How CBAs Can Create Inclusive Economic Growth in Inner Cities

Written by Brian Hull

Community Benefits Agreements (CBAs) are potentially powerful tools cities can use to ensure that inner city residents share in economic growth. CBAs are negotiated contracts between community organizations and property developers or businesses that describe the benefits and amenities that will be provided to the community in exchange for some type of subsidy or development agreement. Traditionally, CBAs have been a mechanism that cities use to ensure a minimum level of construction jobs and contracts go to local area residents and businesses, affordable housing units are built, or community services are provided. Most large cities around the country have used CBAs in the past decade.

San Francisco is an interesting case because the city levies a 1.5% payroll expense tax on businesses with a payroll expense of more than $150,000. Starting in 2011, Mayor Ed Lee and the City’s Board of Supervisors began using a six-year elimination of this payroll tax as an incentive to develop the city’s Central Market and Tenderloin neighborhoods. Both areas have seen significant decline and population loss starting from the 1970s, are fairly concentrated areas of poverty with high rates of low-income housing units, and despite positive signs of growth recently have a significant amount of blighted, vacant, and underutilized property.

With the strong growth of tech businesses in the city, Central Market and Tenderloin were identified as the next frontiers for expansion. This has raised fears of gentrification and displacement among the area’s low-income residents. The city’s tech community isn’t fully to blame though. The increasing unaffordability is exacerbated by the slow pace of new housing units in the city – over the past 10 years the city averaged around 1,700 new units annually compared to an average population growth of about 7,500 annually. This has led to escalating rents that are increasingly unaffordable. A recent report by the National Low Income Housing Coalition highlights this fact, listing San Francisco as the most expensive metropolitan area in the country.

The city has recognized the problem and structured their CBAs for the Central Market and Tenderloin districts to reflect this. ICIC recently highlighted San Francisco’s unique CBAs in a What Works for Cities case study. The CBAs apply to all businesses with annual payroll of more than $1 million that are seeking approval for the payroll tax exemption. For 2014, six companies entered into these CBAs: Microsoft; One Kings Lane; Spotify; Twitter; Zendesk; and Zoosk.

These CBAs are unique, in that they are more expansive and include community building strategies in addition to designating local and minority/women hiring and procurement goals. Among the six CBAs that were enacted in 2014, some of the initiatives include volunteerism; support for community-based nonprofit and arts/cultural organizations; service and technology donations; support for youth education and mentoring; workforce development and job readiness programs; neighborhood improvements and environmental cleanups; and local purchasing. Much of this is structured following the framework developed by the Citizens’ Advisory Committee to ensure the needs and preferences of the communities were integrated into the CBAs and that displacement pressures were minimized to whatever degree possible. These agreements can reflect the core strengths the businesses can bring to improve the community and connect the residents to affordable housing and employment opportunities to minimize displacement.

In one particularly strong CBA, Twitter demonstrates how impactful they can be. In addition to many of the elements listed above, Twitter offers their expertise to nonprofits by identifying candidates to sit on nonprofit Boards, they provide pro bono legal services for residents of Central Market and Tenderloin and offer support through the Homeless Advocacy Project. They also offer transitional youth internships and mentoring, social media assistance to local nonprofits including credit for promoted tweets, and they support digital literacy and women in technology through additional grants and services.

CBAs are a double-edged sword though. On the one hand they are a valuable and viable tool to ensure that neighborhood residents can benefit when public subsidies are used for business expansion and real estate development. On the other hand, if community groups push too hard or ask for too much, they can gain nothing because the developer decides to moves elsewhere. This can often be the case for smaller and mid-sized cities that have less commercial demand. Very few cities have the same bargaining power as San Francisco or New York, which can help ensure high impact CBAs.

Read the case study on how San Francisco leverages CBAs to engage its technology sector.