When Rick Harris, owner of Ideal Commercial Interiors (ICI), moved to the Twin Cities seven years ago, he struggled to get the private sector contracts that had been his bread-and-butter during his three decades of business in California. 

"Coming here was totally different. I kept trying to get my foot in the door and instead would have it shut in my face," Harris said. ICI is certified by the North Central Minority Supplier Development Council and the Central Certification Program as a small, minority-owned business, but Harris noted that the greatest obstacle he faced was not discrimination, but inertia. 

"Businesses were not open to building relationships with new vendors. They preferred to maintain the same decades-long ties with people they knew and were familiar with — but that impedes access to the market," he said. "It’s bad for the economy when you have these small businesses that can’t grow because they’re consistently locked out of the market." 

For a city that struggles with staunch racial inequities in employment and poverty, these barriers to entry pose persistent challenges to the local economy. 

"The state says it wants to create more jobs for people of color, but to do that, you have to understand that minority-owned companies hire more employees of color, and so you have to focus on helping these companies grow," Harris said. 

That is precisely what the City of St. Paul is working to do. With the help of the city’s comprehensive efforts to foster racial equity in its municipal contracting, Harris has been able to fill the void of private sector work with city, county, and state contracts — which now make up 90 percent of his business.

According to David Gorski, a human rights specialist for the City of St. Paul, "The broader goal is to make the local economy more inclusive, to create a launching pad for small businesses," especially those owned by people of color and women.

Supporting entrepreneurs of color boosts local economies

St. Paul is a rapidly diversifying city; nearly half the city’s residents are people of color, and communities of color — especially Black communities — are leading population growth. But these communities continue to face persistent racial inequities in opportunity. Unemployment for people of color is 12.6 percent in the city, compared to 5.3 percent for Whites. For African Americans, unemployment skyrocketed from 9.6 percent in 2000 to 18.8 percent in 2014. Almost two in three people of color in the city are economically insecure — with family incomes below 200 percent of the federal poverty level — and one in five are working poor, struggling to make ends meet despite working full-time. 

In an attempt to combat these longstanding disparities, St. Paul launched its Racial Equity Initiative in 2014. This initiative includes numerous policy and practice reforms to make racial equity an explicit goal for the city — not only to foster inclusion and community justice, but as a necessary precondition for a prosperous, thriving local economy.

Connecting businesses owned by entrepreneurs of color to city contracts is a crucial lever in this work, because these firms represent key areas of growth in the local economy. Businesses owned by people of color in Minnesota are growing significantly faster than average, with 118 percent growth from 2002 to 2012, compared to 10.3 percent growth for all firms in the state. The number of small businesses owned by African Americans in the state grew by about 60 percent between 2007 and 2012, while small businesses owned by Whites declined 3.4 percent. Yet, many of these businesses are small and undercapitalized, with few employees.

Though the state government of Minnesota has recently received criticism for its inequitable procurement practices, St. Paul has been meeting and exceeding many of its racial equity goals. For example, the city aims to award at least 25 percent of public contracts to small businesses. Within that small business goal, the city sets further targets to reach 5 percent of firms owned by people of color, and 10 percent of women-owned firms. In 2016, more than 30 percent of the city’s total business went to small businesses, with 5 percent awarded to businesses owned by entrepreneurs of color and more than 12 percent awarded to businesses owned by women. 

St. Paul’s progress in upping contracting equity can be traced to concerted efforts to reform and innovate practices within the city’s Purchasing and Contract Compliance Divisions. This work began with the assistance of Bloomberg Philanthropies What Works Cities initiative, through which the Government Performance Lab at the Harvard Kennedy School helped the city better understand why it wasn’t adequately reaching small businesses and businesses of color. What they found mirrored the hurdles Harris noted in the private sector. 

"Vendors felt that we were closed off," said Jessica Brokaw, deputy director of procurement, contract compliance & business development for the city. "They felt we had preferred vendors and that was that." 

