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Wednesday, November 12, 2008

Verbatim: Dwaine Chapel on the Community Reinvestment Act

Permit me to expose my ignorance ("Again?!?" cries the peanut gallery). I've been reviewing Dwaine Chapel's "The LAIC Perspective" column in this month's Madison Chamber of Commerce newsletter... and I have no idea what he's saying. The words are clear enough—Community Reinvestment Act, family income, yadda yadda—but the message... just what is Mr. Chapel trying to achieve with this article?

Gentle readers, you know I enjoy throwing snowballs at Mr. Chapel, and I'll have some packed and ready soon enough. But first, why don't you take a crack at parsing the LAIC's misty oraculations. You can go look at the PDF version of the newsletter if you wish, but as a public service, here's a faithful-to-the-last-hyphen reproduction of Mr. Chapel's text:

Dwaine Chapel, "The LAIC Perspective,"
Madison Chamber of Commerce newsletter,
November 2008, p. 7

The Community Reinvestment Act (CRA) was passed in 1977 and states "regulated financial institutions have continuing and affirmative obligation to help meet the credit needs of the local communities in which they are chartered." This simply means that lending institutions are a-for-profit organization and are afforded the ability to reinvest that profit back into the community in which they serve.

Banks are rated on their reinvestment activities and the funds are used to accomplish many productive and positive tasks. For example the funds can be used to take action in creating new jobs, affordable housing, fair housing, and to help small business and entrepreneurs to name a few.

Fair housing and affordable housing focus on the low to moderate income sectors of an area. Area median income is a guideline used to determine if a bank can receive CRA credit for the loans it issues. Many organizations throughout the country have applied for community development loans addressing housing needs in their community.

The definition of area median income is the median family income for a metropolitan statistical area (MSA) or the county or statewide median family income if the individual is outside of a metropolitan statistical area. The definition of low income means that the income level of an individual is 50 percent of a geographical area. Moderate income means that the income level of an individual is at least 50 percent and less than 80 percent of the area median income. Family median income states that the income is at least 50 percent and less than 80 percent of a geographical area. Middle income means that the income level of an individual is at least 80 percent and less than 120 percent of the area median income. Family median income states that the income is at least 80 percent and less than 120 percent of a geographical area.

What is a metropolitan statistical area (MSA)? It is a geographic area used by federal agencies that collect and tabulate survey information gathered. A metropolitan area contains a population of 50,000 or more as its core urban area. Furthermore, a micropolitan is that urban core consisting of more than 10,000 and less than 50,000 in population.

According to the most recent census data obtained through the Federal Deposit Insurance Corporation (FDIC), income information for Lake County shows the 2008 estimated median income to be $57,240 which is an increase from the 2004 median income level of $43,750.

The Community Reinvestment Act provides opportunity for banks throughout the country to provide community development loans to address a number of economic development issues in their communities. The CRA was initiated to improve the quality of life issues and create and retain jobs and most importantly retain families for a neighborhood and a community.

Before I can muster any commentary, I need an answer to one simple question: What is the thesis of this essay? Friends, English teachers, countrymen, have at it!

Update: You can view an English teacher's corrections and comments on the above text here.


  1. Funny, because the 2007 data has not been released yet, and they only do a report every five years, the last being in 2002.

    Wonder where he came up with that.

  2. That is odd, because the executive summary to the LAIC's own housing study said that Claritas, Inc. found Lake County's 2007 median household income to be $41,232. But I'm sure I'm just missign some statistical nuance....

  3. What is he smoking? $57,240 as the median income in Madison. Hogwash! A town that has collectively lost what about
    400-700 jobs this year. He needs to start putting out or be sacked or ran out on a rail or whatever just gone.

    Snowballs, I wouldn't worry about that. I would start to worry about flying eggs. Oh wait they cost money and 400+ people have lost their jobs so I guess I would start leaning towards the flaming bags of dog feces at the front door.

    How does D. Chapel keep his job? That is what he should try to answer to us.

  4. WOW,

    The community reinvestment act has absolutely nothing to do with "allowing" anything. It's one of those "requiring" institutions to be less discriminatory:


    I love this line:

    "The CRA was initiated to improve the quality of life issues and create and retain jobs and most importantly retain families for a neighborhood and a community."

    What a bunch of bolony. The CRA was put in place to FORCE banks to give loans to low income earners. These groups were traditionally thought of as high risk and as such were discriminated against even if they had a good credit score.

    The law says that if you want to be FDIC insured, you can't discriminate.

    This guy doesn't even understand the point of the law.

  5. The point of Chapel's message is that he feels local banks are not supporting local development projects, even though the one ongoing project in question is not passing financial muster with the local banks.

    CRA isn't a blank check for those who wish to develop land that is poorly located, under capitalized and considered risky by all banking standards.

    If our local industries are asking for money to add new jobs and create spendable income for families, that's one thing. For a specific individual to keep coming to the trough for moderate income housing and other new ideas that don't add jobs reeks of favoritism and good-ole boys' clubmanship.

