bridges - spring 2005

8/9/2019 Bridges - Spring 2005

1/12

By Linda Fischer Editor

Each weekday aroundnoon, customers come toMcMurphys Grill in down-

town St. Louis to enjoy luncha bowl of Irish stew, a cornedbeef sandwich or other flavorfuldishes. Waiters and waitresseshustle to get the crowd fed andback to work in a reasonable

amount of time. From all appear-ances, McMurphys is a typicalcozy eatery.

The truth is, McMurphys isanything but typical. The res-taurant is a job-training programrun by St. Patrick Center, a non-profit provider of services for thehomeless or those at risk of becoming homeless. The wait-ers and waitresses are homeless,as are the cooks and busboys.They are trying to get back on

their feet by working for mini-mum wage while learning thegeneral skills needed for restau-rant employment.

One of the waiters, DonShields, has been in training atMcMurphys for eight months

now. A big smile crosses his faceas he describes his work there.Sometimes it gets hectic, hesays. But I love it!

As nonprofit organizations

search for ways to raise money

other than through the tradi-tional grants, donations andpublic subsidies that sometimescome and sometimes dontmany are turning to social enter-prises. And for many, its aventure into uncharted waters:the world of business.

According to the Social Enter-prise Alliance, a social enterpriseis any earned-income businessor strategy undertaken by a non-

profit to generate revenue insupport of its charitable mission.Earned income consists of pay-ments received in exchange for aproduct, service or privilege.

Greg Vogelweid, chief operat-ing officer of St. Patrick Center,says nonprofit organizationswanting to start a social enter-prise need to think like a busi-ness rather than a nonprofit.

The first step in setting up acontinued on Page 2

SPRING 2005L I N K I N G L E N D E R S A N D C O M M U N I T I E S

PUBLISHED QUARTERLY

BY THE COMMUNITY

AFFAIRS DEPARTMENT OF

THE FEDERAL RESERVE

BANK OF ST. LOUIS

PUBLISHED QUARTERLY

BY THE COMMUNITY

AFFAIRS DEPARTMENT OF

THE FEDERAL RESERVE

BANK OF ST. LOUIS

BRIDGES W W W. S T L O U I S F E D . O R G2 CRA RevisionsSpanning the Region

I N D E X

Entrepreneursin America 2

0Public Markets:The Issues6

McMurphys GrillIts Successful As a Social Program, It Struggles As a Business

Waiter Don Shields takes lunch orders at McMurphys Grill in downtown St. Louis. Shownare, from left: Kristina Alnajjar of Spokane, Wash.; Nunzio Lama, restaurant manager; andMaggie Brown, also of Spokane. (Photo by Dennis Caldwell)


2/12

social entrepreneurship ventureis to write a business plan,

Vogelweid says. You also need afinance person who knows howto run a business.

Then you have to decidewhether you want a nonprofit,mission-related program thatmakes money versus a for-profitenterprise that just makes moneyfor the nonprofit. They are very

different things, he says.McMurphys Grill is the former. Well, not quite. After 15 years inbusiness, it is not making money.

We run this as a business, just not a very profitable one, Vogelweid says.

At this point, funding for therestaurant generally comes fromthree sources: grants, the publicand government contracts.

One of the biggest challenges tomaking the restaurant profitable is

the mission of the program. Thevery nature of it conflicts withgood business models for restau-rants. For example, once anemployee is trained, he or she isgently pushed out the door and

into a new job, and an untrainedworker comes on board. Hardly asmart business practice.

We dont want them to becomfortable. We want them tomove on and get a better job,

Vogelweid says.

Another disadvantage is that,in deference to many of itsworkers who are alcoholics,McMurphys does not push thesale of alcoholic beverages. Thisis one factor that keeps the

restaurant from making a profit, Vogelweid says.

The restaurant also pays threefull-time employees to run theprogram: a chef, a jobs coachand a manager.

The upside is that last year

business increased 14 percentover the previous year. And,despite its lack of financial suc-cess, the restaurant remains trueto its mission of getting thehomeless job training, jobs andhousing, Vogelweid says. At anyone time, 11 homeless peopleare in training. About 50 find

jobs each year in local restau-rants. Follow-up surveys showthat, of those who have com-

pleted the program and beenplaced in restaurants, 60 percentto 70 percent still have their jobsafter a year.

In addition, McMurphys Grillis an excellent public relationstool for St. Patrick Center, Vogel-weid says.

As for the future, his vision isfor the restaurant to become aprofitable, full-service restaurantthat is open for lunch and din-ner and on weekends.

2L I N K I N G L E N D E R S A N D C O M M U N I T I E S

continued from Page 1

By Thomas A. GarrettSenior EconomistFederal Reserve Bank of St. Louis

The entrepreneurial spirit isalive and well in theUnited States. A recentstudy revealed that the U.S. pop-ulation is quite entrepreneurialwhen compared with that of

other countries: More than 70percent of Americans would pre-fer being an entrepreneur toworking for someone else. Thiscompares with 46 percent of

adults in Western Europe and 58percent of adults in Canada. 1

Another study on entrepreneurialactivity for 2002 found that, of 36 countries studied, the UnitedStates was in the top third inentrepreneurial activity and wasthe entrepreneurial leader whencompared with Japan, Canadaand Western Europe. 2

One can argue that the desireof individuals to create new busi-nesses, develop new technologiesand venture into the unknownhas propelled the United States

from a small collection of colonies to one of the greatesteconomic powers in the world.Entrepreneurship means growth.

Given the relationshipbetween entrepreneurship andeconomic growth and develop-ment, what policies should gov-ernmentbe it local, state orfederalpursue to foster entre-

preneurship? There are manysuch policies, each of which fitsinto one of two categories: activepolicies and passive policies.

