[Congressional Record Volume 145, Number 121 (Thursday, September 16, 1999)]
[Senate]
[Pages S11054-S11057]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY (for himself, Mr. Wellstone, Mr. Bingaman, Mr. 
        Sarbanes, Mr. Levin and Mr. Cleland):
  S. 1594. A bill to amend the Small Business Act and Small Business 
Investment Act of 1958; to the Committee on Small Business.


         community development and venture capital act of 1999

  Mr. KERRY. Mr. President, the bill that I am sending to the desk is 
the Community Development and Venture Capital Act of 1999. I am pleased 
to share the introduction of this with Senators Wellstone, Bingaman, 
Sarbanes, Levin, and Cleland as cosponsors of it. This small business 
legislation is designed to promote economic development, business 
investment, productive wealth, and stable jobs in new markets.
  It establishes a New Markets Venture Capital program that is part of 
President Clinton's New Markets Initiative that he mentioned in the 
``State of the Union Address'' and promoted on a 4-day tour this 
summer.
  New Markets are our country's low- and moderate-income communities 
where there is little to no sustained economic activity but many 
overlooked business opportunities. According to Michael Porter, a 
respected business analyst who has written extensively on 
competitiveness, ``. . . inner

[[Page S11055]]

cities are the largest underserved market in America, with many tens of 
billions of dollars of unmet consumer and business demand.'' Many rural 
areas also contain low- and moderate-income communities.
  Think of the inner-city areas of Boston's Roxbury or New York's East 
Harlem, or the rural desolation of Kentucky's Appalachia or 
Mississippi's Delta region. These are our neediest communities--urban 
and rural pockets that are so depleted that no internal resource exists 
to jump start the economy. These are places where there have been 
multi-generations of unemployment and abandoned commercial centers and 
main streets.
  To get at this complex and deep-rooted economic problem, this 
legislation has three parts: a venture capital program to funnel 
investment money into our poorest communities, a program to expand the 
number of venture capital firms that are devoted to investing in such 
communities, and a mentoring program to link established, successful 
businesses with businesses and entrepreneurs in stagnant or 
deteriorating communities in order to facilitate the learning curve.
  The center piece is the New Markets Venture Capital Program. Its 
purpose is to stimulate economic development through public-private 
partnerships that invest venture capital in smaller businesses that are 
located in impoverished rural and urban areas or that employ low-income 
people.
  Both innovative and fiscally sound, this legislation creates a new 
venture capital program within the Small Business Administration that 
is built on two of the agency's most popular programs. It is 
financially structured similar to the Agency's successful Small 
Business Investment Company program, and incorporates a technical 
assistance component similar to that successfully used in SBA's 
microloan program.
  However, unlike the SBIC program which focuses solely on small 
businesses with high-growth potential and claims successes such as 
Staples and Calloway Golf, the New Markets Venture Capital program will 
focus on smaller businesses that show promise of financial and social 
returns--what we call a ``double bottomline.'' These businesses tend to 
be higher risk, need longer periods to pay back money, need intensive, 
ongoing financial, management and marketing assistance, and have more 
modest prospects for return on investment than SBIC investments. For 
example, the returns on investments typically range from five to ten 
percent for community development venture capital funds versus SBIC's 
expected 20 to 30 percent rates of returns.
  To balance out the equation, they also provide quality, stable jobs, 
create productive wealth in and among our neediest communities and need 
a smaller equity investment. Equity investments for community 
development investment funds will range from $50,000 to $300,000 versus 
the $300,000 to $5 million of typical deal sizes in the Agency's SBIC 
program.
  Among other conditions, in order for an organization to be eligible 
to participate and approved as a New Markets Venture Capital company, 
it must have a management team with experience in community development 
financing or venture capital financing, be able to raise at least $5 
million of non-SBA money for debentures, and raise matching funds for 
SBA's technical assistance grants.
  Community development venture capitalists, we should be reminded, use 
all the discipline of traditional venture capitalists.
