STATE OF HAWAIIHAWAII COMMUNITY-BASED ECONOMIC DEVELOPMENTTECHNICAL AND FINANCIAL ASSISTANCE PROGRAM

FY 2018
ANNUAL & FINANCIAL REPORTS
TO THE 30th LEGISLATURE
As required by Section 201-10, Hawaii Revised Statutes
and Section 201D-14, Hawaii Revised Statutes

CBED Program Annual Report 2018

EXECUTIVE SUMMARY
The Legislature created a Community-Based Economic Development (CBED) Program in1991 in the Department of Business, Economic Development & Tourism (DBEDT) with
Act 111, SLH 1991, codified as Chapter 210D, Hawaii Revised Statutes. As part of thestatute, the CBED Advisory Council and the CBED Revolving Fund were also created.

The Council reviews CBED financing requests and makes recommendations on theawarding of loans and grants, subject to the final approval of the DBEDT director. The
Council also advises the director on program implementation, and members represent theirisland in liaison with community-based organizations.

The Hawaii Community-Based Economic Development Revolving Fund (CBED
Revolving Fund) was established to provide training and capacity-building opportunities,
and invest in community economic development projects that result in measurable
economic impact. Sources of revenue include repayments of loan principal, loan interest,and interest from the department’s participation in the State’s investment pool.

Beginning balance as of July 1, 2017
Revenues for fiscal year
Loan Interest Payments
Loan Principal Payments
Investment Pool Earnings
Transfers
Expenditures for fiscal year - loans
Encumbrances
Balance as of June 30, 2018

$115,310$ 2,855$16,625($9,836)$124,954

The CBED Revolving Fund may be used for loans, grants and technical assistance. The
CBED Program has focused most of its recent efforts on 1) loans to small businesses thathave expansion plans or projects with a community economic impact; and, 2) technical

CBED Program Annual Report 2018-2-

assistance that can grow small businesses and non-profits seeking to diversify their funding
streams with recurring revenue-generating projects.

Through the CBED Revolving Fund, the CBED Program may assist eligible communitybased organizations (CBOs) with financial and/or technical assistance.

The CBED

Program continues to support community efforts statewide. In FY 2018, the CBED
Revolving Fund continued its partnership with the Department of Agriculture’s MicroLoan Fund, servicing each of the five earlier agricultural business loans made in 2013
through 2017.

The total number of CBO’s, cooperatives, and small businesses assisted in FY 2018
numbered to more than 1,000 through the co-sponsorship of the annual Hawaii Small
Business Fair and sponsorship of the Native Hawaiian Small Business Resources Fair heldin conjunction with the Council for Native Hawaiian Advancement’s (CNHA) Annual
Convention, plus other outreach initiatives on all major islands providing business training
and informational workshops.

DBEDT co-hosted the “Launch Your Dreams into Reality” Hawaii Small Business Fair at
the University of Hawaii’s Leeward Community College. More than 200 small businessowners, entrepreneurs, and community organizations attended the event. The free one-day
event featured 17 business-related workshops and one-on-one business counseling sessions
conducted by the Hawaii Small Business Development Center and SCORE. Exhibits withmore than 34 business resource exhibitors from federal, state and local agencies, private
non-profit organizations and community development financial institutions (CDFIs) werealso on-hand to assist and provide information to Hawaii’s small business sector andentrepreneurs.
The CNHA’s 16th Annual Convention at the Sheraton Waikiki Hotel and Resort boasted
more than 450 attendees, with 22 sponsors, 109 organizations represented, 30 dynamic

CBED Program Annual Report 2018-3-

speakers, 38 Native Hawaiian vendors, and 20 business resource agencies andorganizations.

The Council for Native Hawaiian Advancement organizes the Annual Native Hawaiian
Convention to focus on public policy issues, sources of funding, and capacity-building of
Native organizations, homestead associations, civic clubs, nonprofits, and businesses.

The CBED Program staff and CBED Advisory Council Members continue to develop
program strategy and partnerships that helps revitalize the CBED Program’s loan, grant
and technical assistance initiatives that support DBEDT’s goals, community revitalizationand cultural and community values. Entrepreneurial small businesses and communitybased economic development initiatives to be funded by the CBED Program and Revolving
Fund are anticipated to support a broad range of agricultural-related and urban businesses
and projects such as small business manufacturing enterprises, food security, andagricultural enterprises, including value-added business development and manufacturing.

The revolving fund, technical assistance, and capacity-building program initiatives willcontinue to be a crucial resource for Hawaii’s entrepreneurs and community-basedorganizations to create jobs, implement or expand their businesses, and develop sustainable
revenue generating initiatives. Community-based economic development is a bottom-up
approach and can play an important role in the State’s larger economic development
strategy. As the assistance from the CBED Program helps rejuvenate the entrepreneurialand community economic development sectors, the CBED Program itself will also be
rejuvenated.
Also in 2017, DBEDT and the CBED Program submitted and the Legislature passed
amendments and updates to the CBED Statute, Section 210D, HRS, that amended thedefinition of "community-based organization."

