building economic security in americas cities

7/31/2019 Building Economic Security in Americas Cities

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Bilding Economic Secrit

in Americas CitiesNew Municipal Strategies or Asset Building

and Financial Empowerment


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Bilding Economic Secrit

in Americas CitiesNew Municipal Strategies or Asset Building and Financial Empowerment

January 2011


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CFED thanks the many people whose contributions, support, guidance, advice, knowledge and patience were

invaluable to this project.

This project was made possible through the generous support o Living Cities and the Surdna Foundation, and

we want to thank our program ocers Jasmine Thomas, Kim Burnette and Marian Urquilla or their support and

wisdom. We would also like to thank the Annie E. Casey Foundation or their additional support.

CFED would like to acknowledge the immense contributions o the policy and research committee o the Cities or

Financial Empowerment (CFE) Coalition to this report: Caitlyn Brazill, Jerry DeGrieck, Suzanne Donovan, David

Friedman, Mitchell Kent, Cathie Mahon and Leigh Phillips. We greatly appreciate the careul attention and time you

spent reviewing, editing and improving the content o this report.

CFED would also like to thank all o the members o the CFE Coalition or inspiring and providing much o theinormation contained in this report: Chicago Cara Castellana, Bill Thanoukos, Bina Patel; Los Angeles Sophia

Heller; Miami William Porro; Newark Anthony Santiago, Jacob Daniels, Stephen Pryor; New York Jonathan

Mintz, Cathie Mahon, Caitlyn Brazill, Mitchell Kent, Amelia Erwitt; Providence Garry Bliss, Bert Cooper; San

Antonio Dennis Campa, Richard Keith, Melody Woosley; San Francisco Jose Cisneros, Leigh Phillips, Marco

Chavarin, David Augustine; Savannah Daniel Dodd, Suzanne Donovan, Robyn Wainner, Rochelle Small-Toney;

and Seattle Jerry DeGrieck, Diana Stone.

Finally, we want to thank the team o CFED sta and consultants that researched, wrote, designed and otherwise

contributed to this publication: Ida Rademacher, Jennier Brooks, Kasey Wiedrich, Genevieve Melord, Michelle

Nguyen, Barbara Rosen, Chris Campbell, Kristin Lawton, Amy Radovich and Karen Murrell.

About CFEDCFED (Corporation or Enterprise Development) expands economic opportunity by helping Americans start and

grow businesses, go to college, own a home, and save or their childrens and own economic utures. We identiy

promising ideas, test and rene them in communities to nd out what works, crat policies and products to help

good ideas reach scale, and develop partnerships to promote lasting change. We bring together community practice,

public policy and private markets in new and eective ways to achieve greater economic impact.

Published January 2011

Copyright CFED, 2011

Acnoledgements


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Bilding Economic Secrit in Americas Cities:

Ne Mnicipal Strategies or Asset Bilding and Financial Empoerment

Foreward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Letter rom the Co-Chairs o Cities or Financial Empowerment (CFE) Coalition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Eecutive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

I. A Ne Role or Local Goernment in Poert Alleiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4

Financial Empowerment: An Emerging Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

How Did Cities Get Involved in this Wor? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

2. The Fragile State o Hosehold Financial Secrit in Cities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 0

Income and Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Credit and Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Baned Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Housing and Homeownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

3. Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 6

Strategies to Improve Access to High Quality Financial Inormation, Education and Counseling . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 8

Strategies to Increase Access to Income-Boosting Supports and Ta Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Strategies to Connect Residents to Sae, Aordable Financial Products and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 5

Strategies to Create Opportunities to Build Savings and Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 9

Strategies to Protect Consumers in the Financial Maretplace .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 5

4. Toard an Integrated Polic Inrastrctre: Remoing Barriers and Leeraging Opportnities . . . . . . . . . . . . . . 5 0

Aligning Policies to Improve Access to High Quality Financial Inormation, Education and Counseling . . . . . . . . . . . . . . . . . . . . . 5 0

Aligning Policies to Increase Access to Income-Boosting Supports and Ta Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Aligning Policies to Connect Residents to Sae, Aordable Financial Products and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2

Aligning Policies to Create Opportunities to Build Savings and Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 4

Aligning Policies to Protect Consumers in the Financial Maretplace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 5

5. From Innoation to Sstems Change: The Road Ahead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 8

Invest in Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Further Integrate Financial Empowerment Strategies across City Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 9Plan or Political Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 0

Reerences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Appendi 1: Local, State and Federal Polic Alignment or Asset Bilding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 4

Appendi 2: Mnicipal Data Profles or CFE Cities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 9

Appendi 3: Data Sorces and Measres . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 0

Table o Contents


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THE IDEA FOR THIS REPORT AROSE rom a growing interest in identiying policies and strategies that enable

communities to work more holistically to advance the economic prosperity o their most vulnerable residents.

Never has this work been more needed. As the recent economic downturn has revealed, we have become a nation

that too requently lives beyond its means, increasingly only a paycheck away rom nancial distress. This work

and the growing eld o asset-building has given us a new way o thinking about poverty -- one based on the depth

o overall nancial stability not merely based on income. Such a broader view ultimately challenges us to promote

greater economic sustainability one that can sustain us or months versus weeks and over multiple generations.

Approaching anti-poverty work rom this view point asks that we re-think the social compact between government

and its constituents. It demands that we think beyond reactive policies ocused narrowly on crisis intervention

and preservation o the saety net, to policies that aim to proactively help individuals out o poverty -- in essence

oering them a hand up instead o a hand out.

Who better than the leaders in our cities to help in this eort? Unlike intervention at the state and ederal levels,

city leaders are more able to connect the dots between disparate disciplines that aect the lives and livelihoods

o their residents. From aordable housing, to transportation, to banking services, to consumer protection, cities are

uniquely positioned to align their array o services to advance the common goal o building the prosperity o all o

its residents.

Our hope in supporting this eort is to spread the ideas now bubbling out o a set o innovative places to inspire

more communities to develop and replicate policies and practices to build and maintain Americas middle class. We

look orward to continuing to advance this work together in the coming years.

Jasmine Thomas Marian Urquilla

Program Ocer Program Director

Strong Local Economies Living Cities

The Surdna Foundation

Foreard


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Letter rom Co-Chairs o Cities or Financial Empoerment

In March 2008, New York City Mayor Michael R. Bloomberg and San Francisco Mayor Gavin Newsom, ormed the Cities

or Financial Empowerment (CFE) Coalition to bring together those city governments implementing fnancial empowerment

initiatives. The Coalition, which now includes eleven local governments, came together to share lessons learned, harness specifc

opportunities, and address common challenges.

Since the birth o the eld o asset building two decades ago, diverse players have developed promising

research and programming across this country and the world. Even more recently, a ew local governments have

implemented approaches that go beyond traditional municipal eorts to increase incomes and deliver benets.

This thoughtul and detailed report rom CFED describes the emergence o the Cities or Financial Empowerment

(CFE) Coalition, heralding local governments as new and powerul players helping individuals and amilies create

sustainable pathways to nancial stability.

Mayors across the country are recognizing the unique and large-scale ways in which they can leverage municipalpower and politics to advance the diverse nancial empowerment agenda. Local governments directly touch

populations with low and middle incomes at which nancial empowerment agendas are aimed, and at the same

time regulate or otherwise interact directly with the businesses that can make such a dierence in peoples economic

lives. Armed with a public mandate to serve their entire cities, mayoral administrations also design programs or

scale, producing widespread impact, as well as rich data rom which researchers and other policy makers can learn.

