Economic development projects that have been promoted as boons for an entire city or community have often left low- and moderate-income neighborhoods missing out on the touted gains. When the time came to tally up the rewards that such projects can bring, it appeared that attractive opportunities like jobs, housing and new businesses had bypassed many of these neighborhoods.
A type of contract known as a community benefits agreement (CBA) has emerged in the past decade to help participants achieve advance agreement on how some of the benefits of development will be shared. Residents and community leaders in low- and moderate-income neighborhoods have expressed excitement about the tool's potential to help them gain from economic development projects. However, CBAs are an evolving tool and the evidence regarding their efficacy is still accumulating. What are CBAs, how did they develop, and what are their potential rewards and pitfalls?
The ABCs of CBAs
A CBA is a contract created by the key partners involved in community development projects. The list usually includes a private developer, community-based organizations, public officials, and local government agencies. A typical contract defines specific benefits the developer guarantees to residents of the affected neighborhoods. The benefits can include well-paying jobs, affordable housing, childcare centers, health and recreational facilities, and educational improvements. CBAs can also involve the redress of harm. For example, a CBA could include the construction of a playground as remediation for a loss of green space.
The process of negotiating a CBA is an expansion of the traditional citizen participation framework, in which communities express themselves through public hearings, community forums and other means. To date, this framework has provided a familiar and generally accepted method of gathering public input on economic development projects and many other issues. However, residents of low- and moderate-income neighborhoods pressed for an expansion of the framework on the grounds that it did not sufficiently include their perspectives and concerns and usually did not result in binding agreements.
Origins and context
The CBA strategy has its origins in California, where the Los Angeles Alliance for a New Economy (LAANE) created what is considered the first CBA in 1997. Known as the Hollywood and Highland CBA, the agreement concerned the development of a major hotel and retail complex in Hollywood.
LAANE also played a key role in a coalition that created the Staples Center CBA in 2001, which is associated with the development of the Los Angeles Sports and Entertainment District. In addition, LAANE participated in a coalition that reached a major agreement in 2004 concerning the revitalization of the Los Angeles International Airport.1/ (For more on the Staples Center CBA, see the sidebar below.) Other organizations that have been leaders in the CBA movement are Good Jobs First, The Partnership for Working Families, Center on Policy Initiatives, East Bay Alliance for a Sustainable Economy and Working Partnerships USA.
CBAs have arisen within the historical context of struggles among community groups, developers and public officials over the nature of development projects. Until the advent of CBAs, the primary parties engaged in negotiations about development projects have been the developer, relevant local economic development agencies, and public officials. Public agencies are involved because of the significant role government subsidies play in the development process. Developers often receive subsidies—in the form of tax incentives or abatements, infrastructure development, or land procurement—because public officials are eager to encourage growth within their jurisdictions, especially in areas that are perceived as declining.
When their negotiations over a development project have concluded, public officials and developers normally arrive at a development agreement in return for the subsidy provided to the developer. The agreement provides a general framework for all aspects of the development project, including how it is funded, what will be built, how construction jobs will be allocated, how jobs in the completed development will be filled, whether affordable housing will be included and other critical issues. Development agreements are contractually binding and can be monitored and enforced by the public sector agency responsible for oversight.
Community groups maintain that despite the promises developers and public officials have made in the past, the interests of low- and moderate-income neighborhoods often are not sufficiently taken into account in development agreements. In the eyes of community groups, the commitments made are usually not fulfilled and there is inadequate follow-up and enforcement concerning implementation. This perspective has led community groups to oppose many development projects that come up for review. For decades, battles over development projects have been an unwelcome, yet frequently expected, part of the review and approval process.
In the last decade, community groups have begun striving to be active partners at the front end of the planning process, to ensure that their concerns are addressed. Through CBAs, they've introduced the possibility that conflict can be rechanneled into productive negotiations that will result in an agreement amenable to all concerned parties.
Features and limitations
Like any strategy, CBAs offer a mix of opportunities and challenges.
On the positive side, CBAs may enable community groups to deliver sorely needed economic resources to their strapped neighborhoods. Also, CBAs can facilitate the development process by increasing the likelihood that a deal will be approved. If developers and community groups are able to hash out their concerns and conflicts in advance, ahead of the formal approval process, they can then proceed in unity to local government hearings. In turn, the local government body can expedite ratification of an agreement if the usually opposing parties are united in their support of a development.
Another appealing feature of CBAs is their versatility in addressing a range of community needs.
