How Clam Juice and Lobster Bisque Turned Around a Tiny Maine Town

Community-development corporations aren’t just for cities. Their support can jump-start a rural economy, too.

National Journal
Nancy Cook
Nov. 8, 2013, 8:07 a.m.

Thirty people in Whit­ing, Maine (pop­u­la­tion: 480) near the bor­der with New Brun­swick work for a loc­al sea­food can­ning com­pany that’s been around since 1917. The busi­ness al­most went un­der be­fore Mike Cote, a former food ex­ec­ut­ive, bought it in 2003. Now, Bar Har­bor Foods sells chow­der, lob­ster bisque, canned wild her­ring fil­lets, and clam juice on­line and in na­tion­al su­per­mar­kets such as Whole Foods Mar­ket and Stop & Shop. Even bet­ter for the loc­al com­munity, the com­pany of­fers full-time jobs in one of Maine’s poorest counties where more than 20 per­cent of its res­id­ents live in poverty.

The suc­cess of Bar Har­bor Foods is the kind of eco­nom­ic-de­vel­op­ment story that is all too rare in rur­al areas. But there’s no reas­on it couldn’t serve as a mod­el for oth­ers. Cote didn’t just breath new life in­to the com­pany on his own. The achieve­ment wouldn’t have been pos­sible without the help of Coastal En­ter­prises, a Maine com­munity-de­vel­op­ment cor­por­a­tion and fin­an­cial in­sti­tu­tion that lent him roughly $600,000 at a cru­cial early stage. Cote used the cash to buy new equip­ment to up­date the sea­food can­ning fact­ory, the only one still op­er­a­tion­al in Maine. The in­vest­ment agree­ment worked out bet­ter for Cote than try­ing to take out a loan through a bank. “You don’t have any­body knock­ing on your door im­me­di­ately to get their money back,” Cote says.

In­vest­ing in loc­al busi­nesses throughout Maine and New Eng­land is a hall­mark of Coastal En­ter­prises, known as CEI. CEI is one of hun­dreds of com­munity-de­vel­op­ment cor­por­a­tions and fin­an­cial in­sti­tu­tions na­tion­wide that lend money to busi­nesses or en­tre­pren­eurs as a way to de­vel­op loc­al eco­nom­ies and, in turn, cre­ate jobs. “These are al­tern­at­ive fin­an­cial re­sources,” says Ron Phil­lips, pres­id­ent of CEI. “We lend money to un­con­ven­tion­al en­tit­ies that don’t have a track re­cord or col­lat­er­al or enough cash flow to land a bank loan.”

These types of eco­nom­ic-de­vel­op­ment groups began in the 1960s as an out­growth of the civil-rights move­ment—the driv­ing goal was to give great­er op­por­tun­ity to a wider swath of Amer­ic­ans, par­tic­u­larly in urb­an areas. Over the years, many of the groups like CEI have evolved in­to full-scale loc­al fin­an­cial in­sti­tu­tions that can an­chor eco­nom­ic de­vel­op­ment in their com­munit­ies. The Op­por­tun­ity Fin­ance Net­work, a na­tion­al group rep­res­ent­ing com­munity fin­an­cial in­sti­tu­tions, es­tim­ates that its ap­prox­im­ately 200 mem­bers have in­ves­ted and man­aged $33 bil­lion in com­munity de­vel­op­ment funds over the years.

CEI and its sub­si­di­ar­ies op­er­ate in both the non­profit and for-profit realm. The non­profit arm of­fers fund­ing and coun­sel­ing for en­tre­pren­eurs and busi­nesses, while its for-profit arm man­ages money, of­fers ven­ture cap­it­al to busi­nesses that seem poised to cre­ate jobs, and helps com­pan­ies take ad­vant­age of the fed­er­al gov­ern­ment’s new mar­kets tax cred­it that sup­ports busi­nesses in low-in­come com­munit­ies. Oth­er in­flu­en­tial rur­al com­munity-de­vel­op­ment fin­an­cial or­gan­iz­a­tions in­clude the Ken­tucky High­lands In­vest­ment Corp. and Craft 3, a non­profit lender that serves both rur­al and urb­an com­munit­ies throughout the Pa­cific North­w­est.

CEI has been around since 1977 when Phil­lips moved his fam­ily from New York City to Maine and cre­ated the or­gan­iz­a­tion as a way to think about rur­al de­vel­op­ment and fin­ance. Now, the or­gan­iz­a­tion em­ploys 88 people, man­ages ap­prox­im­ately $898 mil­lion in cap­it­al, and has fin­anced more than 2,250 busi­nesses — everything from a dairy farm to a gelato store to a sol­ar-power com­pany to a former pa­per mill that turns the byproduct of wood har­vest­ing in­to power. These busi­nesses are im­port­ant throughout New Eng­land be­cause they can cre­ate pock­ets of jobs and ven­tures in­side smal­ler com­munit­ies. “In rur­al eco­nom­ies, what is of­ten over­looked is that a small busi­ness, which em­ploys few­er than 20 people, can make a huge dif­fer­ence in the land­scape,” Phil­lips says.

Com­munity-de­vel­op­ment cor­por­a­tions and fin­an­cial in­sti­tu­tions are not without their chal­lenges. For one, those op­er­at­ing in rur­al areas don’t have as much ac­cess to money from found­a­tions and oth­er in­vestors as urb­an-based non­profits in lar­ger cit­ies of­ten do. This can make it harder to raise money to in­vest in rur­al areas. “Phil­an­throp­ic in­sti­tu­tions tend not to be con­cen­trated in rur­al areas ex­cept for Wal-Mart,” says Mark Pin­sky, the CEO of the Op­por­tun­ity Fin­ance Net­work. This lack of found­a­tion fund­ing for rur­al eco­nom­ic de­vel­op­ment, com­bined with the eco­nom­ic af­ter­math of the glob­al re­ces­sion, can make it harder for these groups to raise money, turn a profit on their in­vest­ments, and sus­tain them­selves.

By far, the biggest chal­lenge is simply meas­ur­ing the im­pact of these groups. How can you count the num­ber of jobs a busi­ness cre­ates, or the good it does throughout the com­munity if CEI and oth­er sim­il­ar groups fund such a wide range of en­tre­pren­eurs and com­pan­ies across sec­tors? CEI alone gives money to busi­nesses that op­er­ate in tour­ism, food, re­new­able en­ergy, and fish­er­ies. “At the end of the day, fin­an­cing does not cre­ate jobs. Busi­nesses cre­ate jobs, and busi­nesses suc­ceed in so many dif­fer­ent ways,” Pin­sky says.

Yet none of these caveats mat­ter much to the busi­nesses helped by CEI’s loc­al in­vest­ing strategy, which val­ues the good of the com­munity as much as turn­ing a profit. Just take the town of Whit­ing, where Bar Har­bor Foods con­tin­ues to grow an­nu­ally by about 25 per­cent, ac­cord­ing to Cote. “We are the largest em­ploy­er in the area in one of the poorest, most rur­al counties in the state,” he says. That’s great news for the little Maine town.

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