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Neighborhood Trusts: Investing ARPA funds to build community wealth and equity

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Neighborhood Trusts: Investing ARPA funds to build community wealth and equity

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Local Return endorses the proposal included in the Rhode Island Foundation's Make It Happen recommendations to invest $50 million in neighborhood trusts. These trusts would be created by the communities most hurt by COVID-19 and generations of disinvestment.

Local Return endorses the proposal included in the Rhode Island Foundation's Make It Happen recommendations to invest $50 million in neighborhood trusts. These trusts would be created by the communities most hurt by COVID-19 and generations of disinvestment.

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Neighborhood Trusts: Investing ARPA funds to build community wealth and equity

  1. 1. Neighborhood Trusts Investing ARPA funds to build community wealth and equity December 2021, v.2
  2. 2. RECOMMENDATION: Invest $50 million for the creation of neighborhood trusts in Qualified Census Tracts. “A neighborhood trust is a collection of funds, pooled and held in trust for the benefit of a specific neighborhood, to be directed by people who live in that place. These trusts would allow communities to pool funds, including allocations by other funders and small-dollar investments by residents themselves, into large-scale efforts to revitalize and improve their communities. Strategic investments made by the community would generate social and, ideally, financial returns, resulting in a regeneration of funds. Decisions on how the trust is allocated would be made by members of the community themselves, through the creation of democratic and transparent governance structures.” MAKE IT HAPPEN: Investing for Rhode Island’s Future Rhode Island Foundation, October 2021
  3. 3. What are neighborhood trusts? A neighborhood trust is “a fund held in trust by the community for the long-term benefit of the neighborhood. The trust would have a mandate to address the interconnected problems that beset the community, but only in a way that did not sacrifice affordability. Beyond that broad mandate, the terms and objectives of the trust could be tailored to meet the unique needs of the neighborhood in which it was located.” Joseph Margulies, Communities Need Neighborhood Trusts, Stanford Social Innovation Review, March 29, 2019
  4. 4. What are neighborhood trusts? ✓ Administered by a board of trustees, a majority of whom are residents, business owners, and civic leaders from the community ✓ Overseen with professional governing practices and supports: rotating and limited terms of office, conflict of interest policies, and training and technical assistance ✓ Driving community development and civic participation ✓ With flexibility to respond to the unique needs of the community, as directed by the board ✓ Members of community accountable to each other
  5. 5. In other words, a neighborhood trust is a hyper-local community chest.
  6. 6. What problems would neighborhood trusts solve? ✓ Bring financial resources to communities which have experienced decades of financial disinvestment, which have directly resulted in the unequal impact of COVID-19 on their residents. ✓ Center community decision-making, giving distressed communities local ownership and control of the resources that flow into them. ✓ Bring federal resources close to people, instead of passing through government or nonprofit agencies or programs. People know their own needs and those of their communities best. ✓ Leverage additional investments and grow over time. ✓ Neighborhood trusts that invest in commercial and residential property could help resist displacement and gentrification.
  7. 7. What kinds of things could trusts invest in? ✓ Buying an abandoned building and redeveloping it to provide zero-carbon affordable housing ✓ Creating parks, recreation facilities, or open space to improve the health and social connections of neighborhood residents ✓ Buying an abandoned lot, leveraging brownfield funding from DEM to remediate the land, and building a 3 MW urban solar facility ✓ Setting up energy co-ops so residents of all incomes can save money on their energy bills and lower their utility usage ✓ Creating green infrastructure projects in their neighborhood to help mitigate stormwater and clean the air
  8. 8. Where did this concept come from? Neighborhood trusts (and similar models to share ownership and build equity, like Community Investment Funds or Real Estate Investment Trusts) are gaining attention across the country, due in part to the work of Joseph Margulies and Elwood Hopkins. There are emerging examples of these models, like: ● Kensington Corridor Trust (Philadelphia, PA): Fostering the equitable economic revitalization of a commercial corridor and its surrounding neighborhood through local partnerships, strategic programming, and de-commodifying real estate assets and transitioning them to neighborhood control. ● Trust Neighborhoods (Kansas City, MO): Helping neighborhood-based organizations set up their own Mixed-Income Neighborhood Trusts, community-directed entities that develop, own, and operate rental housing and retail. ● Community Investment Trust (Portland, OR): Offering a long-term path to collective, communal ownership of real-estate for investors starting from $10-$100 per month. ● Northeast Kingdom Prosperity Fund (St. Johnsbury, VT): Investing in local ventures that deliver a financial and social return for the community. ● Ujima Fund (Boston, MA): The nation’s first democratically governed investment fund, using grassroots assemblies and cooperative structures to invest in entrepreneurs of color.
  9. 9. Pooled funding treating intersecting issues in the places where those issues are experienced governed by members of that community with flexibility to focus on that community’s needs.
