Building Partnerships Between State TANF Initiatives and CDCs

Collaborations between community development corporations (CDCs) and TANF (Temporary Assistance for Needy Families) initiatives have become more commonplace in recent years.  Neighborhood organizations regularly seek to link local residents with employment opportunities created by small businesses located in a CDC’s target area.  Increasingly, community groups are finding ways to develop networking relationships with major employers and institutions in the regional economy.

Programs operated by the U.S. Department of Health and Human Services (HHS) have been an important catalyst in nurturing productive partnerships between traditional TANF-funded agencies and CDCs.  Often these interactions seek to build working relationships with entities that can assist low-income individuals with world-of-work orientation, job training, placement, support services or resources (e.g. tools, clothing, child care, and transportation).  The better partnerships also facilitate post-placement interventions designed to make the transition to permanent employment a successful one.

The main federal source for CDC venture funding is the national grant program operated by the HHS Office of Community Services.  This grant competition requires project proponents to build sustained relationships with local TANF service providers.  As a result, hundreds of CDCs promoting job-creating initiatives rely on TANF “partners” to assist low-income residents and entrepreneurs with essential services required to make new workers contributors to the economic revitalization of their communities.

After years of operating demonstration programs in selected settings, HHS now extends the mandate of congressionally enacted welfare reform to new approaches at fostering job creation and community development.  New TANF regulations, effective on October 1^st, 1999, suggest that considerable flexibility is now available to states and their sub-grantees in designing collaborative programmatic approaches using neighborhood-based revitalization organizations to reach the hardest to serve populations.  States will have broad discretion in planning efforts to reach needy local residents as well as the non-needy (who may also be beneficiaries of certain programs in limited circumstances).  States will continue to be responsible for ensuring that allocations are reasonable, necessary and proportionate (with respect to TANF-eligible being served).  Nevertheless, the new flexibility, and range of permitted community development uses, will likely stimulate public and private sector endeavors in unprecedented numbers.

Numerous states and localities have had extensive experience developing innovative collaborations with community development groups, intermediaries, TANF agencies and committed corporations.  This guidebook attempts to elaborate on models, techniques and related considerations for states and CDCs to evaluate when contemplating new approaches to assisting low-income individuals.

Chapter I provides an overview of pertinent statutory and regulatory considerations applicable to welfare demonstration efforts.  It elaborates on the historic roles of CDCs in using federal and philanthropic resources to foster job creation for community residents.  Examples are provided of public/private collaborations and the emergence of networks linking CDCs to significant employers.

Chapter II analyzes certain aspects of the new TANF regulations and ways that the states may share in the costs of CDC projects that create jobs or enhance careers.

Chapter III reviews the techniques developed by the HHS Office of Community Services to ensure that project funding for rural and urban economic development results in job opportunities for low-income individuals and regular interactions with supportive TANF agencies.  The chapter also considers other programs operated by the agency which may serve to complement job creation undertakings.  Examples of “best practices” by a number of OCS prominent grantees are also depicted.

Chapter IV provides a “road map” for organizations seeking to expand activities targeting TANF recipients.  Preliminary steps to be taken in exploring roles and resources are enumerated.

Chapter V describes the various forms of networks which have served to connect critical institutional actors to collaborations serving TANF eligible populations.  The models note the breadth of employment training activities and necessary linkages commonly found in “best practice” scenarios.  This chapter also discusses the value of CDCs as points of entry for TANF agencies and businesses which seek to improve interactions with residents of targeted communities.

Chapter VI depicts programmatic approaches and opportunities which states and CDCs should evaluate for funding priorities.  Less conventional techniques are described which may have an impact on the local business growth climate or resident attitudes toward asset accumulation.  Ways of luring outside firms to the neighborhood are also considered.

Chapter VII reviews elements essential to building productive partnerships with business entities.  Information gathering resources and requirements pertinent to assessing local labor markets are discussed.

Chapter VIII suggests replicable state programmatic innovations.  Links between state business support programs and traditional TANF agencies are also encouraged.

Chapter IX lists components of strategies to connect TANF recipients to private sector jobs.  Brokering activities, post-employment interventions and wage supplements are revisited in this section.