Whether through access to mainstream banking, nancial education and counseling, asset building, or consumer

protection, the work o the CFE Coalition, detailed in this report, oers important and replicable ways or others

to advance the economic security o their cities populations. Though much progress has been made, the eld o

municipal nancial empowerment is still young and, in relation to traditional antipoverty unding approaches,

secondary. Going orward, and working together with our partners at CFED and elsewhere, the challenges o

achieving true scale across the country will lie not just in urther documenting the ways in which large-scale

nancial empowerment initiatives transorm lives on their own, but also in ensuring that such initiatives enhance

the eectiveness o traditional antipoverty approaches, within which they should be embedded.

We are grateul to the dedicated team at CFED or the careul and respectul way in which they researched and

prepared this report. We appreciate the promise o this, and other key partnerships, which have welcomed city

governments and the CFE Coalition into the old.

Jonathan Mintz Jos Cisneros

Commissioner Treasurer

New York City Department o Consumer Aairs City and County o San Francisco

Co-Chair, CFE Coalition Co-Chair, CFE Coalition


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Eectie Smmar

Helping individuals and amilies achieve economic security has never been more critical than it is today. While

strategies to help amilies improve their nancial situations have been prolierating in the nonprot sector or over

two decades, these issues have moved to the oreront during these trying economic times. And now as the eld

grows and matures, new players are emerging, devising new innovative approaches and mobilizing large-scale

delivery systems and resources to help amilies build wealth and assets. This report examines one such set o new

players: municipal governments.

Eorts by municipal governments to shore up residents economic security have traditionally ocused on increasing

residents income through job creation and job training strategies, and by providing subsidies or housing and

other basic goods. What they have not traditionally ocused on is parlaying that increased income into savings and

durable assets and then protecting that income, savings and assets rom predatory nancial practices. However,

evidence suggests that to undamentally change their economic prospects, amilies not only need income, they also

need knowledge o and access to aordable nancial products and services; incentives to encourage savings andinvestment; and consumer protections in the nancial marketplace.

A new vanguard o municipal leaders understands these needs and has committed tangible and measureable

resources to nding new solutions. They are creating partnerships and programs that expand access to mainstream

banking and wealth-building opportunities, as well as help amilies protect the assets they have and become more

nancially stable. These local leaders are pioneering new ways to leverage the resources and regulatory power o

municipalities to work across departmental silos and public/private sector divides to scale up economic inclusion

and asset-building opportunities or low- and moderate-income amilies. They group these eorts under the broad

umbrella o nancial empowerment.

Financial Empowerment StrategiesThis report documents an emerging set o nancial empowerment strategies that are

being piloted and adopted by city governments, oten in collaboration with partners

rom the private, nonprot and philanthropic sectors. These innovative local eorts

have the potential to add a new dimension to the existing eorts to expand economic

opportunity and inclusion or residents. More importantly, they have the potential to

help nancially vulnerable populations benet rom a new range o incentives and

protections and thereby gain a stronger oothold in the economic mainstream.

To understand existing municipal-level asset-building eorts and learn about

practitioner experiences, CFED worked closely with members o the Cities or

Financial Empowerment coalition, cataloging their eorts and documenting the

range o program and policy strategies they were implementing to nancially

educate, empower and protect their residents. We group the strategies under the

ollowing ve main goals:

Cities or Financial

Empoerment Coalition

The member cities are:

Chicago

County o Hawaii*

Los Angeles

Miami

Newar

New Yor City (co-chair)

Providence

San Antonio

San Francisco (co-chair)

Savannah

Seattle


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1. IMPROvE ACCESS TO HIGH quALITy FINANCIAL INFORMATION, EDuCATION AND COuNSELING

To build the nancial capability necessary to eectively manage money and choose sound nancial and credit

products, households need access to timely, useul nancial inormation and advice. Cities are working with

private sector and community partners to help households build their nancial knowledge and improve their

nancial behavior through quality nancial education and counseling. To help improve the quantity and quality

o the nancial education and counseling services available to residents, cities typically engage in three activities:

increasing their understanding o current providers o nancial education and counseling; increasing access to these

providers either by creating reerral networks or connecting education and counseling to existing programs; andworking to improve the quality o programs.

2. INCREASE ACCESS TO INCOME-BOOSTING SuPPORTS AND TAx CREDITS

Stabilizing and maximizing income is a critical step toward nancial security and economic opportunity. Without

sucient income, one does not have the wherewithal to meet basic needs, let alone save or the uture. For many

low-wage workers, however, employment can be unstable and earnings unpredictable. In addition, the wages or

jobs that are available to those without post-secondary education have stagnated over the past several decades. As a

result, many are orced to incur debt just to nance basic needs.

Cities have traditionally provided a range o services and benets to help people in times o need; however, recently

cities have begun to devise new ways to leverage existing services and benets to reach the largest number o

residents possible.

3. CONNECT RESIDENTS TO SAFE, AFFORDABLE FINANCIAL PRODuCTS AND SERvICES THAT

REDuCE COSTS AND FACILITATE SAvINGS

A households ability to save depends on several actors: minimizing costs or basic goods and services, access to

convenient, low-cost nancial products and structures (transaction, saving, credit and insurance products as well as

direct deposit, automatic enrollment, etc.), and nancial capability related to money management, nancial products

and credit.

The reality or many low-income households is that their incomes are insucient to reliably cover basic costs let

alone unexpected emergencies and so they must rely on credit to bridge the gaps. Use o high-cost credit products

creates a cycle o debt that increases monthly expenses and urther limits ability to save. There is no quick x to

break the debt cycle or put household balance sheets back in the black. However, there is increasing awareness

among government and community leaders about the gravity o the problem, as well as a commitment to improving

the aordability, accessibility and quality o nancial products and services.

4. CREATE OPPORTuNITIES TO LEvERAGE SAvINGS INTO APPRECIABLE ASSETS

Emergency savings are essential or amilies to weather crises in the short-term. In the longer term, however,

amilies really begin to get ahead when they have mastered good savings behavior and are able to leverage their

savings (together with aordable nancing and public subsidies) into appreciable assets such as an education

credential, home or business.

Local governments have begun to expand their eorts to help amilies particularly those o modest means to

build a range o liquid savings and tangible assets. While cities have continued their traditional eorts to spur


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homeownership and small business development, they have begun to do so in innovative ways. In addition, they

have also begun to support the attainment o post-secondary education credentials and have recognized that

vehicles are critical assets that acilitate ones ability to maximize income.

5. PROTECT CONSuMERS IN THE FINANCIAL MARkETPLACE

A nal element o household nancial security and empowerment is protection against loss o income or assets,

extraordinary costs, and harmul or predatory external orces. Financial setbacks due to loss o income can be

signicantly cushioned or even avoided i households have access to adequate, aordable and airly-priced health,unemployment, disability and lie insurance. Similarly, assets and wealth gains can be protected through access

to adequate, aordable and airly-priced property insurance, as well as consumer protections rom deceptive or

predatory nancial products and practices, and oreclosure prevention programs and counseling.

