Localizing Lab Research in Philadelphia
The Nowak Metro Finance Lab works nationally, but actively seeks opportunities to perform research, develop solutions and apply best practices in our hometown of Philadelphia. We are fortunate to be based in a city with some of the most sophisticated urban practitioners in the country, from the City administration, to PIDC, The Enterprise Center and the Economy League of Greater Philadelphia. We are currently supported by the Philadelphia Equity Alliance to advance their mission of making Philadelphia the most equitable big city in the country through strategic investment in business creation and scaling, human capital development and increased collaboration among public, private and civic stakeholders to spur inclusive growth.
Below is a summary of the Lab’s recent work in relation to Philadelphia with recommendations for how it might be used to advance inclusive growth and equitable outcomes. The Lab shares this in the spirit of providing local public and private stakeholders with ideas to advance the city. Feedback is welcome and can be sent to nowaklab@drexel.edu.
National Context
For cities and metros, 2020 was a time of unprecedented crisis, and 2021, a time of unprecedented Federal investment. In 2022, the focus is shifting to delivery and how cities can deploy effective approaches to maximize the impact of investments. Drexel's Nowak Metro Finance Lab is working with partners across the country to organize for a transformative recovery.
Local Context
Philadelphia is at a pivotal moment: it must prepare to fully leverage the coming influx of federal investment to maximize potential impact and avoid the pitfalls of piecemeal projects which produce status quo results. Philadelphia must plan for economic transformation based on its unique assets and organize to produce inclusive growth. This will only occur with intention – the city and its network of partners must have concrete plans to apply for/deploy funds based on competitive advantages, with identified projects that come together in real places for cumulative effect (i.e., the Navy Yard, University City, 52nd Street), supplier and worker diversity programs to take full advantage of federal funds to grow Black and Brown owned businesses, and close collaboration between public, private and civic institutions to invent new financial products/funds. Aligning these factors is the only way for Philadelphia to grow quality jobs at scale in its distinctive clusters and propagate long term growth to help compensate for decades of disinvestment as well as the negative impacts of COVID, which are expected to harm Philadelphia more than most cities because of its dependence on wage taxes.
Areas of focus:
1.) Federal Funding Analysis:
In partnership with Accelerator for America and Mastercard, we created a series of Federal Investment Guides for each large-scale spending bill emerging from Congress:
Next step: Complete assessment of funding flows, identifying expected allocations by formula and competitive grants for which Philadelphia must prepare.
2.) Maximizing Impact of Federal Funding:
The flow of new federal resources across multiple agencies, programs, and distribution channels, without even a semblance of coordination, requires cities to organize for success, within government and across multiple sectors. With Accelerator for America and an initial cohort of seven cities, the Lab stood up Stimulus Command Centers as networked hubs for local collaboration around waves of federal investment, enabling cities to bend federal resources towards local priorities and leverage public, private and civic capital for maximum impact. Stimulus Command Centers are executive-level action-focused organizing efforts made up of leaders from the public, private, and civic sectors, serving as the local go-to points for planning, prioritizing, and coordinating federal rescue and recovery investments. Philadelphia utilized this model to create a cross-departmental coordinating working group.
The Lab’s research found that properly organized local leaders can direct resources to drive local recoveries that leverage private and civic resources to create virtuous cycles of community wealth-building, racial inclusion, and resilient infrastructure. However, this coordination must be intensified to avoid a delivery crisis where the scale of the federal investment outstrips the capacity and muscle-memory of cities to spend funds effectively for impact:
Next step: Develop a rubric for prioritizing local projects for receipt of federal funds with attention to impacts on competitiveness and equity; create plans for blending and braiding funds for maximum impacts for transformative effect. Philadelphia’s intergovernmental coordination committee has already begun this work.
3.) Supplier Diversity Initiatives
The Lab partnered with the Irvine Foundation to study historically underutilized businesses (HUBs) and how state, local and quasi-governmental procurement policies can be leveraged to close the nation’s racial wealth gap. This report was timed to develop solutions ahead of the federal infrastructure package and has already resulted in a collaboration of five first-mover agencies (SEPTA, the Port of Long Beach, Denver Airport, the Chicago Transit Authority and the Metropolitan Water District of Southern California) committed to signing an official pledge to achieve diverse procurement goals by December 2025. The Lab is also working to help Philadelphia agencies collaborate to increase supplier diversity and expect to make progress on this publicly in 2022.
This built on our analysis of the strengths of small businesses nationwide through our Small Business Equity Toolkit.
Next steps: The Lab, through its work with the Philadelphia Equity Alliance, is exploring how to support the City, PIDC and the Chamber to build off a recent study of public procurement to increase inclusive purchasing and minority business growth through a supplier diversity intermediary. This intermediary would:
- Help City agencies and quasigovernmental organizations collaborate to eliminate harmful policies and streamline certification and RFP processes
- Work with technical assistance providers like The Enterprise Center and PAGE program to provide quality coaching to Black and brown entrepreneurs
- Connect entrepreneurs to capital providers and identify innovative capital products to reduce structural gaps in credit access and liquidity for minority firms.
- Support adoption of innovative technologies to reduce burdensome qualification hurdles and enable procurers to more easily connect with firms.
4.) New Growth Paradigms:
The post-pandemic world will require new economic frameworks that enable cities to both unlock their distinctive competitive advantages to grow quality jobs and make significant progress on increasing incomes and building assets across a broad segment of their populations.
