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Jan 19, 2011

Municipal Leaders Pioneering New Strategies to Help Low-, Moderate-Income Families Achieve Financial Security

Programs Go Beyond Income Supports to Assist Residents in Building Savings, Assets

WASHINGTON – A vanguard of U.S. municipal leaders have begun employing new strategies to help their low- and moderate-income residents build wealth and assets, adding a new dimension to existing efforts to expand economic opportunity for the financially vulnerable, a new report said on Thursday.

These cities have begun to augment traditional, and still important, efforts that have aimed at increasing their residents’ income through job creation and job training strategies and subsidies. They are now developing programs to increase residents’ knowledge of and access to affordable financial products and services, provide them with incentives to save and invest, and protect them in the financial marketplace, according to the report released by the Corporation for Enterprise Development (CFED).

“Helping individuals and families achieve economic security has never been more critical than it is today,” said Andrea Levere, president of CFED, a national nonprofit that advocates for expanding economic opportunity. “This work has given us a new way of thinking about poverty, one based on the depth of overall financial stability, not merely based on income.

“The cities that are pioneering these new strategies are to be applauded – and other cities need to join them,” she said in releasing “Building Economic Security in America’s Cities: New Municipal Strategies for Asset Building and Financial Empowerment.”

The report was released to coincide with the U.S. Conference of Mayors winter meeting in Washington.

CFED was joined in releasing the report by the Cities for Financial Empowerment (CFE) Coalition, which was created in 2008 to bring together city governments implementing these new initiatives. CFE now includes Chicago, the county of Hawaii, Los Angeles, Miami, Newark, N.J., New York, Providence, R.I., San Antonio, San Francisco, Savannah, Ga., and Seattle.

“New York City and San Francisco launched the Cities for Financial Empowerment Coalition three years ago because of the unique position of cities nationwide to coordinate key stakeholders and programming to create innovative anti-poverty solutions," said New York City Mayor Michael R. Bloomberg. "CFE’s voice has been valuable as the federal government looks to large scale approaches to empower and protect consumers in the financial services marketplace."

In piloting and adopting the new strategies, the report said, the cities have five basic goals:

• Helping households build their financial knowledge and improve their financial behavior through quality financial education and counseling.
• Ensuring that the largest number of residents possible receive the income-boosting supports and tax credits for which they are eligible.
• Improving the affordability, accessibility and quality of financial products and services available so residents don’t have to rely on high-cost credit that creates a cycle of debt.
• Creating opportunities and incentives for families to turn savings into appreciable assets such as an education, a home or a business.
• Protecting residents in the financial marketplace against loss of income or assets, extraordinary costs or predatory lending.

Cities, often working with private-sector, nonprofit and philanthropic partners, have developed a variety of programs to meet those goals, in many cases embedding them within existing anti-poverty efforts.

San Francisco, for example, recently started a program to provide an initial deposit into a college savings account for kindergartners in city schools, and private-sector funding will match the first $100 a family saves in the account.

New York City developed the $aveNYC Account, in which, as part of the free tax-preparation service, participants are offered the opportunity to open a certificate of deposit. If participants direct deposit a portion of their tax refund into the CD and maintain the initial deposit for one year, they receive a privately funded 50 percent match, up to $500. The program was awarded a Social Innovation Fund grant last July and this year is being implemented in New York, Newark, Tulsa, Okla., and San Antonio as $aveUSA.

The Bank On Seattle-King County initiative aims to provide an alternative to check cashers and payday lenders by working with banks and credits unions that provide savings accounts and entry-level checking accounts and, in some cases, small financial incentives to customers who complete financial education classes.

Newark operates a number of Financial Empowerment Centers to provide residents comprehensive services like free tax assistance, financial education and help in filling out forms to receive financial aid for college. Residents can also meet with counselors who screen them for eligibility for health care and public assistance programs.

And San Antonio, after identifying car ownership as a useful tool for increasing income opportunities for residents, created a pilot program to help low-income consumers refinance their high-cost auto loans through its free tax-preparation structure.

“Whether it’s through access to mainstream banking, financial education and counseling, asset building or consumer protection, this work offers important and replicable ways for others to advance the economic security of their cities’ populations,” said Hawaii County Mayor Billy Kenoi. “Going forward, the challenge of replicating these strategies across the country will lie, in part, in ensuring that such initiatives enhance the effectiveness of traditional anti-poverty approaches.”

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CFED expands economic opportunity by helping Americans start and grow businesses, go to college, own a home and save for their children’s and their own economic futures. We identify promising ideas, test and refine them in communities to find out what works, craft 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 effective ways to achieve greater economic impact. Established in 1979 as the Corporation for Enterprise Development, CFED works nationally and internationally through its offices in Washington, D.C.; Durham, N.C.; and San Francisco.

The Cities for Financial Empowerment Coalition brings together pioneering municipal governments from across the country that have begun to use their power and positions to advance innovative financial empowerment initiatives. Already, its members have made tangible and measurable commitments to supporting financial empowerment programming in their cities, and are now joining together to both teach and learn from one another.