  At the Small Business Committee roundtable we held in May on the 
Agency's SBIC program and other venture capital proposals, community 
development venture capital groups from Massachusetts to Minnesota to 
Kentucky talked about profit. Like traditional venture capital funds, 
community development funds have to make prudent investments to earn 
profits in order to attract and keep investors. But they balance that 
with social objectives. One of the most important social goals for 
Boston Community Venture Fund is job creation and job quality.
  Elyse Cherry, who is President of the Boston Community Venture Fund, 
invited me, former Treasury Secretary Robert E. Rubin and former 
Congressman Joseph P. Kennedy II and others to tour a company her Fund 
invested in called City Fresh Foods. Located in Roxbury, one of 
Boston's neediest neighborhoods, Glynn and Sheldon Lloyd started a 
company that manufactures prepares African-American and Hispanic meals 
for the community and corporate clients. And through the Meals-on-
Wheels program, this company serves the elderly in Roxbury and 
Dorchester districts. In addition to providing a needed service, City 
Fresh Foods has created 20 jobs, hires from the community, pays its 
employees from $8 to $16 per hour, and offers training and opportunity 
for them to move from entry-level jobs to supervisory positions.
  There are more success stories like this around the country. The 
Community Development Venture Capital funds across the country have a 
proven track record in making smart, responsible investments in small 
businesses in their communities, but the capital needs of firms in 
economically distressed areas far outweigh the existing capacity of 
these organizations. Compared to the more than 1,143 traditional and 
SBIC venture capital firms in the U.S., only some 40 funds nationwide 
concentrate on investing in companies that show promise of financial 
and social returns. We simply need more community development venture 
capital funds to reach more of these underserved communities.
  The second component of this bill, the ``Community Development 
Venture Capital Assistance Program,'' recognizes that need and is 
designed to increase the number and expertise of community development 
venture capital funds, such as New Markets Venture Capital companies, 
around the country. A Community Development Venture Capital 
organization has a primary mission of promoting community development 
in low-income communities through investment in private businesses.
  Senator Wellstone has carried the water on community development 
venture capital concept and deserves special credit for educating the 
Small Business Committee about this important economic development 
tool. He introduced this initiative in March. It is virtually identical 
to the bill he introduced in the last Congress and passed the full 
Senate as part of a comprehensive small business bill, H.R. 3412.
  First, the Community Development Venture Capital Assistance program 
would authorize $15 million for SBA grants to private, nonprofit 
organizations with expertise in making venture capital investments in 
poor communities. These organizations would use these grants to provide 
hands-on technical assistance to spawn and develop new and emerging 
CDVC or NMVC companies. The intermediary organizations would match the 
grants dollar-for-dollar with non-Federal sources.
  Second, this program would provide $5 million in SBA grants to 
colleges, universities, and other firms or organizations--public or 
private--to create and operate training and intern programs, organize a 
national conference, and fund academic research and studies dealing 
with community development venture capital.
  Finally, to complement the venture capital investments and the 
program to foster the emergence and growth of more community 
development venture capital companies, this legislation would build on 
the BusinessLINC grant program. Already a successful public-private 
partnership that the SBA and Department of Treasury launched last June, 
it encourages larger businesses to mentor smaller businesses, enhancing 
the economic vitality and competitive capacity of small businesses 
located in the targeted areas. This Act will authorize $3 million a 
year to further promote and expand this program.
  It's easy to stare past the broken inner cities and boarded up rural 
towns to the intrigues and fantasies of a booming Wall Street, 
flourishing suburbs and record-low national unemployment. But as we 
trumpet the successes of our economy, we must be smart and leverage 
that prosperity to jumpstart and strengthen our communities that are 
struggling. This legislation aims to do just that.
  The PRESIDING OFFICER. The Senator's time has expired.
  Mr. KERRY. Mr. President, I ask unanimous consent that letters of 
support be printed in the Record.