Active policies include targeted

tax breaks and targeted subsi-dies. As a result, these policiesare often aimed at specific formsof businesses or entrepreneurs.Passive policies, however,include laws and regulationsdesigned to lower the cost of doing business and provide abusiness atmosphere thatencourages entrepreneurship.

This article discusses severalpolicies in the United States thatinfluence entrepreneurship andeconomic growth. These U.S.policies are compared with and

Entrepreneurs Thrive in AmericaFederal, State Policies Make a Difference for Those Facing Risk

SOCIAL ENTREPRENEURSHIP: Any earned-income business or strategy undertaken bya nonprofit to generate revenue in supportof its charitable mission. Earned incomeconsists of payments received in exchange

for a product, service or privilege.

Social Enterprise Alliance

McMurphys Grill


3/12

contrasted to policies in othercountries as well as to policies instates across America.3

Why Passive Policies Are ImportantCommunity development

leaders and interest groups oftenfocus on active policies for entre-preneurs, such as tax breaks forcertain types of small businessesor subsidies from various federalagencies, usually in the form of economic development or smallbusiness loans and grants. Gov-ernment plays a crucial role in

promoting entrepreneurshipthrough active policies. How-ever, while small businesses docreate economic growth, they arenot necessarily entrepreneurial.Only those small businessesthat focus on new and some-times risky opportunities andinvestments can be consideredentrepreneurial. With passivepolicies, the role of governmentis to create an environment thatis friendly to entrepreneurswithout regard to specific busi-nesses or groups of individuals.It is this entrepreneurial-friendlyenvironment that will allowany individual or businessregardless of size, location or

missionto expand and tothrive. As will be seen, passivepolicies in the United States aredifferent from the policies of other countries.

Policies That InfluenceEntrepreneurship

Four policies that have animpact on entrepreneurship are:tax policy, regulation, start-upcosts and access to capital mar-kets, and legal protection and

property rights. Each policy isdiscussed through the lens of economic analysis.

Tax PolicySome minimal level of taxa-

tion is required to have a func-tioning government. While fewpeople would disagree with thisstatement, disagreement doesarise over what constitutes min-imal. Regardless, one fact isclear: A tax on any activityincreases the cost of the activity,thereby discouraging the activity.

Entrepreneurship is an activ-ity that requires investment, con-sumption and income generationto be successful. A sales taxreduces personal consumption,higher personal income taxesreduce the incentive to work,corporate income taxes reducethe incentive to start or expand abusiness, and capital gains taxesreduce the incentive to invest. Arecent study provided estimateson the effect of taxes on eco-nomic growth in the UnitedStates.4 Using data on the UnitedStates for the period 1977 to1992, the authors of the studyfound a negative and statisticallysignificant relationship between

state per capita personal incomegrowth and tax collections (andthe size of government relative topersonal income).

Various tax policies, bothactive and passive, are in placeacross U.S. states to foster entre-preneurship. 5 In response to arecent survey from the KauffmanCenter for Entrepreneurial Lead-ership, many states said theyfocus on lowering the overall taxburden through a reduction in

tax rates or by expanding exemp-tions to promote entrepreneur-ship. About 10 states have moreactive tax policies, such as tar-geted tax credits for businesslocation, research and develop-ment, and capital requirements.Several states have also reducedor eliminated their capital gainstax and inheritance tax.

Policy-makers concerned withentrepreneurship should under-

stand that a trade-off existsbetween entrepreneurial growthand taxes. The benefits of addi-tional government programsfunded through taxation mustbe weighed with the costs of reduced economic growth andentrepreneurial activities. Also,because targeted tax breaks fosteronly certain types of businessesor businesses in certain locations,

continued on Page 4

3O N T H E I N T E R N E T A T W W W . S T L O U I S F E D . O R G


4/12

a more passive tax reductionpolicy will be less restrictive interms of the type of entrepre-neurial activities that may occurand where these activities occur.

RegulationLabor market and business

regulations can be costly forentrepreneurs. However, whencompared with European coun-tries, regulations in the UnitedStates are much less restrictive. 6

For example, many European

countries place restrictions onthe number of hours a businessmay be open or how late into theevening the business may beopen. In addition, there are lawsregulating the maximum lengthof the work week35 hours perweek. There are also morerestrictions on the ability of busi-nesses to hire and fire workers inEurope than in the United States.

A less regulated labor marketserves the American entrepreneurwell. There are several areas inwhich states have reduced thecosts of regulation on U.S. entre-preneurs, as reported by theKauffman Center survey. First,nearly all of the states responding

to the survey said that reducingthe compliance costs of regula-tion is a goal to help entrepre-neurs. Reducing compliancecosts is accomplished by provid-ing one-stop service centerswhere entrepreneurs can findhelp; by allowing electronic filingand storage, which reducespaperwork; and by making com-pliance reporting uniform acrossa state. Many states recognizethat while these improvements

might not be large cost reducers,they will have an effect on wherea new entrepreneur will locate hisor her business.

Reducing regulation outrightis another means of fosteringentrepreneurship. The KauffmanCenter survey reported that fivestates have reduced the regula-tory burden in hopes of fosteringentrepreneurship. States havealso reduced the cost of doing

business through regulatoryreform, such as tort reform, util-ity deregulation and workercompensation adjustments.

While some regulation is likelynecessary to protect workers andbusinesses, states should evalu-ate their regulations to ensuretheir relevancy. Many regula-tions are created in a politicalenvironment and might be theresult of special-interest lobby-

ing rather than a general desireto help the public or businesses.

