Correspondence from Community Social Planning Council re: Community Investment Funds

RE: POLICY TO ENABLE COMMUNITY INVESTMENT FUNDS

The Community Social Planning Council is proposing to create Community Investment Funds to support local job creating businesses and affordable housing projects on Vancouver Island and other regions of BC. We are calling on the BC Government to create enabling policies and tax incentives modeled on successful initiatives in other provinces.

The provinces of Nova Scotia, Prince Edward Island, New Brunswick, and Manitoba have created policy that supports the development of Community Investment Funds (CIFs) with enabling policy and tax incentives. In Nova Scotia over $43 Million has been invested by local residents and created thousands of jobs in locally owned businesses (see Appendix).

The Community Social Planning Council is preparing to launch a Vancouver Island Community Investment Co-operative based on this model to create an ethical investment fund for investors and RRSP contributors who want to support a social and financial return for Vancouver Island communities. The fund will be owned by its member investors and committed to ethical investments that contribute to affordable housing, community benefit projects, and locally owned sustainable businesses. However, there are major red tape barriers and costs in BC compared with other provinces in developing these kinds of investment funds.

Please review our policy brief Enabling Community Investment in British Columbia at (http://www.communitycouncil.ca/sites/default/files/Enabling_Community_Investment_Policy_Paper_Final_web.pdf)

I welcome your comments.

Sincerely,

Rupert E. Downing Executive Director

Enclosure

Appendix: Nova Scotia Community Economic Development Investment Funds Program

The Nova Scotia CEDIF model is a provincial program to encourage equity investment in community economic development initiatives. CEDIFs were developed as an enhancement to the existing equity tax credit program. There are currently 47 different CEDIFs in Nova Scotia. Some have been directly created by local companies or co-operatives to drive investment to their enterprise (e.g. Just Us! Coffee Roasters has formed a CEDIF called Just Us! Fair Trade Investment Co-operative). Others, like the Black Business Community Investment Fund, invest in a range of businesses toward a certain aim.

Key Features of a CEDIF:

• Created by groups of local citizens who first must develop a CED strategy for their community.
• Are structured as a Community Economic Development Corporation, legally a corporation or cooperative (with a minimum of 6 directors)
• Must register under the Equity Tax Credit Program
• Can raise capital to directly invest in one business or allot among several local businesses.
• Provide an equity (or subordinated debt) investment
• Once incorporated, the CEDIF completes a Public Offering and sells shares
• Among other items, the offering document must set out a minimum and maximum amount to be raised through the offering and a plan for use of the funds at the minimum and maximum amounts. This must also include a break down of the costs associated with issuing the offering.
• No guaranteed return on investment beyond the 20% guarantee offered by province
• If desired, can be marketed and/or administered in partnership with a bank, credit union, etc.
• The Government of Nova Scotia estimates that $100 000 is the minimum effective size of the fund.
• Less that 3% default across the lifespan of the program
• Average 5.5% return to investors across the program

Policy Infrastructure and Incentives

• Province partially (20%) guarantees investment (4 years)
• Investments are pre-approved for self-directed RRSPs
• Residents interested in starting a CEDIF can receive support from NS Business Service Centres
• 35% provincial non-refundable income tax credit