[[Page S11056]]

  There being no objection, the letters were ordered to be printed in 
the Record, as follows:

                                     Boston Community Capital,

                                        Boston, MA, July 16, 1999.
     Hon. John F. Kerry,
     Ranking Member, Committee on Small Business, U.S. Senate, 
         Washington, DC.
       Dear Senator Kerry: I am writing to you as president of 
     Boston Community Venture Fund, an affiliate of Boston 
     Community Capital, and as a Board Member of the Community 
     Development Venture Capital Alliance (CDVCA), in strong 
     support of your leadership regarding the Administration's New 
     Markets Venture Capital legislative proposal. I appreciate 
     your positive public remarks concerning New Markets, 
     including at your Committee's recent ``roundtable.'' It is my 
     understanding that you plan to introduce the administration's 
     proposal soon, and I will be extremely pleased and proud to 
     have you as our leading advocate in the Senate. CDVCA has 
     worked closely with the Small Business Administration as they 
     have drafted their proposal, and I have enjoyed working with 
     Patty Forbes of your Small Business Committee staff, as well.
       As you know, a New Markets Venture Capital program would 
     help to direct private, equity financing to small, high-
     potential growth firms in economically distressed urban and 
     rural areas. As the nation's leading practitioners of 
     community development venture capitalism, the Alliance and 
     its member organizations have begun to establish a strong 
     record of effectively promoting such investment through what 
     we call social entrepreneurship--equity investing with a 
     ``double bottom-line'' mission of creating jobs and wealth 
     among economically disadvantaged populations.
       CDVCA strongly supported the Senate's action last year in 
     passing community development venture capital ``capacity-
     building'' legislation. Unfortunately, that effort, initiated 
     by Senator Wellstone, did not pass in the House before the 
     end of the last Congress. We continue to believe that 
     capacity-building assistance for the community development 
     venture capital field would be crucial to the success of a 
     New Markets program at SBA. We urge you to consider adding a 
     provision to incorporate this capacity-building, or 
     ``Wellstone,'' concept into any bill you might introduce.
       CDVCA also believes that a New Markets Venture Capital 
     program could be more workably and effectively targeted if 
     the Administration's discussion draft were modified. CDVCA's 
     member-organizations all have a primary mission of serving 
     low-income people. Indeed, we would prefer that such a 
     mission be a requirement for eligibility for applicants to 
     become New Markets Venture Capital companies in the bill. 
     However, even as our organizations pursue that mission, none 
     of our member-funds restricts itself to investing within 
     geographical bounds as narrow as those suggested by the 
     Administration. Serious pockets of poverty exist outside the 
     census tracts which are the primary basis for that 
     Administration proposal's geographical targeting. We have 
     provided your staff with suggestions for amending that 
     provision, and we would appreciate it if you could consider 
     such changes before introducing a bill.
       We strongly support the Administration's proposal, and we 
     are especially hopeful regarding its prospects for enactment 
     following the President's important recent tour of low-income 
     urban and rural communities. I look forward to continuing to 
     work with you and your office, and I hope you will feel free 
     to contact me or Bob Rapoza, who represents our Alliance in 
     Washington, should you have any questions. Bob's number is 
     292-393-5225.
       Thank you for your attention to this issue. I hope to be 
     discussing it further with you in the very near future.
           Sincerely,

                                              Elyse D. Cherry,

                                                        President,
     Boston Community Venture Fund.
                                  ____

