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ACFCU returns $1M grant, gets 'back to basics'

David Floyd • Jul 21, 2019 at 8:30 PM

After the death of its former CEO, the resignation of key executives and the layoff of 11 employees, Appalachian Community Federal Credit Union has returned a $1 million grant it said was intended to rehab substandard rental housing in Johnson City.

The Neighborhood Revitalization Program was intended to improve neighborhoods through home renovation projects and provide families with mortgage loans as a pathway to homeownership, according to Press reporting from August. The credit union returned the grant in April.

In a statement, the credit union said no grant money had been spent on the initiative and that the U.S. Treasury Department’s Community Development Financial Institutions Fund, which issued the grant, ended the credit union’s grant obligation with no conditions.

Kelly Smith, the new president and CEO of the credit union, said in a Tuesday interview that after the resignation and death of former CEO Ron Scott, further resignations and the layoff of 11 employees, many of which were tied to the credit union’s community development initiatives, it became “quickly clear” that the organization would not be able to support similar grant-funded initiatives.

“We’ve needed to get back to basics, and while these grant-funded activities can be beneficial and they are important in a lot of communities, they require additional overhead, and even more than overhead, the expertise to manage the grant funds and track them effectively and ensure they’re being utilized in the way they’re intended to be utilized,” she said.

“Frankly, after we did the layoffs that we did, most of those employees were tied to that department, so we didn’t really have any bandwidth to track the funds and do those particular activities that were related to that Neighborhood Revitalization Program.”

Smith declined to comment at this time on the reasons behind the resignations and layoffs.

She said the organization has been working to rebuild its team after the high turnover earlier in the year.

“That requires a lot of resource focus just to get that right,” Smith said. “The grant space is not one where I really see us fitting in in the future or at least not in the future that I can see today.”

But just because the credit union has taken focus away from grant funding, Smith said, doesn’t mean the organization isn’t supporting the community.

Smith said the credit union has not applied for any new, additional grant funding this year, but she noted that the organization has done its best to continue to honor community projects that were ongoing.

In its statement, the credit union said it has helped more than 225 people achieve home ownership through a grant-funded down payment assistance program since 2017. The program, the credit union said, has provided more than $2.4 million in interest-free loans and generated about $20 million in home sales.

Richard McClain, the executive director of the Johnson City Housing Authority, said there is a “big need” in the city to remodel and rehabilitate existing housing infrastructure.

“There is a lot of older homes that have been built in the 1940s, ’50s, ’60s that are kind of in disrepair,” he said.

He said organizations like the Appalachia Service Project, the Eastern Eight Community Development Corporation and Habitat for Humanity are doing a good job of rehabilitating homes that are falling into disrepair, but he noted that the rehabilitation work performed by these organizations tend to focus on homeowner-occupied housing.

“If a home is for rent, then it gets back to the owner to be responsible to fix that up,” McClain said.

McClain said some rental housing options in the area offer low rent but have high energy costs, and the kind of support available for the owners of rental housing tends to depend on whether they operate as a non-profit or a for-profit entity.

“If they're operating as a non-profit then there are some grants available,” McClain said. “If they're a for-profit then I would say it’s pretty limited to what the banks will loan them.”

In an August Johnson City Press article about the grant program, Adam Dickson, who was formerly regional community development coordinator at the credit union, said the Langston neighborhood would be a good fit for the Neighborhood Revitalization Program.

Dickson no longer works at the credit union, and earlier this month was appointed supervisor of the Langston Centre, a multicultural hub and community center that will be located in the former location of Langston High School, the city’s African-American public high school until 1965.

“We hope to take our experiences with the school project, apply them to this effort to gain trust and buy-in, and repeat that across neighborhoods throughout the Tri-Cities,” Dickson told the Press in August, when the grant funding was still in place.

John Birchette IV, who grew up in the Langston neighborhood and is now the owner of Birchette Mortuary, told the Press in August that he hoped the funds could be used to make the neighborhood look like it did when he was growing up.

“It was a community then, and now we’ve gone away from that and you see what has happened to the neighborhood,” Birchette said. “I’m excited about the possibility of things returning back to the way I remember them.”

ACFCU Statement Re Capital ... by David Floyd on Scribd

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