Community Benefits Agreements in the Political Economy of Urban Development

Abstract

In the past two-and-a-half decades, community benefits agreements (CBAs) have emerged as vehicles for residents of low-income communities to derive benefits from urban development projects. This paper locates CBAs in their historical context. It argues that the contemporary political economy of urban development has distinctively shaped their form and function. It theorizes CBAs as hyper-local civil-sector responses to unequal growth and market failures in the crucible of neoliberal urban governance. The paper concludes that while CBAs offer limited promise for equitable urban development, their organizing processes disrupt existing power structures and build possibility for further reforming the dynamics of urban development. 

Introduction

In 2001, negotiations between a coalition of community groups in Los Angeles and the private developers of the Staples Center resulted in the nation’s first full “community benefits agreement” (CBA) (Salkin and Lavine 2008). Gross (1998) defined a CBA as a contract pertaining to a single development project that addresses a range of community interests and that is the product of substantial community investment. In the Staples Center CBA, the community coalition traded its support of the development for a “first source” hiring plan to employ local residents, job-training programs, public park construction, affordable housing development, and a living wage policy. In turn, the community coalition’s backing helped the developers to procure over $70 million in subsidies from the city (Baade 2003; Salkin and Lavine 2008). Since then, at least 26 other community coalitions across the nation have won potential economic, social, and environmental benefits for their communities by signing CBAs with private and public developers (Community Benefits Agreements 2012).

Community benefits agreements have emerged in both form and function as the result of a particular set of historical circumstances. Understanding this history offers an important corrective to thinking of CBAs as an ahistorical phenomenon or as a neutral development tool. Locating CBAs in this historical context illuminates the logic behind the form they have taken and the functions they have performed. This understanding, in turn, underscores consequences of the prevailing urban political economy, and suggests how CBAs may contribute to the reconstitution of urban power dynamics and modes of governance.

Community coalitions have worked for CBAs during an era of neoliberal metropolitan governance characterized by selective preference for free markets, inhibited redistributive investment in low-income communities, heightened competition to attract private capital, and public expenditure on development projects targeted at the immediate benefit of relatively high-income businesses and people (Abu-Lughod 1999; Gotham 2001; Harvey 1989; Harvey 2005, 87; Peck 2005). Scholars have characterized urban economies of this era as “post-Fordist” and “flexible” partly in reference to the replacement of stable manufacturing jobs with tenuous, frequently temporary, and low-paying service-sector work and an associated increase in unemployment (Harvey 1989). That CBAs function as a redistributive tax on private capital in order to provide well-paying jobs to local residents and to compensate for locally incurred negative externalities attests to their place in this post-Fordist and neoliberal urban economy. That they take the form of contracts between civil- and private-sector—and even sometimes public—parties accords with the neoliberal molding for “market-based” solutions.

Considering CBAs in their historical context facilitates the conclusion that they are, at most, a second-best strategy for promoting balanced urban growth through investment in low-income communities. Historical accounts suggest that the decisions of government officials in recent decades have created narrow channels of possibility for urban development projects, and that these channels have shaped both the impetus and opportunity for residents to organize for CBAs. At the same time, the act of organizing and sustaining CBA coalitions has coalesced previously nonexistent—or at least inchoate—power. Through CBA processes, coalitions have used this power to promote economic benefit for low-income city residents and to perform environmental and labor-related regulatory functions in the absence of government intervention. In doing so, CBAs and the coalitions organized to create them encourage re-imagination of the current urban political economy. By creating space in urban development discourse and practice for the concerns of their communities and by demonstrating tangible outcomes in the void left by government inaction, community coalitions expansively pressure the restrictive contours of contemporary urban development policy. Importantly, CBAs might also serve as springboards from which community coalitions could launch into broader action for community development and policy reform (Parks and Warren 2009).

