CPD IN THE NEWS

 At the watery edge of Sunset Park, a working-class neighborhood of Chinese, Latino, and Indian immigrants in Brooklyn, lies the South Brooklyn Marine Terminal, a vast plot of warehouses and docks managed by New York City’s Economic Development Corporation (EDC). The terminal is part of an ambitious plan to generate new industrial jobs, innovation, and economic development serving local residents and the city more broadly. The plan, which has been a top priority for the administrations of both Michael Bloomberg and Bill de Blasio, involves efforts to invest in infrastructure and create incentives for new manufacturing businesses while creating new parks for local community members.

But in early 2015, a brewing dispute over the management of the project threatened to derail it. City Council member Carlos Menchaca, who represents Sunset Park, raised concerns about EDC’s role in managing the land and project, blaming the agency for insufficiently involving the local community in shaping the vision for Sunset Park’s future. This 11th-hour snag led to an unusually public war of words between Menchaca and the EDC. After months of further negotiations, the administration agreed to create a planning-and-jobs task force to engage community members, in addition to reinvesting 5 percent of the site’s revenue into a community fund and improvements to the nearby Bush Terminal Park.

While that task force has engaged local residents in a series of town-hall meetings, private investment has rapidly poured into the area as developers snatch up property for new industrial and commercial uses. The influx has left local residents fearful that, despite the new task force, they are still being left out of the conversations about the neighborhood’s future. While many say they welcome the influx of investment and jobs, they worry that, without a voice in the process, they might be displaced or left out of the economic gains.

In the midst of our national conversation about economic inequality, these questions of local-level economic development are critical. Although easily overlooked in favor of more sweeping policy issues, the reality is that cities have a disproportionate stake in the inequality crisis. Urban areas house more than 80 percent of the US population—and within these urban areas, policy decisions about how to attract investment, development, and jobs play a defining role in who gains from the resulting benefits and who loses, often for years to come.

But, as the debate roiling Sunset Park suggests, the concerns over development go even deeper than job-creation numbers and zoning. Beneath the surface is a new and more persistent anxiety about governance—about who makes decisions and how those decisions get made. If economic policy is to address inequality, it must not only be the right policy; it must also be formulated and driven by the right people.

At the national level, a growing body of scholarship indicates that the economic policies that have helped exacerbate inequality are themselves rooted in political inequalities, as industry, business, and economic-elite interests have continued to sway elections, legislation, and policymaking. As scholars like Larry Bartels, Martin Gilens and Benjamin Page, Nicholas Carnes, and Jacob Hacker and Paul Pierson have argued, economic policies skew to favor the interests of wealthier citizens, whether as a result of more sophisticated and better resourced interest-group lobbying, the decline of unions, or more subtle forms of social and cultural influence. The implication is that greater democratic accountability may be a necessity to shift economic policies in a more equitable and inclusive direction.

This same diagnosis and prescription applies to cities. In this New Gilded Age, cities are on the front lines of the battle to address economic inequality and declining opportunity. And the way they fight these battles matters. From minimum wages, gentrification, and affordable housing to neighborhood development, job creation, and local hiring, the process by which cities pursue urban economic policy can mean the difference between economic growth that continues to exacerbate inequality, and a more equitable, inclusive form of economic growth. Achieving this more equitable growth requires not only the right policies but also systems to empower stakeholders to hold policymakers, developers, and industry elites accountable to these more equitable goals.

A growing body of scholarship indicates that the economic policies that have helped exacerbate inequality are themselves rooted in political inequalities.

At the same time, by operating at the local level, cities offer real potential for rapidly engaging and empowering a wide range of stakeholders to remedy some of these structural disparities in political power. Cities can pioneer a new mode of democratic governance, where we build processes that include the full range of stakeholders, and provide them with a meaningful voice in shaping and driving economic policy. From New York to California, some of the most exciting innovations in urban development involve pioneering new ways to empower grassroots organizations and citizens—and in so doing, channel the benefits of growth more equitably.

