EWING — Across the country, a growing number of cash-strapped governments looking for ways to fund social programs are turning to a new kind of public-private partnerships known as social impact bonds.
The concept might now find its way to Trenton following a student research project at The College of New Jersey.
Students in Susan Hume's finance class researched programs happening elsewhere — some successful, some not — and presented their findings this week to the Trenton Area Stakeholders, a diverse network of community leaders who are working to improve the city.
"It's not happening in Trenton ... so this is an opportunity to get people thinking about how we can make this happen," said Heather Camp, a senior program director in the college's Center for Community Engaged Learning and Research who helped coordinate the project. "That's really what it should be about — the college using some of its resources to benefit the community surrounding the college."
The concept, Hume explained, involves a government entity teaming up with an intermediary that identifies a service provider, develops a program with specific, measurable goals and raises the capital from private investors or philanthropic foundations.
Investors are repaid only if a program succeeds in its goals. If it falls short, the investors lose their money, sparing taxpayers the costs of the program.
"They're loans made for social purposes with a government standing between the concept," Hume said.
The bonds — which are more of a loan than a bond — were first tried in Britain in 2010 and have since spread to the U.S.
Here are some examples:
- Reducing youth recidivism
Goldman Sachs, with backing from Bloomberg Philanthropies, invested in a program that attempted to reduce teenage recidivism by at least 10 percent at Rikers Island in New York City. Even though a number of factors led the program to fall short of its goals, Goldman still labeled it a success because it shifted the risk away from the taxpayers while providing a necessary service.
- Improving school readiness
Goldman has had better results with its second social impact bond aimed at raising the achievement level of low-income children before they enroll in school and thereby reducing the later cost of special education. addressing early childhood education. It says that its investment helped almost all but one of the 110 Utah children it was tracking avoid special education in kindergarten.
- Funding charter schools
Tennis great Andre Agassi teamed up with Bobby Turner, former CEO of Canyon Capital Realty Advisors, to establish an investment fund that helps charter schools acquire and develop facilities. The goal is to help limit the financial strain on schools during their key expansion years, while giving them an opportunity to ultimately purchase the campus.
- Providing healthcare to underserved communities
In 2014, Goldman closed a $6 million loan to Urban Health Plan, a network of federally qualified health centers in New York City. The capital helped finance improvements to UHP's facilities in a Bronx neighborhood that was hit hard by the closing of a community health center and supported other expansion projects.
- Developing mixed-use projects
In Newark, a ShopRite opened last fall as the anchor of the Springfield Avenue Marketplace, a mixed-use development that also includes 152 market-rate apartments and 52,000 square feet of retail space. The supermarket provides access to healthy food, has an on-site dietician and has space reserved for a federally qualified health center.
- Increasing the arts
Using New Orleans as an example, the group of students developed a hypothetical scenario in which private investors would help fund after-school music programs such as the Trenton Community Music School. The capital would go toward building upgrades, instruments, music lessons and other equipment. Potential partners, they said, could include the McCarter Theatre in Princeton and performing arts centers at the local universities and colleges.
A STEP FURTHER
Those who attended were excited about the prospects of how social impact bonds could be carried out in Trenton.
"They're all so relevant to Trenton," said Cynthia Oberkofler, executive director of Millhill Child and Family Development. "These models need a collaborative approach and the Stakeholders is all about collaboration and connecting people and talking about bigger issues in our city to help youth and families so this is the perfect marriage."
Camp said she would like to take the project a step further and introduce the group to potential investors so they can begin talking about projects worth pursuing.
"There's different topics and different avenues that these social impact bonds have gone and that's something we'll have to figure out," she said.
Calvin Thomas, the coordinator of TAS, said even focusing on one area — be it crime, education or healthcare — could have a ripple effect.
"If we focused on one area, that will probably impact all the other areas that we are really struggling to try to impact," he said. "All the pieces in Trenton are in place, but we've just been fragmented."