Start-Up Costs and Capital AccessThe costs of starting a business

are certainly a factor one consid-ers before embarking on anyentrepreneurial activity. Start-up costs include the number of procedures and days it takes toform a business entity, the feesrequired to establish a business,

and a minimum level of requiredcapital. According to the WorldBank, start-up costs in the UnitedStates and European countries arequite different. 7 For example,there are no fee payments in Den-mark. In other countries, feesrange from $210 in the UnitedStates to $4,565 in Italy and$8,115 in Greece. Capitalrequirements, as a percent of percapita income, vary from none in

the United States and the UnitedKingdom to 145.3 percent inGreece. The average length of time to form a business entityranges from four days in Den-mark and the United States to115 days in Spain. Given theselarge start-up costs in some coun-tries, one should not be surprisedat the level of entrepreneurship inthe United States.

Entrepreneurs cannot operateor expand their ventures withoutaccess to capital markets. Unfet-tered access to adequate capital

markets will provide the greatestopportunities for entrepreneurialexpansion. Many states haverecognized the importance of capital to entrepreneurs andhave implemented policies toensure access to capital. TheKauffman Center survey reportsthat most states implementactive policies to provide entre-preneurs with adequate capitalthrough loans. These loans usu-ally have modest interest ratesand reasonable repayment peri-ods. However, while thereappear to be adequate capitalresources available to entrepre-neurs through state govern-ments, there is little done in the

way of planning and manage-ment of this capital. So, onceentrepreneurs acquire theirneeded capital, they might nothave the experience or educationnecessary to properly manage it.This is something state and localgovernments should address.

Legal Protection, Property Rightsand Economic Freedom

No entrepreneur can succeedin a society lacking respect for



ENTREPRENEURSHIP: The rapid growthof new and innovative business...associ-ated with individuals who create or seizebusiness opportunities and pursue themwithout regard for resources under theircontrol. They build something from practi-cally nothing and usually reinvest earningsto expand their enterprise or to createnew enterprises. Other words that charac-terize entrepreneurship include innovative,creative, dynamic, risk-tolerant, flexibleand growth-oriented.

State Entrepreneurship Policies and Programs by Jay KayneKauffman Center for Entrepreneurial Leadership, 1999


5/12

individual property rights and alegal system that protects theserights. Property rights aredefined as the right to control,use and obtain the benefits froma good or service. While thissounds reasonable, think of howlittle entrepreneurship wouldoccur if individuals did not havethe right to their property andthe profits that they acquire fromusing this property in the mostvalued way. Without propertyrights, there would be littleincentive to invest, expand or

create because any gains fromsuch endeavors would be trans-ferred to the state. And grantingindividual property rights with-out enforcing them by means of a well-established legal systemwould be pointless. One of themost significant reasons central-ized economies like the formerSoviet Union collapsed was thelack of individual property rightsand a legal system that advo-cated for these rights.

Property rights and legal pro-tection of these rights are part of a passive policy environmentthat promotes entrepreneurship.Other policies, such as moderate

taxation and regulation, alsocontribute to the entrepreneurialenvironment. Economists havequantified a countrys active andpassive policies through a mea-sure called the Economic Free-dom of the World (EFW) index.This index, ranging from 0 to10, evaluates a country based onfive general criteria: size andscope of government, legalstructure and property rights,access to sound money, freedomto exchange goods and services,and the regulation of credit,

labor and businesses.8

Not sur-prisingly, recent research hasfound that countries with ahigher EFW index, such as theUnited States (8.2), Canada(7.9) and the United Kingdom(8.2), have higher rates of entre-preneurship and growth thanmore centralized countries, suchas Russia (5.0), Ukraine (5.3)and Indonesia (5.8). 9

While the EFW index allowsonly cross-country comparisons,it does provide lessons for stateand local governments here inthe United States. Specifically,the relationship between a coun-trys growth and EFW index sug-

gests that states with greater eco-nomic freedom will have higherrates of growth. The earlier dis-cussion of differences acrossstates regarding tax policy, regu-lation and start-up costs certainlysuggests differences across statesin terms of growth.

ConclusionGovernment can conduct both

active and passive policies toencourage entrepreneurship.

Although active policies, such astargeted tax breaks and subsi-

dies, are the most commonlydiscussed, it is passive policythat is important for generatingan entrepreneurial-friendly envi-ronment. This article hasaddressed several areas of policy,both active and passive, thatencourage entrepreneurship.Evidence was presented here oncross-country and cross-statedifferences in entrepreneurshipas a result of different active andpassive policies.

One point should be clear:Institutions matter. Institutionsthat lower the cost of doingbusiness, either through tax pol-icy, start-up costs or regulationwill encourage entrepreneurship.

More broadly, a complete respectfor private property rights and awell-functioning legal systemthat recognizes and protectsthese rights is vital. States andcountries that respect andenforce these institutions willencourage entrepreneurship andbe rewarded with greater eco-nomic growth.


ENDNOTES

1 Black, Sandra and Philip Strahan. Entre-preneurship and the Availability of BankCredit. Journal of Finance,vol. 57, no. 6,December 2002, pp. 2807-33.

2 Global Entrepreneurship Monitor.National Entrepreneurship AssessmentUnited States of America, 2002 ExecutiveReport. Available at www.kauffman.org/ pdf/us_gem_2002.pdf.

3 See also Poole, William and Howard Wall. Entrepreneurs in the U.S. FaceLess Red Tape. The Regional Economist,Federal Reserve Bank of St. Louis, Octo-ber 2004, pp. 5-9.

4 Crain, Mark W. and Katherine Lee.Economic Growth Regressions for the

American States: A Sensitivity Analysis.Economic Inquiry,vol. 37, no. 2, April1999, pp. 242-57.

5 Kayne, Jay. State Entrepreneurship Policiesand Programs. Kauffman Center forEntrepreneurial Leadership at the EwingMarion Kauffman Foundation, KansasCity, Mo., November 1999.

