How can a city create a CDC?

Reviewed: June 12, 2024

Visitor Question: I'm interested in having our city create a community development corporation for a part of our community that doesn't get a lot of love.

It was once a thriving commercial area because it was on the streetcar line. But of course the streetcar has long since gone away, and we are left with a commercial street that is devoid of any activity except the occasional used appliance store that goes out of business at the drop of a hat. The residential area behind this commercial street has really gone downhill quickly, and we have to get a grip on that.

Selfishly, I don't want this blight to spread, since I live in the next neighborhood over.

I've read just enough to think that a CDC might be the answer here, or at least a good part of the answer. Can our city government set up the CDC? In my small amount of reading, it seems like a CDC is a private organization, albeit one with a public purpose. Is this correct?

Editors Reply: Your understanding is the correct one for most community development corporations (CDCs). However, there have been numerous instances of a city starting and then dominating a CDC. In this answer we will give you some tips about doing so.

At the outset we should point out that we have answered some related questions already, but we felt that your question was different from these others. However, they would be useful to you as to dig into the potential relationship between a city and a CDC further.

So please read about city involvement in a CDC, elected officials and a CDC, and "https://www.agoodcommunity.org/cities-funding-cdcs.html">cities funding CDCs.

The first thing for a city to do would be to consult the city attorney about legal reasons why direct city action to set up a community development corporation might be illegal in your state or found to be illegal by a court. Our mail from website readers makes us think that many people are skeptical about whether a city should have anything to do with a CDC, so you cannot assume that your city would be immune from lawsuit if you try this.

Providing the legal review does not turn up any red flags that would make this step either an outright prohibited activity or very difficult to undertake in a legal fashion, next you would need to assess the political situation. Would all of the elected officials support such a move? Be especially careful that the elected representative for the area in question is a wholehearted supporter. This might involve a considerable amount of education of that official.

You also should check carefully on the attitude and enthusiasm of the mayor or whatever your chief elected officer is called. One who is lukewarm to the idea is unlikely to withstand political pressure when the going gets tough.

If there is a city manager, talk with that person too. See if your community development director, planning director, and/or social services director would support this move. Naturally, a budget or finance director will have an opinion about this too!

Think carefully about the relationship between the residents of the area in question and the city government. We maintain that resident involvement and support is essential to the success of a CDC. If the current residents begin with a mistrustful attitude toward city hall, you might be much better advised to do the hard work of recruiting residents and private sector individuals interested in the possibility of improving the geographic area in question, and then bringing in the city for moral, financial, and planning and zoning support.

Now let's assume that all of these checklist items turn out positive for the city forming a CDC. Begin by convening residents, city leaders, and city staff in a roundtable discussion of the potential. If you have a nearby university extension office, well-respected professor, or successful CDC executive director, bring them in to do a program and to kick off the discussion.

We used the term roundtable for a specific reason. It would be very important at this point for the residents and other stakeholders to perceive that the city government does not intend to completely dominate the CDC without any input from the affected people. If you cannot find an outside facilitator, at least pick a resident leader to co-chair the meeting with someone from the city.

Have a city staff member who has become well versed on the subject be the most visible and talkative city person at the meeting. Our experience is that it is very easy for an enthusiastic elected official to veer off into speculation about something that is untrue, unrealistic, illegal, or inappropriate for a CDC. Such verbal meanderings may be extremely well-meaning but they can cause trouble later. Make sure a city staff member is there to keep the discussion realistic and truthful.

At the close of the discussion, let the residents dictate the next move. If they are content to let the city plan and provide resources for the next meeting, the city should agree to do so. But if they want to control the meeting, let them, providing they agree not to meet in secret without the city if they later expect the city's help and money.

Once one side of the table has agreed to let the other side take the lead, then the lead organization should follow the steps outlined in our article on how to start a community development corporation, while still keeping the other parties well informed and involved in community outreach and planning for the CDC.

You also will want to distribute our current list of website pages that are helpful to CDCs, a link to which will always be found in the yellow box near the top of our sitemap page.

Many times a city government will get cold feet somewhere along the way toward forming a CDC, or else the neighborhood will get angry at the city and blow up the effort. But if this happens, do not despair; just get busy to rally the private sector to do the work, approaching the city for funding near the end of the process if need be.

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