Chapter X concentrates on creating measurable outcomes and success standards.  Accountability, reimbursement issues and performance bonuses are highlighted.  The “eternal” quest to achieve self-sustaining programs is also analyzed.

Chapter XI reviews supplemental sources of funding.  Governmental dollars, philanthropic grants and private sector contributions are assessed.

Chapter XII provides a partial listing of valuable web sites that many practitioners will want to visit.  A number of these sites, such as the web page of the National Congress for Community Economic Development, also offer hyper-links to numerous additional sites.

Chapter XIII offers several sample agreements that may be appropriate in documenting important understandings between pertinent parties.  An Employment and Training Agreement (ETAG) useful for business loan fund programs is also provided…

Both state and CDC representatives can learn from innovative programs depicted within this guidebook.  Each sector, however, must evaluate how to sustain such programs so that they may become self-sufficient during periods of growth as well as decline.  The flexibility of TANF funding represents a unique opportunity for governmental agencies and community groups to engage in strategic planning about new collaborative activities and long-term relationships.  This document attempts to educate potential partners among state TANF policy makers, subgrantees and CDCs concerning new means and opportunities for joint initiatives.  It, hopefully, will also alert such partners to the new flexibility within the TANF regulations regarding state definitions of “needy” persons which might permit a broader group of low-income individuals (e.g., non-custodial parents, working poor) to participate in community development undertakings.  Higher income levels may now be established for some services such as job creation than traditionally permitted for services such as child care or cash assistance.  Incentives such as high performance bonuses and the ability to lure greater participation by private sector firms (particularly for community development projects resulting in new jobs) will also be a catalyst for new public/private partnerships.

Historic Roles of CDCs re: Job Creation for Community Residents

Background on the evolution of CDC programs and the use of federal and philanthropic funds for development

The earliest CDC initiatives received federal funding through a bi-partisan national demonstration program as a result of legislation sponsored by Senators Jacob Javits and Robert Kennedy.  In New York, for instance, major corporations and Wall Street firms participated with community representatives on boards of directors and in planning venture development activities.  Today, the CDC movement has blossomed from the original forty demonstration projects to over thirty-six hundred organizations around the nation.  CDCs have created a quarter of a million private sector jobs while developing seventy-one million square feet of commercial or industrial space and facilitating loans exceeding two billion dollars to over sixty thousand small businesses.

Small business growth alone does not represent the panacea for bridging former welfare recipients to family-sustaining employment.  As a result, most CDCs engaged in job creation efforts also focus on connecting to major employers in the regional economy.  Thus, examples abound of partnerships between CDCs and companies like Eaton Corporation, (a Fortune 500 manufacturer of submarine parts for the Navy) and Wisconsin’s well-regarded Northwest Side CDC in Milwaukee that screens, trains and refers former welfare recipients for Eaton’s nearby manufacturing jobs.

Other examples may be found in a state like Minnesota where Minneapolis-based Honeywell Corporation partners with the CDC known as Project for Pride in Living to elevate formerly homeless individuals to new jobs recycling electronic components.  Even hundreds of miles away in a more remote, rural part of the state, the Midwest Minnesota CDC collaborates with TEAM Industries in placing former welfare recipients into well-paying assembly line jobs manufacturing components for Club Car golf carts.  In Oakland, California, within blocks of earthquake-devastated corridors, the Asian Neighborhood Design CDC produces wooden cabinets for kitchens and locker room facilities.  This same CDC and its manufacturing venture receives capital and advice from the George Roberts Foundation while a similar wood products manufacturing venture in Brooklyn receives support from the New York City Partnership Fund chaired by Roberts’ partner in Kohlberg, Kravis and Roberts – Henry Kravis.  In almost every one of these initiatives, state resources have played an important role in transitioning welfare recipients from dependency to self-sufficiency…

An HHS/OCS requirement

Since the inception of the CDC program, the HHS Office of Community Services (or its predecessors in the Community Services Administration/the U.S. Office of Economic Opportunity) has been the principal agency responsible for providing venture capital to such CDCs.  It has compelled neighborhood groups to coordinate with local, (and, sometimes state) TANF agencies when filling positions created within their newly established businesses or with their commercial tenants.  In the past, local governmental agencies were more likely to establish relationships with neighborhood-based, human services organizations (e.g., child care, emergency shelter or substance abuse programs).  However, as OCS began encouraging CDCs in recent years to build working relationships with TANF agencies, more public officials discovered that such entities had alliances with a myriad of non-governmental institutions which could also play a role in providing bridges to the world of work for poor people.

