$100M fund for Black and Latinx business owners expands to 7 more N.J. cities

Posted Feb 19, 2021

Seven more mayors across New Jersey are on board to help create a $100 million philanthropic fund to support Black and Latinx business owners and real estate developers.

The idea first started in Newark last year in September. Now, mayors from Orange, East Orange, Paterson, Camden, Trenton, Irvington and Atlantic City are helping to call on the private sector to contribute to the fund and assist their residents too.

The mayors on Wednesday also called on Gov. Phil Murphy for his support to expand the program across the state, which has one of the worst wealth gaps in the nation.

“Sometimes it’s a hard conversation to have about the inequalities in our community as it results from systematic racism that has been going on for a long time in this country,” said Irvington Mayor Tony Vauss in a Zoom conference announcing the collaboration. “And it needs to be addressed head-on, especially in a state like New Jersey.”

Newark dubbed the initiative the “Newark 40 Acres and a Mule Fund,” or FAM fund, a program which takes its name from a Reconstruction-era initiative, and the first federal attempt at reparations for formerly enslaved African-Americans that never fully materialized.

The New Jersey FAM Fund is run by a private company. Bernel Hall is a managing partner of the New Jersey FAM Fund and is also the president and CEO of Invest Newark, a quasi-governmental nonprofit that helps administer capital to businesses and operates Newark’s land bank.

Newark Mayor Ras Baraka recognized that all small businesses, especially during the pandemic, are struggling. But, the mayor added, Black and Latinx business owners have historically been denied loans and access to capital, even during the pandemic.

“When people say things like that,” said Baraka of those who say there shouldn’t be a fund only for people who are Black and Latinos, “I take it as dismissive of a history of things that have happened to our people in this country. It’s dismissive of the inequity that exists here and dismissive of our attempt to try to address hundreds of years’ of a problem.”

The mayors said the fund is one solution aimed at closing the staggering racial wealth gap.

Federal Paycheck Protection Program loans provided during the pandemic to small businesses only reached less than 20% of counties with the densest Black-owned business activity, according to an August 2020 study from the Federal Reserve Bank of New York.

A 2020 report by the National Bureau for Economic Research found that between February and April of last year, Black business ownership saw an estimated 41% decline while the number of businesses owned by Latinx people declined by an estimated 32%. White business owners saw an estimated drop of 17%, according to the report.

The median and mean net wealth for white families in the United States are $188,200 and $983,400, respectively, according to a 2019 Federal Reserve Survey of Consumer Finances. Median and mean net wealth for Black families are $24,100 and $142,500. For Hispanic families, they are $36,100 and $165,500.

The median income for a white household in New Jersey was $71,137 and just $45,755 for a Black household, according to the latest data from the state Department of Labor in 2018.

Trenton Mayor Reed Gusciora said his residents are often competing with residents in nearby Princeton for loans. The median household income in Trenton, where 49% of residents are Black, is about $35,402, according to census data. In Princeton, where 72% of residents are white, it’s $137,672.

“They come to this space with experience and know-how that Black and brown businesses who haven’t had a chance to spread their wings don’t have,” said Orange Mayor Dwayne Warren. “It makes them less attractive to those who would provide capital.”

Hall, the managing partner of the fund, said the goal is to generate $10 million by the end of the first quarter of 2021, and the initiative is quickly approaching that goal. Two commitments from Fortune 500 companies are also close to being finalized, Hall added.

New Jersey Community Capital, the largest community development finance institution in the state, is helping with direct investment and fundraising. Commitments have already come from companies and celebrities including AT&T, Panasonic, RWJBarnabas Health and Shaquille O’Neal.

And the return on investment?

Hall said it gives investors the opportunity to get tax credits under the federal Community Reinvestment Act, which requires banks to meet credit needs of low- and moderate-income neighborhoods.

“There are already many fortune 500 institutions that have created large social investment vehicles for these types of potential transactions involving underserved minorities,” Hall explained.

The funds will be administered through recoverable grants, loans and equity investments and initially will include pre-development loans for real estate deals, acquisition loans, and both grants and loans for small businesses. Mini-perm loans will be available as well, Hall said.

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published this page in News and Politics 2021-02-20 02:30:03 -0800