    CRA originally was directed at large city, inner-city financing for blighted areas. We need jobs for our people, not housing projects that benefit one individual. LAIC should be audited for use of the $2.5 Million Fund Drive.

  6. Is Randy Schaefer having trouble getting financing for this sham of a housing development clearly unsupported by the housing study? Is there a reason they now want the average income to appear higher? Even with $325,000 of tax breaks local bankers are weary? Or is this about the new thing he wants?m

  7. Randy Schaefer puts in streets, curb, gutter, sewer, water and leveling the soil in an area that adjoins silver creek (hence Silver Creek, LLC) at a total cost of over $300,000 (over $40,000 per lot for affordable housing when we've never sold a single lot for $40,000 in Madison, much less near a flood area) and now he wants to have some of that property rezoned for commercial purposes after using TIF money to move soil and improve the property. Schaefer told the city he and his name were on the line for the money, but he quickly created a corporation to eliminate his personal risk after the TIF was approved. LAIC purchased a house for Schaefer six months before he even applied for the TIF. How do you reallocate TIF land for a different purpose after you've already used public money to improve the property as "residential" for affordable housing. Now he is putting up storage units and two commercial buildings in that area behind his plaza building. Isn't the city watching our money? And Dwaine Chapel is selling the package to the city and banks. How many new jobs is this creating? Time for a new director.

  8. At the meeting when he requested and received the additional money, he also said he wanted to make a name change. That's how he and his attorney phrased it, and that name was an LLC. So you're saying by the city allowing that the change to LLC, with our city attorney sitting there while that was said, they released him from financial responsibility?

  9. A corporation is only responsible up to the amount of the corporation's assets, which may, in this case, simply be the TIF District funds and the extra land received from the city when the frontage was purchased. The corporation is an entity unto itself and is treated as a person, but does shield an individual from losing personal assets. The city co-signed on the TIF and is obligated if the developer doesn't perform.

  10. Why is Dick Errickson making motions to approve Randy Shaefers zoning request. Dick Errickson's son is married to Randy Shaefers daughter. Is that conflict of interest since they are related.

  11. At time of approval Karen Lembke asked twice for assurance the city would not be financially responsible if the tif failed. At that same meeting Randy told them the new name which ended with LLC. David Jenks had not long prior given me advice to put my rental properties in an LLC, but he did not express concern when Randy described this only as a name change. This would have been Dick Ericsson's first meeting, but he was unable to attend. By omission, was the commission not given correct advice? Would it have mattered? Who are the members of the LAIC, and who are the major donors? Shouldn't that be public so we can know of any conflicts of interest? John Hess

  12. Does Dwayne Chapel even live in Lake County????

  13. He has #6 license plates and I believe he lives in Brookings where his wife is a realtor. How much can you believe in your community if you don't reside here?

  14. If it matters, you can find Dwaine and Gayle Chapel's Brookings address on Jerry Johnson's campaign finance report.

    Back to the main point: I'm still unclear as to the purpose of Chapel's essay. If I understand the above comments, is he arguing that local banks are required under the CRA to float loans for the TIF district? Can developers claim loans under the CRA, or does CRA only cover loans directly to the low-income home-buyers themselves? Or is the essay simply Chapel's nod toward Obama-esque principles of sharing the wealth? I remain quite confused... which I wouldn't be if Mr. Chapel would just say what he means.

  15. Knock Knock.

    Who's there?


    Dwaine who?

    Dwaine the bafftub momma I'm dwowning.

  16. I suggest that if you're outraged you should check out the TIF district statutes in Title 11, Chapter 9 of our South Dakota Codified Laws. This is dedicated to Tax Incremental Financing Districts. It's been a while since I've dealt with that chapter, but I thought the funds could not be used for residential housing. Also, if someone signed a personal guarantee, I'm not sure forming a limited liability entity would insulate them regardless.

  17. They allowed the tif to be tied to Randy's existing commercial project. If I remember right a tif can't be for housing itself, but can be used for improvements.

    Ryan raises the most important point about financial responsibility.

    Is there a personal guarantee, or some other way the city is protected? The LLC may have been created to protect him in other ways such as contractor liability, etc.

    Is it certain that Randy has been unable to get financing for the project?

    If both of those are the case, then the tax payer is exposed and we have legitimate concern. Otherwise he's just wisely covering himself. jh

  18. Chapel most likely has a lot of first hand knowledge pertaining to finances. Apparently learned how to cook the books during the time that he filed bankruptcy. Once you erase all your debt, (and I mean erase), then it is clear sailing until a person gets caught up in the tongue twister publications. Somethings never change!

  19. Intriguing assertion, Anon, but I see no evidence to back up your claim. Can you provide any documentation of that bankruptcy filing?

  20. Wait -- I take that back: check out the South Dakota Bankruptcy Court's Voice Case Information System....


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