Last spring, the University of Chicago distributed four $250,000Â deposits to four community development financial institutions and banks on the South Side. The $1 million total, split between Urban Partnership Bank, Hyde Park Bank, Seaway Bank and Trust Company, and Illinois Service Federal Bank, is meant to spur community-led development. Unlike larger financial institutions and private investors, CDFIs are focused more on community consequences than getting a big return on investment.Â The deposits mark a notably different approach to community engagement for the university. The UofC’s implicit mission has long extended beyond pure academics–consider its hand in shaping the neighborhood, from the contentious 1960s urban renewal policies to the preservation of the iconic Robie House. This strong precedent is bolstered by the university’s more visible projects of the past few years, including the Washington Park Arts Incubator, the Harper Court renovation, and the proposed mixed-use high-rise along 53rd between Kenwood and Kimbark. Â While these plans are seen as an investment in the community, the bank deposits are significantly less heavy-handed.
“Have you heard of bank deserts? The South and West Sides have around a third fewer banks than the rest of Chicago,” said Brian Berg, director of corporate communications at Urban Partnership Bank. “Too often, people in these areas have to rely on irresponsible services such as currency exchanges.”
UBP has already seen a bevy of projects arise within the past year, supported by the new cash on hand. One example Berg provides is an investor who acquires and renovates houses that are furnished and rented at affordable rates to moderate- to low-income tenants. It’s hard to imagine such a project wooing angel investors, but not so hard to see it impressing a neighborhood club.
Another project has been the Lakeshore Learning Academy, a daycare center for children of teenage mothers. Led by Tess McKenzie, the learning center opened in 2012 at 87th and Euclid with support from UPB. “She used the loan to expand her daycare business to young and single moms so they have a safe learning environment for their children…some of the mothers work two to three jobs and go to school,” said Berg.
CDFIs were established by the U.S. Treasury in 1994 to promote economic development in underserved communities. The CDFI program awards federal resources to qualified banks pursuing development goals such as providing financial services or promoting homeownership. The allocated funds are legally designated to provide financial resources to low-income people who would have previously been unable to access them. Banks like UPB, whose primary focus is to revitalize those on the economic fringes, contribute primarily to small-scale projects–individual loans, small businesses, personal mortgages.
Technically, the UofC did not actually invest in the CDFIs; they made a deposit. The money was not part of the school’s invested endowment, but rather came out of its operational budget.
As one of the largest employers on the South Side, the UofC plays an influential role in the economic fortunes of the surrounding community. “I want to say that obviously the University is not an institution on an island,” says Steve Kloehn, Associate Vice President for News and Public Affairs. The CDFI money makes this clear.Â “It fit our values but it was students who raised these questions…who wanted to talk about all sorts of ways the university invests its money,” said Kloehn.
“The idea was to have the university begin a culture of thinking critically about its investments,” says recent UofC graduate Nakul Singh. “We had approached President Zimmer and Chief Investment Officer Mark Schmid, among others, to discuss forming a committee for socially responsible investments. That was shut down during the hour we talked,” says Singh, referring to 2010, his third year at the school.
In the fall of 2011, Singh and Caitlin Kearney, a fellow fourth-year, drafted a few proposals Â as intermediate steps to the larger goal. Singh and Kearney submitted two proposals: to make deposits in certain community banks, and to submit a survey to the University endowment’s fund managers to gauge the ethical implications of its investments. The latter never saw the light, while the former advanced with relatively little resistance.
By February the University had examined four banks, submitted by students, to be considered for possible deposits. The administration researched the financial strengths of each bank. Associated financial professionals sat down with representatives of each to determine how beneficial deposits would be and how the banks would be able to effectively link these funds to the community. By the end of spring, the FDIC-insured deposits had reached the banks.
“The university was satisfied going in, in making these deposits that it would serve the university’s own interests by moving this amount of money to local banks, it could help them achieve their own goals within the community,” says Kloehn. “The more the neighborhood thrives, the better off we all are. “
“It was a nice gesture by the university… as recognition for what we’ve done for the community,” says Mike McGarry, president of Hyde Park Bank. HPB has been a fixture in Hyde Park for the last eighty years. While not technically a CDFI, HPB focuses on small business loans on the South Side, characteristic of the other participating banks.
It is difficult to trace the outcome of every project which has benefitted from the deposits. Does the university plan to continue with community bank deposits? “Our work with local banks is ongoing… I wouldn’t call it a one-time project. They are still working with those banks, and I don’t know of any plans of that to change,” says Kloehn.
Singh, for one, remains skeptical. “If they really cared they would give more autonomy in what happens in Hyde Park, instead of buying everything and putting in an Akira,” he says. In light of other development projects, such as the reimagined 53rd street, these deposits seem lost in the university’s relationship with the community outside of Hyde Park. While one route is to directly partner with private developers to alter the community landscape, a second one is to allow members to shape the community with their own hands. Can both paths coexist, and will it ever be possible for the second to have the same power as the first?