Goal Cit Strategies

Improe access to high

alit fnancial inormation,

edcation and conseling

n Financial education and counseling networs and reerral structures

n Neighborhood-based nancial one-stop centers

n Incorporating nancial education into social service and wororce programs

n Standardiing and credentialing o nancial education services and providers

Increase access to

income-boosting spports

and ta credits

n Leveraging technology to streamline public benets screening and uptae

nAccess points or benets screening in high-need communities

n Funding or ree/low-cost ta prep services

nVITA and EITC public awareness campaigns

n Enacting a locally-unded EITC

Connect residents to sae,

aordable fnancial prodcts

and serices

n Creating and promoting low-cost transaction and savings products through Ban On

campaigns or in partnership with nancial institutions

nAordable credit products, e.g., small dollar, reund anticipation or auto renance loans

n Encouraging employers to use direct deposit

Create opportnities

to bild saings and assets

n Short-term and emergency savings products

n Incented savings accounts, e.g., Individual Development Accounts (IDAs), college savings

accounts, or other accounts or uses such as buying a home or a vehiclen Epanding access to small business capital and training

nTa assistance or the sel-employed

n Shared-equity homeownership

Protect consmers in the

fnancial maretplace

n Limiting or managing the prolieration o alternative, high-cost nancial service providers

through licensing and oning powers

n Curbing predatory consumer lending through enorcement o local disclosure laws or

litigation

n Foreclosure prevention strategies, including oreclosure counseling, orgivable emergency

loans, encouraging lender worouts and assistance to tenants in oreclosed properties

Unique Added Value o Municipal GovernmentsMunicipalities can and do play unique roles in advancing and promoting household nancial stability and helping to

bring the best practices incubated through nonprots to greater scale. In this report, CFED identies a dozen value-

added roles that municipal governments can play that provide critical capacities to the eld. Local governments can

champion eorts, convene the diverse local stakeholders and use their infuence to persuade other actors to engage

in these issues. They can communicate to residents through public awareness and social marketing campaigns,


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connect residents to resources, and give their stamp o approval to products or

services, providing a powerul legitimizing eect or residents. Local governments

can also use their powers to integrate nancial empowerment work into existing

programs and services, tap existing sources o ederal, state and local unding to

sustain this work, and serve as testing grounds or pilots and evaluation, creating

an environment o experimentation or innovation. Furthermore, they can advocate

on behal o larger policy eorts while oten possessing the authority to regulate

and scrutinize problematic practices. This report seeks to signal the importance oengaging local government ocials into this work and to help those ocials exercise

their diverse and valuable roles.

From Innovation to Systems Change: The Road AheadThe ast pace o growth and adoption o these strategies is an indicator that the

work is lling important gaps in the set o services that cities provide to their

residents to help them ully and airly participate in the economic mainstream o

their communities. However, while the prolieration o nancial empowerment strategies is exciting, in order or

these strategies to be sustainable and continue to grow, we must strengthen the oundation or doing this work

going orward. Below are our key recommendations or how these eorts can be advanced.

1. INTEGRATE FINANCIAL EMPOwERMENT AND ASSET BuILDING INTO CITy SERvICES

The undamental approach o each o the cities documented in this report is to embed and centralize nancial

empowerment and asset-building strategies within city administration. They aim not to create separate or

independent programs, but to create connection points within and between multiple service areas. Each o them has

made signicant strides in integrating nancial empowerment work into the myriad o agencies that serve residents

working to ensure that no matter what door a person walks through, they can access the nancial supports,

products and services they need. Yet, there is a great deal more to be done.

In any given city, the agency that houses the nancial empowerment work imparts a distinctive stamp on the

kinds o issues, partners and strategies that become priorities. However, in the long run, to increase ecacy and

eciency, city leaders must look more broadly across public agencies and encourage all o those with a stake in the

game to see the relevance o nancial empowerment work to their own agendas. Municipal leaders should actively

encourage the incorporation o nancial empowerment services into other systems such as workorce development/

job training, housing, economic development, education, public utilities, human services and other core city

unctions.

2. ALIGN LOCAL, STATE AND FEDERAL POLICIES

Cities ability to deliver services that help individuals boost income, reduce debt, increase savings, and build

and protect assets is partially dictated by state and ederal policy permissions and prohibitions. In the best case

relationship, state and ederal governments will provide adequate resources to carry out policy mandates and, at the

same time, will eliminate barriers to innovation or local governments. Local governments, or their part, will take

advantage o incentives to improve policy and use the fexibility they have to devise innovative ways to address

local needs.

12 ke Roles or Local

Goernment

Champion

Convene

Persuade

Communicate

Connect

LegitimateIntegrate

Sustain

Pilot

Advocate

Regulate

Evaluate


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Across the strategies described in this report, there are examples o policy synergy among levels o government

where local, state and ederal structures, unding and rules align to maximize government investment.

Unortunately, however, there are also instances where policies at dierent levels o government are out o step or

even working at cross purposes. Better alignment o policies at local, state and ederal level is needed.

3. INvEST IN EvALuATION

Experimentation at the municipal level can spur innovation in cities nationwide and lead to adoption o innovative

strategies through state and ederal policy. However, to accelerate this process, more needs to be done todemonstrate the eectiveness and impact o the strategies described in this report.

Cities have certain advantages as pilot testers or innovative programs: they have access to large qualities o

personal data; they are trusted sources o independent inormation; and they have a vested interest in rigor because

they would likely incur costs o any new programming. In addition, they have better access to community-based

organizations and research institutions than a single nonprot implementing a pilot program would; and, although

smaller scale than a large ederal pilot, they can provide the basis or investment in a ederal pilot or policy change.

As state and ederal leaders and private oundations increase their investment in municipal pilot programs, it is

critical that they do so at a level that enables and even requires evaluation to occur so that we can know whether

the strategy is eective or simply inspired.

4. PLAN FOR POLITICAL TRANSITION

While political leadership and champions are eective ways to get nancial empowerment initiatives o the

ground, that same aliation has the potential to limit the longevity o the initiative during times o political

transition. Without careul planning and institutionalization o the work, political and nancial support may dry up

under new city leadership.

Embedding nancial empowerment work in the ongoing operations and unctions o a city agency may increasestaying power and potential or true systems change. Similarly, securing permanent city unding or privately-

unded pilots is essential to the sustainability o the work.

* The County o Hawaii joined the Coalition in September, 2010, ater the research or this publication was completed, and as

such, inormation on the Countys fnancial empowerment work is not included in this report.


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14

CITIES HAVE LONG BEEN THOUGHT OFas places o opportunity or low-income workers

to orge pathways to the middle class. But ar too many urban households have remainedstuck in a cycle o poverty. In addressing poverty, local government has traditionally ocused

on increasing employment opportunities through job creation and job training programs, in

addition to subsidizing consumption through income supports and subsidies or housing and

other basic goods.

A growing body o evidence suggests that traditional

income supports, housing subsidies and workorce

programs are necessary but not sucient to help

amilies stabilize their nancial lives and escape poverty.

A new vision backed by a growing body o research

holds that while income is vital to nancial security, a

household also needs to have knowledge o and access

to aordable nancial products and services to build

the savings and nancial cushion that enable upward

mobility. Policies that protect consumers in the nancial

marketplace and that acilitate and incent savings and

investment among low-income households can work in

conjunction with traditional anti-poverty policies and

programs to help amilies get ahead nancially.

Asset-building programs have been prolierating

in the nonprot sector or over a decade. In recent

years a growing number o city leaders have become

champions o asset-building strategies and nd them

to be a natural adjunct to the roles they already play.

Municipal leaders are connecting amilies to programs

that expand access to mainstream banking and wealth-building opportunities, as well as helping

amilies protect the assets they have and become more nancially stable. Across the country, local

leaders are pioneering new ways to innovate and leverage the resources and regulatory power

o municipalities to work across departmental silos and public/private sector divides to scale up

nancial empowerment and asset building opportunities or low- and moderate-income amilies.

This report catalogs emerging asset-building and nancial empowerment policies and program

strategies that are being piloted and adopted by some city governments, oten in collaboration

with partners rom the private, nonprot and philanthropic sectors. These innovative local

A Ne Role or Local Goernment in Poert Alleiation

Chapter 1

Local elected ofcials have a largely

untapped, but powerul role they can play

to fnancially empower and protect their

residents by promoting fnancial education,

asset building and easy and sae access

to mainstream banking. By strategically

leveraging the unique opportunities inherent

in municipal government, including its many

enorcement powers, city halls across the

country can broadly, switly and eectively

help move large numbers o people towardfnancial stability.

Jonathan Mint, Commissioner,

Department o Consumer Aairs, New Yor City

Co-Chair, CFE Coalition


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15

eorts have the potential to add a whole new dimension

to existing tools and strategies that boost economic

opportunity and inclusion in urban areas today.

