SEATTLE -
Spearheaded largely by a $500,000 grant from the Medina Foundation, the project is starting to gather steam after years of research and consultation, all in the hope that the new LICU will have the legs and visionary acuity of North Carolina’s Latino Community CU–a model that has been carefully studied by all the parties involved.
Community Capital Development (CCD), a non-profit specializing in providing start-up capital for small businesses, is acting as the credit union’s fiduciary and will be responsible for paying its bills until the credit union, as yet unnamed, receives its charter, according to CCD CEO Jim Thomas.
“If there are expenses incurred until the point the charter is finalized, we would pay those off as well,” added Thomas.
In addition to the $500,000 from Medina, CCD also received $230,000 from the Bill & Melinda Gates Foundation to help fund the start-up LICU, although CCD officials did not confirm for what the grant has been earmarked.
Thomas did say that brick-and-mortar expenses associated with constructing a main branch for the credit union would be paid from other fund-raising efforts and that the nascent credit union would start out financially sound.
“They [the credit union] will start out with $500,000 in cash and $500,000 in equity minimum when they open up,” he added.
Census Rates Below Poverty
Early on when Medina organizers were studying potential fields of membership and a potential location for the credit union, they looked at U.S. Census Bureau data to confirm that many census tracts in King County have poverty rates as high as 49.6%, with many other areas well above 20%. In stark contrast, King County is also home to many affluent Seattle neighborhoods, as well.
Thomas said the targeted area for the credit union was one of the most populous in the state of Washington and that studies determined the area had the highest concentration of low-income people in a census tract located downtown just off of the business district.
The $7.5-billion Boeing Employees Credit Union (BECU), which also signed on to provide the necessary infrastructure and back-end systems, said it is also helping with strategic guidance.
Medina sought out BECU because of its experience as a thriving CU and its track record of supporting local economic improvement and social assistance programs. At this point, the specific level of BECU’s support has yet to be determined.
Too Early In The Process
“I think a lot of that is in the planning mode,” said BECU VP of Marketing Tom Berquist. “We told Medina that there are several different avenues that we’re looking at support-wise but it may be fractionally too early in the process.”
Berquist said that initially, Medina did not set out to form a credit union. The group wanted to find a way to help the low-income community, focusing on financial services, and it looked to a number of partnership opportunities before eventually decided that it might be better to start a credit union using their own model.
“We think it makes a lot of sense in terms of how they’re going to combine the philanthropy world with a social services agency and a credit union,” Berquist said. “I think that’s a model that we truly believe in, but I also think it’s a little too early.”
A CEO has not yet been selected, but several partners in the project confirm that a candidate to helm the LICU will likely be picked within a month or two. Officials at Waldron & Co., a Seattle-based executive search firm, said that several candidates have been interviewed and that the process would continue until a final candidate is hired for the $100,000-plus position.
The Medina Foundation has a long history of providing economic and social assistance programs to the needy in the Puget Sound area dating back to the mid-1940s, and is perceived by the partners involved in the LICU startup as having the necessary financial and community networking resources to make the project a success.
Some of those partners include executives from BECU and other credit unions, former members of the state’s department of financial institutions and several well-known charities and community-based organizations.
With so many big-name players involved in the project, the question that begs an answer is: Why has taken so long to get the credit union off the ground? The answer depends on who you ask.
One observer suggested that the NCUA attaches a low priority to LICU start-ups and drags its feet in providing support resources or delaying paperwork until filing deadlines have almost been reached. Others believe that unless the start-up credit union has at least $500,000 in initial funding, it is prone to failure.
“If you want to start a credit union in Washington, you need at least $500,000 in funding and that’s determined by the state,” Thomas said. “They [Washington State] didn’t want a lot that were undercapitalized.”
Cliff Rosenthal, CEO of the National Federation of Community Development Credit Unions, New York, noted his organization publishes a 400-page manual on how to organize a low-income credit union, but also agreed that unless the organization can raise $250,000 to $500,000 to carry it through the first three years, it is very difficult to start a new credit union of any kind.
Rosenthal, who also has had sporadic consultations with organizers at Medina, said that despite suggestions to the NCUA about how to streamline the CU application process, it remains bogged down in bureaucratic red tape.
A Couple Of Positive Things
“A couple of positive things came out of the preliminary approval of the low-income designation that’s been very helpful, but beyond that we haven’t really seen any more efficient or quicker chartering than we saw years ago,” Rosenthal said. “I’ve got to say, that I think the average is still two, two and a half years which is far, far too long.”
Rosenthal believes that once a CEO is selected, the process will move along at a much quicker pace. He also said that the Medina Foundation has crossed all their “t’s” and dotted all their “i’s.”
“They’ve lined up substantial financing and we think they will be able to make their proformas and business plan work more readily than many other groups can,” Rosenthal said. “A lot of preparation has gone into this.”
For more information
www.medinafoundation.org
www.cdcu.coop
www.gatesfoundation.org
www.becu.org
www.cooperativalatina.org