Community Benefits Agreements: An Overview

The Staples Center agreement, regarded as the first “full-fledged” CBA, followed three years after the Hollywood and Highland Center CBA-archetype. The Hollywood and Highland Center CBA differed from subsequent “full-fledged” CBAs in that a local politician, rather than the involved community coalition, initiated and drove the negotiation process. Still, this CBA-archetype provided a model for community coalitions to emulate in later initiatives (Meyerson 2006; Salkin and Lavine 2008).

The Hollywood and Highland Center, also located in Los Angeles, contains over a million square feet of retail space, several hotels, and the theater that each year hosts the Academy Awards. During the Center’s development phase, Los Angeles Councilwoman Jackie Goldberg withheld her approval of the project until the developers met with and addressed the concerns of local residents and business owners. The local residents and business owners, represented by the Los Angeles Alliance for a New Economy (LAANE), expressed their expectations that the proposed development would cause increased traffic congestion, air pollution, and crime. They also brought concerns about the economic benefit of the development for their community. For example, would local residents be hired to work in the Center, and if so how would they be paid? Through a process of negotiations, LAANE and Councilwoman Goldberg traded their support of the project for traffic improvements financed by the developer, a “first source” hiring plan to employ local residents, a living-wage policy, and a union card-check neutrality policy. In turn, the community coalition’s backing helped the developers to procure $90 million in subsidies from the city. Because of the CBA, 70 percent of the initial employees hired were local residents. Nearly a decade after the CBA signing, about half of all jobs in the Hollywood and Highland Center paid a living wage (Meyerson 2006; Salkin and Lavine 2008).

Since then, community coalitions have negotiated for approximately fifty CBAs, in cities as diverse as Denver, Milwaukee, Atlanta, Seattle, Oakland, San Diego, New Haven, and San Francisco. Not all have succeeded. Currently, 28 CBAs are in effect (Community Benefits Agreements 2012). These CBAs are attached to a range of development projects, including professional sports arenas, shopping malls, condominium complexes, university expansions, and entertainment complexes (Drier 2009; Salkin and Lavine 2008). Coalitions negotiating for CBAs have included community organizations with diverse though frequently complementary interests: school districts; labor unions; and environmental, political, social, and religious organizations (Baxamusa 2008).

These coalitions have won an array of benefits: “targeted” and “first source” hiring policies to benefit local and impacted residents and marginalized worker groups; living wages and fringe benefits; union card-check neutrality; worker-retention; a paid residential street-parking permit system; creation and improvement of parks; affordable housing; community job training; exclusion of big-box retailers from commercial space; day care services; and even free basketball tickets (Baxamusa 2008; Drier 2009; Parks and Warren 2009; Salkin and Lavine 2008). The Los Angeles Airport (LAX) CBA, a prominent example, included a number of these, and totaled about $500 million in community benefits (Baxamusa 2008).

Generally, developers have agreed to CBAs to expedite or increase the likelihood of obtaining land-use permits or subsidies they want from city government. Community coalitions have been able to gain traction by exploiting critical windows in the planning phase of developments. Some cities stipulate specific processes in the course of development planning for social or environmental assessments and for impacted local residents to speak out. These provide opportunities for community coalitions to make claims as impacted residents or to submit their own technical information or analysis (Parks and Warren 2009). Even in the absence of formal forums, however, some community coalitions have succeeded in bringing private developers to the negotiating table by creating political risk through imminent public opposition.

The responsibility of monitoring and enforcing CBAs also falls under the purview of the private community coalition (Baxamusa 2008) and relies on the community coalition’s sustained organizing efforts (Parks and Warren 2009). Developers might not faithfully implement the terms of the CBA if community groups do not monitor the process, and violations of the agreement have no chance of legal enforcement if CBA signees do not file for judiciary redress (Baxamusa 2008). The legal enforceability of a CBA rests on tort law (Parks and Warren 2009), though it remains empirically untested, and questionable in its legal feasibility (Salkin and Lavine 2008).