Specically, they have the potential to help low-income

and nancially vulnerable populations benet rom new

incentives and protections and thereby gain a stronger

oothold in the economic mainstream.

In addition to cataloging the program and policy

strategies currently being undertaken by municipalities,

this report also explores the roles that municipalities

can play in advancing and promoting household

nancial stability and identies potential impediments

to such eorts. We include a number o observations

about engaging in this work and provide suggestionsor the types o issues that city leaders might consider

as they think about beginning this work in their own

communities.

To research and produce this report, the Corporation

or Enterprise Development (CFED) worked closely

with members o the Cities or Financial Empowerment

(CFE) Coalition. The authors met with them, cataloged

their eorts, and documented the range o program and

policy strategies they were implementing to nancially

educate, empower and protect their residents. The

research team also reviewed national policy research ocusing on municipal-level asset building

and studied local government legislative powers.

Financial Empowerment: An Emerging Approach

THE TERM FINANCIAL EMPOWERMENT has recently emerged and been embraced by a

growing number o cities as a way to broadly describe their asset-building work and their new

and expanding eorts to ensure that nancial education and protection is broadly available

to help amilies with low incomes stabilize their economic lives. The goal o this approach is

to boost income, reduce debt and increase savings. Financial empowerment strategies include

improving access to quality nancial inormation, increasing access to work supports and

tax credits, connecting residents to appropriate nancial products, creating opportunities to

leverage savings into appreciable assets and protecting consumers in the nancial marketplace.

Financial empowerment initiatives provide practical solutions that oster real change in the

lives o working amilies.

Cities or Financial Empoerment

The member cities o the Cities or Financial

Empowerment (CFE) Coalition are seeing toepand the vision o what municipal government

can and should do on behal o their residents

with low and moderate incomes. The member

cities o CFE are creating bold, in-house nancial

empowerment agendas. CFE cities strongly believe

that municipalities are uniquely poised to implement

innovative and eective programs, to create powerul

partnerships and to deliver orward-thining

services to the communities they serve every

day. Cities have the ultimate ability to bring any

number o ey players to the same table nancialinstitutions, community organiations, thin tans,

other government agencies and unders and their

unique birds eye perspective on the resources and

challenges in their own communities allows them

to develop and target the programs that wor most

eectively. These opportunities, combined with the

can-do mentality o local government, allow or

tremendous gains or residents in need o nancial

empowerment.


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How Did Cities Get Involved in this Wor?SOME CITIES BECAME INTERESTED IN FINANCIAL EMPOWERMENT WORk through their

involvement with Earned Income Tax Credit (EITC) campaigns and ree tax-assistance. Others

approached nancial empowerment through citywide eorts to help amilies living in poverty

or in supporting residents to return to the workorce. As the more traditional anti-poverty andworkorce strategies were assessed to determine long-term eectiveness, city leaders started to

recognize the importance o implementing nancial education and asset building approaches

along with existing income-ocused public assistance.

In Newark, the city started coordinating Volunteer Income Tax Assistance (VITA) sites even

locating one o the sites in City Hall because o the low take-up rate o the EITC. The city

recognized that the reason many people were not claiming their reund was due to a lack

o awareness about the program and so began integrating nancial education and public

awareness campaigns into this work, which oten meant working with and coordinating the

work o the citys asset-building programs.

Similarly, San Antonio was coordinating the EITC and VITA work and recognized that this

strategy was only the tip o the iceberg in helping amilies achieve nancial well-being.

With the large-scale expansion o the citys EITC work through partnerships with nancial

institutions and local nonprots, San Antonio ocials saw that they could use the citys

infuence to create new, innovative nancial products or low-income residents.

In San Francisco, while the city itsel was not coordinating the VITA work, they were trying

to build the take-up rate o the EITC with a local cash match, called the Working Families

Credit (WFC). The WFC was launched out o the Treasurers oce, which sent 10,000 checks

to low-income amilies who qualied. City ocials were concerned that thousands o these

checks would be taken to check cashing outlets and sent out a letter that advised people to take

their check to any o 10 banks that would cash it or ree. This work led to the creation o the

Bank on San Francisco campaign, which oers several low-cost savings options to unbanked

households and has been replicated by dozens o cities across the country.

Other cities, such as Los Angeles, Savannah and New York, launched nancial empowerment

strategies based on both their involvement with EITC and the work and recommendations

o blue-ribbon anti-poverty task orces commissioned or led by the mayor. New York Citylaunched a new oce in City Hall called the Center or Economic Opportunity, which created

the Oce o Financial Empowerment and strategically located it within the Department o

Consumer Aairs to leverage the citys licensing and enorcement powers. In Los Angeles,

the mayor was asked to chair the Poverty, Work and Opportunity Task Force or the U.S.

Conerence o Mayors. The city worked with the Brookings Institution to research best practices

and anti-poverty strategies grounded in research and with bipartisan support. Los Angeles


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17

Table 1. CFE City Financial Empowerment Entry Points and ChampionsCit Local

Goernment

Champion

Entr Point into Financial

Empoerment

where wor is

Hosed

Poplation

(Ran)

Chicago Mayor, Treasurer Financial education initiative Treasurer (elected) 2,740,224

(3)

Los Angeles Mayor, Economic

Development Policy

Mayor chaired U.S. Conerence

o Mayors National Tas Force on

Poverty

Oce o the Mayor 3,770,590

(2)

Miami Mayor, Special

Projects

Administrator or

the City o Miami

EITC outreach campaign

developed into a citywide anti-

poverty initiative, which became

ACCESS Miami

Oce o the

City Manager

Economic Initiatives

352,064

(42)

Newar Mayor, Deputy

Mayor

Newar Now (Mayors

nonprot); Bric City

Development Corporation

(Citys CDC)

Oce o the Mayor

and independent

organiation

Newar Now

265,375

(68)

New Yor Mayor, Deputy

Mayor or

Health and

Human Services,

Commissioner o

Consumer Aairs

Mayors Anti-Poverty Blue Ribbon

Tas Force; Ta-time eorts (i.e.,

VITA, local EITC)

Department o

Consumer Aairs,

Oce o Financial

Empowerment

8,246,310

(1)

Providence Mayor, Oce o

Human Services

AECF Maing Connections,

Poverty Commission

Pathways to

Opportunity

170,220

(137)

San Antonio Mayor, Director o

the Department

o Community

Initiatives

AECF Maing Connections; VITA

site administration

Department

o Community

Initiatives

1,267,984

(7)

San Francisco Mayor, Treasurer Local EITC Treasurer (elected) 757,604

(12)

Savannah Mayor Step Up Savannah, Poverty

Tas Force 2003; Supporting

Wor project unded by Ford

Foundation and the Families and

Wor Institute

Oce o the Mayor

and independent

organiation Step

Up Savannah

127,526

(181)

Seattle Mayor, City Council

Member, Public

Health Manager and

Policy Advisor

People Point; Seattle Asset

Building Collaborative grew out

o National League o Cities

technical assistance project

Human Services

Department

565,809

(23)

Source: Population: U.S. Census Bureau, 2005-2007 American Community Survey

Ran: U.S. Census Bureau, Population Division (2009)

Note: Ran by population is based on annual estimates o the resident population

or incorporated places over 100,000, based on estimates as o July 1, 2009.


18/96

18

identied banking as an important unmet need and launched Bank on LA (modeled on San

Franciscos program) as a starting point to implement citywide asset-building strategies.

In Savannah, the city initiated a task orce in 2004 that researched and analyzed poverty

and identied the key barriers to sel-suciency. Poverty was identied as an economic

development issue, and the city held poverty simulations to engage the community, bringing

over 2,500 participants to the table rom 2005-2008. These meetings helped Step Up Savannah, a

collaboration o 85 organizations and city sta, to orm as an anti-poverty collaborative.