Emergence of networks involving CDCs, banks and significant employers in regional economies

Initially, CDCs built their strongest partnerships with local banks that sought to address Community Reinvestment Act obligations.  The typical scenario involved a bank financing the rehabilitation or construction of affordable housing units.  Eventually, initial successes at such interactions between banks and CDCs led financial institutions to steer many of their regular business customers to commercial sites being developed by CDCs in urban mall settings, retail corridors and industrial parks.

Subsequent to numerous successful business transactions in the lender/borrower context, many banks began to work with CDCs to obtain referrals of screened neighborhood residents who could fill jobs ranging from branch tellers to back office computer operators.  Networking partnerships with utilities emerged in some settings wherein an official of an electric company might steer a light bulb manufacturer to an industrial park developed by a neighborhood non-profit.  Eventually, positive interactions with CDCs induced sustained working relationships between neighborhood development organizations and smaller-scale manufacturers rather than just with conventional major civic institutions like hospitals, utilities and banks…

Diverse roles of CDCs

CDCs often assume diverse roles operating loan programs, re-building shopping corridors, rehabilitating industrial facilities, developing business incubators, providing technical assistance to local entrepreneurs and functioning as training entities or providers of post-employment support services (e.g., child care, transportation access, housing, programs for non-custodial parents, finance for emergency expenses and interventions with pertinent institutions.)  CDCs engaged in economic development can be a catalyst for job creation and employment access by playing differing roles.  In rural Maine, for instance, Coastal Enterprise, Inc. (CEI) plays an important function in providing capital to emerging businesses.  CEI also creates links to important governmental agencies engaged in assisting the poor.  Ultimately, the CDC inserts contractual language called Employment and Training Agreements (ETAGs) (attached in the Appendices) in its business loan agreements.  It also steers companies to agencies that can be helpful in screening, training and otherwise supporting entry-level employees who may have previously relied on welfare benefits.

CDCs which use federal and state resources to re-build shopping nodes, business incubators and industrial parks regularly obtain commitments from tenants offered attractive rents which correspondingly make commitments to hire local residents.  Some CDCs operating in partnerships such as the Westside Industrial Retention Network (WIRENET) in Cleveland, aid local manufacturers in dealing with city hall and the state house regarding infrastructure improvements and related governmental support.  This allows such industrial firms to thrive in an old neighborhood setting while replacing members of a maturing workforce.  It simultaneously facilitates “bridges” for local residents seeking new, higher paying skills as apprentices in such firms.  Other CDCs, individually or collaboratively, address the need for such new workers to have access to child care, transportation, uniforms, tools, housing and other emergency resources…

Achieving Self-Sustainability

While a number of programs in recent years have been funded for substantial amounts and multi-year periods, most endeavors need to establish that they can eventually operate without perpetual government subsidy.  Having project proponents establish the long-term prospects for private sector placements and corporate partnerships is essential.  In some instances, CDCs establish a for-profit sister corporation (e.g. a placement company or an automobile repair venture) to support a training program less likely to achieve financial viability.  Frequently the successful for-profit business can easily accommodate the non-profit with tax-deductible gifts which do not jeopardize the expected returns on investment to investors in the business.  Few agency officials look forward to presiding over the dissolution of a non-profit training program that failed to plan for its long-term cash flow needs.  Challenging project developers to establish eventual self-sustainability is becoming commonplace in agency funding settings.  However, agencies must remain realistic when the need for extensive interventions require a disproportionate level of counseling not readily reimbursable through normal funding streams.  Where appropriate, the investment into an expensive support program will prove justified by the impact of transitioning welfare recipients to careers affording a livable wage…