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This is not the first time economic inequality has led to greater efforts at political inclusion. Half a century ago, the War on Poverty took a similar tack. The centerpiece of President Lyndon Johnson’s domestic agenda, the 1964 Economic Opportunity Act, created expansive new programs to provide job training, early childhood education (in the form of Head Start), access to legal services, community health services, and more. But the most controversial and radical innovation of this agenda was its focus on grassroots political empowerment as a key to fighting poverty. The act called for local governments to form “community-action agencies” to oversee these programs, and to administer them to local communities of poor and minority constituents. Furthermore, these community-action agencies had a mandate to pursue “maximum feasible participation” of the poor, including through direct representation of poor and minority constituents on the boards administering community-action programs. The theory was that the only way to hold the War on Poverty accountable to its mission was by providing the poor with a role in designing and administering anti-poverty policies.

This influx of money into anti-poverty programs was important, but combined with these institutional forms of empowerment, the War on Poverty helped activate a huge wave of organizing and mobilizing at the local level as civil-rights activists jumped on the opportunity to demand representation on the community-action boards, and accountability for channeling funds and programs to their neighborhoods. As new historical accounts of the grassroots political mobilizations around the War on Poverty suggest, mayors and city officials, alarmed by these newly emboldened grassroots movements of poor and minority constituents, reacted with increasingly harsh measures, first attempting to coopt these movements by appointing representatives they could work with to the community-action boards, and then cracking down on protesters and activists, siphoning off funding for community organizations that were the most active in pressuring local leaders.

Even in Washington, DC, the participation mandate quickly came under fire. Local party officials pressured the Johnson administration to abandon the mandate, while Johnson himself had always been uneasy with the more radical political message of the War on Poverty, viewing the notion of “local action” as encouraging cooperation between Washington and local officials, not as a call for grassroots protest.

Despite these difficulties, the War on Poverty was enormously successful in reducing the poverty rate and creating new models for economic programs. More important, it laid a foundation for greater political empowerment of community groups and the poor as a vehicle for improving economic equity, in the process helping catalyze a wave of community organizing. It also established, or dramatically expanded, initiatives like legal-defense and tenant-advocacy programs to address economic disparities by politically empowering their constituencies.

This is not the first time economic inequality has led to greater efforts at political inclusion. Half a century ago, the War on Poverty took a similar tack.

This participatory aspect of the War on Poverty is compelling today because of how it contrasts with the specter of top-down, heavy-handed urban renewal of the sort championed by Robert Moses to the detriment of many minority and poor communities. Today the concern is somewhat different—not that officials will ram through policies, but that they will skew too far towards privatization and overly friendly collaboration with developers, industry, and the economic elite. By providing representatives of often-overlooked constituencies with a real seat at the table to shape, implement, and monitor economic development policies, grassroots participation offers the hope of a more equitable approach to economic development.

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In a number of cities, efforts to empower stakeholders in economic-development projects have led to a more constructive and collaborative environment, which in turn has helped ensure a more equitable sharing of the gains. From housing to parks to infrastructure development, the economic and geographic environment within cities can undergo radical transformations, driven not by natural “market forces” but by an array of public policies—and by particular coalitions of political actors. These policies are often opaque to most residents. But empowering grassroots stakeholders in the nitty-gritty work of planning neighborhood redevelopment can help ensure that benefits of development are shared more equitably.

Consider the experience of Oakland. Rapid development and gentrification in the East Bay—in part fueled by the dramatic rise of housing prices in San Francisco—are creating both opportunities for economic growth and the threat of displacement of poorer and minority communities.

In 2000, the Oakland City Council designated the public land from the recently closed Oakland Army Base as a major redevelopment site, opening the way for construction of new public infrastructure, and laying the groundwork for new businesses and greater public access to the waterfront. Traditionally, community groups will seek a “community benefits agreement” (CBA) for redevelopment projects of this sort. A CBA is a three-way bargain between government, developers, and community representatives. In exchange for various tax and other incentives from the government, developers are required to provide some investments in neighboring communities, for example by hiring local workers in the construction projects, and setting aside funds for local parks and public spaces. The challenge with CBAs is that they can be time-consuming to negotiate and often lack meaningful grassroots community engagement. Moreover, they are rarely fully enforced, with the benefits failing to materialize long after developers have already cashed in their tax and other incentives.