In addition to the locally initiated strategies, many eorts also had early support and assistance

rom national oundations and intermediaries. The Annie E. Casey Foundation provided major

support and capacity building or San Antonio and Providence through its Making Connections

Initiative. The Ford Foundation supported early work in Savannah through the Supporting

Work Project, administered through the Families and Work Institute. The U.S. Conerence o

Mayors National Taskorce on Poverty introduced the mayor o Los Angeles to the issues. The

National League o Cities has played an important role in getting cities to address the issueso savings and nancial security in three ways: through its asset-building technical assistance

project that began in 2005, through its Poverty Working Group, and through orming a learning

and technical assistance group or cities who wanted to develop strategies to expand banking

access through Bank On initiatives.

How the city got involved in nancial empowerment and who champions the work can oten

determine where the work is housed within city government and, with it, the unique powers

and capacities that that particular agency can leverage. For example, in San Antonio and

Miami, the nancial empowerment work is led by a City Director who coordinates a multitude

o community and human service strategies. As a result, some o the strongest initial areas o

work tended to ocus on integrating nancial education, tax help and asset building strategies

into existing programs. In San Francisco, the champion is the City Treasurer, and the nancial

empowerment work grew out o his oces eorts to administer the Working Families Credit

(a local version o the EITC) and develop a campaign to expand access to nancial institutions.

In New York, where Mayor Bloomberg is a strong champion or nancial empowerment,

the specialized Oce o Financial Empowerment is housed in the Department o Consumer

Aairs, and central strategies in its nancial empowerment work relate to consumer protection

and regulation in the nancial marketplace.


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19

12 ke Roles or Local Goernment

Champion. City ocials can leverage the public spotlight and bully pulpit in order to promote and add legitimacy

to municipal nancial empowerment eorts. Mayors and council members attract media attention and can

acilitate the dissemination o program inormation to the public through press conerences and local media.

Conene. Cities have a unique ability to bring together and coordinate the wor o diverse actors and organiationsin the community toward a common cause. By taing advantage o eisting woring relationships, or by engaging

businesses or nonprots that have a vested interest in residents nancial security, city ocials and sta can

acilitate cooperation.

Persade. City ocials can use their infuence as policymaers, customers and employers, along with other

incentives such as positive publicity and/or access to new customers to persuade local actors to engage in

certain activities.

Commnicate.Cities can spearhead public awareness and social mareting campaigns that inorm residents about

opportunities and rights related to nancial products and services, inormation and consumer protection.

Connect. Cities can connect residents directly to resources through mareting and reerral services and can

leverage general inormation services lie 311 and citywide directories.

Legitimate.City involvement in nancial empowerment eorts has a powerul legitimiing eect or residents.

City oversight and/or involvement increases the credibility o programs targeted to lower-income citiens and

thereore increases uptae o programs and services. For many people, a clear message that the citys stamp o

approval has been given to a nancial product or a service provider reduces personal ris and osters trust and

willingness to utilie new products or services.

Integrate. Cities can integrate nancial empowerment wor across agencies by embedding nancial education,

services and products into eisting programming.

Sstain. State and ederal grants directed to local governments, as well as available municipal general und revenues,

provide opportunities or municipalities to und nancial empowerment programs. Several ederal grants are

distributed through the U.S. Department o Housing and Urban Development namely through the Community

Development Bloc Grants, the HOME Investment Partnership Program and the American Dream Downpayment

Initiative. These grants provide a natural vehicle or municipal governments to promote asset-building wor.

Pilot. Cities are prime testing-grounds or innovation in public programs and policies. By engaging in asset-building

wor, municipalities create an environment o eperimentation which leads to greater innovation in the eld.

Ealate.City representatives are both accountable to their citiens and now that data is necessary or epansion

o programs beyond initial pilot phases. Although relatively ew cities are now actively engaged in rigorous

evaluation o pilot programs, there is considerable interest and desire to evaluate their innovative wor. Liewise

there is uniorm acnowledgement that amassing evidence about the inds o strategies that are eective is

critical to move any initiative to scale.

Reglate.While cities legislative powers are more limited than those o states, municipalities can enact local

legislation, called ordinances, or such local issues as oning, taation, budget decisions, capital improvements and

department organiation. In addition, cities can eercise their eisting powers o enorcement to curb abusive

lending practices and improve local consumer protections.

Adocate.Municipal-level lobbying o state and ederal lawmaers is another avenue or improving economic

opportunities or city residents. Given the abundance o state- and ederal-level policies impacting local asset

building and economic security, city ocial lobbying o legislators can have low-cost and high-impact potential.

Cities doing innovative nancial empowerment wor have an important role to play in advocating or new and

eective policies at the state and ederal level.


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THE ECONOMIC RECESSION THAT GRIPPED THE NATION has been both cause and eect or

escalating unemployment and oreclosures. The resulting loss o nancial security or manyormerly middle class amilies and the urther deterioration o the economic stability o lower-

income amilies have been acute. According to the Federal Reserve, between 2007 and 2009,

U.S. households lost $14 trillion in wealth, a sum representing nearly a quarter o all personal

wealth and the largest loss o wealth in generations (Fed Board o Governors 2009). However,

even beore the start o the current nancial and economic crisis, household nancial insecurity

was widespread in America. Personal savings rates were at historic lows, and income poverty

and unemployment numbers in urban centers were alarmingly high. Americans in general

were overextending themselves, in many cases with nancial products that stripped, rather

than helped build, wealth and nancial security. Combined with a lack o access to aordable

nancial products and services and the general high cost o being poor (Fellowes 2006),

American amilies are really struggling.

At the outset o this project, CFED worked with the 10 cities in the CFE Coalition to map a

range o indicators o household nancial ragility. Several o the key indicators income

and assets, banking status, credit and debt patterns, housing aordability and educational

disparities are discussed below. Other data is available or review in Appendix 2.

Income and Assets

INCOME AND ASSETS ARE EACH CRUCIAL COMPONENTS or a households establishmento economic well-being and security. While interrelated, it is important to distinguish between

the two as they represent two dierent sources o nancial security. Income is a fow o unds

generated through wage earnings, investment returns, business prots and public benets that

can be used to cover household monthly expenses. Income can also be set aside as savings to

help und uture expenses or asset acquisition. Assets such as a retirement und, an education

credential, a home, a business or even a car are essential or helping households guard against

nancial setbacks and get ahead over time. Without income, one does not have the cash fow

necessary to sustain a amily or build a personal saety net. But without assets, a household

that is just making ends meet with their current income is more susceptible to being driven

into poverty during dicult times (De Janvry 2008). Assets provide the route to both nancial

security and opportunity.

Income poverty is a persistent problem in urban centers, and households o color and single-

parent households tend to experience the highest rates o income poverty. Asset poverty is

another way o looking at nancial security levels across households and is dened as not

having enough net assets (net worth) to survive at the ederal poverty level or three months

The Fragile State o Hosehold Financial Secrit in Cities

Chapter 2


21/96


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22

High levels o debt and diculties paying it back have serious consequences or a borrowers

credit score, which can have a dire impact on a amilys ability to get ahead. Credit reports and

scores not only determine access to credit but can also be barriers to basic goods and services.

Credit reports are used by employers and landlords to evaluate applicants; utility companies

can also use credit scores to price deposits or their services (Fellowes 2006). Unortunately,

the reality or many amilies is that their low credit scores reduce access to aordable credit.

An average o almost 60% o residents in CFE counties have subprime credit scores,1 and the

range varies rom 41% o residents in San Francisco to 69% o residents in San Antonio (Bexar

County), Texas (see Chart 2).

Chart 2: Percentage o Consumers with Subprime Credit Scores in CFE Cities

Source: TransUnion (Q1 2009). Subprime Credit Score is dened asa TransRis score 700 on a scale o 150-934.