This led to a series of structural changes to the procurement process. The city rolled out a new online bidding platform that made the process more transparent and accessible, and ensured that any vendor could download bids free of charge. They also revised the language of bids — from PhD reading level to eighth grade reading level— so that most any vendor could understand them without an attorney.

Wherever possible, officials also streamlined certification processes. For example, a vendor can become registered as a minority-owned business enterprise (MBE), a woman-owned business enterprise (WBE), or a small business enterprise (SBE) through one-day Central Certification Program (CERT) community workshops that are hosted monthly. These certifications are recognized by Hennepin County, Ramsey County, Minneapolis, and St. Paul, making it easier for businesses to pursue public procurement and contracting work regionally. The increased community engagement is reflected in attendance at the annual procurement fair, hosted by the city’s Department of Human Rights and Equal Economic Opportunity. In 2017, 350 vendors showed up within the first three hours alone.

Perhaps most impressively, the city has made significant changes to open up public contracts to new businesses. Starting in 2014, the city has changed five-year agreements to yearly agreements whenever possible, and broken down larger projects into small subcontracts to increase opportunities for new and small businesses to bid. 

"We decided to not renew hundreds of master contracts — some of which we had held for 20 years," Brokaw said. "We got lots of pushback, because there were vendors who didn’t really have to compete for years upon years, and there were city departments who didn’t want to have to orient new vendors to how we operate." 

When the city opened up contracts to a more competitive market, however, "the city and the local economy benefited," Brokaw noted. "The bids are lower, so the city is saving several million dollars, and our relationship to the community is so much stronger because vendors can see that we are open to them." 

Bridging the public-private contract divide through mentorship

In addition to the structural and procedural changes noted above, one of the key facets of St. Paul’s efforts to promote small business growth among minority entrepreneurs is the Construction Partnering Program (CPP). 

Founded by the city and administered through the Metropolitan Economic Development Association (MEDA) and the Association of Women Contractors, CPP supports emerging small businesses owned by women and people of color by fostering long-term partnerships between these firms and larger industry experts in the region.

In general, the odds can be stacked against small businesses trying to expand: They don’t always have access to the same product lines or discounts because they don’t buy in large enough quantities. They often lack access to the kind of financing necessary to purchase the kind of bonds that are required to insure projects or to cover their costs for the months it can take for contracts to pay out. 

"It creates a catch-22 because the financials limit the size of contracts a business can take," said Salah Tarraf, participant in the CERT and CPP programs and owner of Tarraf Construction, a general contractor operating in the Twin Cities for 17 years. "We have so many fantastic contractors of color who want to grow, but are held back because they can’t take larger projects." 

The city has stepped in to remove some of the financial barriers: city projects up to $100,000 no longer require bonds, so they are now more accessible to small contractors. Through CPP mentorship, however, the city also hopes to start bridging the gap between public and private work. 

Tarraf Construction has been partnered with McGough, a large general contractor headquartered in St. Paul, for the past 13 years. This relationship has allowed Tarraf to benefit from the insight and experience of the larger firm, and McGough has helped them break into the private market by inviting them to bid on subcontracts for their work and including them in negotiations as an "equal partner." 

Though it remains an "uphill battle" to get the private sector to work with small companies, Tarraf said he gives "a lot of credit to St. Paul. The city has been really supportive of the minority community, and I think it’s been a success." 

Financial institutions have a long history of failing to meet the needs of low-income communities and communities of color — whether through discriminatory practices that strip wealth from neighborhoods of color or systematic disinvestment that has left too many struggling communities without access to affordable banking. 

Over the past few years, however, community advocates have been putting an established advocacy tool to new use to bring the voices and needs of underserved communities to the negotiating table with local banks. 

Community benefits agreements (CBAs) — contracts that have traditionally been used to ensure that local real estate development projects create opportunities for local workers and communities — are increasingly being applied to banks to increase access to financial services for disadvantaged communities. 

