Neighborhood funding preserved racial disparities

Southwest groups prepare for future

Lowry Hill East Neighborhood Association
Board elections for the Lowry Hill East Neighborhood Association at the organization’s 2019 annual meeting. The Wedge is one of several neighborhoods looking to diversify its funding sources as the city eyes new formulas to finance neighborhood organizations. File photo

Minneapolis has funded its neighborhood organizations in ways that propped up racial inequities in the city for the past 30 years, according to a new University of Minnesota analysis.

The city is approaching the finish line for Neighborhoods 2020, a multiyear plan to change the goals and funding formula for Minneapolis’ 70 neighborhood organizations, with a desire to make the program more equitable. With the City Council poised to approve a new system this spring, many neighborhood groups in Southwest are anxiously awaiting the results. 

“We’re setting the stage for what the program should look like moving forward using a racial equity lens,” said David Rubedor, director of the city’s Neighborhood and Community Relations (NCR) Department. “It’s going to look different than it did before.”

Preserving inequity 

The City Council approved a Neighborhoods 2020 framework in May 2019 that directed staff to hire a consultant to review how the program’s history looked in terms of racial equity and to recommend changes to improve equity and accountability in the future.

That consultant, the U of M’s Center for Urban and Regional Affairs (CURA), began a racial equity analysis of the Neighborhoods 2020 program in November. C Terrence Anderson of CURA said one bias that was clear was favoritism toward homeowners. Between 1990 and 2019, about half of the money allocated to neighborhood organizations was directed into small grants for homeowners. Because the homeowners in Minneapolis are overwhelmingly white, white people received a disproportionate share of the benefits.

“I struggle to find another term than ‘institutional racism,’” Anderson said.

Racial equity was not the goal of the Neighborhood Revitalization Program (NRP) when it began in 1990, or when it converted to the Community Participation Program (CPP) funding model in 2010. Many have been upset by these findings, Anderson said, but he noted the intent isn’t to discredit any of the good work neighborhood organizations have done but to recognize that the outcomes disproportionately benefited white households.

For example, white households made up 67% of applicants for housing benefits through neighborhood groups from 2013 to 2019 but received 77% of the funding from those programs. For other groups, the percentage of recipients was lower than applicants.

“If we’re looking at this from a 2020 perspective, I would say the NRP has a contribution toward the racially inequitable outcomes for housing in the city of Minneapolis,” Anderson said.

When the program launched in the early ’90s, the city was facing disinvestment and population was dropping, Rubedor said. The goal of the NRP was to stem the bleeding.

“In many ways the program was highly successful in that, but it didn’t have a racial equity overlay,” Rubedor said.

Minority residents and renters are also underrepresented on neighborhood boards. Initial plans for Neighborhoods 2020 called for requiring boards to match the demographics of their neighborhoods, but those proposals have been dropped. The NCR department believes a funding formula structured around racial equity will draw in a more diverse group of participants.

Chris DesRoches, president of the Kingfield Neighborhood Association, said the group recently rewrote its equity and inclusiveness statement and that he believes many neighborhood organizations are thinking about how to reach more residents from diverse backgrounds.

“It’s a tough conversation to have and I credit CURA for getting to the meat of all this,” DesRoches said.

Kaley Brown, executive director of the Whittier Alliance, has attended all three CURA sessions on Neighborhoods 2020. Knowing what we know today about racial disparities in Minneapolis, a new funding formula is needed, Brown said.

“It would behoove us to move toward a model that is the most equitable it can be at this time,” Brown said.

A new proposal 

Traditionally, neighborhood organizations have been funded via a tax-increment finance district downtown. That funding source, which allocates $4.1 million annually to the 70 groups, expires at the end of 2020. The City Council has approved funding at current levels for the next five years via the general fund, but the dollars have not been officially allocated.

The goal is to have the new rules set this spring, Rubedor said. The NCR department intends to present its draft recommendations to the City Council on Feb. 3. The formal guidelines will be made in mid-February, followed by a 45-day public comment period before a vote in early May.

The program has had three funding formulas in its lifetime. The CPP model that began in 2010 put more emphasis on engagement and improved on past NRP programs in terms of equity, CURA believes. But CPP largely preserved where money went under NRP, Anderson said. Under CPP the existence of a minimum funding base made it so low-density neighborhoods like Kenwood received a disproportionate amount of money per capita.

“From an equity standpoint we know this needs to look different going forward,” Rubedor said.

The new proposed CURA formula focuses on three groups: Nonwhite residents, households that are cost burdened (spending more than 30% of income on rent or mortgages based on census data) and neighborhoods experiencing gentrification.

The framework approved by the City Council in May would give each neighborhood organization a base of $25,000 annually, with additional funding allocated using an equity formula. CURA’s proposed formula takes into account population, diversity, rental rate, crime rate, foreclosure rate and average incomes. But the $25,000 in base funding required in the framework weakens the equity intentions, Anderson said. In CURA’s analysis, the lower the minimum each organization receives, the more equitable the program will be.

Preparing for a new funding future

The uncertainty of what future funding will be has some neighborhood organizations thinking about how to remain viable in the future.

Neighborhood organizations in Southwest vary in size and scope. The Whittier Alliance has three full-time staff members running multiple programs. Many smaller groups, like Armatage Neighborhood Association, have just one part-time staff member.

For more robust groups like the Whittier Alliance and the Lowry Hill East Neighborhood Association (LHENA), the focus is on identifying multiple funding sources so they don’t have to rely on the city alone. The Whittier Alliance is currently looking to hire a grant writer, Brown said.

“Regardless of the funding we receive from the city, it is incumbent on us to diversify our funding streams,” LHENA executive director Paul Shanafelt said.

Joel Federer, president of the Armatage Neighborhood Association, said the neighborhood is trying to prepare for potential funding outcomes.

Armatage is among neighborhood organizations that have remaining NRP dollars— there are about $35 million in unused NRP funds citywide, according to Rubedor — and could survive for the next couple years off that money. But when the $200,000 in leftover funds run out, the future is less clear. He said the Armatage board has been supportive of the equity goals.

“It is also our hope that smaller neighborhoods like Armatage can continue to serve our communities,” Federer said.

The Kingfield Neighborhood Association has been thinking about funding, too. In the past year, the organization moved in with neighbors from the Lyndale Neighborhood Association at 35th & Nicollet to cut costs. The board has been trying to take stock of its annual events and deciding which ones to dedicate staff time and funding toward and which might be able to survive with just volunteers.

Kingfield has run an analysis and believes it would need at least $15,000-$20,000 to fund the organization each year, a figure that would only cover the basic operations of the KNA, which today runs on an annual budget of around $100,000. The question is where the money will come from.

For some neighborhoods in Southwest, the answer may be in simply asking residents to contribute to events they’d like to see continue, DesRoches said. Still, he added, “it would be great to have a consistent amount of money from the city.”

Fundraising can be easier said than done, Federer said, and while generosity from neighbors is nice, it can’t be counted on as a consistent source.

“We’re kind of eager and anxious to see what the plan looks like when it’s released,” Federer said.

Corrections: The original version of this article misstated the day the racial equity analysis will be presented to the City Council. The presentation will occur Feb. 3.

The original version of this article misstated the amount of unused Neighborhood Revitalization Program dollars. There are about $35 million remaining citywide.