Amended the qualifications forcommunity-based economic development grants to include technical assistance tocommunity-based organizations. Reduced the number of community-based economic
CBED Program Annual Report 2018-4-

development advisory council members from twelve to ten to address quorum issues. And,
updated non-discrimination language.

CBED Program Annual Report 2018
-5-

COMMUNITY-BASED ECONOMIC DEVELOPMENT PROGRAM
CBED: Revolving Fund

The Hawaii Alliance for Community-Based Economic Development (HACBED) wasestablished in 1989 by a group of community development practitioners. HACBED
formulated strategies for the state government to support community-based organizations(CBOs) that wanted to create economic development initiatives. These efforts resulted inprogram legislation to provide financial and technical assistance to local groups. The
Legislature created a Community-Based Economic Development (CBED) Program in the
Department of Business, Economic Development & Tourism (DBEDT) with Act 111, SLH
1991, codified as Chapter 210D, Hawaii Revised Statutes. The legislation created the
CBED Advisory Council and the CBED Revolving Fund with an appropriation of$900,000, in 1991. Today, more than ever, Hawaii must move toward a new economy.
The forces of globalization and economic transition have created great challenges in theworld economy. Hawaii’s isolation and dependence on tourism and fossil fuel energy havemade the islands more susceptible to these effects.

CBED strategies and practices can play a valuable part in an overall economic development
strategy for Hawaii. Specifically, CBED is a bottom-up economic development initiativethat can supplement more centralized or top-down approaches. This bottom-up approach
begins by sourcing economic development opportunities from local communities
themselves, which can be “demographic communities” or “communities of interest.”
These opportunities, which usually become projects, not only have community-backing,but usually have some form of community control. The CBED approach can help build
new infrastructure for a more sustainable Hawaii economy, based on decentralization,
partnerships, human resource development, and innovation.

The foundation created by community-based economic development leads to long-term
capacity-building for local communities and residents, and provides backward linkages toancillary firms to sustain and expand the main sectors of the economy. Hawaii’s economy
is in need of true diversification. CBED is a practical way to achieve a true restructuringof Hawaii’s economy. As the old economic engines become obsolete, the state must lookfor new alternatives. CBED is a key strategy for not leaving behind the lower income
urban and rural communities in the State of Hawaii.

The Hawaii CBED Revolving Fund was established to provide training and capacitybuilding opportunities, and invest in community economic development projects that result
in measurable economic impact. Sources of revenue include repayments of loan principal,
loan interest, and fees from community conferences and other events sponsored throughthe CBED Program.
Beginning balance as of July 1, 2017
Revenues for fiscal year:
Loan Interest Payments
Loan Principal Payments
Investment Pool Earnings
Transfers
Expenditures for fiscal year
Encumbrances (CBED Accelerator)
Balance as of June 30, 2015

$115,310$ 2,855$16,625($9,836)$124,954

The CBED Revolving Fund may be used for loans, grants and technical assistance. The
CBED Program has focused most of its efforts on 1) loans to small businesses that have
expansion plans or projects with a community economic impact; and, 2) technicalassistance that can help grow small businesses and non-profits seeking to diversify theirfunding streams with recurring revenue-generating projects.

CBED Program Annual Report 2018-7-

CBED Revolving Loan Report
In 2017 the CBED Revolving Fund approved a loan to Kohala Meats & Deli, LLC for$25,000.00, matched by an additional $25,000.00 from the State Department ofAgriculture’s Micro-Loan Program. These funds provided capital to complete renovationsof a 1,592 square foot store space located in Kohala, Hawaii.

The intention of the business owners is to develop a business that sells butchered meat,deli/processed foods, as well as hot prepared foods. The business also provides training incooperation with Hawaii Community College for local youth to earn a certificate inbutchering as well as an opportunity to learn business management.

The store provides a market for local livestock producers and locally grown produce andvalue-added products. Store owner, David and Carolyn Fuertes intend to utilize the new
Big Island Mobile Slaughterhouse Unit, which will be stationed close to the market making
it very efficient to slaughter and process the animals. The store will have the necessary
meat processing equipment, cold storage and a certified kitchen - to offer fresh cuts ofmeats as well as hot prepared foods. Area residents will have an opportunity to purchaselocally grown, high quality meats and produce at reasonable prices.

CBED Program Annual Report 2018-8-

In 2015, CBED loan funds provided capital to the Chandara Farm to purchase farm supplies
and working capital needed to expand crop production. In November 2015, CBED staff
were informed by the Department of Agriculture’s Loan Division that Mr. Chandara hadsold his farm and equipment to another farmer. In January 2016, due to the inability tocontact Mr. Chandara, the case was referred to an investigator with the Department of the
Attorney General for assistance in tracking the debtor.

