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The pioneering Coastal Enterprises Inc., which is building lobster-land’s local economy
from the ground-up, specializes in fisheries, food and forests

By Ellie Winninghoff

How do you develop a rural economy that is 90% covered with trees and includes 4613
islands–but which has no major corporations, lousy soil and an inhospitable climate
most of the year?

In l977, when Ron Phillips started Coastal Enterprises, Inc., or CEI, a Wiscasset-based
revolving loan fund and community development finance institution, to support low-
income people in Maine, the state was like a “third world country,” he said–one based
on natural resources and extractive industries with “less value-added than you’d like to

Today CEI (assets under management: $792 million) is one of the most sophisticated
and pioneering impact investors in the country, and its do-good tentacles are felt from
Millinocket, Me. to Lopiwa, Hawaii Island. With a focus on start-ups and small growing
businesses, especially those involved in fisheries, farms and forestry, its triple bottom
line innovations include things like FISHTAGS, which commit borrowers to collecting
biological data in order to help manage sustainable fisheries.

CEI is also particularly lauded for its StartSmart program, through which it has helped
Somali refugees and immigrants to establish farms and a low-income farmers’ market
in Lewiston, as well as other businesses in the burgeoning Muslim communities in
Lewiston and Portland.

Loans range from under $25,000 to over $25 million, and like other community
development finance institutions, CEI has a heavy emphasis on technical assistance
to its borrowers. But it takes that a step further by developing a more holistic sector
approach involving investments in production capacity, market opportunities,
infrastructure and policy development.

“We pride ourselves on due diligence here, and we look at what needs to change to
make proposals stronger,” says Gray Harris, director of sustainable Ag at CEI. “There
is a commitment in this shop to have someone who can take the time to work with the
people in [each of these sectors] to strengthen them so that they are viable sectors
moving forward.”

Accredited investors can participate in the fund’s CEI Notes, which pay rates ranging
from 2% to 3.5% for three to ten years. CEI is rated AAA-3 by CDFI Assessment and
Rating Systems (, or CARS, and minimum investment is $5000.
Recent investors have included the Ford, MacArthur, Kellogg, Kresge, Annie E. Casey
and FB Heron Foundations.

Working waterfronts–a new twist on conservation

Initially established to help add value in natural resource sectors, CEI made its first real
mark in l979 with a $300,000 investment in Boothbay Region Fish & Storage, Inc. The
only refrigerated space available to local fishermen, it was slated for sale for tourist-
related development after it burned. Saving “the Freezer,” as it was called, became a
community effort to preserve traditional livelihoods and the working waterfront–and it
presaged some of CEI’s heralded work to come.

Maine’s fisheries represent $750 million in annual state revenues, and support 35,000
jobs. But according to the Island Institute, in Rockland, Me., there are only 20 miles
of working waterfront among the 5300 miles of coastline in the state of Maine, where
much of it has been sold for residential use, vacation homes and other types of tourist
development–at prices that lobstermen can no longer afford.

“You need a lot of infrastructure on all these peninsulas and islands, and the ability
to land lobster up and down the coast is critical,” says Hugh Cowperthwaite, fisheries
director at CEI. “You can’t have all these small boats running to Portland or driving to
Portland. It just doesn’t make sense.”

In 2003, CEI played a role in the early development of a first-of-its-kind conservation
easement in York, Me. Easements are the legal removal of a right of use, and
conservation easements generally protect wildlife habitat, recreational land etc. by
eliminating development rights. Historically, most conservation easements in Maine
were “forever wild,” meaning all economic use of the land was strictly prohibited. In this
case, however, the easement was used to protect the economic use of the land–by
preserving the working nature of the waterfront.

“The move to protect commercially valuable assets is new and says much about the
way Maine is changing,” Down East Magazine pointed out in its May 2007 cover story.

In York, the 2290 square foot Sewall Bridge dock was situated on one-sixth acre, and
its purchase by two lobstermen gave one of them (also a wholesaler) a place to buy the
catch from 14 other lobstermen. The negotiated price of the property was $710,000, its
value at “highest and best use.” In this case, that meant development as residential or
tourist-related property.

The lobstermen paid $300,000. The York Land Trust, with donations and a $150,000
loan from CEI, paid $410,000 for the development rights and placed a conservation
easement on the property. The lobstermen own the property, but there is a covenant in
the deed restricting its use to commercial fishing–even if they sell it in the future.

CEI helped form the Maine Working Waterfront Coalition that then lobbied the state to
fund additional working waterfronts with public investments, and Maine’s voters have
overwhelmingly approved bond funds to acquire additional development rights based
on the York model. CEI administers the program, which has allowed nine fishermen’s
co-ops, three municipalities, a land trust and an historical society among others to
preserve 24 more working waterfronts from Harpswell and Boothbay to Vinalhaven and
Isle au Haut.

Real estate notwithstanding, lending has always been the backbone of CEI’s fisheries
program, which it administers through its Fisheries Revolving Loan Fund. Since l979,
it has made 215 loans to the industry totaling $14.4 million–gap financing that has
leveraged an additional $50 million from local banks. About half those loans have
gone to harvesters, 12% to seafood processors and the rest to shore-side suppliers,
wholesalers, and for infrastructure.

Scaling do-good impact

But while CEI’s strategy has always involved supporting entrepreneurship and local
enterprises rather than attracting big business to the state, the downside was the
inability to scale do-good impact. During the l990s, a group of CDFIs led by CEI’s
CEO Ron Phillips developed the New Markets Tax Credit (NMTC) concept to spur
investment in distressed communities. Authorized by Congress and allocated by the
Treasury’s CDFI Fund, NMTCs allow investors to reduce their basis by 20 to 25% and
thereby increase returns.

Through CEI Capital Management, LLC (CCML), its for-profit subsidiary, CEI has
$778 million in investment capacity–the largest NMTC allocation in the country. It has
completed 68 of these complex multi-million projects–about one quarter of them in

Projects have included things like cellulosic ethanol, zinc hazardous waste recycling,
and a eucalyptus plantation and veneer mill in Lopiwa, Hawaii Island. And they
encompass nearly 2.5 million acres of timberland committed to sustainable forestry.

“We’re very careful not to tie up a forest so there’s no access to traditional local
community uses,” says CCML CEO Charles J. Spies III.

Case in point: the 2009 purchase of about 22,000 acres surrounding Grand Lake
Stream in Washington County by the Lyme Timber Company–something that would
allow for both forestry and recreation through a working forest conservation easement.
Lyme also donated 132 acres to the town to develop light industry and low-income

With a year-round population of 120, the town’s entire industry consists of sporting
camps and guides. So when a special town meeting was called to commit the
taxpayers to this project with a $10,000 donation to the Down East Lakes Land Trust
to purchase and manage the easement, the taxpayer/residents voted to quadruple the
donation to $40,000.

“This was a huge commitment for our small town to make,” says First Selectman and
Maine Guide Louis Cataldo. “Beautiful water for our clients and land to hunt on is a
critical part of our operation here. If we lost that, it would definitely, definitely affect us

A former investment banker, Ellie Winninghoff is a writer and consultant specializing in impact
investing. Her writing about impact investing is linked at her blog, and she
can be reached at: ellie.winninghoff (at) gmail (dot) com.