                                               September 15, 1999.
       Dear Members of Congress: We urge you to support the 
     President's proposal for a ``New Markets Venture Capital 
     Companies'' program to be administered by the Small Business 
     Administration. The program would help establish 10-20 new 
     venture capital investment funds with a mission of creating 
     good jobs and new businesses in economically distressed 
     communities across America.
       The remarkable prosperity now enjoyed by much of the 
     country unfortunately is leaving large numbers of Americans 
     behind. One reason is lack in many urban and rural 
     communities of the needed equity capital and technical 
     assistance which are key to starting and expanding new 
     businesses.
       An emerging industry of community development venture 
     capitalists is addressing this need. Committed to a ``double 
     bottom-line'' of rigorously promoting profit-making growth 
     companies while also creating large numbers of good jobs in 
     low-income communities, these funds have demonstrated 
     impressive results. The same model of business development 
     that has driven economic expansion in the Silicon Valley and 
     Route 128 in Massachusetts, coupled with a focus on poor 
     communities and job creation, is beginning to make a powerful 
     difference in areas such as rural Appalachia, Minnesota's 
     Iron Range, inner-city Baltimore, Boston and elsewhere.
       We need to build on the success of this grassroots model to 
     help ensure that all of America's communities have a chance 
     to participate in current growth. A modest public investment, 
     leveraging significant private capital, would yield 
     tremendous national benefits.
       The Administration's proposal is contained in the 
     President's FY 2000 budget request. Bills to be introduced by 
     Senator John Kerry and Representative Nydia Velazquez, the 
     Ranking Members of their respective Small Business 
     Committees, faithfully embody the same concept. We are very 
     hopeful that this idea, grounded in local self-help 
     principles and targeted to where it is most needed, can be 
     enacted as a bipartisan legislative accomplishment.
       A New Markets Venture Capital program would allow 
     participating funds to issue SBA-guaranteed debentures for 
     urgently needed equity capital and to receive matching 
     technical assistance grants to allow the intensive, hands-on 
     management and direction which is key to the success of 
     community development venture capital. A $45-million Federal 
     investment would match other sources on a dollar-for-dollar 
     basis and be directed over 10 years to generate hundreds of 
     millions of dollars in economic activity.
       All this would take place in communities that currently 
     have the most trouble attracting private investment, despite 
     numerous potential business opportunities with good returns 
     and outstanding social benefits. Participation would be on a 
     competitive basis and geared toward funds with a combination 
     of a strong financial track record and a mission of community 
     development. The program would be community-based to meet the 
     specific needs of each area in which it operates.
       Community development venture capital funds are proving 
     that the tools of venture capital can fuel business creation 
     and expansion, create good jobs and improve the lives of 
     people in low-income communities. We hope you can give a 
     boost to this extremely promising new tool for genuine 
     economic development by supporting and passing New Markets 
     Venture Capital legislation this year.
           Sincerely,
     African-American Venture Capital Fund, LLC, Louisville, KY
     Alternatives Federal Credit Union, Ithaca, NY
     Appalachian Center for Economic Networks, Athens, OH
     Arkansas Enterprise Group, Arkadelphia, AR
     Association for Enterprise Opportunity, Chicago, IL
     Banc of America SBIC Corporation, Charlotte, NC
     Bank One, Chicago, IL
     Boston Community Capital, Boston, MA
     Carras Community Investment, Inc, Fort Lauderdale, FL
     Cascadia Revolving Fund, Seattle, WA
     CDFI Coalition, Philadelphia, PA
     CEI Ventures, Inc, Portland, ME
     Center for Community Self-Help, Durham, NC
     Commons Capital, Nantucket, MA
     Community Loan Fund of Southwestern Pennsylvania, Inc, 
         Pittsburgh, PA
     Development Corporation of Austin, Austin, MN
     DVCRF Ventures, Philadelphia, PA
     Enterprise Corporation of the Delta, Jackson, MS
     Enterprise Foundation, Columbia, MD
     First Nations Development Institute, Fredericksburg, VA
     Gulf South Capital, Inc, Jackson, MS
     Illinois Facilities Fund, Chicago, IL
     Impact Seven, Inc, Almena, WI
     Intrust USA, Wilmington, DE
     J.P. Morgan Community Development Corporation, New York, NY
     Kentucky Highlands Investment Corporation, London, KY
     Karen H. Lightman, Senior Policy Associate, Carnegie Mellon 
         University Center for Economic Development, Pittsburgh, 
         PA
     Local Economic Assistance Program, Inc, Oakland, CA
     LEAP, Inc, Brooklyn, NY
     Millennium Fund, LLC, Seattle, WA
     Minnesota Investment Network Corporation, Minneapolis MN
     Mountain Ventures, Inc, London, KY
     MSBDFA Management Group, Inc, Baltimore, MD
     National Association of Affordable Housing Lenders, 
         Washington, DC
     National Community Capital Association, Philadelphia, PA
     National Congress for Community Economic Development, 
         Washington, DC
     National Cooperative Bank Development Corporation, 
         Washington, DC
     National Council of LaRaza, Washington, DC
     New York City Investment Fund, New York, NY
     New York Community Investment Company L.L.C. New York, NY
     Northern Community Investment Corporation, St. Johnsbury, VT
     Northern Initiatives, Marquette, MI
     Northeast Ventures Corporation, Duluth, MN
     Pioneer Human Services, Seattle, WA
     Resources for Human Development, Philadelphia, PA
     The Roberts Enterprise Development Fund, San Francisco, CA
     Rural Development & Finance Corp, San Antonio, TX

