, and can we think outside of that? We try to start the conversation from, "What kind of places do people want to live? What's going to make you feel good about where you are? What's going to make you feel safe and happy and secure in a place you're proud of and you feel connected to?" I think it's really that connection that people have to place, that is about love for place, that's where resilience comes from. That has nothing to do with voting laws or financial returns and things like that. That has to do with so many other factors. We are trying to go back to where our financial systems and structures can be in service of that relationship with community, instead of the other way around where community ended up being used to generate some financial returns and benefits for a few people.

Josh Daley  36:14  

If I can add, it's really interesting that you both talked about a new paradigm, because it is a new paradigm, and yet it's an old paradigm, right? And I think there's something analogous analogous in the zoning changes that happened over generations and what happened in our financial systems. There were changes that happened to zoning laws that didn't allow for patterns of development that people wanted, and got in the way of those patterns of development. Same types of things with securities law, it was good intentions to try and keep people from getting scammed. But then you put in place all these laws around securities and say how you can and can't invest your money. Well, suddenly you can't invest your money in your own community, and I don't know that anybody intended that, per se, but how do you  revolutionize the paradigm so that it's back to this older paradigm? People love their communities. They want it to be livable. They want to control the vision of what they want to see. Unfortunately, it's these things around zoning and financial regulations that stand in the way of making that real.

Tiffany Owens Reed  37:42  

Yeah, it's really helpful that you pointed that out, Josh. I feel like so much of the conversation around the future of our cities eventually does, at some point, come down to money. And I think what y'all are doing is so interesting, because it's saying, "Okay, fine, money is a real issue. Let's not run from that. Let's face it head on, and let's rethink the patterns that dictate how we can invest in our own communities." And I'm sure that's not an easy task. Jessica, could you share some of the challenges that you're facing as you pursue this goal?

Jessica David  38:18  

Money is like number one on the list of things you don't talk about in polite company. I think that's why we use words like finance and capital, instead of just saying money when it's really about money. So one challenge is that it's a lot easier to talk about visions and ideas, even from the most well intentioned of us, and not get into the actual nitty gritty of how to how to make that work financially. So I would say that would be one challenge. Another is just a lack of awareness around investments and how they work, like this securities law, stuff that certainly we did not know anything about before this. Talking to people about the Investment Securities Act of 19 or Investment Companies Act of 1940 ,which I've learned more about than I ever wanted to, that would be another challenge. The legal structural barriers, as well. It took us, like I said, over three years to get the fund in place. That's a long time, and that's a ridiculous barrier to entry. So just keeping people's interest long enough to get us to the place of being able to take $1 from them was a challenge. The last two things I'll say, one is outreach. We're a very scrappy organization. We have no paid staff. I mean, we're doing this in our extra time, and just getting out there and getting the investors to reach our goal is always a challenge. And I think, as Josh indicated, when you actually get into it and start trying to make these deals work, it's complicated. I have so much admiration for people who do community development work and who do work with the money and somehow make very complex, difficult deals work, especially for things like affordable housing or true community development projects. We're just so out of whack right now, there's a lot of work that has to be done to realign things. There's no part of this ecosystem that's easy, I guess. Josh likes to say, "At every point where we had kind of a choice of how to go, we chose the hardest possible version." Like, yes, we want unaccredited investors, and yes, we want an investment fund and not just a charitable loan fund. And yes, we're going to build the pipeline and the supply at the same time. And like we said, there are reasons for that, but I think it's just an uphill climb each step of the way.

Tiffany Owens Reed  41:02  

Yeah. I might use lingo that's not actually accurate for the finance world. But, Josh, is there a specific way that funding has to be packaged for small scale developers in order for them to be able to access it? Is that something that y'all are working on? Like, let's say we achieve our goal in terms of getting all the funding. Now we have to distribute the funding. We have these channels, but I'm just curious what that actually looks like. Can you just illustrate that for us? Does it have to fit within certain terms or products, or how does that actually get into the hands of the developers themselves?