While private developers have often depended on cities’ approval of their projects, cities have also depended on attracting and retaining private capital. Most city governments actively court developers whose projects will create jobs, increase the city’s tax base, and appeal to middle- and upper-class residents and tourists. Perhaps now more than ever, the increased mobility of private capital creates this need (Harvey 2005).

Situating CBAs in Historical Urban Political Economy

Between World War II and the early 1970s, Fordist modes of production dominated US economic structures. These Fordist modes featured stable labor relations, geographically fixed capital investment, and vertically integrated economies of scale. Under this system of production, Midwestern US cities like Chicago thrived on various manufacturing industries. These industries enjoyed reliable markets fortified by widely distributed purchasing power for their goods. In the 1970s, however, changes in modes of economic production and political governance together generated an era of “flexible accumulation.” In this “flexible” economy, capital became increasingly mobile, domestic manufacturing declined, governmental deregulation transformed labor relations and financial markets, and the emergent service economy spawned high levels of structural unemployment—particularly for urban communities of color (Abu-Lughod 1999; Harvey 1989; Wacquant 2001).

Changes in metropolitan public policies and the prevailing political economy have attended, enabled, and resulted from these economic shifts. Cities have responded to the increased mobility of capital by tailoring their policies to create a “‘favorable business climate” (Gotham 2001; Harvey 1989, 168). The competitive impetus to attract and retain businesses has resulted in two trends of city policy: (1) tax reduction and suppression of redistributive social policies, and (2) provision of infrastructure and subsidies for businesses, and amenities for their “white-collar” employees. 

To enhance their attractiveness to businesses (Abu-Lughod 1999; Gotham 2001), middle- and upper-class tourists (Gotham 2001), and high-earning professionals (Peck 2005), cities have used a variety of public-private inventions (e.g., tax increment financing and enterprise zones) to facilitate and subsidize private development in hopes of achieving higher tax revenue through economic growth (Gotham 2001). For example, the City of Chicago has spent considerable public funds and effort to attract Boeing’s corporate headquarters, build a downtown “entertainment complex” in Navy Pier, plan and construct the United Center professional sports arena, and expand the McCormick Place convention center (Rast 2001). Cities partly justify their large public expenditures on “entertainment-destination” developments by their hope that benefits will “‘trickle down’ into the local economy, generating ancillary investment [and] high employment in the hospitality and retail sectors,” while “bring[ing] in needed tax revenue” (Gotham 2001, 14). 

These policies, however, have intensified “uneven metropolitan development” (Gotham 2001, 2; Harvey 1989). While city governments have spent large sums of money in this course, research has shown

that the building of urban entertainment facilities and the traditional public subsidization of the private sector has done little to improve living conditions for the majority of urban dwellers and, in fact, has exacerbated inequality and the fiscal problems of local governments. (Gotham 2001, 15)

Multiple factors hinder these public and public-private investments from benefitting lower-income communities. One reason, for example, is that municipal leaders consciously restrict tax rates and the channeling of tax revenues into redistributive social or economic development programs to benefit low-income communities. To do otherwise would damage the “business climate” (Abu-Lughod 1999). A second reason is that while entertainment-destination and downtown developments may create some service sector jobs, many of those jobs pay low wages and some are filled through temporary staffing agencies, which do not provide a probable pathway out of poverty (Nollen 1996; Parker 1994; Peck and Theodore 2001). Indeed, most contemporary city governments act as if their policy choices are inevitably, and all but entirely, beholden to the interests of private investors, as some theorists have argued (Lindblom 1982; Peterson 1981).

Such perceived constraints, in conjunction with the wider neoliberal political economy, preclude significant reprioritization toward investment in low-income communities. These conditions make unlikely any municipal government violation of the pro-business canon, which the City of Chicago has advertised as: “lower wages . . . lower corporate and individual taxes, and a more ‘cooperative’ administration [than other cities]” (Abu-Lughod 1999, 327). Even if, as Rast (2001) argues, city leaders could, with economic success, privilege blue-collar sectors and low-income neighborhoods with development policies, the bipartisan and popular orthodoxy of neoliberalism makes embarking on such policies politically untenable.