"Banks have an important role to play in our communities, and these community benefits agreements help ensure they fulfill that role for everyone, including low- and moderate-income communities and communities of color," said John Taylor, president and CEO of the National Community Reinvestment Coalition (NCRC), the driving force behind the recent proliferation of bank CBAs. In this incarnation of CBAs, banks team up with local community organizations to negotiate key services and resources targeted to communities traditionally underserved by banks. 

In 2016, NCRC worked with hundreds of local community organizations to negotiate three large merger-related CBAs with Huntington Bank, KeyBank, and Fifth Third Bank. Collectively, these three agreements will bring $62.6 billion in lending and investments targeted to low- and moderate-income communities and communities of color across 23 states. 

Reversing systematic disinvestment in low-income communities and communities of color 

Bank CBAs capitalize on the Community Reinvestment Act (CRA) — a longstanding federal policy designed to encourage banks to meet the needs of moderate- and low-income neighborhoods. The CRA was passed in 1977 in an attempt to combat redlining — a destructive and discriminatory lending practice that denied or severely restricted access to mortgages, credit, and other financial resources necessary to promote economic growth within communities of color. 

"The CRA has certain pressure points where communities have an opportunity to advocate for their needs," said Thomas Keily, consumer data and research coordinator at the Western New York Law Center, one of the grassroots NCRC members involved in the KeyBank CBA. Mergers, acquisitions, and CRA exams are intervention points where banks enter regulatory review and may be amenable to negotiations with community advocates. 

Because bank mergers often result in branch closings that cut jobs and can reduce access to banking in certain locations, the CRA encourages banks to commit resources to counteract negative community ramifications. Traditionally, however, banks have sought to meet their CRA requirements without ongoing engagement with community leaders. The recent spate of bank-merger CBAs represents an important departure from business as usual. 

Through a combination of in-person meetings, site visits, and conference calls, banks and representatives from several dozen community organizations negotiate the details of these agreements over the course of months. The resulting contracts include a wide range of commitments targeted to low-to-moderate income areas. 

For example, the hundred-plus community partners representing six cities that came to the table to negotiate the Huntington Bank CBA identified four key focus areas for investment: affordable housing, workforce development, small business development, and supportive services, including community needs not typically associated with financial products, such as social services. 

"The goal was to create a plan that was holistic and considered all the assets needed for a community to thrive and for individuals to reach their potential within that community," said Catherine Crosby, executive director of the City of Dayton's Human Relations Council, one of the organizations representing Dayton, Ohio, in the Huntington Bank negotiations. She is also a member of the NCRC board. 

The resulting community development plan committed $5.7 billion in funding for single-family mortgages in low- and moderate-income areas and to low- and moderate-income borrowers, $3.7 billion in community development lending and investment for affordable housing, $25 million in grants for housing and small business credit services, and 10 new branch locations in underserved areas, among other investments. As this plan is implemented at the local level, community advocates have the opportunity to specify particular service needs within their local areas, such as down-payment assistance, loan counseling, or diversity requirements in bank hiring. 

The CBA investments for KeyBank, announced in March 2016, contained similar measures, committing $16.5 billion in investments and lending over five years. The most recent CBA with Fifth Third Bancorp, announced in November 2016, represents the largest investment by a single bank in recent history — $30 billion invested across 10 states through 2020. 

"The impact of billions of dollars in community reinvestment that comes from bank agreements cannot be overstated — the resources have a real, tangible impact, creating jobs and expanding access to mortgages, small business lending, education opportunities, and access to other financial resources," Taylor said.

The changes these CBAs are intended to implement come at a crucial time for Fifth Third. Earlier this month, the Federal Reserve released an assessment of the bank's 2011-2013 operations that found evidence of discriminatory practices during that time. As a result, Fifth Third's CRA compliance rating was lowered to "needs to improve."

