City budgeting for equity and recovery

Capital budgets and improvement plans are critical to economic development. Their spending power will also help determine the course of the recovery. “Equity in Capital Improvement Planning Processes,” is a City Budgeting for Equity and Recovery report from PFM and What Works Cities that explains how cities can adjust their capital improvement planning process to drive equitable outcomes for economic recovery. 

The full version of this article was first published by PFM and is a What Works Cities resource.  Smart Incentives and PFM strive to advance inclusive economic development, effective and responsible business incentive use, and an equitable recovery.

Capital budgets and improvement plans present exceptional opportunities for governments to drive equitable outcomes in municipalities, particularly when budgeting for recovery. The significant spending power authorized through capital budgets – multiple billions for some jurisdictions – can allow for increased, targeted spending on geographies that historically lacked investment from the public and private sectors. In addition, the job creation necessary to complete these projects offer workforce and economic development opportunities for residents and businesses. 

Most cities have no structured mechanisms to incorporate equity considerations into their capital investment planning. Equity- based approaches to funding, project selection, and community input are still evolving and imperfect at best – but such approaches are now developing rapidly for operating budget allocations. 

This resource outlines strategies and case examples (related to equity in capital planning) from across the country, that can be adapted to the local context. 

Prioritize projects that align with long-term strategic goals

In the City of Seattle, WA, equity goals have been set by the Seattle 2035 comprehensive plan – and the City’s scorecard for capital investments uses detailed, quantifiable criteria to rank projects in terms of alignment with these goals.  Projects that score high on these measures (and, thus, are highly aligned to the plan) receive higher priority for funding than those with relatively lower scores. (City of Seattle, Office of Planning & Community Development)

Develop a more impactful community benefit agreement structure

In Sacramento, CA, a recent CBA developed for a multi-billion-dollar mixed use development generated $50 million in funding for affordable housing, anti-displacement investment, prioritized hiring for residents, and improved public transit infrastructure. These benefits were developed, prioritized, and supported by direct resident input. The evaluation firm highlighted dialogue with community members (versus presentations) and recommended reevaluating success measures (i.e., rethinking straight, or traditional, financial return-on-investment). (Darrene Hackler, Smart Incentives, Community Benefit Agreements: An Equitable Tool for Innovation District Development)

Formalize “% for X” investment goals in major capital projects

The City of Austin, TX, recently dedicated $300 million of a +$7 billion transit expansion program to affordable housing and anti-displacement programs for the nearby neighbors of the new transit line.  Not only does this provide funding for an equitable priority, but also enhances the value of the transit assets themselves through potential increases in ridership. (Harrison Young, Austin Monitor, “Austin Transit Partnership Oks Anti-Displacement Funding”)

Connect capital budges and workforce development

One city in the current Bloomberg Philanthropies/What Works Cities City Budgeting for Equity and Recovery cohort is working to design a sidewalk maintenance program that would include a set amount of work conducted each year by apprentices and workers seeking employment. This helps to improve walkability and economic activity, while also training residents to work in trades that offer family-sustaining wages and add value to businesses in the City. 

Seek strategies for co-investment

The Philadelphia Energy Authority’s Solar Savings Grant Program, for example, leverages funding from the Commonwealth of Pennsylvania for green energy projects to offset the cost of installing solar panels on low- and moderate-income households’ roofs. The grants lower the overall costs of the program, residents save money on their electric bills each month, and the city decreases its overall carbon footprint. (Philadelphia Energy Authority)

Set a future-focused investment strategy

Invest in growing service areas based on demographic trends and strategies that can reallocate funding to more equitable priorities. In Eugene, OR, the CAHOOTS mobile crisis team program cost approximately $2 million to operate (in 2019) and is estimated to have saved approximately $23 million in public safety and health costs. Investments like these also create an equitable outcome of clinically appropriate care delivered to residents in need (i.e., instead of holding residents in prison or police custody without timely treatment) while diverting from corrections populations and overburdened emergency rooms. (Reach out Response Network, November 2020)

These strategies also suggest s shift away from traditional measures of financial return that tend to favor wealthy neighborhoods with high property values when assessing projects. For example, the report suggests considering analyzing social vulnerability (an index created by the CDC), ranking projects on equity metrics, investing in disadvantaged communities, and incorporating measures of environmental and social impacts. 

Conclusion

Many municipalities currently face a myriad of deferred maintenance and equity imperatives – all of which have been exacerbated by the COVID-19 pandemic. The path to reversing severe long-term under- and disinvestment must include large-scale, strategic capital program initiatives. Through engaging their communities, cities can address both historical disparities and identify investments that can build towards a more equitable future. 

A common theme across the strategies documented here is the importance of change management to creating sustainable change. Whether starting from a top-down directive (e.g. executive order) or a bottom-up approach (e.g. employee-led, department level change), understanding the stakeholders involved and the relevant processes is critical to designing a more equitable approach. Another factor embedded in each of these strategies is the availability and monitoring of disaggregated data to ensure that all residents benefit from the changes implemented. 

As equitable considerations take hold and begin to shift the balance of capital investment dollars to the previously neglected corners of the local map, municipalities should become better places to live, work, and enjoy for all residents. When combined with strong community engagement, data-driven project criteria, and thorough measurement and evaluation, funds that seemed too limited will deliver results above and beyond their scale. With the first American Rescue Plan Act (ARPA) funds arriving to cities, states, and counties in the last month, and recent, additional infrastructure spending discussed at the federal level – now is the time to prepare stakeholders to rise and meet the moment.