* New Yor Citys data is a weighted average o the 5 counties that compose the City.

Baned StatusECONOMIC INCLUSION BEGINS WITH A BANkING RELATIONSHIP. Savings accounts are one

o the most basic asset-accumulation tools, and transaction (i.e., checking) accounts can act

as a gateway into the nancial mainstream. A 2009 survey conducted by the Federal Deposit

Insurance Corporation (FDIC) (see Table 2) ound that 7.7% o all American households and

11.3% o households in cities are unbanked, meaning that no one in the household has a checking

or savings account. In addition, 18% o households are considered underbanked, meaning that

although they have a bank account, they still rely on alternative nancial services or certain

kinds o transactions. The lack o a basic bank account is particularly prevalent among minority

and low-income households. Nationally, 22% and 19% o Black and Hispanic households,

respectively, are unbanked compared to only 3.3% o white households. In addition, over 1 in 4

households earning less than $15,000 annually do not have a bank account (FDIC 2009).

LosA

ngeles

Coun

ty,CA

SanFranc

isco

Coun

ty,CA

Miam

i-Dade

Coun

ty,FL

Chath

am

Coun

ty,GA C

ook

Coun

ty,IL Ess

ex

Count

y,NJ

NewY

orkCity*

Provid

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Coun

ty,RI Be

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Coun

ty,TX Kin

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Coun

ty,WA

0

10%

20%

30%

40%

50%

60%

70%


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23

Table 2. Unbaned and Underbaned Households in CFE Metropolitan Areasunbaned

Hoseholds

underbaned

Hoseholds

Total un- and

underbaned

Nmber Percent Nmber Percent Nmber Percent

Chicago MSA 248,000 7.4% 463,000 13.8% 711,000 21.2%

Los Angeles MSA 406,000 9.2% 637,000 14.4% 1,043,000 23.6%Miami MSA 186,000 8.4% 286,000 13.0% 472,000 21.4%

New Yor-Northern

NJ MSA

691,000 9.6% 1,069,000 14.8% 1,760,000 24.4%

Providence MSA 30,000 5.6% 71,000 13.5% 101,000 19.1%

San Antonio MSA 82,000 10.6% 199,000 25.9% 281,000 36.5%

San Francisco MSA 74,000 4.7% 161,000 10.2% 235,000 14.9%

Seattle MSA 49,000 3.5% 244,000 17.2% 293,000 20.7%

USA 9,850,000 7.7% 21,276,000 17.9% 31,126,000 25.6%

Source: FDIC, 2009 National Survey o Unbaned and Underbaned Households.

Data was unavailable or Savannahs MSA.

There are many reasons or a household to be unbanked, but the primary reason cited by

households was that they did not eel that they had enough money to need an account

(FDIC 2009). However, the perception o a bank account not being o value to them may be

exacerbated by the practices and products oered by nancial institutions. Traditional banking

products are oten not customized to the needs o lower-income households (Tuano and

Schneider 2005). Research nds that nancial institution practices o establishing minimum

balance ees, directing the majority o marketing dollars to more afuent customers, and using

ChexSystems to screen out potential customers with prior bank account problems are ways

that banks discourage enrollment o lower-income customers (Tuano and Schneider 2005).Minimum balance requirements and higher ees can drive certain households to non-traditional

service providers, such as check cashing establishments or payday lenders. Yet these non-

traditional services are extremely costly; check cashers charge an estimated $40 per payroll

check to cash a check rom an unbanked household with ull-time workers (Fellowes and

Mabanta 2008). Over a career, an average ull-time worker who does not have an account will

spend more than $40,000 on nancial services (Fellowes and Mabanta 2008).

Housing and HomeownershipHOUSING COSTS ARE OFTEN THE LARGEST MONTHLY ExPENSE FOR FAMILIES. Aordable

and predictable housing costs (i.e., mortgage or rent and utility costs) enable a amily to plan

or the expenses o other goods such as ood, clothing and healthcare while also being able to

save money or emergencies and or the uture. Unortunately, aordable housing is scarce

in many cities, and an average o 50% o both renters and homeowners in the CFE cities are

housing cost-burdened, meaning that they spend more than 30% o household income on

housing, as shown in Chart 3.


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Chart 3: Percentage o Cost-Burdened Renters and Homeowners in CFE Cities

Source: U.S Census Bureau, 2005-2007 American Community Survey. Cost burdened

is dened as spending 30% or more o household income on housing costs.

Despite the recent oreclosure crisis and erosions in home equity, homeownership continues

to be the primary means by which amilies build and transer wealth. Home equity is by ar

the largest component o net worth, especially or low- and moderate-income households

and minority populations (CFED 2008). However, households in urban centers tend to

become homeowners at much lower rates than the rest o the nation as a whole, in part

due to the housing stock and the high cost o housing in dense, urban areas. Across the ten

cities, the homeownership rate ranged rom a low o 25% in Newark to a high o 61% in San

Antonio, compared to 67% nationally. Even or those households that are able to achieve

homeownership, it may be unsustainable. In 2007, an average o 18% o mortgages in the CFE

counties were high-cost or subprime mortgages (on par with the national rate o 17.5%), which

bring with them a signicantly higher risk o delinquency and oreclosure. In act, in March

2009, the oreclosure rate in the cities was an average o 5%, 66% higher than the national rate

o 3% at that time.

Renters Homeowners

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40%

50%

60%

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25/96

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26/96

26

BEFORE DESCRIBING THE RANGE o municipal asset-building and nancial empowerment

strategies that are ocus o this report, it is helpul to consider rom a householdsperspective what it really takes to build nancial security over time. CFED has created the

Household Financial Security Framework to describe this cycle o asset building and nancial

empowerment, which, in the abstract, is relatively straightorward. Individuals must rst learn

the knowledge and skills that enable them to earn an income. They then use that income to take

care o basic living expenses and debt payments, and then i income has exceeded expenses

they can save some or uture purposes. When they have accumulated enough liquid savings,

they can leverage those savings and invest in assets that will appreciate over time and generate

increasing levels o income, equity and net worth. Throughout the cycle, access to insurance

and consumer protections help households protect the gains they make.

In reality, there is nothing particularly straightorward

about getting a household balance sheet to balance, much

less tip toward asset accumulation. As the data in the last

chapter make clear, nancial security is the exception

rather than the rule or the majority o Americans. Part

o the explanation lies with the individual; they may

lack the knowledge and skills that would enable them to

get a good job and advance, or may not understand the

long-term implications o using costly credit or ailing tosave or retirement. But another part o the explanation

has very little to do with individual knowledge and skills

and instead has to do with the systems, structures and

protections that exist or dont in the marketplace. It

is oten the institutional arrangements provided through government policies, employers,

nancial products and institutions, and education that determine who accumulates assets and

who does not (Sherraden 1991).

Strategies

The strategies that are documented in the

remainder o this chapter are designed to be

responsive to both individual agency and the

conditions o the fnancial marketplace as

they work to increase the fnancial stability o

low-income households by boosting income,

decreasing debt, and increasing access tosaving and asset-building opportunities.