The Oakland Army Base project, however, has been different. After lengthy negotiations that involved community groups, unions, developers, city government, and other stakeholders, the resulting CBA not only included provisions for local hiring and public investment in community needs such as parks, it also forged a deep collaboration between these different players. This agreement has proved remarkably effective and durable, in large part because of the effort to empower and include community representatives more directly in the negotiations, planning, and monitoring of the project.

In the buildup to the CBA, for example, a number of influential community organizations—from the East Bay Alliance for a Sustainable Economy (EBASE) to the Alliance of Californians for Community Empowerment to Oakland Rising—formed a broad coalition engaging thousands of voters in the low-income areas to support an inclusive economic development agenda. This grassroots movement helped change the debate around the project to focus more directly on how the redevelopment would serve local residents and the local community. In the end, the campaign brought together city officials and developers around an agreement on the local-hire and public-investment demands now baked into the CBA.

More important, the goals of the CBA are being implemented and monitored through an innovative, inclusive process in which community members are participating not only as sources of input but also as actual partners. To implement the local-hire provisions, the city created the West Oakland Job Resource Center, operating it in close collaboration with EBASE and other community organizations. The CBA requires developers to work with the Job Center to hire local residents; the Job Center helps make this possible by enabling employers to find qualified local workers, while also providing services, support, and referrals to job seekers looking to transform their engagement with the army-base project into longer-term careers.

This collaborative and inclusive process surrounding the Oakland army-base redevelopment is perhaps best exemplified by the Community Jobs Oversight Commission, a new body chartered by the city, which is comprised of representatives of the developers and community organizations. These representatives are appointed by the mayor and charged with the task of overseeing the redevelopment project.

The commission serves as a unique focal point for civic engagement, operating as a forum for airing grievances, a mechanism for ensuring that local-hire and public-investment provisions are in fact being met, and a vital point of leverage for community members to continue to have a voice in the ongoing implementation and development of the army-base project. By providing a public process for monitoring outcomes and airing grievances—and by including representation from all the major stakeholders, including community members—the commission has helped create an extraordinarily effective process; the redevelopment project is not only meeting its local-hire targets but exceeding them, according to members of Revive Oakland.

The Oakland experience is a good example of how a commitment to political inclusion can help drive economic inclusion. But this isn’t just a product of greater advocacy; it required a number of different actors to commit to an inclusive process. Government officials had to create institutions like the Commission and Job Center—and imbue them with real authority. Community leaders had to decide to shift from an advocacy stance to a collaborative one, joining in and investing scarce human and financial resources to make these institutions function. And labor leaders had to see that their interests in winning good jobs on the development projects were aligned with the community groups’ interest in access to those jobs.

Empowering grassroots stakeholders in the nitty-gritty work of planning neighborhood redevelopment can help ensure that benefits of development are shared more equitably.

Similar models of inclusion in planning and implementation can help create a more democratic approach to equitable development. EBASE itself is part of the Partnership for Working Families, a national network of community organizations that is attempting similar strategies in a number of other cities.

On the implementation side, a number of cities are considering more participatory approaches to monitoring and enforcing wage-theft policies. San Francisco’s Department of Labor, for example, provides grants and partnerships with community groups to expand their capacity to monitor and report violations. The national network of progressive local officials, Local Progress, has helped share lessons from this model, as other cities from Seattle to New York are now considering similar approaches.

Beyond their particular urban contexts, these examples indicate a broader potential. Participation and community engagement in these examples involve more than just town-hall meetings or comment periods. Rather, they involve empowering stakeholders to actually shape the strategy and vision for development plans, and to engage in the work of executing, implementing, and monitoring. This deeper engagement helps shapes policies at an early stage to make them equitable. If engaged early and in good faith, these community representatives can become important partners in implementing development policies and project goals.