6 Poole, William and Howard Wall.Entrepreneurs in the U.S. Face Less RedTape. The Regional Economist,FederalReserve Bank of St. Louis, October 2004,pp. 5-9.

7 Wor ld Bank. Doing Business in 2004:Understanding Regulation. Washington:

World Bank and Oxford Univers ity Press,2004. Available at http://rru.worldbank.org/DoingBusiness/

8 See www.fraserinstitute.ca andwww.freetheworld.com.

9 2002 values are from The Economic Free-dom of the World: 2004 Annual Report,TheFraser Institute. Also see Sobel, Russell,

J. Clark, and Dwight Lee. Freedom, Bar-

riers to Entry, Entrepreneurship, and Eco-nomic Progress.Entrepreneurship Center,College of Business and Economics,

West Virginia University. Available atwww.be.wvu.edu/ec/Papers/ SobelClarkLee.pdf.

The Community Affairs Office at the Federal Reserve Bank of St. Louis has focused muchof its work in 2004 and 2005 on small business and entrepreneurship. This is one of

several Bridges articles on those topics.


6/126L I N K I N G L E N D E R S A N D C O M M U N I T I E S

By Jean Morisseau-KuniCommunity Affairs AnalystFederal Reserve Bank of St. Louis

Public markets have been apart of the American landscapesince trading began on this con-tinent. From those early begin-nings, when they were a placewhere people went to buy lifes

necessities, public markets haveevolved into specialty markets.Farmers, crafters, restaurant

owners, antique retailers andspecialty foods vendors areamong the small business opera-tors who have embraced theconcept of a public market as aninexpensive place to sell goods.Community leaders also see apublic market as another venuethey can support to help boostlocal sales and provide a spacefor small businesses to grow.

Establishing a new publicmarket can be a winning situa-tion for a community, existingbusinesses and vendors. A well-placed market can increase foot

traffic to nearby businesses andkeep money that would havebeen spent outside of the com-munity in the community.

While community leadersmight agree that a public marketcan be an economic boost toany streetscape, a market that isill-placed or not well-regulatedand well-managed can become ahornets nest of unhappy cus-tomers and vendors.

Before allocating funds to sup-port a new market, communityleaders need to ensure that a mar-ket will be a welcome addition.Some questions they should askinclude: Are there enough ven-dors interested? Will the marketbe for local products or will it

include vendors and productsfrom outside the community? Will the community support amarket? Where is the best placeto establish the market? Are busi-nesses located near the proposedmarket site in favor of it? Whatregulations do they want to applyto the market?

A community that has anexisting public market needs toensure that the market is fulfill-

ing the needs of the vendors,nearby businesses and the com-munity. And market regulationsmust be enforced.

Communities need to investi-gate the availability of both gov-ernment funding and localfinancial assistance for a public

market. Funding assistancevaries from state to state.In addition, there are several

federal programs, such as theFarmers Market NutritionProgram and the Seniors Farm-ers Market Nutrition Program,that help low-income familiesand senior citizens who wantto purchase fresh produce at afarmers market.

Examples of public markets

throughout the country abound.The three featured here were allcreated to address a different setof community needs, operateunder different governmentalregulations and have had differ-ent levels of success.

Soulard Farmers Market inSt. Louis: A Tradition

In the St. Louis area, SoulardFarmers Market is the oldest andlargest public market. Locatednear downtown St. Louis in thehistoric Soulard neighborhood,the market opened in the early1800s. Today, up to 70 vendorssell everything from produceto pets.

A walk through the buildingsat the year-round market givescustomers the feel of an interna-tional bazaar with a diversegroup of vendors and customers,including many immigrants toSt. Louis.

Arlene and Earl Kruse andtheir son, Steve, operate KruseGardens at Soulard Market.

At their stand, customers canfind organically grown fruit andvegetables, along with floweringplants and herbs. Arlene is thethird generation of her familyto operate a stand at the market.

Its not easy to make a livingselling at a market, but I havecustomers that I have been sell-ing produce to my entire life.

When youre that involved withboth the customer and the pro-

To Market, To Market...Or Not?Communities Need to Think Through Issues Surrounding Public Markets

Jody Hardin displays some of the naturally grown fruits and vegetables he sells at the River Market in Little Rock, Ark.


7/12O N T H E I N T E R N E T A T W W W . S T L O U I S F E D . O R G7

duce, you want to give yourbest, Arlene says.

The American public is turn-ing to farmers markets for betterquality produce, Arlene says.They are tired of hothouse pro-duce sold at the grocery stores.

We pick everything the daybefore its sold at market, shesays. You just cant comparethe quality of a product that hasbeen cultivated by hand to aproduct that was commerciallyproduced.

The Kruses have made a niche

for themselves by organicallygrowing specialty foods that arenot available at a grocery chain.

I take a seed, plant it, nur-ture it, watch it grow, harvest itand sell it, Arlene says. I guessyou could say that this is myRembrandt.

Old Town Market in Belleville, Ill.:Four Years Old and Going Strong

Old Town Market in Belleville,Ill., was developed four yearsago as a way to provide localgrowers an inexpensive space tosell produce. The developersalso hoped that the marketwould draw foot traffic to exist-ing businesses in the downtown

business district. Open everyweekend from May throughOctober, the open-air market islocated on Main Street in apocket park.

Its been growing every yearsince we started, says NormGeolat, market director. Werealways on the lookout for newvendors and activities. We wantpeople to come, get some greatdeals on produce and see that

Belleville is still a place to go.Old Town Market has 12 ven-

dors selling fruit, vegetables,homemade jellies and jams.Local artisans also sell qualityhandmade crafts and artwork.Each weekend, the market haslive music and activities for chil-dren and provides space forcommunity groups to promotetheir programs. We want themarket to be an event for theentire family, something foreverybody, Geolat says.