In the two decades that preceded the advent of CBAs, the federal government drastically decreased its funding to cities. In 1978, federal funds made up, on average, 15 percent of city revenues. The portion exceeded 25 percent for some larger cities. Twenty years later, federal funds, on average, made up less than three percent of cities’ budgets (Kincaid 1999, 136). Between 1981 and 1993, the Reagan and Bush administrations slashed the real value of assistance programs to cities: 36.5 percent of the Community Development Block Grant program, 100 percent of the Urban Development Action Grant, 49.3 percent of federal mass transit assistance, 70.6 percent of employment and training funds, and 66.8 percent of assisted housing funds (US Conference of Mayors 1994). Because federal funding for states fell concomitantly, state governments could do little to compensate cities for their drastic loss of federal funding. Between 1977 to 1992, state aid as a percentage of municipal revenues declined from 24.5 to 21.2 percent (Chernick and Reschovsky 1997).

With limited fiscal assistance from federal and state governments, city governments have experienced heightened pressure to raise their tax bases. To do this, they have turned to pro-business and entertainment-destination development policies while retaining only a circumscribed set of options for benefitting their low-income residents and communities. It is in this time of economic need—under an urban governance regime that favors limited investment in low-income communities and that restrains the taxation and regulation of private developers—that CBAs have emerged.

Assessing Community Benefits Agreements: Function, Form, and Power

In many cases where developers may eventually have obtained zoning approval or subsidization without a community agreement, they consented to the costs of the CBA in order to obviate or reduce the risk of the government delaying or denying their project (Baxamusa 2008; Parks and Warren 2009; Salkin and Lavine 2008). To the extent that community coalitions succeed in maximizing concessions from developers, CBAs represent the price developers are willing to pay to avoid risk. To the benefit of community investment, CBAs are able to extract this price from private developers when city governments will not.

Mainstream economic theory postulates that an efficient tax minimizes society’s economic losses and thus maximizes social welfare. In one application, an efficient tax will capture the cost of a negative externality to those who bear it, assess this amount—but not more or less—on the producer of the externality, and redistribute the value to those who bear the cost. Government can estimate the price of an efficient tax, but will often—or always, some argue—do so imprecisely and inefficiently. This is the logic with which neoliberal governments favor market-based solutions. They base policy decisions on the notion that transactions between voluntarily contracting parties in the free market will discover an efficient price. In other words, free market transactions allow parties to agree to the price at which they will each maximize their welfare, ceteris paribus—given the existing conditions.

Given the conditions typical to recent decades, individuals and businesses in possession of high levels of resources will benefit—and, generally speaking, have done so—in free-market arrangements. The Marxian theory of capital accumulation predicts that if free to do so, individuals and corporations with greater economic resources will leverage those resources to create economic arrangements increasingly favorable to them. They will do this particularly by extracting surplus value over the wage paid to common workers (Harvey 2005, 53; Marx and Engels [1848] 2004). The widening income inequality in the United States since 1970 reflects this (Stone et al. 2012).

In the absence of government intervention, private real estate developers and corporations generally perceive little economic incentive to pay a living wage or to provide other benefits to local communities. A living wage is arguably higher than the subsistence wage Marx ([1867] 2004) wrote about. Employers do have the incentive to pay workers a subsistence wage at which they can guarantee a supply of labor. In contemporary urban environments with high rates of unemployment, however, the surplus supply of labor means employers need not pay workers high wages in order to maintain full employment levels for their firms (Parker 1994; Peck and Theodore 2001).

