Blog Post #8 - Reflections on Findings of the Washtenaw County Capital Flow Report

Monday, March 29, 2021

Reflections on Findings of the Washtenaw County Capital Flow Report

March 2021 Blog Post • By Jennifer Oertel, CMF Impact Investing Expert in Residence

Earlier this year, the Ann Arbor Area Community Foundation, a CMF member, commissioned and issued the results of their Washtenaw County Capital Research Report: 2020 Analysis of Local Capital Flow & Opportunities. Supported by the Ralph C. Wilson, Jr. Foundation and working with local and national research partners Revalue, Entrypoint and The Urban Institute, the report was the first of its kind to establish an independent and objective understanding of the local investing ecosystem. (You can read CMF’s feature story on the report here.)   

Although based on Washtenaw County, the results of the report are not dissimilar to many (I would guess, even most) other communities around the country. The data underscore the inequities that exist at the very heart of how capital flows and highlight the importance of the local investing and impact investing movements – using investment capital as a force for social justice, equity and inclusion.  

By way of example, the report found the following statistics about Washtenaw County: 

  • 80% of businesses are white owned. 

  • Neighborhoods that are at least 60% white receive three to five times more investment per household than racially diverse neighborhoods. 

  • The median income for Black families is 53% of that for white families, and 25% of Black households have zero or negative net worth. 

  • More energy and resources go into nurturing populous (downtown) areas. 

  • Although 70% of the county’s businesses have fewer than 10 employees, capital is mostly available to large businesses, meaning that small business owners (more of whom are people of color) must invest their own capital. This also results in a barrier to entry into entrepreneurship for those who aren’t independently wealthy or have wealthy relatives from which to borrow. 

Despite the significant challenges to small, local businesses in the county, they: 

  • Keep as much as 48% of the capital in the local economy (as opposed to about 14% for large chains). 

  • Help support job creation. (More than half of all U.S. jobs are with small businesses.) 

  • Donate 250% more to local nonprofits and community causes than large chains. 

While the report focuses on Washtenaw County, I have seen these same issues running rampant in communities around the country. The purpose of the report and other studies like it is not to lay blame or to point fingers but rather to utilize these objective data to do better. And we must.  

The report identifies opportunities for improvement that can help rectify historic inequities in the community. These same efforts can make a significant and positive impact in your own region, including: 

  • Creating a stronger residential workforce pipeline, with particular attention to people of color. 

  • Promoting access to affordable housing, as opposed to low-income enclaves that easily become isolated and disinvested. 

  • Supporting small, local business and traditionally excluded entrepreneurs. 

  • Investing in businesses that can return positive social and financial benefits. In Washtenaw County, those businesses include caregiving, private educational services, food supply, real estate and independently owned “Main Street” businesses.  

  • Updating zoning and recovering abandoned/foreclosed land to enable entrepreneurs to affordably locate their operations, especially to bring jobs and services to low-income areas. 

The report suggests that an integrated capital approach – where organizations like the Ann Arbor Area Community Foundation collaborate with other community-minded organizations, businesses and people – is the key to creating a resilient and equitable local economy. This approach involves education about the social capital held by various ecosystem stakeholders, sharing community narratives and creating infrastructure that supports – and accelerates the flow of capital to – small businesses and especially traditionally excluded entrepreneurs.  

Thank you to the Ann Arbor Area Community Foundation and those who supported the report for being brave enough to highlight these issues. Thank you to all of CMF’s members who are currently, or who are moving toward, utilizing at least a portion of their investment capital not just for the financial return that it may bring but for its power as a force for racial and social justice. Each and every one of our investments has an impact, whether intentional or unintentional, whether positive, neutral or negative.  

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Jennifer Miller Oertel is CMF's Impact Investing Expert-in-Residence and a shareholder in the law firm of Bodman PLC, where she leads the firm’s Tax-exempt Organizations and Impact Investing Group.  With a background in securities law, private equity and mergers & acquisitions, Jennifer utilizes her corporate law and governance skills to assist family and corporate foundations, community foundations, public charities, regional associations, trade and labor associations, chambers of commerce, religious organizations and other tax-exempt organizations as well as impact investors, impact funds, and social enterprises, in all aspects of their business.