  10. 10. $48 million for 9 neighborhood trusts in RI $45,000,000 To seed trusts in 9 communities with $5 million each $2,500,000 To create a technical support team to work with trust communities to establish governance structures, identify priorities, and generate operating procedures over the first five years $2,500,000 For legal support to establish the trusts
  11. 11. We can’t create Neighborhood Trusts in every community. How do we decide? It’s critical to have objective criteria that derive from external, verifiable data sources. We suggest keeping it simple, as well. For example: All Qualified Census Tracts are eligible and prioritized according to a relevant statistic such as COVID-19 cases or the Opportunity Atlas “household income at age 35” data point. Community control sounds great, but how would that actually work? It would be very similar to other institutions in our democratic republic. Residents in each community would elect a governing board, made up of people who live or own small businesses in the community. The real promise of Neighborhood Trusts is that they ultimately become self-accountable.
  12. 12. How would the first governing board members be selected? The governing board members should be selected through an election. Residents in each participating census tract would be eligible to “run” for the board, make their case at a public meeting, and vote. What kinds of supports will the boards receive on how to govern this money? The boards will need some support and oversight to get off the ground. During the first five years, a nonprofit will be retained to coordinate a technical support team around topics like financial literacy, legal structures, governance, participatory decision-making, and human-centered design. (In this way, we are also building capacity within our communities.)
  13. 13. Who will provide this support? We suggest that there be a nonprofit partner who can convene and support the Neighborhood Trusts by assembling a team of resources. The board members, first and foremost, know their communities. They bring wisdom, social capital, and resilience from their relationships and experiences. Where does the money live? We suggest that the state place the funds initially at an institution like the Rhode Island Foundation. The Foundation can also conduct the RFP to hire the nonprofit partner described above. Once a trust is legally established and the board is in place, the Foundation can transfer the funds to a local financial institution of the board’s choice. By placing the money in a locally-owned bank, credit union, or CDFI, we are strengthening our economy.
  14. 14. Why don’t the communities need to match the funds? Matching funds would be a plus, but they shouldn’t be necessary because they may disincentivize participation from the very communities that need the funds the most. How would we ensure accountability? The best accountability comes from the community – when the members of the board are accountable to themselves and their neighbors. Of course, we want to put in place good procedures to prevent corruption or mistreatment of funds. The nonprofit partner would be in charge of ensuring good governance and tracking learnings over the first five years.
  15. 15. A timeline Month 1: Identify 9 communities, place funds at Rhode Island Foundation Month 2: Rhode Island Foundation conducts RFP for a nonprofit partner to support trusts with technical assistance, training, and evaluation Month 3: Select nonprofit partner to provide technical assistance, training, and evaluation Months 4-5: Election of governing board members Selection of financial institution by each trust Months 6-10: Convene boards, provide training and technical support, make structural decisions Months 11-12: $5 million released by Rhode Island Foundation to each trust (upon incorporation, bylaws and board in place, relationship with financial institution established)
  16. 16. What is success for neighborhood trusts? In 5 years, we would look for: ✓ Concrete social impacts in the communities from the portfolio of investments ✓ $ added to Trusts from other sources ✓ Increased economic activity in the neighborhoods In 10+ years, we envision: ✓ $ financial returns generated by initial $45 million ✓ Narrowed opportunity gaps ✓ Increased community capacity (“the interaction of human, organizational, and social capital existing within a given community that can be leveraged to solve collective problems and improve or maintain the well-being of a given community”)* ✓ Increased sense of agency ✓ Increased community wealth ✓ Increased social resilience *Definition from Robert J. Chaskin
  17. 17. About Local Return Our mission is to build community wealth in Rhode Island through ownership and investment, particularly in neighborhoods that have experienced historical disinvestment. We do this by: ● Building the local community investment ecosystem ● Advocating for local policies and practices that support a vibrant and just local economy ● Increasing community awareness and capacity We define community wealth building as creating and using local assets to make a community more vibrant, developing assets in such a way that the wealth stays local, and helping families and communities control their own economic destiny (with gratitude to Marjorie Kelly of the Democracy Collaborative for this definition). Board of Directors: Sue AnderBois food and climate resilience/clean energy policy and systems Josh Daly small business development and financing Jessica David philanthropy and organizational/ecosystem development Carmen Diaz-Jusino entrepreneurship, banking, and program oversight Raul Figueroa worker rights, organizing, and cooperatives Lisa Raiola food businesses, start-ups, and advancement Contact: LocalReturn.org jessica@localreturn.org (401) 575-9717

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