Without an organized coalition creating risk for a developer, and in the absence of government intervention, a real estate developer would likely perceive no economic incentive to pay living wages, to compensate residents for negative externalities generated by their projects, or to promote equitable well-being and development for low-income communities. In some cases of negative externalities, this represents obvious market failure. For example, if no one from the community had intervened, the LAX airport expansion would have caused even more significant noise problems than it did for students in local schools (Baxamusa 2008). If equitable development and social welfare are considered public goods, then uneven metropolitan development that exceeds a certain threshold can also be considered a market failure. It is generally agreed upon that government should intervene in the case of market failures. What is potentially significant about CBAs, in this regard, is that they provide fodder for an argument that the market is not failing if private residents and civil-society organizations address these issues.

Under the conditions where neither the government nor civil society intervenes, the market will fail, as outlined above. By organizing coalitions and heightening political risk for developers, community coalitions change existing conditionsand reconstitute urban power dynamics. If rational economic theory holds, a developer would be willing to grant benefits to the community at a cost up to the point commensurate with how much the developer values the consequent reduction of risk. By creating concentrated power through organizing, groups of community residents have emerged as private claimants of negative externalities (e.g., traffic congestion, airplane noise, pollution), demanders of direct “trickle-down” benefits (e.g., first source hiring), and as the enforcers of efficient taxation (i.e., of what private business developers are willing to pay). In this model, the only roles for government are as a contractor with private parties and as the potential enforcer of private property rights and contracts.

CBAs occupy a complex position in urban political economy, and their functionality in it offers multiple interpretations. On the one hand, neoliberal proponents could argue that CBAs provide proof that in the absence of government intervention, market actors will innovate their own solutions. On the other hand, CBAs’ downwardly redistributive products (e.g. living wages and restricted hiring protocols) contradict the typical outcomes of neoliberal processes and the “flexible” economy (Parks and Warren 2009). Furthermore, some CBAs result in de facto redistributive public policy when businesses mediate the redistribution of public funds to social equity projects. In these cases, the government grants public funds (probably tax revenues) to private businesses, which then pass on a portion of those funds to low-income communities for infrastructure development, job training, education, and/or other social programs outlined by the CBA. There are also cases where CBAs are attached to public development projects. In both cases, “the market” is pricing and mediating public funding for social programs to low-income communities.

By organizing previously inchoate power for low-income urban residents to wield, CBA coalitions also disrupt existing urban power dynamics. By organizing residents of low-income communities and granting them access to development planning processes, CBA coalitions transform these residents from objects of urban development policy to subjects who actively shape development decisions (Baxamusa 2008, 343). As subjects in the development planning process, these individuals, united in community coalitions, exact a price on private capital that it would not otherwise incur.

Shortcomings for Equitable Urban Development

To borrow from Gross’s (1998) definition, a community benefits agreement pertains to a single development project. Inherently, then, each CBA is a localized phenomenon. If the framework discussed in the previous section is applied, and CBAs are understood to perform functions that government might, then CBAs can be understood as hyper-local. Redistributive benefits and regulatory protections apply only to a limited number of residents and employees, and the associated costs are levied on a single business entity. In the scenario where government suppresses tax levels to attract businesses, most businesses benefit. The business pressured into consenting to a CBA, however, pays a steeper effective “tax” than it would if higher redistributive taxes were levied on all businesses citywide and the CBA were obviated. Furthermore, CBAs are only possible in the places and times where a developer proposes a large development project. Needless to say, this opportunity does not occur universally. In fact, it occurs with some systematic bias: characteristically, new large-scale development projects occur relatively infrequently in low-income urban communities of color (Parks and Warren 2009).