"This tool can be used for social as well as economic development issues," says Roger Banks, a policy and research analyst for the Council on Black Minnesotans.
Banks' organization, in partnership with the Northside Residents Redevelopment Council and other concerned groups, is involved in negotiations over a multifaceted development the University of Minnesota has proposed for the predominantly African American area north of downtown Minneapolis. The centerpiece of the development is a clinic that will provide wellness services and conduct mental health research in the surrounding neighborhoods.2/
"We want to have a say in how research is conducted in our neighborhoods, because past research has resulted in significant costs to the African American community," says Banks. "The CBA is a beautiful mechanism for responding to the fears of the community, establishing what the expectations are and setting up measures to determine the extent to which those fears are being addressed."
On the downside, CBAs have some potential limitations.
For instance, the use of CBAs has been targeted to development projects that require a public subsidy or involve exceptions to routine business start-up or improvement processes. (For example, rezoning a city block to accommodate a new retail development would be considered an exceptional step in the business start-up process. In contrast, acquiring a construction permit to convert a clothing store into a shoe store would be considered a routine step.) The need for public approval of subsidies and exceptions has been the leverage to bring developers to the negotiating table. It is unclear how CBAs would work in a situation requiring no such approval—e.g., a situation involving only private development and private decision making.
In addition, the process of negotiating a CBA can be complex, lengthy and laborious. For community groups, the process might demand more in organizational capacity, staffing or resources than they have at their disposal. Community leaders interested in utilizing the CBA strategy must demonstrate willingness to consider nearly all populations within a community for inclusion in a broad coalition. Coalition work can be challenging, because individual members must be capable of dealing with the conflicts that will inevitably arise. This is essential in ensuring that multiple issues will be addressed in a unified voice when negotiating with a developer.3/
For their part, developers have to be sufficiently motivated to spend the time and resources necessary for negotiating with community representatives. They have to believe that the time and money they spend hammering out upfront agreements will help them avoid delays, negative publicity, protests or possible litigation down the road.
Layered in among the opportunities and challenges of CBAs are some unknowns. For example, since CBAs are a relatively new tool, there are unanswered questions about their durability and long-term effectiveness. Will the terms of an agreement be complied with, will unanticipated factors intervene, will the enforcement mechanisms work? To what extent will low-income neighborhood residents actually benefit? And can the CBA strategy work in all settings? So far, the CBA movement has been concentrated in urban areas and it is unknown whether it would be viable in rural areas.
A mutual learning process
Community groups are engaged in CBA negotiations in a variety of urban areas across the country. CBA negotiations in the Ninth Federal Reserve District are concentrated in Minneapolis and St. Paul, where a nonprofit organization called the Alliance for Metropolitan Stability (the Alliance) has been instrumental in providing assistance to community groups that are in the early stages of crafting and implementing CBAs. Listed below are a few examples of CBA efforts in the Twin Cities.
- The Digital Inclusion Coalition persuaded the City of Minneapolis to require community benefits provisions in its contract with US Internet, the vendor that was selected to install a citywide broadband wireless network. The coalition secured an estimated $10 million in future vendor revenues to ensure low-income people and communities of color have access to technology.4/
- In St. Paul, the University Avenue Community Coalition and the Central Corridor Equity Coalition are promoting CBAs and equitable development regarding the housing and economic development opportunities that will likely accompany the development of Light Rail Transit along University Avenue, a significant commercial corridor.5/
- The Harrison Neighborhood Association is creating a land-use plan to address the anticipated development of a 230-acre parcel close to downtown Minneapolis. The plan focuses on affordable housing, living-wage jobs and training, and minority- and women-owned business opportunities.6/
A close look at one additional example reveals how the two sides view the negotiation process. Longfellow Community Council (LCC), a resident advocacy organization in southeast Minneapolis, is engaged in CBA negotiations regarding the development of a one-block parcel near a Light Rail Transit station along the city's Hiawatha Avenue corridor. With assistance from the Alliance, LCC entered CBA negotiations with the project developer, Capital Growth Real Estate, in early 2006.
"We saw this as an opportunity to be proactive about defining a community vision and values for development, rather than reacting later on in the process," explains Katie Hatt, former executive director of LCC.
"It's important to advance a community agenda around goals for development, but also to understand that the private sector shares in defining how we can promote something that's going to work. It's also important to strengthen relationships with the public sector actors who will have a big say over whether the project happens, like our city council members and county commissioners."
Minneapolis-based developer Dale Joel, a partner at Capital Growth Real Estate, offers another perspective.
