By Scott Watkins
“A healthy community is not just a feel-good thing – it impacts economic development and fiscal health,” says Hernando, Mississippi mayor Chip Johnson.[i] Current projections put Mississippi’s obesity liabilities hitting $3 billion within the next 4 years on a total annual state budget of $5 billion. Yet Mayor Johnson has found a way to reduce Hernando’s resident’s taxes 15% percent a year and give city employees a 2% pay increase at the same time.
All of this was made possible by employee participation in Blue Cross & Blue Shield’s Healthy Workplace program. Imagine working at a place that requires you go for a walk on your lunch break – and gives you a raise for making it a habit! While you’re out on a mid-day walk, you pick up fresh fruits and vegetables at the local farmers market for lunch and dinner. Not only will you receive a pay increase but you’ll also feel better and help strengthen your local economy[ii] by putting cash directly in the hands of local farmers.
Understanding the connection between health and the economy can be a missing link in creating thriving communities. Of course, capital-financing strategies to implement successful programs that help residents live healthy with new playgrounds, walking trails, bike paths, as well as a farmers’ market and a community garden can be a major stumbling block to succeeding at Hernando’s level.
But making it easier for residents to be active within the context of their everyday routines doesn’t take an overwhelming amount of cash. Existing deficiencies within communities built environment can be funded through a wide number of funding methods.
A simple way to fund healthy neighborhood improvements is by coupling design standard enhancements with developer impact fees. By strengthening and streamlining community design standards through general plan, specific plan or neighborhood plans, communities can spur development. Along with updated design standards, communities ought to reexamine the nexus between their fee schedules and development costs associated with tying new developments with existing.
Often the combination of a “timing gap” and a developer preference for developing where communities have already invested in infrastructure make impact fees alone impractical to fund comprehensive infrastructure projects.
In California, Senator Lois Wok’s promising SB 33 sought to remove some of the barriers to Infrastructure Funding Districts (IFDs) and create a more viable funding and financing mechanism for comprehensive infrastructure by “capturing” incremental increases of property tax revenues from future development.[iii]
But unfortunately, IFDs face an upward climb in a hostile climate. They have a very similar approach to funding projects as the now defunct California Redevelopment Association’s Tax Increment Financing Fund. Due to the perceived similarity between the two, the historic misuse of redevelopment funds, and Governor Brown’s 2012 veto of Senator Wolk’s substantially similar SB 214, this may be an idea ahead of its time. SB 33 was recently placed in the Assembly inactive file.
A combination of emerging funding techniques such as Social Finances’ “Social Impact Bonds” may be the financing vehicles to foster social innovation and improve existing infrastructure.
A Social Impact Bond is an innovative financing mechanism designed to raise private-sector capital to expand effective social service programs. SIBs are a way to finance pay-for-success contracts, which allow government to pay only for results. If a program funded by SIBs achieves successful outcomes,[iv] which are defined and agreed upon in advance by all parties to the contract, government repays investors their principal plus a rate of return based on the program’s success. If outcomes are not achieved, on the other hand, government is not obligated to repay investors.[v]
Social Impact Bonds are already being leveraged to mediate the impact of complex social issues, such as Recidivism and Asthma, in 11 states across the country.[vi] [vii] The California Endowment and the Rockefeller Foundations are playing a key role in helping to accelerate the rigorous data collection and evaluation procedures associated with demonstrating the social and financial benefits of using Social Impacts Bonds. According to the Rockefeller Foundation’s Kippy Joseph, Social Impact Bonds (SIBs) are the “tip of the spear of innovative financing instruments that can be put to use for the benefit of society.”[viii]
Eventually the conversation ought to change to “cool plan… who’s going to save from it?” and the answer ought to be the taxpayers.
[i] Bailey, H. (2011, February 23) Hernando: A Small Mississippi Town Bucks a Statewide Trend. Memphis Daily News, pp. A1, A4
[ii] Mitchell, S. (2000). The Home Town Advantage: How to Defend Your Main Street Against Chain Stores… and Why It Matters. Institute for Local Self-Reliance.
[iii] City of Salinas Site Opportunities and Constraints; Salinas Economic Development Strategy (2014). Economic & Planning Systems
[iv] Historically, government payment to service providers has been based on outputs rather than outcomes. The metrics associated with outputs usually focus on head count, for example the number of people enrolled in a program or the number of families served. Outcomes measurement, by contrast, focuses on the impact of the service with regard to achieving desired benefits, such as the reduction in prison recidivism or the number of people who gain long-term employment as a result of the program.
[v] Hughes, J. Scherer, J. (2014) Foundations for Social Impact Bonds; How and Why Philanthropy Is Catalyzing the Development of a New Market. Social Finance
[vi] Harvard Kennedy School, Social Impact Bond Technical Assistance Lab. Accessed April 17, 2014 http://hks-siblab.org
[vii] Asthma management demonstration project in Fresno, CA paves way for Social Impact Bond. (2013) Social Finance. Accessed April 17, 2014 http://www.socialfinanceus.org/sites/socialfinanceus.org/files/Fresno%20Asthma%20Demonstration%20Project%20Press%20Release.pdf
[viii] Reflections from the Aspen Institute Event on “Foundations for Social Impact Bonds.” (2013) Social Finance. Accessed on April 17, 2014 http://socialfinanceusblog.wordpress.com/2014/03/13/reflections-from-the-aspen-institute-event-on-foundations-for-social-impact-bonds/