Given the needs of low-income communities, the scale of CBAs’ impact also remains vastly limited and necessarily localized. Alternatively, city governments could reallocate public funds directly to economic development and social programs in low-income communities and promote, through official policy, the retention and creation of good jobs (Moberg 1997; Rast 2001), living wages (Drier 2009; Luce 2004), investment in neighborhood infrastructure and schools, as well as basic social supports. The argument that an alternative to CBAs is broader government policy favoring low-income workers and communities finds its premise in the inversion of its terms. Surely, if government policies stipulated living wages, promoted the employment of vulnerable urban workers, protected or compensated local communities for negative externalities, and increased policies targeted at more equitable urban development, then urban residents would have less incentive—or none at all—to expend their scarce resources organizing for CBAs. Similarly, government (particularly the federal government, in some cases) could implement policy that supports industries that hire blue-collar workers, favors workers’ well-being and bargaining power, provides social supports and affordable housing to low-income members of society, and decreases the need for US cities to compete among themselves in wooing private capital. Of course, which policies could best accomplish these goals and whether these are even desirable goals are matters of great contention.

Regardless, in the current urban political economy, most cities have deferred the potential responsibility for mitigating imbalanced growth onto private individuals. These individuals have the option of forming coalitions to exert some power in the development process, as they have with CBAs. Of course, these individuals must have the resources available to engage in extensive organizing efforts that will, in the end, bring no guarantees. In the past, CBAs have been hampered by lack of adequate community representation, opaque negotiating processes, unilateral action by coalition members, low penalties for developer noncompliance, lack of specificity or unenforceability of agreement terms, and developer disinterest (Salkin and Lavine 2008).

In the contemporary political economy of urban development, government inaction on behalf of low-income communities and government action on behalf of business interests has made even small steps toward balanced development uncertain. Furthermore, it has placed some of the burdens and risks of producing even those small steps onto the backs of already-disadvantaged local residents.

Conclusion

Community benefits agreements have entered the urban development arena during a time when the federal government has retrenched funding for cities; metropolitan governments have suppressed redistributive policy and catered to the interests of businesses and higher-income residents; and stark economic need has pervaded low-income urban communities, especially those of color. In this historical-political context, community coalitions have organized to perform functions that government has not. They have exacted on development projects what effectively functions as a redistributive tax used to regulate labor relations and environmental impacts, to compensate local communities for negative externalities, to fund social programs, and to reduce the unevenness of urban development.

The limited scale of CBAs’ localized impact excludes large numbers of urban residents who could benefit from citywide public policies with similar objectives. CBAs’ potential for stimulating economic growth in low-income communities also falls short of what government could achieve with urban development policies that gave priority—or at least parity—to low-income communities. Furthermore, the process of negotiating for CBAs and monitoring their fulfillment requires the expenditure of significant resources by city residents for whom resources may already be relatively scarce.

Understanding the conditions that have given rise to CBAs facilitates the conclusion that their form and function signify a political economy that is strikingly unfavorable to low-income urban residents. While CBAs are rightly celebrated as victories for low-income workers and communities, the unfavorability of the conditions in which they emerged and operate inherently limits their promise for achieving social welfare and equity. 

Fortunately, while the form and function of CBAs mark them as the distinctive products of a particular matrix of historical conditions, CBA processes also act transformatively upon that matrix. The organization of a community coalition results not only in a CBA but in the concentration of previously unassembled power from which further efforts can be launched (Parks and Warren 2009). The unified voices of numerous community residents and of leaders from diverse organizations have proved powerful enough to bring developers to the negotiating table. Community coalitions have leveraged the power of their unified voices to win millions of dollars’ worth of benefits for their communities. They have carved a space in urban development discourse and practice for the concerns of their communities. By accepting CBAs as a victory, but not as conciliation, community coalitions may continue to devote their power to campaigns in the ongoing struggle to transform the dynamics of urban development.

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About the Author

Matthew Raffol is a second-year social administration student.  Prior to attending SSA, he worked as a counselor in residential treatment with adolescents.  He also has had brief experience in philanthropy targeted at community organizing.  In his current field placement, he performs street-level outreach and engagement with people experiencing homelessness and severe and persistent mental illness.  Matthew holds a B.S. from Boston College, where he studied psychology and management with a concentration in economics.  He currently lives and works as a resident assistant in the full-time volunteer community at Franciscan Outreach Association, a provider of social services to people experiencing homelessness.