"One difficulty with CBAs is that community groups expect developers to make promises on issues that, in the end, we don't have complete control over. A lender could throw a requirement at the developer at the end of the process that may conflict with a CBA that's already been negotiated and signed, for example. It puts the developer and the neighborhood in a difficult position."
"The paradox of the CBA is that, as a developer, it sometimes leads you to take a position that's more conservative than you'd like, because you're being asked to commit to so much before the development is done and you also have to meet the requirements of other stakeholders, such as lenders and governments. If there were more flexibility in the agreement, you could work together toward achieving more of those concepts than you could commit to absolutely upfront."
Joel observes that despite the challenging nature of CBA negotiations, the process is valuable—not only for the benefits the agreement will ultimately create, but also for the mutual learning involved. Neighbors in Longfellow engaged in a lengthy learning process that included reading, research, and talking with experts, and Joel learned a great deal as well.
Bringing new voices to the process
Thus far, CBAs play a part in only a handful of the development projects under way in the Twin Cities. It's a similar story in other urban areas across the country. Currently, CBAs have a foothold in community development circles, but they are relatively novel and rare.
However, according to Julian Gross, legal director of Partnership for Working Families and principal author of Community Benefits Agreements: Making Development Projects Accountable, recent changes in the field could make CBAs a more routine part of the community development process.
"There's been a real sea change in the development world in the last ten years or so. An increasing number of local and state elected officials are working with community groups to improve development projects by bringing voices into the process that weren't there before."
These voices potentially can frame a larger vision for bringing greater good to greater numbers, especially those who have not received the rewards of development in the past.
Gross identifies benchmarks to watch for as the CBA movement evolves. They include:
- An increasing number of local and state public officials who advocate for community benefits and are willing to speak to their peers in other cities;
- More CBAs won for specific developments;
- More development projects for which the public entity maintains a revenue stream dedicated for community benefits; and
- New policies requiring certain minimum standards for subsidized projects, like local hiring or well-paying jobs.
If, as Gross predicts, the CBA strategy becomes more prevalent in the future, developers and community organizations will have more opportunities to experience CBA negotiations firsthand. The process entails challenges and complexities, but if the negotiations are successful, the rewards can be significant.
In the words of developer Dale Joel, CBAs involve "a tremendous time commitment, added cost and a little pain and suffering that come with all relationships. However, the upside is their ability to facilitate deeper involvement and more engaged relationships, with the possibility of creating a better project for the developer, the investor, and the neighborhood."
L.A. story: CBA provisions address hiring, housing and more
What specific provisions does a typical community benefits agreement (CBA) contain? A CBA involving development near a well-known sports complex in California provides some examples.
In 2001, a proposal emerged for the construction of a huge sports and entertainment district adjacent to the Staples Center sports arena in Los Angeles. Plans included a 7,000-seat theater; a hotel; a convention center expansion; a housing complex; and plazas for entertainment, restaurant, and retail businesses. Public subsidies for the project reached approximately $150 million.
In response to the development proposal, community groups in the low-income neighborhoods surrounding the arena formed the Figueroa Corridor Coalition for Economic Justice. Instead of opposing the project, based on a perception that their communities and residents would derive negligible benefits from it, or petitioning local government to blunt the developer’s efforts, the coalition chose to determine what kind of benefits the community could reap from the project. They then negotiated with the developer and the city to secure those benefits.
The negotiations resulted in the Staples Center CBA, a legally binding agreement that earned the approval of the coalition, the Los Angeles Arena Land Company, Flower Holdings LLC and the Community Redevelopment Agency of the City of Los Angeles. The agreement set forth the following provisions:
- A goal that 70 percent of the jobs created by the project will pay the city’s living wage;
- A requirement that the developer will consult with the coalition on the choice of commercial tenants, particularly in regard to paying the city’s living wage;
- Implementation of a hiring program that targets job opportunities to low-income residents and those displaced by the development;
- An affordable housing commitment to equal 20 percent of the housing units constructed;
- A developer-funded assessment of community recreation needs and a $1 million commitment toward meeting those needs; and
- A residential parking program, partly funded by the developer for the first five years.
Construction of the sports and entertainment complex began in 2005. Since then, the developers have made progress toward implementing a number of their commitments, including the establishment of a residential parking program, the construction of on-site affordable housing and the implementation of a hiring and job-readiness program.
Source: Julian Gross, Greg Leroy and Madeline Janis-Aparicio, Community Benefits Agreements: Making Development Projects Accountable, Good Jobs First and California Partnership for Working Families, 2005.