Leveraging CBAs for equitable growth 

Access to basic financial products and services — including bank accounts, mortgages, and retirement accounts — is a crucial component of building long-term financial security. Without these services, many families and individuals living paycheck to paycheck must turn to payday lenders and check-cashing centers that impose exorbitant interest rates and fees on those who can least afford it. According to a study conducted in California, payday lenders are nearly eight times as concentrated in primarily African American and Latino neighborhoods compared to White neighborhoods, draining nearly $247 million in fees from these communities each year. 

"In Buffalo, New York, we've seen a systematic flight of financial resources within low-income communities and communities of color, especially in the city's east side," said Keily. "East of Main Street there are seven bank branches, but to the west there are over 25, and we see huge racial disparities in who gets mortgages." 

On a community level, access to capital to purchase homes, start new businesses, or take on community development projects is a necessary ingredient for spurring economic growth, yet the majority of disinvested communities are still systematically underserved by the banks that could be providing these services. This persistent legacy of disinvestment perpetuates poverty and stymies the kind of growth that could revive local economies. 

Through the CBA negotiation process, however, communities have increased leverage to hold financial institutions accountable for providing them with the services and resources that will enable them to thrive. 

"This process gives community members back their voice and keeps their needs at the forefront of the process," said Keily. As part of negotiations with KeyBank, Western New York Law Center enlisted 100 residents to write about their experiences with financial institutions — testimonials that helped bring lived experience to the data and research presented during CBA meetings. The organization is also working to establish CBA agreements with smaller local banks and recently announced a $101.2 million agreement between the Northwest Savings Bank and Buffalo Niagara Community Reinvestment Coalition (BNCRC), a NCRC community-based coalition member. 

As these agreements become increasingly popular, more and more banks are recognizing the value of working in concert with community to increase services and facilities in underserved markets. 

"Some leaders of banks are stepping up and doing the work we also need to see from our political leadership — building collaborations between bank leaders, community group leaders like our members, and other stakeholders to ensure that communities have economic opportunity," Taylor said. 

Delivering community benefits through broad coalitions 

Negotiating the competing priorities of hundreds of community partners while attempting to influence large financial institutions that hold all the purse strings is no simple matter. 

"NCRC did yeoman's work to bring everyone together," said Crosby. "A negotiation with this many parties is a push-and-pull process, so you need to have people who are thinking of the highest and greatest good for the community — not just themselves or their particular organizations." 

But she felt the outcomes were well worth the laborious process. 

"Formerly, the Human Relations Council would meet with the CRA officers for the bank to negotiate community investments, but this process is far more comprehensive and more impactful," Crosby said. There is also a key level of accountability, because communities can report to CRA regulatory bodies if a bank fails to make good on the promises encoded in the CBA. 

Though it's too early in the implementation process to quantify the impact of these commitments, Crosby noted that the relationships formed and strengthened between the community partners that came together these past months have already been a huge win. Keily emphasized the power of the process for raising community awareness and empowerment. 

"This shows us — and the community — what's possible when their voices are heard," he said. "It will be an ongoing process to implement this locally, but we're committed to keeping community members at the forefront of this process." 

Annually, the federal government returns upwards of $640 billion directly back to households to help increase financial security through the tax code. Of that, nearly 80 percent goes back to households who are already wealthy. Current tax reform proposals aim to increase the amount going to wealthy families, leaving low-income people and people of color further behind.

Now, more than ever, we must work together to build a more equitable tax code that benefits all Americans. The Tax Alliance for Economic Mobility, led by PolicyLink and CFED, along with nearly 40 national advocacy organizations, racial justice groups, and tax experts, has just launched a new website that identifies priorities to expand savings and investment opportunities for lower-income households through reform of the U.S. tax code.

Today, the Alliance is pleased to announce four briefs on tax credits for low-income workers, higher education and college savings, housing and homeownership, and retirement savings. The briefs feature recommendations to build a more equitable tax code focused on the near- and longer-term security of families, communities, and the national economy.

