In Rochester, N.Y., the Northern Marketview Heights section has all too much in common with other inner-city neighborhoods rundown houses, vacant lots, and rampant drug dealing. But that's been changing recently, thanks in part to the collaborative efforts of the hometown thrift First Federal Savings and Loan Association of Rochester, a neighborhood nonprofit group, and the city of Rochester. The effort, with financial support from state and federal housing agencies, has resulted in the redevelopment of a bedraggled five acre downtown site with affordable homes for 46 low- and moderate-income families. The project, the first large-scale residential development in downtown Rochester in three decades, can be seen as a model of public and private sector cooperation at a time when some community activists, deeply skeptical of the commitment of financial institutions to reinvestment in urban cores, have tried to block mergers, saying the banks failed to meet Community Reinvestment Act obligations. The effort, which went from a thrift executive's idea to an attractive block of tidy, single-family homes for nearly 150 people in two and a half years, has been so successful that the bank broke ground last February on a similar project in downtown Rochester. It's almost as if we've created a catalyst for redevelopment within this neighborhood, said Edward C. Schultz, a bank vice president and Community Reinvestment Act compliance officer at the $7.2 billion-asset thrift. The houses have been sold to first-time homebuyers who make less than 80% of the median income for the area, or about $36,000 for a family of four. The qualifying families needed just $500 up-front to buy a home worth about $87,000. Last year, First Place, as the complex is called, was one of six affordable housing programs in the nation to win a $10,000 outstanding community investment award last year from the Social Compact, a Washington, D.C.- based nonprofit. The key here is the philosophical attitude that First Federal brought to the package, in the sense that they were open to working in partnership with the city and the local nonprofit group, said Don Wolff, senior vice president of community development at the Federal Home Loan Bank of New York, which provided a $500,000 grant for the project. The idea for First Place is credited to First Federal's chief executive, Thomas N. Borshoff. He had a very strong feeling about it. He is very much in support of First Federal's role within communities, its role as a good corporate citizen, said Mr. Schultz, who headed the project for the bank. First Federal didn't accept a developer's fee, which would have been about $365,000 for a project of this size, to further subsidize the purchase price of the homes. Any profit it makes will come from holding the mortgages and developing deeper banking relationships with First Place residents. The bank also awarded more than half of the construction work to minority- owned contractors in the area. And seven high school students from the neighborhood which is populated predominately by African-Americans and Hispanics were recruited to work on the project and learn construction trades. They worked 20 hours a week for $6 an hour. We felt that one of the best things we could for the city was to provide decent housing, and try to strengthen families, said Mr. Schultz. This wasn't purely just to build houses. The thrift's interest in real estate development stemmed from the recession of the early 1980s, when it foreclosed on several troubled subdivisions it had financed for local builders. Rather than quickly dispose of the property at fire-sale prices, the bank decided to complete the projects. It proved to be a profitable venture. Soon, the subsidiary, B.H.D. Properties Co., was involved in all aspects of real estate development buying and subdividing property, preparing lots, and building houses. In the last 13 years, the company has constructed about 1,000 units. But by 1993, Mr. Borshoff wanted to deploy that experience to develop affordable housing in Rochester. His original idea was building a 30-acre subdivision downtown. The city couldn't find enough land for a project that big, but it did own about 70% of a five-acre site in the targeted neighborhood. Over the years, the city had repossessed houses there for back taxes and demolished the dilapidated structures. Many of the remaining century-old homes had long been neglected by absentee owners who rented them out. The entire neighborhood had fallen by the wayside over the last 20 years, said Mr. Schultz. City officials were eager to pursue the project and pointed the bank to the North East Block Club Alliance. The nonprofit neighborhood group agreed to provide community outreach, credit counseling, and refer potential homeowners to the bank. The city of Rochester donated most of the land and spent $400,000 for sewers, street lights, sidewalks, and other infrastructure improvements. First Federal was the developer, builder, sales agent, and financier. Mr. Schultz concedes that, at first, there was some skepticism from the city, but it passed quickly. We all sat down at the same table working for the same thing, he said. We weren't being forced or coerced into doing it. We were actually putting a project or concept on the table. They were just focused on the goal, agreed Mr. Wolff. I think that says something about the environment up there at that point. Shirley Edwards, executive director of the North East Block Club Alliance, also praised the bank. First Federal has proven that they really know how to work with people, she said. After approaching the city and the nonprofit, First Federal acquired the 15 privately held properties on the site, for a total of $440,000, and razed the remaining buildings. The bank then deeded that property to the city, which combined it with the vacant property it already owned, reconfigured the irregular shaped lots, and sold it back to First Federal for $1. Critical to the success of the project were subsidies from state and federal housing agencies. In addition to the $500,000 grant from the Federal Home Loan Bank of New York for down payments and closing costs, the agency also awarded the bank a two-year advance of $750,000, under its community investment program, for 30-year fixed-rate mortgages. In additional First Federal provided $2.5 million in permanent mortgage financing at market rates. Additional support came from the New York State Affordable Housing Corp. Today, said Ms. Edwards, It's a beautiful site that has had a ripple effect throughout the neighborhood. The private owners who are living around the edges are now coming into our office and asking about grants that could do cosmetic types of repairs to their property. And they are applying for low-interest loans to do the fix-ups, said Ms. Edwards. First Place is not the only sign of rebirth in Northern Marketview Heights. First Federal is working with a grass-roots Hispanic group, Ibero-American Action League Inc., to build 25 more homes nearby. Directly across the street from First Place are 15 new rental townhouses. Habitat for Humanity has also built nine homes in the area. And the city built a new middle school as well as 26 other houses on vacant lots through its Home Expo program. So almost this entire area is new homes, said Mr. Schultz. He said the bank has plans for similar projects in other cities. For example, it is working with the city of Buffalo to rehabilitate homes there. And this year it hopes to expand the efforts to Staten Island and the Bronx in New York City, where the bank has branches. I think that this model is easily replicable anywhere in the country, said Mr. Schultz. My own personal feeling is that most financial institutions know their market, they know who the players are in the market, and they easily ascertain and know what's needed. But First Federal is also taking time out this year to celebrate its centennial anniversary with some of the festivities held at First Place. It's going to coincide with a big block party for the whole group, said Ms. Edwards of the North East Block Club Alliance. And that's going to be our top celebration.

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