Josh Daley  41:45  

We have the ability as kind of being small and scrappy, to be somewhat flexible in meeting those needs. I would say that one's not as tough a nut to crack. There are loan funds out there. I mentioned Jumpstart has loan funds around the country that do this kind of lending. It's oftentimes the short term gap lending, right? It's the 12 to 18 months for you to get the project done, and then you're going to have what they call takeout financing, where you're going to get that refinanced. So there's certain flexibilities that you want to build in. Interest only periods or grace periods, as folks are working through pre-development sort of stuff. We know that pre-development in particular is a really challenging place for any development projects, and that usually has to come in forms of grant capital. So we imagine blended capital in this mix as well. So I think those are some of the ways that we we think about packaging and structuring the deals. I think one of the things that is workable in this space, that doesn't always happen in other spaces, is that you can really do it based on projects. What they call DSCR financing, debt service coverage ratio. You can look at the project and the cash flow of the project somewhat independently of, say, credit scores. You've already got collateral built into the lending when you're doing real estate lending. So it allows for that kind of flexibility that fits better with these types of projects. On the small business lending side, I'm pretty excited about this too. I think what I saw consistently was that small businesses that had great businesses, great cash flow, strong track record, but didn't have 25% to 30% cash equity to buy a property. Who does right? In particular, among black and brown small business owners, that's a huge barrier. So seeing that we could come in with equity and equity-like investments, so they can get the debt, they can get the loans from banks and credit unions that way, if they had that piece of equity and equity-like investments. So that's where I think we're being a little more path-blazing in thinking about our financial structures for that type of a use case. We're innovating in as many ways as we can, and sometimes that takes longer and is more complicated.

Tiffany Owens Reed  44:33  

Well, it's been really interesting and insightful talking to you all today. I'm really glad we got to bring your work to the forefront of the show and share it with our audience. I used to live in Providence not too long ago, so it's a special city to me. I'm excited to hear how you all answer my last question for the show, because I also have my favorite places around town. If someone were coming to Providence for a little, a couple hours or a day trip, what are some local places you like to recommend that people check out to get a slice of local life? Jessica, can we start with you?

Jessica David  45:10  

Oh, boy, there's so many. Providence has amazing. Iautomatically went to the food, maybe because you said slice and that made me think pizza. And Providence has amazing pizza. So first place that came to mind is Figadini, right downtown, and their pizza, which is one of my favorites. I would also say Apsarra is great. And one of my new favorite places actually might have opened since you moved Tiffany, I don't know, the Madrid Bakery at Wayland Square. They have the most amazing chocolate stuff, and you can actually see them making it. I go in there and eat chocolate, and it's amazing. I guess if I were to say something non food related, there's an amazing parks network that kind of runs from one end of the city all the way to the other through the downtown, along the water. You're in a city, but you're also surrounded by this amazing, active, vibrant green space. So those are my recommendations.

Tiffany Owens Reed  46:09  

Speaking of Apsarra, did you know that apparently, there's like, two different sets of recipes for the two locations? Someone told me on my last visit, I did not know this inside scoop.

Jessica David  46:23  

Yeah, rumor is there was a split there at some point. I don't know if that's true or not.

Tiffany Owens Reed  46:28  

So on my next trip to the Providence, I feel like I'm gonna have to do a comparative analysis of the pad tais and see like what's going on here. What's the story?

Jessica David  46:44  

When you do that, let's compare notes, because I definitely have my favorite but I'm not gonna say.

Tiffany Owens Reed  46:45  

All right, excellent. Josh?

Josh Daley  46:45  

Well, going in a different direction. Providence is such a cool city for being a great art city. So AS220 and RISD and a lot of different cool things to check out, arts and music wise. And then I guess going back to food and cafe, and circling back, Jess mentioned we're doing a coffee shop tour of the state, and one of the spots that we went to has a special place in my heart. White Electric Coffee, in particular because I worked with them when I was in my previous world, the Small Business Development Center, and helped them. They're employee owned now. So they bought the business from the previous owner, and I helped them do that. So I love them, and it's a great coffee shop.

Tiffany Owens Reed  47:38  

Yes, all right. Well, Josh and Jessica, thank you so much for joining me on this episode. It's really exciting what you all are doing at Local Return. To our audience, thank you so much for listening. Thank you for for joining me for another conversation. I'll be back soon with another episode. In the meantime, keep doing what you can to build a Strong Town.

Norm Van Eeden Petersman  48:05  

This episode was produced by Strong Towns, a nonprofit movement for building financially resilient communities. If what you heard today matters to you, deepen your connection by becoming a Strong Towns member at strongtowns.org/membership.