PARK RAPIDS COMMUNITY DEVELOPMENT CORPORATION
WHAT IS A COMMUNITY DEVELOPMENT COPORATION?
HOW DOES A COMMUNITY DEVELOPMENT CORPORATION WORK?
WHO CAN INVEST IN A COMMUNITY DEVELOPMENT CORPORATION?
WHERE CAN A COMMUNITY DEVELOPMENT CORPORATION INVEST?
WHY DOES PARK RAPIDS NEED A COMMUNITY DEVELOPMENT CORPORATION?
PARK RAPIDS COMMUNITY DEVELOPMENT CORPORATION
WHAT IS A COMMUNITY DEVELOPMENT COPORATION?
A Community Development Corporation is a special purpose business corporation authorized
by the State of Minnesota to support economic development in local communities that face
particular challenges of low investment, low incomes and high unemployment. Properly organized,
a CDC operates as a business, but may also be recognized by the Internal Revenue Service as a
501(c)(3) non-profit charitable organization, and be recognized by the Minnesota Commissioner
for the Department of Employment and Economic Development (DEED) as a certified Community
Development Corporation.
HOW DOES A COMMUNITY DEVELOPMENT CORPORATION WORK? (back)
A CDC operates just like any other business corporation. Articles of incorporation and by-laws
are adopted by a board of directors to set policy and provide governance for the day-to-day
activities of the CDC, similar to any other corporation. The major difference between a CDC
and
a regular business corporation is the source and use of capital. Private corporations raise
capital by issuing shares to shareholders, who expect the business to return their investment
with a profit. A CDC attracts capital from donors and social investors who expect their investment
to be used for a productive purpose, but do not expect their investment will be returned.
WHO CAN INVEST IN A COMMUNITY DEVELOPMENT CORPORATION?
Any one willing to make a social investment in a local community economic development effort
can invest in a CDC. As a IRS Chapter 501(c)(3) tax exempt non-profit entity, donors who
provide capital to a CDC are entitled to take a charitable tax deduction against their income.
Donor investments then become part of the permanent capital base of the CDC to support local
economic development projects. The CDC may also apply directly for certain grant support
and may borrow loans from financial institutions, just like any other business.
WHERE CAN A COMMUNITY DEVELOPMENT CORPORATION INVEST? (back)
A CDC is authorized by Minnesota statutes to operate within a defined community boundary.
In larger metropolitan areas, a CDC may target only a specific neighborhood. In a city of the
size and population base of Park Rapids, a local CDC can operate anywhere within the city
limits
of Park Rapids.
WHY DOES PARK RAPIDS NEED A COMMUNITY DEVELOPMENT CORPORATION?
By definition, "development" means doing something that has not been done before. A major
component of development is “risk taking.” As a “risk taker” a CDC, or any new business for
that matter, must effectively manage three elements to successful risk taking:
1. THE ABILITY TO MANAGE RISK
This is basic business and managerial skills, judgment, experience, and expertise.
2. THE PROPENSITY TO TAKE RISK
This is the willingness to take a risk. Entrepreneurs are generally willing to take risks and try
new ventures. Other organizations seek to avoid or minimize exposure to risk.
3. THE CAPACITY TO SUSTAIN RISK
This is the capacity to survive a bad outcome. A thinly capitalized entrepreneur may have
both the ability to manage risk and the willingness to take a risk, but if the resources are not
adequate to sustain the risk, the likelihood of failure can be high.(back)
A Community Development Corporation functions to bring together the skills, capacities,
resources, risk management expertise to develop new businesses and new ventures.
PARK RAPIDS’
ECONOMIC PROFILE |
||
| Private Sector | Financial Institutions | Public Sector |
|---|---|---|
| High Risk | Low Risk | NO Risk |
| Small enterprises | Managerial skills | Maintenance skills |
| Thinly capitalized | Access to capital | Access to resources |
| Limited resources | Capacity & Resources | Administration |
| Limited capacity |
PARK RAPIDS COMMUNITY DEVELOPMENT CORPORATION
A CDC can create the alignment between private sector entrepreneurs who have the willingness to take risks with other community stakeholders who have capacity and resources, but have a low tolerance or propensity for risk taking.(back)