• Tax Credits for Low-Income Workers: Unlike many other poorly designed tax exemptions and deductions that deliver the bulk of their benefits to the highest-income filers, the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) both work well to help low-income working families. But there are opportunities to strengthen the credits and build on their success, including filling the gap for workers not raising children and making the CTC fully refundable. Congress should also reject proposals that purport to reduce improper payments when in actuality they make the credit more difficult to claim or cut benefits.
   
• Housing and Homeownership: The Tax Alliance has adopted a set of principles for reforming the Mortgage Interest Deduction (MID), a homeownership subsidy provided through the tax code. Recommendations include expanding access for lower-income Americans, increasing benefits for renters, helping communities of color build wealth, and reducing subsidies for high-income households.
   
• Higher Education and College Savings: Higher education is a pathway to economic mobility, but existing higher education tax expenditures disproportionately benefit above-median income households, who own nearly 99 percent of all savings in tax-subsidized college savings accounts. The Alliance has adopted a set of principles for reforming these tax expenditures, with the goal of increasing tax-based aid and college savings support for lower-income students, providing aid before expenses are incurred, increasing take-up, incorporating automatic enrollment features, and eliminating programmatic features that disadvantage lower-income students.
   
• Retirement Savings: For low-income communities and communities of color, financial insecurity in retirement is exacerbated by lower earnings over the course of their work history, and reduced access to employer-sponsored retirement benefits. The Tax Alliance has adopted a set of principles for reforming existing retirement savings tax expenditures to expand access to subsidized accounts for lower-income Americans, subsidize the savings for these Americans, and make reforms to limit expenditures for high-income households.

To learn more about these principles and to access resources for creating a more equitable tax code, visit The Alliance’s website: www.taxallianceforeconomicmobility.org and sign up for the Tax Alliance newsletter.

Cross-posted from The San Francisco Chronicle

Nearly 40 years ago, when San Francisco’s struggling Bayview-Hunters Point neighborhood was losing yet another business to hard times — in this case, a grocery store — one attorney had seen enough.

Angela Glover Blackwell, an early believer in the need for fresh foods in the inner city, petitioned the governor’s office to intervene and make sure the community maintained a full-service grocery. The alternative was letting residents shop at liquor stores and gas stations.

The petition didn’t go as planned — a new store didn’t open. But the case marked the dawning of Blackwell’s long and distinguished career in social justice, which most recently had her working with the Obama administration to bring grocery stores to underserved cities nationwide.

“I think the last 10 years have been my best,” said Blackwell, now 71, as she sat in her window office on a recent weekday at PolicyLink, the Oakland research and advocacy group she founded 18 years ago. “We need to keep working to make sure we’re creating opportunities.”

From her desk, which sits beneath pictures and posters that sound rallying cries such as “Equity” and “Protect Oakland renters,” Blackwell oversees a staff of 70 public policy experts and attorneys in California, Washington, D.C., and New York. Her organization partners with communities all over the country to help disadvantaged people, often minorities.

The effort, which not only involves healthy food but issues ranging from housing to transportation to education, earned Blackwell a nomination for the 2017 Visionary of the Year award sponsored by The Chronicle and the School of Economics and Business Administration at St. Mary’s College.

“With shifting demographics, the big story is that the majority is becoming people of color,” she said. “The fate of our nation will depend on what happens to people of color.”

Among her organization’s recent work is helping implement the federal government’s Sustainable Communities Initiative. The program assists with planning in depressed neighborhoods; for example, making sure residents have basics like public transit and Internet.

PolicyLink is also helping with business development in poorer parts of Detroit, Baltimore and Pittsburgh. It’s also aiding in the creation of community art projects from Alaska to Mississippi.

“We cross all the issue areas and all the work domains,” said Blackwell, as she clutched a copy of “The Equity Manifesto,” PolicyLink’s call to action that takes its employees to wherever they might find inequality.