Chapter 3


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Wage Income

+ Business Income+ Public & Employee Benets

+ Tax Credits

+ Investment Income

= Income

Ability to Maximize Income

Depends On:

Ability to Save Depends On: Ability to Build Assets

Depends On:

H o u s eh o l d F i n a n c i a l S e c u r i t y F r a m ewo rk

nAccess to reliable basic goods andservices (housing, transportation,

medical care, child care, food)nAvailable qualityjob and business

opportunities

nAccess to public benets and taxcredits(e.g., EITC, Child Care)

nAsset ownership (higher educa-tion, home, business, nancial

investments)nKnowledge and skills related to

work, taxes and benets

nPrice and appreciation of assets(higher education, home, business,

nancial investments)nAffordable nancingnAccess to public incentives (e.g.,

downpayment assistance, govt loan

guarantees, tax incentives, PellGrants, IDA/CSA match)

nKnowledge and skills related toasset purchase and management

nAccess to affordable basic goods andservices (housing, transportation,

medical care, child care, food)nDebt reductionnConvenient, low-cost nancial

products (transaction and savings

vehicles, credit and insurance

products)nConvenient, affordable nancial

structures (e.g., direct deposit,

automatic enrollment, online banking,

bank location)nKnowledge and skills related to

money management, nancial products,

and credit building and repair

INVEST

Savings+ Borrowing

+ Public Incentives

= Assets

Income- Current Consumption- Debt Payments

=Savings

SAVEEARN(Maximize Income) (Build Assets)

nInsurance (public or private): Protects against loss of income or assets as well as against extraordinary costs (e.g., unemployment,disability, life, health/medical, property)

nConsumer Protections: Protect consumers from discriminatory, deceptive and/or predatory practices (e.g., redlining, predatorymortgage lending, payday lending, banking practices)

nAsset preservation: Depends on government policies (e.g., community investments, blight ordinances, foreclosure prevention) andmarket conditions

Gains must be protected against loss of income or assets, extraordinary costs, and harmful or predatory external forces

nK-12 & Postsecondary Education: Basic literacy and math skills, plus commitment to lifelong learning are critical for employmentand advancement

nFinancial Education & Counseling: Timely, relevant, accurate information on basic budgeting, taxes, nancial products and services,and use of credit

nAsset-specic Education: Preparation for homeownership, business ownership, postsecondary education, and nancial investments

LEARN

PROTECT

Assets can increase income and earning capacity

Knowledge and skills that enable navigation of and success in markets (labor, nancial) have a direct bearing on nancial security


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The city leaders we spoke with are keenly aware o the roles that both individual agency and

the conditions o the nancial marketplace play in determining the economic realities o a

household. The strategies that are documented in the remainder o this chapter are designed to

be responsive to both as they work to increase the nancial stability o low-income households

by boosting income, decreasing debt, and increasing access to saving and asset-building

opportunities. We group the strategies under ve main goals:

n Improve access to high quality nancial inormation, education and counseling

n Increase access to income-boosting supports and tax credits

n Connect residents to sae, aordable nancial products and services that reduce costs and

acilitate savings

n Create opportunities to leverage savings into appreciable assets

n Protect consumers in the nancial marketplace

Strategies to Improve Access to High Quality Financial Inormation,Education and CounselingTO BUILD FINANCIAL CAPABILITY to manage money and choose sound nancial and credit

products, households need access to timely, useul nancial inormation and advice. Cities are

working with private sector and community partners to help households build their nancial

knowledge and improve their nancial behavior through quality nancial education and

counseling.

To help improve the quantity and quality o the nancial education and counseling services

available to residents, cities typically engage in three activities: increasing their understanding

o current providers o nancial education and counseling, increasing access to these providers

either by creating reerral networks or connecting education and counseling to existing

programs and working to improve the quality o programs.

INCREASING ACCESS TO FINANCIAL EDuCATION AND COuNSELING

A number o cities led the way in identiying and documenting all o the disparate nancial

education providers working in community-based organizations, social service programs and

other programs throughout their city and then developing systems to increase access to those

services. The systems to increase access include both nancial education networks and reerral

structures. In some cases, the reerral structures are specically or nancial education, in othercases they leverage existing citywide inrastructure, such as 2-1-1 and 3-1-1 lines.

n New Yorks Oce o Financial Empowerment (OFE) manages the Financial Education

Network, which includes a searchable online database connecting residents with nancial

education classes, workshops, hotlines and 3-1-1 reerrals, and one-on-one counseling

services throughout the city.


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n The City o Seattle, the Seattle-King County

Asset Building Collaborative (SKCABC)

and Bank on Seattle-King County led

the creation o a Financial Education

Providers Network, which includes a

searchable Financial Education Locator on

the Bank on Seattle-King County website.

Similar inormation can be accessed

through Seattles Your Money Helpline,

an online resource tool, and through the

2-1-1 Community Inormation Line call-

in number which reers target groups to

resources and agencies that can answer their

nancial questions and be o assistance.

n

San Franciscos nonprot serviceproviders, philanthropic unders and

local public-sector representatives are

working together to streamline access to

nancial education services and products,

to increase quality o service and to

encourage collaboration among providers.

Creating Phsical Access Points

in High-Need Commnities

Some cities use actual brick-and-mortar

centers located in high-need communities to

consolidate and deliver nancial education

services more eectively.

n The City o Newark operates a number o

comprehensive Financial Empowerment

Centers, which use SingleStop USAs

One-Stop-Shop model to provide

comprehensive services to Newark

residents, including ree tax assistance,

nancial education and FAFSA orm

assistance. Residents can meet with

counselors who screen them or eligibility

or health care and public assistance

programs aligned with their goals.

Pblic-Priate Partnerships or Asset Bilding and

Financial Empoerment

As cities assess how to become involved in asset-building

wor, they oten loo or ways to collaborate with partners

rom nonprots, business and philanthropic sectors. Below aredescriptions o the ey roles that various sectors are playing and

can play.

Nonproft and community-based partners Many cities

already partner with nonprot organiations, civic organiations

and aith-based institutions on other anti-poverty eorts, or at

least have a general sense o the relevant groups with whom

they should be partnering. In a survey administered by the

National League o Cities, city mayors and managers reported

that nonprot organiations, oundations or civic organiations

and churches were the most important partners in local povertyeorts. When ased about current collaborators in local poverty-

reduction eorts, city ocials responded that they were currently

collaborating with nonprot organiations 84% o the time, with

civic organiations 61% o the time, and with churches 55% o the

time (Furdell, Perry, and Undem 2008).

Private sector partners As cities have begun ocusing on

asset building or low-income residents, they have ound ways

to partner eectively with private employers and nancial

institutions. For eample, these private sector partners can oten

more easily reach many city residents who do not typically havedirect contact with government agencies. Cities have also sought

assistance rom nancial institutions and rom private companies

to disseminate inormation, provide monetary or in-ind

donations, or improve services to low-income residents.

Philanthropy Philanthropic partners can help cities test pilot

programs and eperiment with new approaches, steps that are

dicult to tae with tapayer dollars. Privately unded innovation

and demonstration allows cities to uncover new strategies and

to pinpoint which approaches wor best beore implementing

them on a large scale. In an era o tightening public budgets, manyunders have become more strategic and sought to leverage the

impact o limited dollars. Philanthropic partners identiy ways

in which a particular grant or activity can stimulate or catalye

other resources.


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n New York Citys Financial Empowerment Centers oer ree one-on-one nancial

counseling in collaboration with community-based organizations. Clients can receive

assistance with money management, budgeting, credit counseling, negotiating with

creditors, connecting to aordable banking services, debt management, government benet

screenings and reerrals to other services and organizations.

n In Savannah, Providence and San Antonio, city ocials are supporting neighborhood-

based Centers or Working Families and Family Success Centers where city residents can

receive nancial education, coaching, counseling, and other services that help them access

nancial services, income supports and employment training to achieve greater economic

sel-suciency.

n With Operation Hope and private partners, the City o Miami provides ongoing counseling

and nancial education using the citys park system as a ocal point within the community.

Incorporating Financial Edcation and Social Serice and wororce Programs

In addition to creating new nancial empowerment centers, many cities are incorporatingnancial education, counseling and savings opportunities into government social services. The

City o Seattle and the SKCABC, or example, are working closely with the United Way o King

County to incorporate nancial education, access to nancial services, and products and benet

access into ree tax preparation services. A similar eort is taking place in Providence through

the Family Stability Partnership.