A nearby business owner

attests to the fact that the markethas met its original goal of increasing foot traffic in thedowntown area.

Every weekend the market isopen, new people visit ourshop, says Gloria Smith, whoalong with her husband, Rod,owns the Crystal and SpiceShoppe in downtown Belleville.

The market has been a reallygood catalyst to bring peopledowntown and spend moneylocally, she says. People arenow coming downtown andfinding its a great place to shop.Once they see the variety of unique shops and restaurants,they keep coming back.

River Market in Little Rock, Ark.: A Market District Development

The River Market concept wascreated to take advantage of thescenic charm of the ArkansasRiver, a public park and historicstructures along Little Rocksriverfront. This example of amarket district reflects thegrowth and variety of publicmarkets throughout the United

States. Both an indoor specialtyshop market and an outdoorfarmers market, River Marketmarries existing elements withnew structures, including anamphitheater, water park andevent space.

The indoor market is a med-ley of 17 permanent shops andrestaurants that are open year-round. The outdoor market is

open May through Octoberand features more than 100farmers selling in-season freshproduce. On Fridays while theoutdoor market is open, localartists and craftsmen sell theircreations at an event calledArt at the Market.

Shannon Light, the River Mar-kets manager, says she is work-

Market on Lake Pine Bluff

Part of Revitalization PlanA pavilion under construction at Lake Pine Bluff will be the new home of afarmers market currently located in the adjacent downtown area of Pine Bluff,Ark. The Pavilion at the Landings is taking shape on a pier that juts out into thelake. It is part of a new development expected to stimulate activity in the down-town area and bring jobs to southeast Arkansas.

The project was initiated with a $100,000 gift to the city from Simmons First National Bank in honor of the banks 100th anniversary. A combination of pub-lic and private funds is being used to complete the project. Last fall, Pine Bluff received a $1.5 million grant from the U.S. Economic Development Administra-tion to attract economic development to the area. The state, county and twoprivate foundations have also pledged financial and in-kind support totaling more than $350,000.

The total cost of the project is estimated at about $2 million. The 10,800-square-foot pavilion will include community rooms and stadium-

style seating to accommodate arts and nature activities and festivals.Phase I is scheduled to be completed by January, 2006. Plans for additional

phases include a walking trail, a bike trail and a bridge to connect the lakefront area to the University of Arkansas at Pine Bluff campus.

An artists rendering of the proposed farmers market pavilion at Lake Pine Bluff.

continued on Page 8


8/12

ing to improve the market andoverall is pleased with the mar-kets growth.

Light says she would like toattract a more diverse group of vendors. It would be nice tohave a fish monger and a poultryvendor who, along with our cur-rent vendors, would help build awell-rounded market, she says.I hope to see our market growas it becomes better established.Like most markets, we performbest in the nice weather, but our

foot traffic has continued toincrease since we opened.Two permanent vendors at

River Market, Steve Brown and Jody Hardin, are working tomake a go of it. Hardin also hasbeen involved in planning a new

market in Pine Bluff. (Seerelated story on page 7.)

Brown runs a gourmet butchershop, V.K. Browns, which hasbeen a part of the market since itopened. Hardin operatesHardins River Mercantile, a farmstand that sells naturally grownfruit and vegetables.

We opened our shop whenthe market opened in 1996 tocelebrate 100 years in businessfor V.K. Brown Packing Co., acompany founded by my grand-father, Brown says. The first

three years the market was open,his shop enjoyed good sales, hesays. However, sales have beendeclining every year since.

He says the decline in busi-ness is due to people tiring of traveling downtown to shop at

the market. The first coupleyears, the market was the placeto be seen in Little Rock on Sat-urday, but now its just anotherplace, Brown says.

Hardin sees the market fromthe perspective of a new vendor.

I waited five years to get thisspace and opened my indoorstand four months ago, he says.I have a seasonal stand, butwanted to expand and offer nat-urally grown fruit and vegetablesall year.

Hardin is meeting his low esti-

mate of income earnings fromhis stand and is hopeful his busi-ness will improve. That couldcome to pass if the indoor mar-ket featured competing vendors,he says. Competition wouldgive shoppers another reason to

come to the market throughoutthe year.

Both vendors agree that theywould like to see more publicityto attract vendors and customersto the market.

Resources for communitiesinterested in developing apublic market:

USDA Farmers Market website provides information onfarmers markets and USDAprograms and regulations.

www.ams.usda.gov/ farmersmarkets

Resources for Farmers Mar-kets web site provides a varietyof information, including linksto programs at federal and stateweb sites and contact informa-tion. www.nemw.org/ farmersmarkets/index.html

Farmers Markets Marketingand Business Guide web siteoffers a variety of information onstarting and sustaining a publicmarket. www.attra.org/ attra-pub/farmmrkt.html

Public Markets and Commu-

nity Revitalization textbook ispublished by the Urban LandInstitute and provides a varietyof information on public mar-kets and economic growthopportunities. www.pps.org/ PublicMarkets/



Start-Up Issues forFarmers Markets Start-up costs

Publicity and marketing

Location and existence of other nearbyfarmers markets

Market charter issues: i.e.,who canbe a vendor, membership fees, prod-ucts offered

Space assignments

Leadership and managementboardmembers and market manager

Local and state regulations, such asstandards for food handling

Licensing

Competitive pricing among vendors

Production and marketing experienceof potential growers

Expectations, interest and support of the community, government officials,and commercial business people

Little Rocks River Market District is located downtown along the Arkansas River.