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These examples echo the War on Poverty attempt to empower a wider range of stakeholders, especially within poor communities and communities of color, by providing them with institutionalized points of leverage. The difference this time is that there is a greater potential for governments themselves to invest in and support this kind of engagement. In Oakland, New York, and elsewhere, the active efforts of city officials to create opportunities for early and active engagement makes participation genuine.

Equitable development is about more than getting the policies right; it is also about empowering stakeholders to outline the vision, implement the strategy, and monitor outcomes. Achieving this requires an ecosystem of actors committed to political inclusion and democratic participation. As a start, it requires government officials to create and manage an inclusive process that provides a meaningful voice to stakeholders, including institutionalized forms of representation or leverage—as with the War on Poverty Community Action Boards, or with the more contemporary efforts at participatory planning and monitoring. Next, it requires civil-society actors and other stakeholders willing to engage not just as advocates but as partners in implementing and enforcing standards. Finally, it also requires transparency and data. Beginning with stated public commitments to goals—such as the local-hire commitments in Oakland’s CBA—and metrics for monitoring compliance and impact through objectively trackable metrics.

We now have all the ingredients to do this; it is up to us to make the most of this opportunity.     

By K. Sabeel Rahman

Source

Aljazeera America Fault Lines Blog - September 9, 2014, by Mark Kurlyandchik - In September 2010, the federal government got into the business of selling delinquent home mortgage loans, which are at least 90 days past due, to the highest bidder. The program was instituted to help the Federal Housing Administration (FHA) rebuild its cash reserves, which were wiped out by a wave of loan defaults.

In the first two years of the program, the FHA sold 2,000 loans in six national auctions. In September 2012, it expanded its loan pools under the newly named Distressed Asset Stabilization Program, or DASP, selling more than 3,000 loans in the first auction. The FHA also introduced a second stated objective of the program to help stabilize neighborhoods by creating a new category of loans tied to geographic areas hit hardest by foreclosures with mandates that purchasers service them in a manner that stabilizes surrounding communities.

Two critical new reports on DASP admit that the program is helping the FHA avoid having to hit up taxpayers for more money. But they question the sincerity of any efforts to protect neighborhoods plagued by foreclosures, pointing out that a whopping 97 percent of the loans have gone to private, for-profit investors, including hedge funds, mutual funds and private equity firms. And approximately just one out of 10 of the loans sold have achieved a neighborhood stabilization outcome.

“These are companies that put the financial gains of their shareholders first and community stabilization second—or I would say it's not even necessarily a priority for them,” says Connie Razza, co-author of a report by the Center for Popular Democracy and the Right To The City Alliance, which came out today.

Razza’s group sent a petition to Julian Castro, who recently took over the Department of Housing and Urban Development (HUD), the cabinet agency that houses the FHA, asking him to stop selling loans under the DASP until the program’s implementation could be strengthened and refocused on communities.

When the FHA was created in 1934 to stimulate a lifeless housing market buried in the depths of the Great Depression, the U.S. was a nation of renters—with only 40 percent of Americans owning their homes. The FHA was able to help boost that percentage by offering affordable mortgage insurance to approved lenders who made loans to high-risk borrowers with relatively low down payments. By 2004, nearly 70 percent of Americans were homeowners.

During the recent housing crash, with private lending drying up, the share of FHA-backed loans skyrocketed, rising from a reported 2 percent of all mortgages in 2006 to nearly a third in 2009. Those loans kept housing prices from going into free fall, but a wave of defaults plundered the FHA’s mortgage insurance fund. So, in 2013, it took a $1.7 billion taxpayer bailout to stay afloat.

So far, nearly 100,000 non-performing loans have been sold through DASP, netting the FHA $8.8 billion.

According to a report released last week by the Center for American Progress, only about 11 percent of the loans sold through DASP are now considered “re-performing.” Another 22 percent were either allowed to do a short sale or the home was surrendered in exchange for loan forgiveness. A third of the loans were turned around and sold to other buyers. The final third went into foreclosure.

Bidders who want to acquire neighborhood stabilization loans are required to achieve one of several outcomes that help homeowners and surrounding communities on at least half of the loans they purchase: getting the loans to re-perform, renting the home to the borrower, gifting the property to a land bank or paying off the loans in full. Through May of this year fewer than 18,000 of the FHA loans have been sold through neighborhood stabilization pools, compared to more than 73,000 that have no strings attached.