In 2015, CBED loan funds provided capital to the Luangrath Farm to purchase farm
supplies to expand farm production to an adjacent 8-acre parcel. Mr. Luangrath was
successfully able to put the 8-acre parcel into production with a variety of crops such as
sweet peppers, tomatoes, long beans, string beans, eggplant, and cucumbers. This loan is
performing well and payments are current.

In 2013, CBED loan funds provided capital to relocate the Chanthabouasith Farm to alarger 14-acre parcel located in Kahuku. The new farm is operating well and is very
productive with a wide variety of crops such as sequa, eggplant, sweet potato, long beans,chili pepper, okra, bittermelon, jackfruit, bananas, cucumber, taro and long squash. Thisloan is performing well and payments are current.

In 2011, CBED loan funds provided capital to Hawaiian Agricultural Products, LLC andbusiness owners, Mr. and Mrs. Ken Hirata, to finance the purchase and installation of asteam boiler for a shochu distillery. The distillery began production of shochu in 2013. It
is currently producing at its capacity of approximately 6,500 bottles per year. This loan is
performing well and payments are current.

CBED Program Annual Report 2018-9-

CBED: Technical Assistance Activities
The number of community-based organizations, cooperatives, and small businesses
assisted numbered more than 1,000 through the co-sponsorship of the Hawaii Small
Business Fair at University of Hawaii’s Leeward Community College, Council for Native
Hawaiian Advancement’s 16th Annual Convention – Business Resource Fair, and otheroutreach initiatives on all major islands to provide business information and training
workshops.

Attendees of the fairs and workshops are offered valuable information on a wide range ofbusiness topics that included, but not limited to: Copyrights, Patents & Trademarks,
Financing Your Business, Professional Networking, and Tax Tips for Small Business, andmuch more. Members of the Hawaii Small Business Development Center, SCORE andother professionals are on hand to provide small business owners and entrepreneurs withfree one-on-one business counseling. A wide-range of more than thirty Federal, State andprivate agencies, including financial institutions are also on hand to provide businessresources and information.

CBED Program Annual Report 2018-10-

Comments provided by attendees are consistently positive:•“I was impressed with the turnout and the quality of the guest speakers. I reallylearned a lot from all three workshops I attended.”•“Great service for the community.”•“Excellent workshops, excellent vendors. Thank you!!”•“Very valuable information.”•“It was great! I look forward to the next fair.”These free workshops and exhibits provided an opportunity for small business owners andfuture business owners to learn to grow or start their own business.

CBED Program Annual Report 2018
-11-

CNHA 16th Annual (FY2017) Native Hawaiian Convention.
Business Resource Fair hosted by DBEDT.

CBED Program Annual Report 2018-12-

CBED: A Continuing Strategy
Community-based economic development is specifically a strategy for addressing theneeds of low–income communities. CBED has been implemented in the United States formore than 40 years, and in Hawaii for 20 years. As the dialogue about incorporating
community vision and values into present day Hawaii continues, CBED stands out as aneffective strategy to achieve those goals by empowering the community, increasing
capacity, and conserving local resources. CBED is a proven strategy that differs fromtraditional economic development because it emphasizes community reinvestment andlocal economic opportunities. It is a complete process that addresses a community’s
economic and social needs. CBED strategies help maintain Hawaii’s cherished quality oflife for its residents over the long term, while Community-Based Organizations (CBOs)
provide social services and ecosystem services that make a locality attractive to new,appropriate investment and economic development. In the spirit of creating “PublicPrivate Partnerships,” the CBED Program has focused on partnering with other state,federal and private agencies to help build the capacity of small businesses, entrepreneurs,and CBOs through training workshops, conferences, conventions, and other events.

CBED ADVISORY COUNCIL
In 2017, DBEDT and the CBED Program submitted and the Legislature passed
amendments and updates to the CBED Statute, Section 210D, HRS, that reduced thenumber of community-based economic development advisory council members fromtwelve to ten to address problems pertaining to quorum issues and CBED Council
meetings.
The CBED Advisory Council now consists of 10 members. The Director of DBEDT, theChairperson of the Board of Agriculture, and the Chairperson of the Office of Hawaiian