9/12

Consumers in three statesserved by the Federal ReserveBank of St. Louis can now

obtain their credit reports freeof charge on an annual basis. As of March 1, 2005, resi-

dents of Missouri, Illinois andIndiana can order the reportsfrom each of the three majorcredit bureaus: Experian,Equifax and Trans Union. Andresidents of the remaining statesserved by the BankArkansas,Mississippi, Kentucky and

Tennesseewill be able toorder their free reports begin-ning June 1, 2005.

The free reports are mandatedby the Fair and Accurate CreditTransactions Act, which wasenacted in December 2004.The government is phasing inthe law over a nine-monthperiod, beginning with Westernstates last December, Midwest-ern states last month, Southernstates June 1 and Eastern statesSept. 1.

There are three ways con-sumers can order the reports: Visit

www.annualcreditreport.com Call 1-877-322-8228 Print and complete the

Annual Credit Report RequestForm, available atwww.ftc.gov/credit, and mailit to:

Annual Credit ReportRequest ServiceP.O. Box 105281

Atlanta, GA 30348-5281


HUD Raises Limitsfor FHA Home Loans

The Federal Housing Administration(FHA) has increased home mortgage lim-its for single-family homes by more than7 percent. The increase is part of anannual adjustment the Department of Housing and Urban Development makesto accommodate rising home prices.

As of Jan. 1, 2005, FHA is insuring home mortgages for up to $172,632 inlow-cost areas and up to $312,895 inhigh-cost areas. The 2004 loan limitswere $160,176 in low-cost areas and$290,319 in high-cost areas.

Senior citizens who qualify for FHA-insured reverse mortgages also willbenefit from the increase. With reversemortgages, homeowners aged 62 andolder can borrow money against the valueof their homes without selling them.

More information is available at

www.hud.gov and espanol.hud.gov.

$34 Million New Thresholdfor HMDA Exemption

The Federal Reserve Board recentlyraised the asset-size exemption thresholdfor depository institutions under Regu-lation C, which implements the HomeMortgage Disclosure Act (HMDA), by$1 million.

The exemption will increase to a levelof $34 million, based on the annual per-centage change in the Consumer PriceIndex for Urban Wage Earners and Cler-ical Workers for the 12-month periodending in November 2004. As a result,depository institutions with assets of $34million or less as of Dec. 31, 2004, areexempt from data collection in 2005. Aninstitutions exemption from collecting data in 2005 does not affect its respon-sibility to report the data it was required

to collect in 2004. The adjustment became effective Jan. 1, 2005.

HEARDHave you

Wal-Mart Exec Tapped for Fed Advisory Council

Michael Cook,

vice president and assistant treasurer for Wal-Mart Stores,Inc., in Benton-ville, Ark., hasbeen appointedto a three-year

term on the Federal Reserve BoardsConsumer Advisory Council.

The council,which meets three times

a year in Washington,D.C.,advises theBoard on the exercise of its responsibil-ities under the Consumer Credit Protec-tion Act and on other consumer financial services matters.

At Wal-Mart, Cook is responsible for domestic payment services and finan-cial operations. His work supportsglobal strategies for electronic pay-ments and financial services. A 12-year veteran with Wal-Mart, Cook has

been instrumental in numerous com-pany initiatives, including the formationof its F inancial Services Division.

Cook

Free Credit Reports Available in Midwest

Entrepreneurship Focusof Memphis ConferenceThere is still time to regi-

ster for Striking the Right Noteson Entrepreneurship,sched-uled April 18 to 20 in Mem-phis, Tenn.

This is a national conferencesponsored by the Fed-eral Reserve Bank of St. Louis in part-nership with theEwing Marion

Kauffman Foun-dation, the Amer-ican Bankers

Association, CFEDand the Federal ReserveBank of Kansas City.

Speakers include Bill Poole,president of the Federal ReserveBank of St. Louis; Debbi Fields,founder of Mrs. Fields Cookies;and Richard Florida, author of the 2002 best-seller The Rise of the Creative Class.

Conference attendees willhave an opportunity to boostsupport for entrepreneurship,contribute to economic develop-ment policy decisions, andincrease their understanding

about the impact of smallbusiness and entre-

preneurship on eco-nomic growth.

The event will be of

interest to commerciallenders, CRA officers,CEOs of financial insti-

tutions, venture capital-ists and representatives of

foundations, governments,higher education policy centers,community and economicdevelopment organizations, andassociations representing smallbusiness owners.

For more information or toregister, visit www.stlouisfed.org.


10/12

St. Louis Businesses Eligiblefor Neighborhood Loan Program

Eight neighborhoods in St.Louis and one in East St. Louis,Ill., could benefit from a newprogram designed to spark eco-nomic development in impover-ished areas.

The Sustainable Neighbor-hoods Small Business Loan andGap Financing Program provides

loans of up to $10,000 to smallstart-up businesses and existingsmall businesses wanting toexpand in the nine neighbor-hoods. Gap financingup to$7,500 and no more than 43percent of the total financingpackageis also available.

The Sustainable Neighbor-hoods Development Office, partof a grassroots effort to revitalizethe St. Louis area, is offeringthe program with help from the

Justine Petersen Housing &Reinvestment Corp., a local non-profit organization.

The loans have an averageinterest rate of 9.5 percent to11 percent over a maximum of

five years.The nine neighborhoods are:Covenant Blu/Grand Center,

Vandeventer; Walnut Park West, Walnut Park East, Mark Twain;Carr Square, St. Louis Place, OldNorth St. Louis, ColumbusSquare; Gravois Park, BentonPark West, Fox Park, McKinleyHeights; Forest Park Southeast;Lemay; Jennings; Wellston; andEmerson Park in East St. Louis.

For informa-tion, call SherriFlanigan-Vasquez,economic develop-ment director for

Justine Petersen, at(314) 664-5051.