"In its current form, the DASP is unnecessarily undermining the very mission of HUD by selling loans to some of the same reckless actors who caused the financial crisis."

Connie Razza, Center for Popular Democracy

Instead of getting loans to re-perform, many of the companies buying up the loans may be looking to convert the distressed assets into rental properties. Since the housing crash, Wall Street-backed groups have bought up an estimated 200,000 single-family homes across the country to convert to rentals. As housing prices rise and foreclosures become less common, housing advocates worry that these firms have turned to non-performing loans as a way to increase their housing stock.

For instance, the private equity firm Blackstone, which has recently become the largest owner of single-family rental homes in the country, is a 46-percent owner of Bayview, the company that has won the second-highest number of DASP loans. According to one report, the delinquent notes are sold to the highest bidder without considering past performance metrics at getting the loans to reperform.

Further, allowing the vast majority of the loans to fall into the hands of high-bidding corporate investors—rather than defaulting—keeps many of the properties they’re tied to from going through the typical foreclosure process. As a result, the FHA might actually be diverting housing stock from first-time homebuyers, the very group it was formed to serve 80 years ago, said John Husing, chief economist at the Inland Empire Economic Partnership in San Bernardino, California.

Aljazeera America Fault Lines Blog - September 9, 2014, by Mark Kurlyandchik - "In its current form, the DASP is unnecessarily undermining the very mission of HUD by selling loans to some of the same reckless actors who caused the financial crisis," Razza and her co-authors write in their report.

The reports contend that HUD should be tracking bidders' track record for good outcomes and taking that performance into consideration. They also criticize HUD for a lack of transparency when it comes to making information about what happens to these loans available to the public. Further, they call for boosting the size and ratio of loans sold through the Neighborhood Stabilization Outcome pools and increasing access for non-profits in the bidding process.

“Community development financial institutions and other non-profits have been trying to participate,” Razza said. “They've only won 2.5 percent of the loans and are really shut out because HUD is running the program as a straight auction.”

Representatives for HUD did not respond to specific questions about the program, but offered this statement: “For purchasers, the program is an opportunity to acquire assets at competitive prices with the flexibility to service the assets while providing borrowers an opportunity to avoid costly foreclosures. The program is meeting financial goals as the amounts offered for these assets are steadily rising as volume has increased in recent years.”

Where investors used to pick up non-performing loans in the program for an average of 40 to 50 cents on the dollar, the most recent sale in June had an average of more than 77 cents. The bidding war was reportedly the most contested yet, with the entire pool going to one investor, private equity firm Lone Star Funds.

“I think that as demand for these loans grow, it builds a stronger case for FHA to ask buyers to do more for the communities they’re buying in,” said CAP report co-author Sarah Edelman. “We want to see loss-mitigation requirements on all of the loans sold.”

Source

Democrat and Republican lawmakers on Wednesday took issue with the current structure of regional Federal Reserve Bank boards, though they couldn't agree on how to reform the quazi-private-public firms.

The twelve regional Fed banks have come under increased scrutiny in recent months after Democratic presidential nominee Hillary Clinton issued a statement in May saying she supports removing bankers from regional Fed boards and increasing director diversity. Her comments heightened the public profile of an issue that otherwise hasn't received much focus.

A key point of debate was concerns by consumer groups that having bankers on regional Fed boards creates a conflict of interest since reserve bank staff supervise big and small commercial banks in their districts. This contrasts to the central bank in Washington, which is a government agency with governors that are nominated by the president and confirmed by the Senate. 

For example, among the nine directors who serve on the New York Fed board are Morgan Stanley (MS) CEO James Gorman and two community bank chief executives.

House Republicans indicated during a subcommittee hearing of the House Financial Services Committee that they weren't overly concerned by bank CEOs serving on such quasi-private boards while Democrats questioned the diversity of the panels.

