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Economic Opportunity

One of the biggest challenges facing the next mayor of Chicago is addressing the severe racial economic inequality in the city. To do this, the next mayor must focus significantly more attention and resources on the communities that have suffered from decades of disinvestment. Toni believes one of our first responsibility as government is to ensure that there is equitable public investment in public education, public safety, health care, transportation infrastructure, and housing in our communities. Our other responsibility, when necessary, is to intervene when private markets have failed due to misinformation and frankly, discrimination.

Microlending

When the City of Chicago launched the Chicago Microlending Institute (“CMI”) 7 years ago, it found that there was an unfulfilled demand of $28 million dollars for microloans for small businesses in the city’s most vulnerable communities. This lack of investment threatens job security and economic viability in these communities.

Since then, the CMI has made over 250 successful loans; creating or preserving over 1,000 jobs. 90% of these loans have gone to minority and women-owned businesses. These loans from $500 to $25,000 have helped companies meet payroll, hire employees, and buy necessary equipment to grow their businesses.

As mayor, Toni will work with our partners to quadruple the city’s investment in small business microloans to $4 million, and recruit a bevy of the city’s banking partners to match that contribution. That additional money will not only make a major dent in the $28 million demand for capital-starved minority small businesses, but it will increase the number of success stories in our community. These additional success stories will provide the evidence and ammunition we need to convince more private capital sources to invest in the vision, talent and worth ethic in all of our communities.

While the CMI is going to help a lot of early stage small businesses meet working capital needs to hire more workers and pursue additional contracts, the Neighborhood Opportunity Fund helps small and medium size businesses in disadvantaged communities on the south, west, and southwest sides take the next level of growth.

As mayor, Toni will work with our partners to quadruple the city’s investment in small business microloans to $4 million, and recruit a bevy of the city’s banking partners to match that contribution.

Neighborhood Opportunity Fund: Revitalizing our Neighborhoods

According to a 2019 study by the Community Reinvestment Fund and Next Street, “the fruits of Chicago’s small and midsize businesses (SMBs) economy have not been shared equally among the city’s residents. The research uncovered significant disparities...along racial, ethnic, gender and geographic lines.” Specifically, for businesses owned by women and people of color, ...we identified several gaps in the market where the availability of capital and other resources is not always well aligned to their reported needs.”

The study found a need for grant/equity in the range of $50,000-$250,000 that could support startup activity for Black and Latinx entrepreneurs. That is why we are looking to The Neighborhood Opportunity Fund, a program that has the potential to meet this need.

The Neighborhood Opportunity Fund (NOF) is a program that invests density bonuses paid by downtown developers into small and medium size businesses in the south, west, and southwest sides via equity grants for construction projects and other improvements that grow their businesses. As of August 2018, the program had collected $34 million with an additional $170 million in bonus payments pending. As of August 2018, the NOF had granted roughly $11 million to 90 small businesses. Current unspent funds and expected receipts total almost $200 million.

Given the size of the fund and critical need to invest in our underserved communities, it is important that the City ensures that the program operates as effectively and efficiently as possible so that it can serve its broader purpose of expanding economic opportunity to every part of the city. But for this to happen, reforms to the program have to be made.

Right now there isn’t enough pre-application assistance to prepare small businesses to successfully apply for the grants. Too many are woefully unprepared, lowering the number of grants that could be given.

In addition, because grants are issued as rebates for expenditure, cash-constrained businesses are ill-positioned to take advantage. It may not always be possible to borrow against the grants, and even when it is; interest payments and other fees eat into the principle. For this reason, some grantees have been significantly delayed in actually leveraging their awards for their projects.

Finally, as the NOF’s funding grows, it will be important to reimagine the program to support broader investment in communities, particularly around employment. The NOF program needs to provide both more support and incentives for businesses to provide jobs in neighborhoods that need it most.

The study found a need for grant/equity in the range of $50,000-$250,000 that could support startup activity for Black and Latinx entrepreneurs. That is why we are looking to The Neighborhood Opportunity Fund, a program that has the potential to meet this need.

To ensure the NOF and our neighborhoods are as successful as possible, Toni will enact the following policies as mayor:

  1. Work with the Business Affairs and Consumer Protection (BACP) staff to help businesses through the pre-application process which will include small business to-do lists, business counseling, and process guides. In addition, BACP will connect small businesses with local workforce development organizations including the Chicago Cook Workforce Partnership to help the identify workers in their community to fill new jobs created by expansion. On top of that, staff should work with businesses whose applications have been denied to help strengthen their case for future rounds. With millions of more dollars flowing, the City must make sure that the pipeline of qualified applicants grows.

  2. Secondly, to better meet the needs SMBs in underserved communities, whenever possible, NOF grants should be paid in real-time for projects. Currently grants work as rebates for money already spent. Many SMBs do not have enough cash on hand to fund these projects upfront which was why they applied for the grant in the first place. Even if a small business is able to secure a loan against the grant, fees and interest payments eat into the principle, lowering the grant's value. Instead Toni proposes placing the grant dollars into construction escrow accounts that would be dispersed by third party inspectors contracted and based in the same communities. These inspectors would ensure dollars were spent responsibly, for their granted purpose, and contractors made good on their contracts. Allowing the grants to directly fund the project would make it equal opportunity for small business not sitting on large cash reserves.

  3. Finally, it doesn't make sense to invest in SMBs in our communities unless we are helping to build the consumer markets in our communities as well. NOF grantees should be hiring people in the communities. To incentivize this, Toni will propose increasing the Build Community Wealth Bonuses for applicants employing workers from the communities in which they operate. Instead of capping bonuses at 15%, Toni will raise the maximum bonus to 50%, making it possible for businesses to receive up 100% of their project funded. Additional bonuses will be offered for creating additional jobs above the two currently mandated, hiring formerly-incarcerated individuals and opportunity youth; 16 -24 year olds who are out of work and out school; and paying wages above the city’s current minimum wage.  As part of this, Toni will institute rigorous auditing of grantee business employment in 6 and 18 months intervals find out whether employment gains have been sustainable and what supports are needed to ensure that they are.

Our investment in NOF has to produce real results for communities and the only way to ensure that happens is through robust measurement.