Seniors Find Help Interpreting Contracts from Louisville BBB

Scam artists trying to separate

senior citizens from their hard-earned money will have arougher go of it in Louisville, Ky.The Better Business Bureau therehas developed Elder ContractReview Services, a program toassist senior citizens who areasked to sign a contract.

The program provides seniorcitizens with free legal advicebefore they sign a mortgage,home improvement contract andother similar documents. Theprogram is meant to deter thosewho would financially exploitsenior citizens. It will also pro-vide a way to report scam artiststo law enforcement agencies.

If confronted with a question-

able contract, a senior citizenmay request a legal interpreta-tion through the Better BusinessBureau hotline at (502) 588-0035. The call will then belogged and screened.

Situations requiring help fromlegal resources will be routed tothe legal team, which will providean explanation of the risks, con-tent and implications surround-ing the contract within 24 hours.

The legal professional willthen inform the Better BusinessBureau of any case of fraud orabuse, after which authoritieswill be notified.

Indiana Organizations ProvideHomeownership Counseling

With an increasing number of homeowners in Indiana facingforeclosure, three organizationsare working together to reversethe trend.

Indiana Legal Services,Momentive Credit CounselingServices (formerly ConsumerCredit Counseling Services of Central Indiana) and the IndianaHousing Finance Authority(IHFA) are providing homeown-ership counseling to low-incomeHoosiers in the form of a newprogram, the Post-PurchaseCounseling Initiative.

The program is available tohomeowners who have receivedIHFA down-payment assistance.

The organizations are work-ing together to educate those eli-gible about fair housing laws,money management, homeown-ership responsibilities, predatorylending practices and energy-efficient products. The Post-Purchase Counseling Initiativealso offers legal representation topreserve homeownership,decrease predatory lending prac-tices, and economically

strengthen communities.For additional information,

visit IHFAs web site,www.in.gov/ihfa, or call toll-freein Indiana 1-800-872-0371.

Web Site Links Workersin Memphis to Benefits

Low-wage workers in Mem-phis, Tenn., can increase theirannual income by an average of $4,000 by using a new web siteto learn about money-savinggovernment and non-govern-ment benefits.

Seedco, a national commun-ity development intermediary,developed EarnBenefits Onlineas a one-stop shop to help eligi-ble people connect to benefitssuch as food stamps, the EarnedIncome Tax Credit and Individ-ual Development Accounts.The web address iswww.earnbenefits.org.

Faith-based and communitynonprofit organizations are

working to spread the wordabout the program.EarnBenefits is funded by

the Ford Foundation, the Cityof Memphis, the CommunityFoundation of Greater Mem-phis, the Department of Healthand Human Services, and otherstakeholders.

1L I N K I N G L E N D E R S A N D C O M M U N I T I E S0

T h e r e g i o n s e r v e d b y t h e F e d e r a l R e s e r v e B a n k o f

S t . L o u i s e n c o m p a s s e s a l l o f A r k a n s a s a n d p a r t s o f I l l i n o i s ,

I n d i a n a , K e n t u c k y, M i s s i s s i p p i , M i s s o u r i a n d Te n n e s s e e .

THE REGIONSPANNING


11/1211O N T H E I N T E R N E T A T W W W . S T L O U I S F E D . O R G

Bridgesis a publication of the Community Affairs department of the Federal ReserveBank of St. Louis. It is intended to informbankers, community development organi-zations, representatives of state and localgovernment agencies and others in the

Eighth District about current issues andinitiatives in community and economicdevelopment. The Eighth District includesthe state of Arkansas and parts of Illinois,Indiana, Kentucky, Mississippi, Missouriand Tennessee.

Contributors:

Glenda WilsonCommunity Affairs Officer, Assistant VicePresident and Managing Editor(314) 444-8317

Linda FischerEditor(314) 444-8979

Community Affairs staff

St. Louis: Matthew Ashby(314) 444-8891

Jean Morisseau-Kuni(314) 444-8646

Memphis: Ellen Eubank(901) 579-2421

Dena Owens(901) 579-4103

Little Rock: Lyn Haralson(501) 324-8240

Amy Simpkins(501) 324-8268

Louisville: Faith Weekly(502) 568-9216Lisa Locke(502) 568-9292

The views expressed in Bridgesare notnecessarily those of the Federal ReserveBank of St. Louis or the Federal ReserveSystem. Material herein may be reprintedor abstracted as long as Bridgesis credited.Please provide the editor with a copy of any reprinted articles.

If you have an interesting communitydevelopment program or idea for an article,we would like to hear from you. Pleasecontact the editor.

Free subscriptions and additional copiesare available by calling (314) 444-8761 orby e-mail to [email protected].

BRIDGES

MAY

C A L E N D A R

Kentucky Rents A new web site offersinformation on affordable rental housing inKentucky. By visiting www.kyrents.org, indi-viduals can look for rental housing using criteria such as size, price, location andmove-in date. The site is a service of theKentucky Housing Corp. For additional infor-mation about Kentucky Rents, contact Doug Wade at (502) 564-7630,ext. 258, or at [email protected].

A Support Strategy for Small Busi-nesses: Implications of Seedcos

Technical Assistance Initiative inLower Manhattan after Sept. 11,2001Lessons learned in the aftermath of the attack on the World Trade Center can beuseful in helping small businesses in eco-nomically distressed communities, a report by Seedco states. The organization, a

national community development operating intermediary, provided financial and techni-cal support to small businesses in lower Manhattan devastated by the attack. Thereport is available online at www.seedco.org/publications.

Practice Guides for Planners, Policy-makers The Center for EnvironmentalPolicy and Management at the University of Louisville has developed a series of practiceguides for urban and regional planners andpolicy-makers. Written in easy-to-understandlanguage, the guides provide practical infor-mation on economic development and envi-ronmental planning issues. The guides areavailable online at http://cepm.louisville.edu/publications/publications.htm.