"I don't object to bankers being on the boards," Gwen Moore, D-Wisc., told reporters after the hearing. "I'm concerned about the voice of other directors who are there and their efficacy to participate fully and about mobilizing and empowering them once they are there."

Moore, the top Democrat on the Monetary Policy and Trade subcommittee, said she the boards need more diversity, noting that none of them have hired a Latino or African American as president of the regional Fed banks where they serve.

Meanwhile, demonstrators from a consortium of consumer groups calling itself "Fed Up" attended the hearing, dressed in green shirts with slogans such as "16 of 17 Fed leaders are white."

The group also took issue with bankers on the regional Fed boards and, in their view, a lack of board diversity.

"When these voices are excluded from the conversation, then our interests are excluded," Ruben Lucio, a representative from the Center for Popular Democracy and a member of Fed Up, told reporters outside of the hearing.

According to current rules, regional boards have nine directors divided into three classes. Three banking directors are elected by member banks, another three are designated by the same banks to represent the public and interests of commerce, industry, labor and consumers, and the final class is appointed by Fed governors to represent the public. 

Rep. Ed Perlmutter, D-Colo., said he wanted to delve more deeply into bank executives serving on the boards but noted that the Kansas City Fed, which covers the district he represents, appears to be quite diverse based on a variety of metrics.

It "has a diverse board ethnically, gender wise, labor wise, regional within the Fed and that was the template I'm using," Perlmutter said.

Two regional Fed presidents, meanwhile, pushed back against concerns about conflicts of interest during their testimony. 

Richmond Fed President Jeffrey Lacker noted that strict rules govern their conduct. "They simply have no avenue through which they can influence supervisory matters," Lacker said.

And Esther George, president of the Federal Reserve Bank of Kansas City, pointed out that bankers who serve on reserve bank boards are prohibited from participating in the selection of bank presidents.

Republicans, meanwhile, focused much of their attention on whether too much influence over monetary policy is wielded by the East Coast, particularly the New York Fed.

Rep. Bill Huizenga, R-Mich., and chairman of the monetary policy subcommittee, argued that lawmakers should back legislation he sponsored, the Federal Oversight Reform and Modernization Act, or FORM, which includes a provision that would reduce the influence of the New York bank.

The Federal Open Market Committee, the branch of the central bank that determines monetary policy, has 12 voting members made up of seven members of the Fed board of governors and five of the regional Fed banks.

The president of the New York Fed, which supervises Wall Street firms from JPMorgan Chase (JPM) to Goldman Sachs  (GS) and Citigroup (C) , is a permanent voting member but the other regional bank presidents serve rotating one-year terms. Huizenga's legislation would put the New York Fed president into the voting rotation along with all the other regional bank chiefs.

"For crying out loud, the San Francisco bank has a tremendously important area," Huizenga told reporters after the hearing. "Silicon Valley, that stretches from LA to Seattle, has tremendously valuable input and to have them only be a voting member every two or three years doesn't make a lot of sense to me."

Rep. Mia Love, R-Utah, said she was concerned that the Western states weren't well represented by the regional Fed bank structure.

"You have members on both sides of the aisle expressing concerns and I would like to know what might be done to rebalance the Fed to ensure that all Americans are represented in monetary policy decisions," she said. 

Don Lamson, of counsel at Squire Patton Boggs in Washington and a former regulator at the Office of the Comptroller of the Currency, suggested that if the goal is to create greater accountability to Congress, legislators should require the Fed regional bank system to be funded through congressional appropriations instead of the self-funding that exists now.

With that structure, legislators could remove the regional Fed boards, transforming the quazi-private-public entities into government agencies.

An appropriations process, however, would destroy the independence of the Fed, which is vital to setting interest rates and supervising banks appropriately, Moore argued.

Expanding legislative influence would also open Federal Reserve funding to unrelated policy measures that might be attached in an attempt to get them passed. "Come meet with me I'm the chairman of the Fed's appropriations committee," Moore said facetiously.

By Ronald Orol

Source

Instead of addressing the roots of drug addiction, mental illness, and poverty, we’ve come to accept policing and incarceration as catch-all solutions. It’s time for a change.

Read the full article here.