- Competitive Advantage Analysis and Narrative Creation: The Drexel team is part of a consortium coaching Phase 1 winners of EDA’s recent Build Back Better Regional Challenge. From initial analysis, it is clear Phase I winners benefitted from having strong ecosystems and/or strategic plans which helped them define their leading industry cluster and put forward a series of projects to address challenges and opportunities. Greater Philadelphia did not advance to Phase 1, and should have been able to put forward a compelling application around life sciences and precision medicine, given the efforts that have emerged in the aftermath of the 2017 report, Connect to Compete.
o Next step: Through our work with the Equity Alliance, the Lab proposes to support a collaborative effort with the city, PIDC, the Chamber and other stakeholders to support the creation of a clear competitive narrative and plan for Greater Philadelphia to unlock the full potential of the life sciences sector. This would be prepared in advance of coming federal grant competitions and define not only innovation/industrial policy but also a range of small business, workforce, placemaking and infrastructure programs. Having a clear narrative/plan will be the gift that keeps on giving over the next several years.
- Community Wealth Paradigm: In partnership with Accelerator for America, Nowak Lab created a new Community Wealth framework to replace the antiquated community development approach with a broader focus on skills development, local business ownership, commercial corridor regeneration and community equity, so that local residents benefit from urban revitalization.
o Next step: This paradigm is expected to be updated in the first half of 2022.
- Innovation Districts: The Nowak Lab is partnering with the Global Institute on Innovation Districts to scale the development of mixed-use hubs that leverage the full jobs and equity impact of urban universities, hospitals, and clusters. This work will build on and partner with efforts underway in Canada, Europe and Israel. This includes a partnership with Israel’s National Economic Council to build relationships between US and Israeli innovation districts.
o Next step: the Lab is working with GIID and the University City Science Center to define a local agenda to leverage GIID research
5.) New Investment Playbooks:
The compartmentalized nature of federal investments means that efforts to revitalize targeted geographies within cities (e.g., central business districts, innovation hubs, disadvantaged neighborhoods) will often require deploying resources from multiple federal agencies and programs as well as private and civic institutions. To make the process of matching local uses and federal resources more efficient, the Nowak Lab worked with cities as diverse as Buffalo, Dayton and El Paso to invent a replicable tool, an Investment Playbook. Each Investment Playbook sets out a clear vision for economic regeneration in a targeted geography, costs out specific investments and then identifies and taps the full plethora of federal resources as well as other public, private, civic, and philanthropic capital to bear on the task of bringing that vision to fruition.
Next step: The Lab is slated to collaborate with the Enterprise Center in 2022 on an investment playbook for 52nd St.
6.) New Governance Models:
- City leaders recognize that many of the institutions built in the 20th century to govern and finance cities are now inadequate to the task. The Nowak Lab is working closely with cities that are experimenting with new kinds of institutions and intermediaries that are more fit to 21st century needs and possibilities.
- Tulsa is creating a new Public Authority on Economic Opportunity to adapt European models that capture the appreciation in land value for continuous reinvestment in public goods and services.
- Cincinnati and Erie are creating new nonprofit development corporations with the capacity, capital and community standing to drive large scale urban transformation.
- Philadelphia’s own PIDC is a novel entity with multifaceted structure and capabilities for ownership, development and finance which could serve as a national model
- Next step: As described above, Philadelphia is exploring a new intermediary to maximize the deployment of public infrastructure resources across multiple public agencies for the formation and growth of Black- and Brown owned businesses. In each case, our goal is to build a body of deep research around a proven institutional model (e.g., the public asset corporation) to enable large-scale adaptation and adoption.
7.) New Financial Products:
The pandemic revealed that the current suite of financial funds and products (e.g., institutional investment, venture capital, conventional bank debt) were over-concentrated in a small subset of growth centers in the country and not fit to the purpose of growing Black- and Brown-owned businesses.
- Through an EDA grant, Nowak Lab is partnering with Blueprint Local (an alternative financial investment firm) and a cohort of six leading cities to identify new funds and products that can be scaled across the country. These models include new revenue-based financing models as well as investment practices that enable local investors to invest back in their communities rather than export their capital to traditional growth centers.
- We’ve zeroed in on the newly rejuvenated State Small Business Credit Initiative (SSBCI) as an opportunity to address challenges in states delivering support to small business. The first installment of the program’s $10 billion is set to flow early this year, and Treasury has set a deadline of February 11 for states to submit final applications. The Lab is preparing to embark on a study to engage states around programs that address this emerging delivery backlog.
o Next step I: Our strategy development for SSBCI impact will begin in Pennsylvania this spring
o Next step II: We continue to engage with Della Clark’s work at the Enterprise Center to raise funds as an SBIC to scale Philadelphia businesses following her success both locally and nationally in facilitating PPP loans.
8.) Innovative Inclusive Housing Finance:
The Lab assessed gaps in racial equity related to wealth-building through homeownership and made recommendations for coordination and integrated investments to help residents grow assets, including the creation and scaling of ‘Community Wealth Districts, an accessible homeownership strategy for planned, whole-neighborhood, public/private “district economic redevelopment” in order to successfully grow value appreciation (equity).
In addition, the Lab documented the innovative capital stack Mosaic Partners used at Golaski Labs to make inclusive development possible.
Next step: The Lab is in the process of creating a City Case documenting the Kensington Corridor Trust, an innovative intermediary developed by Shift Capital’s impact-driven development strategy to convey properties to a community-controlled non-profit which can support affordability, spur local business growth and mitigate neighborhood change.
9.) Workforce Development best practices:
The Lab developed a City Case on the West Philadelphia Skills Initiative as a model for employer-driven workforce development initiatives.
Next step: Through our work with the Philadelphia Equity Alliance, we will connect the competitiveness strategy described above with the workforce training and education in partnership with local leader. The Lab benefits from the expertise of Michael O’Bryan, a Lindy Institute fellow with deep experience in trauma-informed and equitable workforce development strategies.