CBED Program Annual Report 2018-13-

Affairs, or their respective designees, are ex-officio members. The Governor appoints theremaining seven members, representing all counties plus one member who has specificcommercial finance experience.
The Council reviews CBED financing requests and makes recommendations on theawarding of loans and grants, subject to the final approval of the DBEDT director. The
Council also advises the director on program implementation, and members represent theirisland in liaison with community-based organizations.
Council members bring a myriad of skills sets to the Department and the CBED Program.
Skill sets of current CBED Advisory Council Members include, but are not limited to:Strategic Communications, Program Management, Community Outreach, ProjectManagement, Government, Strategic Planning, Public Speaking, Nonprofits, Leadership,
Business Strategy/Business Analytics, Financial Modeling, Process Improvement,
Finance, Risk Management, Public Policy, Grants, Public Administration, Customer
Service, Legislative Relations, and Policy Analysis.
In 2016, during a strategic planning session, the Council voiced its agreement andunderstanding of the importance of partnerships, and emphasized the need to leverage
and obtain additional CBED funding, and seek loan servicing services to address the factthat DBEDT does not have a loan officer to service loans made through the CBED
Revolving Fund.
The CBED Advisory Council listed the following as desired program goals:
Create jobs & opportunities (such as new businesses) in economically disadvantaged
areas and empower communities to control their own economic destiny by:
1) Targeting communities in disadvantaged areas of the state such as thoselocated in enterprise zones (EZ);2) Supporting start-ups, business expansions, social enterprises, co-ops, andentrepreneurship;

CBED Program Annual Report 2018-14-3) Considering youth training and mentorship/apprentice programs in projects;
4) Facilitating sustainability among communities and organizations so they cancontinue operating;5) Including multiple communities – by demographic, by island;6) Leveraging program funds through partnerships;
7) Dovetailing CBED program with EZ and other state, county, federal, private
programs;
8) Seeking ways CBED can uniquely impact, not replicate, what others are
doing.
The Council also noted that while specific industries should not be targeted or given
preference, the CBED program should consider which industries will create the most jobs
and jobs requiring skilled workers.

CBED Tools/Resources/Strategies/Program Activities
In implementing the CBED program, chapter 210D, Hawaii Revised Statutes, allows
DBEDT to make grants, loans and offer technical assistance.
The Council’s guidance on how to use these tools were as follows:
Grants should be used for:

Non-profit organizations determined to be exempt from federal
income tax by the IRS;

Technical Assistance for grant writing – “Grantsmanship Center”
and other resource centers for grant writing;Train-the–trainer programs – i.e., HANO; Hawaii Community
Foundation; Hawaii County;Capacity-building – building a community’s financial expertise;

Development of business mentorship programs;

CBED Program Annual Report 2018
-15-



The Council suggested that grants be 10% of the CBED budget
with 90% for loans and technical assistance, e.g. $500,000 budget
would allocate $50,000 to grants.



CBED could use EZ program as “filter” for guidance – geographic
target areas such as Enterprise Zones;Consider start-ups/business growth/entrepreneurship/youth
training;

Targets for loans may include for-profits, social enterprises andcooperatives that produce and/or utilize community
resources/products;

Consideration towards partnerships to leverage CBED funds:

Loans:- Department of Agriculture- Small Business Administration (SBA)- Maui Economic Opportunity (MEO)- Pacific Gateway- Office of Hawaiian Affairs (OHA)- Contact counties to identify other organizations providing microloans;Council agreed that loans should on average be $25,000, but cango as high as $100,000 depending on the project and partner(s).

Technical Assistance:
For consideration:
One Stop Centers/CBED Resources;

Web portal site for Hawaii community-based economic
development;

Financial Information/Training;Business Resource Centers – i.e., SBDC, UH & Community
Colleges; Innovation Centers

CBED Program Annual Report 2018
-16-



Accelerators – Designed to assist community-based non-profitsthat have an economic impact mission. Seek to diversify nonprofits’ funding streams through the development of projects thatgenerate recurring unrestricted revenue.

Outcomes/metrics-Measuring Success
The Advisory Council agreed on the following tracking metrics that could be used tomeasure success:










Jobs createdJobs retained
Earnings
Training hours
Revenue increases
Local sourcing of inputs (multiplier effect)
Satisfaction by program
Social impact – use same metrics as partner non-profit
organization
New businesses created

Current CBED Advisory Council Members

CBED Program Annual Report 2018-17-

CBED Program Annual Report 2018-18-

CBED Program Annual Report 2018-19-

CONCLUSION
Traditional top-down economic development is focused on business and profit, but manyof Hawaii’s rural and disadvantaged urban communities and residents do not reap the
benefits or resist a centralized approach to economic development. Hawaii must look atalternatives for economic development in these communities. CBED is a positive programthat empowers the community, strengthens the knowledge base and provides access to theresources to expand economic and social development. CBED supplies the infrastructure
for long-term self-sufficiency, entrepreneurial opportunities, jobs, and revenue for
Hawaii’s local communities. CBED is a bottom-up approach and can play an importantrole in the State’s overall economic development strategy. An expanded fund commitment
to the Statewide CBED Program serves to make Hawaii stronger by empoweringcommunities and increasing self-sufficiency and economic diversification.

CBED Program Annual Report 2018-20-