PANEL 6 Food System Investors Meeting
Moderator – Glynn Lloyd (GL)
Gerry Palano from MDAR (J)
Thai Ha-Ngoe (THN)
Eric Bodzinski (EB)
GL: Start out trying to develop City Fresh Foods as an enterprise, a LLC. Started out their project as for-profit and wanted to transition into a Co-op, but ran into trouble with attracting capital. Urban Farming Institute (UFI) was founded to help get nonprofit resources to the LLC. UFI can use money it receives from foundations and contracts out work to the private LLC.
GL: City Growers has been getting money from anywhere and everywhere (slow money conference, individuals giving and loaning, and foundations. Much of the money comes through these channels via personal relationships.
EB: Problems happen when one project has multiple funding sources. The issue is who does the debt belong to? Who is liable for debt in a non-profit enterprise? If government can’t figure that out, interest rate is going to have to be pretty high. That said, if the project is viable, USDA can help to “stack money” and funding. LLC and sole proprietorships are easier to lend to.
EB: UF is new territory for FSA loaning process. Recently started a micro-loan program to help deal with new small farms, for amounts of 35k or less. FSA is a subsidized loan, however, so in some cases you might have to show proof of denial for a normal bank loan before you can receive one of these.
Carolyn Huff: from Farm Credit East (a farmer-owned co-op) and they are looking to get involved and be stakeholders. Want to provide financial services.
Greg Horner from Cedar Tree: We give grants. But not many.
THN: We are trying to forge new partnership opportunities. Often times foundations act as loan guarantees. We offer matching grants and try and take a collaborative approach.
Aud: What are industry trends? How do current processes compare to large scale farmers?
EB: Mass. has a big mix of loans compared to Midwest loans (mostly to huge enterprises out there), but FSA doesn’t discriminate on size. However, FSA has no specific programs for urban farms. The Gov tries to be fair.
J: at the state level we are trying to use public tax dollars for capital investments in for profit ag programs.
EB: Most govt loans are given to for profit businesses
Carolyn Huff: Farm Credit East mostly deals with for profit farms with limited programs geared towards non profits, but there are a few. Urban farming is viewed as an interesting and emerging market trend.
GL: The loans are given out by local banks and backed by the state or local government. So the loan actually moves through a local bank.
J: MADR is giving loans to farms to help them be more energy efficient. Loan granting is a timely process revolving around the fiscal calendar.
Aud: Who is doing big picture food system analysis? Where is the market analysis of areas for growth and and economic/financial appraisal of what is needed locally and regionally?
THN: Food Solutions New England at UNH is developing a regional food system plan for New England.
GL: New England should be growing all its cold weather greens if not exporting our excess. We should start small (filling empty lots) and fill in going up the size-chain.
Margaret Connors (MC) – the farm bill is a really strong place to look for change to support UF (being reviewed next week in Congress). Unfortunately, the House just removed the CSP which grants loans to small farmers and urban ag. Get on your representatives on making sure that gets back in.
AUD: What are the opportunities at the local, mass state level?
Jen Faigel: two Mass. state initiatives: (1) Senate bill about farming infrastructure, (2) House bill around food trusts and how to get money from the bond bill (?)
Jessie Benhazl (Green City Growers (GCC)): we’ve been funded by many groups, but where is the most funding available and how should be get involved (for-profit or non-profit (NP))? We have shown a new model by using “slow money, sprouts” and staking funding sources.
GL: verdict is still out. City Growers (CG) is having more trouble than GCC because of their non-profit business model difference. City growers has a very ambitious goal and huge financial hurdles to overcome. Some foundations and funding sources favor or like NPFs, but most don’t. We have struggled with this question of organizational structure for years; to be for profit or to be not for profit? How do we create economic sustainability at the organizational and industry level into the future? How do we return equity to investor? These are the questions we need to ask. These are the questions the UF community needs to develop solution for.
J: Many funders are specifically looking for profitable ventures to really invest in. MDAR looks for for-profits, and that generally is true for government bureaus.
Aud: Farm Credit East used its NP arm to give money to people outside of their usually for-profit
Aud: One of the biggest issues is that the system is really set up to give money to FP enterprises.
J: A question is should the system be changed to give loans to NPs or should farmers just decide to go for FP status? Still don’t know…
Aud: SBA coordinates loans between individuals and banks.
EB: loan guarantees are helping to get local money back into the system (by supporting credit unions).
GW: Private investors want to get involved but don’t know how yet. They want to know who is farming urban and rural areas and how do they get to know those people. Maybe pooling resources between difference unconventional funding types is possible. The Conservation Law Foundation Ventures is exploring ideas of how to invest in urban ag. We need as follow meeting with Jo-anne Shatkin of CLFV.
GL: We need to build this whole system together with farmers, investors, and government.
Kelly Erwin: 15 years ago this conversation wouldn’t have happened because farming was on its way.
AUD: In the past Boston Community Capital was involved in mission based local investments in public green spaces. Are they still involved and active? Would that type of entity be useful?
MC – We need legislation to get LCCCs going in Massachusetts; NPs cannot sustain a whole new food
system so is there a way to get low-profit classification for new farms?
Aud: Where does Mass. Food Policy Council (MFPC) fit into the investment side?
GW: MFPC is looking to find how to make the whole system work.
Aud: Big question; how to deal with the real estate valuations for UF?
Aud: Farm Viability Enhancement Program (FVEP)
Aud: Valuation of programs outside of Boston is completely different than programs inside
Aud: APR is a program that is useful.
J: FVEP helps to get farms from debt to profit-making; MEGA is another funding organization; The Agricultural Environment Enhancement Program can also help; finally the agricultural energy grant.
Aud: What is the benefit of going FP or NP for a farm? What could be changed? How do we do analysis to make this stuff possible?
Aud: Brian Donahue from Brandeis asks ‘How do we feed ourselves on our own food? What is the market-based entry into this equation?
Aud: Maybe the answer is patient-capital? That’s what we’re really going to need.
Aud: Could the Conversation Law Foundation (CLF) act as an umbrella organization for people and groups that want to invest in farming?