Accounting and Financial Operationsfor Nonprofits in Rural Housing

This guidebook,published by the Housing Assistance Council,provides basic account-ing and financial management informationfor small nonprofits. It is available onlineat www.ruralhome.org. (Click on Recent Publications.) A print copy also is available

for $4.

Entrepreneurial 1-Stop DirectoryLouisville entrepreneurs and small bus-iness owners can access vital resources at www.GreaterLouisville.com/1stop. The website includes links to 42 government andbusiness organizations in Louisville, South-

ern Indiana and the surrounding region. It was created by the Louisville Metro govern-ment and Greater Louisville, Inc., the cityschamber of commerce.

Development Report Card for States CFEDs 2004 report is availableonline at http://drc.cfed.org. The 18thannual report uses 68 measures to assesseconomic development in each state andassigns grades in three main areas: perfor-mance, business vitality and development capacity.

www.mymoney.gov The Financial Lit-eracy and Education Commission hasdeveloped a financial literacy web site tohelp consumers understand more about money. The commission is made up of representatives from the Federal Reserve

Board and other government agencies. The web site contains links to resourceson topics such as taxes, financial planning,home ownership and starting a small busi-ness. Consumers also can call a hotline,1-888-696-6639, to order a free MyMoney tool kit.

R E S O U R C E S

4-6Loan Fund Management TrainingMemphis, Tenn.Sponsor: National Association of Development Organizations (NADO)Research Foundation(202) 624-8467www.nado.org/meetings/index.html

19Investments in Progress in the UrbanCore of St. Louis and St. Louis UrbanMarketplaceSt. LouisSponsor: Urban Land Institutehttp://stlouis.uli.org/programs.html

23-25 Advancing Regional Equity and SmartGrowth: The Second National SummitPhiladelphiaSponsor: Funders Network for Smart

Growth and Livable Communitieswww.fundersnetwork.org (Click on Smart Growth Calendar.)

JUNE1-2MEDC Spring ConferenceLake Ozark,Mo.Sponsor: Missouri EconomicDevelopment Councilwww.showme.org

2-3Governors Conference on BusinessDevelopmentLake Ozark, Mo.

Sponsor: Missouri EconomicDevelopment Councilwww.showme.org

12-14Rising Together: Summit on the RuralSouthPoint Clear, Ala.Sponsor: Southern Growth Policies Boardwww.southern.org

JUNE16-17National Value-Added Ag ConferenceIndianapolisCo-chaired by the Indiana CooperativeDevelopment Center and the PurdueUniversity Extension New Ventures Team;managed by the Agricultural Innovationand Commercialization Center (765) 496-3099e-mail: [email protected]

JULYJune 27-July 2Emerging Latino Communities:Strengthening AmericaSponsor: League of United LatinAmerican Citizenswww.lulac.org


12/12

Post Ofce Box 442St. Louis, MO 63166-0442

FIRST-CLASS MAILU.S. POSTAGE

PAID

ST. LOUIS, MOPERMIT NO. 444

The public is invited to com-ment on proposed revisions tothe Community Reinvestment Act

(CRA). Enacted in 1977, theCRA encourages depository insti-tutions to help meet the creditneeds of the communities theyserve, including low- and moder-ate-income neighborhoods.

The revisions are intended toreduce regulatory burden on com-munity banks and make CRA

evaluations more effective. Com-ments are due by May 10.The Boards notice of proposed

rulemaking is identical to pro-posals approved by the Office of the Comptroller of the Currencyand the Federal Deposit Insur-ance Corp.

The proposal would: exempt banks with assets

between $250 million and$1 billion, referred to asintermediate small banks,from the data-reporting oblig-ations currently required for

banks with assets larger than$250 million.

subject intermediate small

banks to a two-part test onretail lending and communitydevelopment instead of thecurrent three-part test on lend-ing, investment and service.(The community developmenttest would provide greater flex-ibility to intermediate smallbanks than under the large

bank tests applicable to themcurrently, by enabling them toallocate their resources for CRApurposes among communitydevelopment loans, invest-ments and services based onthe needs of their community.For intermediate small banks,a satisfactory communitydevelopment rating and a satis-factory retail lending ratingwould be necessary for anoverall rating of satisfactory.)

revise the definition of com-munity development for banks

of any size to include activi-ties such as affordable hous-ing in underserved rural areas

and designated disaster areas. clarify when illegal lending

practicesfor example, by abanks affiliatemight reducethe banks CRA rating.

The proposal addresses con-cerns expressed by the Board in2004 when it withdrew a pro-posal to raise the small-bank

threshold to $500 million. TheBoard expressed concern that theproposal was not certain to yieldsignificant cost savings for banks,but might reduce communitydevelopment capital in somerural communities. The currentproposal would deliver greatercost savings while maintainingscrutiny of banks communitydevelopment records, though ona more flexible basis.

To submit comments to theFederal Reserve Board on theproposed revisions, identified by

Docket No. R-1225, interestedpersons can use any of the fol-lowing methods:

visit www.federalreserve.gov/generalinfo/foia/ ProposedRegs.cfm and fol-low the instructions;

visit www.regulations.govand follow the instructions;

send an e-mail [email protected] and

include the docket numberin the subject line of themessage;

send a FAX to(202) 452-3819 or(202) 452-3102; or

mail comments to: Jennifer J. Johnson, Secre-tary, Board of Governors of the Federal Reserve System,20th Street and Constitution

Avenue, NW, Washington,D.C. 20551

Fed Seeks Comments on CRA Revisions

bridges - spring 2005

Documents