While Blackwell frequently travels in the pursuit of social justice, as well for speaking engagements and fundraising, sometimes the need is right in her backyard.

PolicyLink recently helped create Oakland’s affordable housing strategy, a work in progress designed to protect 17,000 city households from being pushed out of town by rising real estate prices and to create 17,000 new homes over eight years.

“They’ve been a critical partner to me as mayor,” said Oakland’s Libby Schaaf, noting that Blackwell was a source of inspiration for her long before the two got to know each other and exchange cell phone numbers.

“As a young college student, I saw her speak at a League of Women Voters event, and it’s really the first time I felt inspired to get involved with local politics,” Schaaf said. “I remember almost feeling drawn, like you’d be drawn to a minister.”

Blackwell lives near Oakland’s Lake Merritt in a house she’s been in for four decades. She is married with two grown children, and three grandchildren, all of whom live locally. Trying to make time for work and family — her husband is an orthopedic surgeon — is tough, she said, but she manages, eating out a lot and waking up early to go to the gym.

Blackwell grew up in St. Louis, where her neighborhood was anything but the neglected communities she advocates for today. It was an economically diverse area with good schools, parks and a healthy mix of businesses, she said, though as she got older she saw it slide.

“Rather than walking to a grocery store, or driving, we were driving farther and farther into the suburbs,” she said.

Blackwell got her bachelor’s degree at Washington, D.C.’s Howard University before going to law school at UC Berkeley.

Before PolicyLink, she worked as a senior vice president at the Rockefeller Foundation in New York, overseeing the organization’s cultural activities. Before that, her career had a number of chapters, including 11 years practicing law at the nonprofit firm Public Advocates in San Francisco.

It was during her time there, in 1979, that she fought unsuccessfully for a grocery store in the Bayview, though her effort prompted Gov. Jerry Brown, during his first time around in the office, to form a commission to explore the problem of “food deserts.” The state Department of Agriculture followed up with money to support farmers’ markets in communities that lacked fresh food.

As chief executive officer at PolicyLink, Blackwell’s push for fresh foods continued when she helped the Obama administration launch the federal Healthy Food Financing Initiative, which today provides funding for groceries and markets in low-income areas.

While she worries that government assistance programs may take a hit under President Trump, she tries to remain optimistic.

“It’s too early to say there’s going to be no opportunities,” she said.

This winter, Blackwell authored an essay called the “The Curb-Cut Effect” in a Stanford University journal about how assisting one group, say the disabled, benefits everyone. She hopes Trump’s moves to help red state voters who supported him out of economic concerns will also help those suffering in poor, urban areas.

“The good news,” she said, “is that the economic inclusive agenda that will reach people who are white, rural and working class is the same economic inclusive agenda that will reach people of color.”

Visionary of the Year award

This is one of six profiles of nominees for The Chronicle’s third annual Visionary of the Year award, which is presented in collaboration with St. Mary’s College’s School of Economics and Business Administration. The honor salutes leaders who strive to make the world a better place and drive social and economic change by employing new, innovative business models and practices. The six finalists were nominated by a distinguished committee that included Chase Adam, co-founder of the nonprofit Watsi and winner of the 2016 award; Greg Becker, president and CEO of Silicon Valley Bank; Emmett Carson, founding CEO of the Silicon Valley Community Foundation; Ron Conway, angel investor and philanthropist; Zhan Li, dean of the School of Economics and Business Administration at St. Mary's College; Libby Schaaf, mayor of Oakland; Jennifer Siebel Newsom, a documentary filmmaker; and Michael Walker, executive vice president and regional executive of City National Bank.

Chronicle Publisher Jeff Johnson, Editor in Chief Audrey Cooper and Editorial Page Editor John Diaz will select the winner, which will be announced during a March 30 event.

To read more: www.sfchronicle.com/visionsf