Whose leadership will guide Chattanooga Neighborhood Enterprise?

Whose leadership will guide Chattanooga Neighborhood Enterprise?

May 12th, 2013 by Ellis Smith in Business Around the Region

Chattanooga Neighborhood Enterprise has promoted homeownership and livable neighborhoods for 25 years.

Photo by Staff File Photo /Times Free Press.

Ric Ebersole

Ric Ebersole

Photo by By Margaret Fenton

About CNE

The agency has assisted nearly a quarter of all Chattanooga homeowners in some way

3,600 families have purchased homes through CNE

3,800 families have received home improvement loans and repair assistance through CNE

CNE made 17 rehab loans totaling nearly $450,000 and provided grant funding for 75 weatherization jobs in 2012

2,500 families who were at risk of foreclosure have worked with CNE to avoid losing their home, and in 2012 CNE counseled 620 clients and made $4.5 million in forgivable loans.

Source: CNE

Chattanooga Neighborhood Enterprise is seeking a "pied piper" to replace interim director Ric Ebersole as the organization goes through its second overhaul in seven years.

Ebersole, a onetime board member at CNE, temporarily took the helm at the nonprofit after the abrupt resignation in October 2012 of ex-CEO David Johnson, amid accusations about sexual and financial impropriety.

CNE now wants a permanent executive to take the reins, said Ebersole, who himself is a developer and never intended to stay at CNE full-time.

Before his arrival, CNE received failing grades on a city audit, which found that records were not properly maintained for some of the agency's 3,000 loans. The review noted that auditors had "great concern" with CNE's financial reporting and found financial discrepancies that were "very serious." Separately, a group of ex-employees had filed federal complaints against Johnson and his lieutenants, alleging racial and sexual discrimination.

CNE, which takes in roughly $7 million in revenue per year, offers home loans and home improvement loans to people who can't get a bank loan. It also educates homeowners on the quirks of home ownership and helps them avoid foreclosure.

The organization in the past has helped distribute federal and state money directed at weatherization and neighborhood revitalization, and formerly made business loans and managed rental property.

In simple terms, CNE is a nonprofit lender that also does some construction and education. But what the future holds still is unclear.

A spokeswoman for Chattanooga Mayor Andy Berke said the mayor wasn't sure how much support CNE will continue to receive from the city.

"Economic and community development is one of Mayor Berke's top priorities, and there is no doubt Chattanooga Neighborhood Enterprise provides a valuable service to our community," said Lacie Stone, the mayor's communications director. "We are still conducting an extensive review of the functions of city government and budget, as we work to provide the most effective services at the best value for taxpayers."


As a precaution when he took over, Ebersole enrolled all CNE employees in training courses specific to their jobs -- "not because they needed it, because the more you know about what you're doing, the better," he said.

But that's all in the past now. CNE is ready to move on, Ebersole said, albeit with a slightly modified mission.

"I came in here assuming that there was a demoralized staff, that because of turnover issues, we probably did not have appropriately trained personnel in the positions," Ebersole said. The impression I had was that if somebody left, they just picked up the next body, but I was completely wrong. Productivity and morale was very good; it's excellent now."

The agency was co-founded in 1986 by Bob Corker to promote affordable housing and provide homeownership education. Its mission evolved over time, for better and for worse.

CNE was forced to exit the property management market in 2007 amid millions of dollars in losses and declining contributions from the city, which have fallen from more than $4 million per year to $1 million per year today. Employment fell as well in 2008 under then-interim executive director Sandra Williams, who cut staff from 54 workers to 19. That number has risen to 21 today.

In an era of declining municipal support, Ebersole says CNE's current goal is to find a way to sustain itself with less government backing. To start, the organization is tightening up its lending rules and collection standards, and is also generating policies to help loan recipients avoid foreclosure. It also no longer is offering small business loans, and is considering a return to the multi-family market.

"We have focused on what it is that we did well, what we did not do well and how we can focus on core business lines," Ebersole said. "I think that there was a period of self-reflection of internal improvements and controls that CNE went through, we got a new financial platform and a new accounting system and we have reorganized ourselves a little bit differently."


Though CNE has embarked on a more focused mission, any future executive still will need to wear multiple hats to manage the agency's diverse operations. A good executive director must understand housing, lending and fundraising, a job ad says, and be able to pursue sometimes conflicting goals.

"You have to balance the mission side of the organization with the requirements of an ongoing business," Ebersole said. "It is very difficult for CNE to be simultaneously talking to people about the benefits of home ownership, and then also have to be the guy who's sending demand letters to people who are late on their payments."

A future director also will face the possibility of seeing CNE's government funding cut further, which will require some creative thinking, Ebersole said.

There's no single easy solution to create a fully independent CNE, but possible solutions to bolster the agency's revenue include buying and holding cheap land, and allowing so-called "impact" investors to buy into the agency's loan portfolio.

"Real estate can be a profitable business," he said.

Another key choice will be whether to re-enter the multi-family segment, after being forced to publicly exit that market years before amid millions of dollars in losses.

"I think multi-family has to be a part of anything other than a very small community development project," he said. "We still promote home ownership, but we also have to recognize that there are people who don't want to own, and that should be part of neighborhood redevelopment. Multi-family is going to be part of the mix."

But rather than the sprawling projects that defined CNE's failed previous efforts, the agency could fill a smaller niche.

"Instead of a five-block project, we need to look at infill for neighborhoods like M.L. King," he said. "The risk is much less there."

Ebersole doesn't know exactly what CNE will look like under its new executive, but the nonprofit's core customer has never changed. In 2014, the agency still will be targeting the slice of Chattanooga residents who are too poor to qualify for help from a traditional bank, but are still well-off enough to pay back a loan.

"We're looking for the guy who wants to get a house but is marginal in their ability to buy a house," he said. "There's a big demand out there."

Contact staff writer Ellis Smith at esmith@timesfree press.com or 423-757-6315.