[[Page S11057]]

     Silicon Valley Community Ventures, San Francisco, CA
     Southern Development Bank, Arkadelphia, AR
     Southern Tier West Regional Planning and Development Board, 
         Salamanca, NY
     Sustainable Jobs Fund, Durham, NC
     Woodstock Institute, Chicago, IL
     Vermont Community Loan Fund, Inc, Montpelier, VT
     Virgin Islands Capital Resources, Inc, St. Thomas, USVI
                                  ____



                                           Northeast Ventures,

                                   Duluth, MN, September 16, 1999.
     Senator John F. Kerry,
     Small Business Committee/Democratic Staff, Washington, DC.
       Dear Senator Kerry: I am writing in support of the New 
     Markets Venture Capital bill, which I understand you are 
     introducing today. I serve as chair and chief executive 
     officer of Northeast Ventures, a $12 million community 
     development venture capital firm investing in northeastern 
     Minnesota, a restructured iron mining area of the country. 
     Over the last ten years, we have invested almost $10 million 
     in 21 growth companies which would not exist but for the 
     presence of our equity capital. We apply market disciplines 
     along side a frankly stated social purpose of intervening in 
     this distressed area.
       I also serve as chair of the Community Development Venture 
     Capital Alliance, a national alliance of community 
     development venture capital funds. We have 40 funds 
     throughout the United States and eastern Europe. All these 
     funds have a mission of poverty alleviation through the 
     disciplined use of venture capital in distressed areas and 
     among distressed populations.
       The New Markets Venture Capital legislation has the 
     potential of providing significant additional funding and 
     catalyzing the creation of a significant number of new funds 
     for this important purpose.
       We thank you very much for your support. Nothing could be 
     more important than job and wealth creation in the most 
     distressed urban and rural areas of our country.
           Respectfully submitted,
                                                       Nick Smith,
                                                         Chairman.

 Mr. SARBANES. Mr. President, we have spent a lot of time in 
the Senate praising the booming American economy and low unemployment 
rates. I, like the rest of the colleagues, am proud to see our country 
benefitting from such prosperity, but all Americans are not 
participating in these benefits.
  In reality, Americans that live in low income areas, either in cities 
or rural areas, are not experiencing today's prosperity. This is 
largely because they do not have the economic infrastructure in their 
communities to take advantage of it. Poor communities frequently lack 
local businesses to employ residents and provide services, creating no 
point of entrance for participation in the larger American economy.
  It is for these reasons that I am co-sponsoring the Community 
Development and Venture Capital Act of 1999 introduced by Senator 
Kerry. This legislation is part of President Clinton's New market 
Initiatives Proposal. As my colleagues know, I have already introduced 
America's Private Investment Companies Act of 1999, or APIC, which is 
another part of the New Market initiative.
  The Community Development and Venture Capital Act makes a three 
pronged effort to infuse capital into distressed communities, and 
establish small businesses in our nations most needy neighborhoods. 
First, the bill will use federal money to leverage private funding for 
venture capital companies with a commitment to community development, 
referred to as New market Venture Capital Companies (NMVC). This will 
help to nurture new businesses in poor areas. The companies funding by 
this bill will function much like the successful SBIC program that the 
Small Business Administration sponsors, but will focus on businesses in 
targeted neighborhoods that need more patient, long term capital 
funding, and added technical assistance to ensure success.
  Furthermore, the bill will increase the number of community 
development venture capital funds so that more communities can be 
served by the program and expand the successful business mentoring 
program, BusinessLINC, already in place.
  I have long argued that the best social policy is a job. This 
legislation, combined with the APIC bill and the New markets Tax Credit 
introduced by Senator Rockefeller, will be a catalyst to the creation 
of new businesses and the jobs and economic opportunities they bring in 
those areas most in need.
                                 ______