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August 10, 2006
Calvert and Ford Foundations Help Launch Public Radio Fund to Democratize the Airwaves
    by Bill Baue

The foundations jointly seeded $4.5 million in the revolving loan fund administered by Denver-based Public Radio Capital to provide low-interest loans to public radio projects nationally.


Back in 1999--three years after the Telecommunications Act of 1996 opened the floodgates for corporate consolidation of radio station ownership--a group of leading public radio station managers gathered to discuss how public radio could move forward in such an environment. The group determined that lack of access to capital was limiting the ability of public radio to hold its own against the increasing homogenization and corporatization of the airwaves, according to Marita Rivero, vice president and general manager of WGBH radio and TV in Boston.

"A light bulb went off when someone in the back of the room said, 'We need a public radio bank,'" Ms. Rivero recalled.

Enter Public Radio Capital (PRC) in 2001, a 501(C)3 organization committed to bridging the divide between the non-profit world of public radio and the complex financing environment of the media world. Over the past half-decade, PRC has facilitated $100 million worth of financial transactions for more than 20 public radio projects reaching more than 22 million people nationwide.

And just yesterday, PRC joined the Calvert Foundation and Ford Foundation to launch a new Public Radio Fund, an initiative that borrows the community investing model of a revolving loan fund that self-perpetuates by channeling loan repayments into a pool for originating new loans.

"The Public Radio Fund is a rare, first-of-its-kind opportunity for mission-based investors around the country to band together behind grass-roots, alternative, independent media," said Tim Freundlich, director of strategic development for the Calvert Foundation, an independent non-profit spawned by the Calvert Group of socially responsible investing (SRI) mutual funds. "In the face of growing concern about over-concentration in media ownership, we feel more public radio in more places in the US is a positive thing for the country, and that's the goal of the fund."

"This will be the largest multi-station investment fund campaign ever undertaken for public radio in the US," added Marc Hand, managing director of PRC. "Beginning this fall, the Public Radio Fund will help public broadcasters all over the US gain access to capital on an affordable basis, and move more quickly and aggressively when an opportunity to compete for a valuable channel comes on the market."

The fund is seeded with $4.5 million--$3 million that Calvert Foundation has aggregated from small individual investors, and $1.5 million from the Ford Foundation--with a target of reaching $15 million over the next year. This amount will support five to ten stations directly, with the recycled capital in the revolving loan fund likely securing financing for 20 to 30 more stations. Institutional and accredited individual investors (namely high net-worth folks) can invest $100,000 or more in the fund, with below-market interest rates ranging from zero to three percent for three-year notes and as much as four percent for five-year notes.

Community investment typically trades off market-rate financial returns in exchange for so-called "social returns"--namely, the benefits to society and individuals from the investment. A November 2005 report by the Investors Circle Foundation (the non-profit arm of the social venture capitalist and angel investor organization) jointly sponsored by the Calvert and Ford Foundations examined the notion of social returns in the media industry. Entitled The Double Bottom Line (DBL) Media Industry: An Analysis of Investment Opportunities, the report defines DBL media as comprising three broad characteristics: minority-oriented, independent, and explicitly social mission-focused.

While the Public Radio Fund does not explicitly embrace this definition of stations to support, PRC's client list largely fits this definition. For example, PRC provided $50,000 in financing to Radio BilingŁe, a Latino-led Spanish and English public radio outlet, to acquire KVFR-FM in Laytonville, California. This particular transaction demonstrates a specific advantage of the Public Radio Fund in providing financing below the $1 million mark, a threshold below which media financing becomes much more difficult.

"Most radio financing is national in scope," Mr. Hand explained. "What makes the Public Radio Fund unique is that we're trying to create a mechanism for doing national acquisitions and financing but retain local ownership and control of stations."

Financing will focus on acquisitions as well as preservation of public radio stations on the left-hand side of the FM band reserved for non-commercial stations. Public radio will compete some with commercial outfits for stations on the AM band, but the primary focus is providing capital very quickly, as opportunities arise in the reserve part of the band with very little notice, catching public radio organizations flat-footed in the past.

Mr. Hand identifies three major divisions of the 2,900 non-commercial stations operating in the reserve part of the band. These three categories include: public radio stations affiliated with National Public Radio (NPR), Public Radio International (PRI), or funded by the Corporation for Public Broadcasting (CPB); non-commercial religious broadcasters; and everything else, including community-based radio stations. While PRC primarily works with stations in the first category, it also works with stations in the third.

For example, PRC provided a $15,000 grant to Boulder-based community station KGNU to explore the purchase of a signal in Denver, and helped with the 2004 purchase of KJME at 1390 on the AM band for $4.1 million--considered a bargain in the Denver market. PRC is also working with two national organizations, the Prometheus Radio Project (which promotes the proliferation of community radio) and the National Federation of Community Broadcasters (NFCB), on a joint project to map out available non-commercial frequencies.

"The Federal Communications Commission plans to open a window to submit applications for vacant non-commercial frequencies sometime next year (though it hasn't set a specific date)," said Mr. Hand. "The joint mapping project will identify what those potential frequencies might be so we can work with public broadcasters and get them prepared for filing applications."

"I think it is great that there is a loan fund to help public and community radio get more frequencies," NFCB President and CEO Carol Pierson told SocialFunds.com. "We need more local, diverse voices on the radio in this country."

 

 
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