The cities o Savannah, Seattle and New York provide examples o dierent approaches to

pairing nancial empowerment with workorce development.

n Step Up Savannah is a community-based organization that pairs workorce development

with asset building to move people toward sel-suciency. Step Up Savannah and the City

o Savannah integrate nancial education classes, access to appropriate nancial products,

ree tax preparation and other services with existing workorce development and GED

classes oered throughout the community.

n In Seattle, SkillUp Washington/College or Working Adults is a collaborative eort

involving community and technical colleges and employers that creates training

opportunities or low-skill, low-wage workers to help them move into living-wage

jobs. The Seattle Human Services Department (HSD), which is the home base or Citys

nancial empowerment work, along with the SKCABC is working with the initiative to

connect participants to a ull range o nancial empowerment services including nancial

education, credit counseling, access to benets, access to nancial services and asset

building. HSD and SKCABC are training SkillUp sta and leadership to help their students

utilize nancial empowerment resources including PeoplePoint the Citys one-stop

online benets access platorm. In addition to SkillUp Washington, SKCABC and HSD are


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working with Homelessness Prevention and Rapid Rehousing providers, the Workorce

Development Council, among others, to embed nancial empowerment services into their

service delivery systems.

n New York Citys Workorce1 Career Centers operated by the Department o Small Business

Services provide employment services as well as access to nancial empowerment

counselors with inormation on public benets, nancial education and nancial products.

IMPROvING THE quALITy OF FINANCIAL EDuCATION AND COuNSELING

Many city eorts to increase access to nancial education and counseling are tied to eorts to

also improve the quality o these services. Cities have taken approaches ranging rom sharing

o industry best practices to standardization and credentialing o services and providers.

n Seattles Financial Education Providers Network adopted quality standards and sponsors

ongoing train-the-trainer opportunities. Its Your Money Helpline includes an electronic

manual used to train proessionals and volunteers on multiple nancial empowerment topics.n San Franciscos nancial education collaboration includes sharing o industry best practices

through quarterly learning circles and the development o nancial education standards so

grantmakers (including City agencies) and consumers have a benchmark or quality.

n In New York City, OFE runs the Education Evaluation Improvement Initiative, which

supports the collection o dozens o uniorm metrics across providers. OFE will use the data

to help determine which services have the greatest impact on segments o the low-income

population.

n OFE also developed a nancial counseling certication program or nancial educators,

counselors, trainers, coaches and others, allowing them to receive a standardized, rigorous

and City-endorsed certicate in nancial education and counseling. OFE submitted the

curriculum to the Academic Review Panel at the City University o New York and is

awaiting approval or the program to be eligible or course credit.

n New York Citys Department o Consumer Aairs is also working with its CFE Coalition

partners, unders and the U.S. Department o Treasury to explore expanding New Yorks

approach to certication nationally.

Strategies to Increase Access to Income-Boosting Supportsand Ta Credits

STABILIzING AND MAxIMIzING INCOME IS A CRITICAL STEP toward nancial security andeconomic opportunity. Without sucient income, amilies do not have the wherewithal to meet

basic needs, let alone save or the uture. For many low-wage workers, however, employment

can be unstable and earnings unpredictable. In addition, the wages or jobs that are available

to those without post-secondary education have stagnated over the past several decades. As a

result, many are orced to incur debt just to nance basic needs.


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One strategy to boost income is to increase earning potential through skill building and

education. Many cities oer skill-building services through their workorce development

systems and community colleges. Depending on the city, these services may or may not be

included under the nancial empowerment umbrella.

Cities also try to maximize individual income by increasing the take-up o public benets

(in-kind and cash) and tax credits. Cities have traditionally provided or administered a range

o services and benets to help people in times o need; however, recently cities have begun

to devise new ways to leverage existing services and benets to reach the largest number o

residents possible.

Champions o asset building and nancial empowerment

are utilizing technology, creating new and leveraging

existing physical access points, and launching public

awareness campaigns to connect residents to the ullrange o benets, work supports and tax credits or which

they are eligible. In addition, some cities are oering

new benets, such as a local EITC, to help low-income

residents maximize their income.

IMPROvING ACCESS TO AND uPTAkE OF

PuBLIC BENEFITS AND wORk SuPPORTS

One o the most promising strategies or boosting income

is to use technology to eciently connect low-income

residents to public benets. Cities are using a range o technology platorms to link residents

to city- and state-administered benets. The Benet Bank (TBB), EarnBenets, PeoplePoint

and La RED are examples o online platorms that have been developed to help streamline

eligibility determination and acilitate access to a wide range o public benets, tax credits and

nancial services.

n The City o Miami is using TBB at each o the citys Neighborhood Enhancement Team

locations and with community- and aith-based organizations across the city. The system

allows a trained counselor to prepare a city residents tax return and simultaneously

complete application orms or state and ederal benets, including Medicaid, KidCare

(CHIP), ood stamps (SNAP), cash assistance (TANF) and energy assistance (LIHEAP), as

well as voter registration.

n EarnBenets was initially launched in New York City in 2003 and has expanded to

Memphis, Atlanta, Baltimore and Louisville. The platorm was developed by the nonprot

Seedco and is implemented through partnerships with government agencies, employers,

aith- and community-based organizations, and oundations. It connects low-wage workers

Champions o asset building and

fnancial empowerment are utilizing

technology, creating new and leveraging

existing physical access points, and launching

public awareness campaigns

to connect residents to the ull range

o benefts, work supports and tax credits or

which they are eligible.


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to a range o public benets, including tax credits, ood stamps, health insurance, as well as

to nancial services.

n The City o Seattle developed PeoplePoint to help low-income residents apply or a

range o ederal, state and local public benets. The City is now working with the state

government to launch a joint online portal that will streamline the application process or

city and state benets and create access points at community organizations, libraries and

community centers.

n Bank on San Franciscos Financial Education Network is using the online screening and

reerral system La RED to connect people to public benets, appropriate nancial services

and community-based services. La RED was developed by the Mission Asset Fund

originally to serve diverse populations in San Franciscos Mission District and is now

serving multiple Bay Area counties.

In addition to using technology to increase benets coordination and uptake, some cities are

also using the community-based oces and centers mentioned in the previous section not onlyto deliver nancial education and counseling but also to connect residents to resources and

benets. In San Antonio, there is a concentrated eort to integrate nancial empowerment and

asset building opportunities into various departments and to ensure they are part and parcel

o existing programs, not overlaid on them. This integration helps assure sustainability or the

program across administrations and in all economic environments.

MAxIMIzING uPTAkE OF TAx-RELATED BENEFITS

The ederal EITC is one o the largest and most eective programs to boost incomes or low-

and moderate-income amilies. Each year the credit lits more than 5.1 million Americans out o

poverty (Sherman 2009) and can also reduce asset poverty (Holt 2006).

Unortunately, many who are eligible do not take advantage o the credit. National estimates o

EITC-eligible taxpayers who ail to claim their EITC range rom 13% to 25% (Holt 2006). In any

given city, unclaimed tax credits result in the loss o signicant sums o money that could be

reunded to residents and either saved or spent in the local economy.

Cities have employed two main strategies to help residents claim the EITC and other tax credits:

unding ree tax preparation services and public awareness campaigns. In addition, a small

number o cities have also created local credits that piggy-back on ederal and/or state EITCs.

Free and Lo-Cost Ta Preparation Serices

Free tax preparation is one o the most well-established strategies cities use to help residents

claim the EITC and boost their incomes. Some cities directly support ree tax preparation by

unding equipment and paid sta positions at VITA sites, which are primarily run by nonprot

organizations and volunteers. San Antonio and Miami, or example, have a line item in their


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city budgets to und a Campaign Coordinator or

building economic security in americas cities

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