Background on Current Social Impact Bond Initiatives

Cuyahoga County: Avoiding Homelessness and Family Separation

In December 2013, Cuyahoga County announced the first county-level Pay-for-Success project, in which an innovate service delivery model will address the needs of homeless women, enabling them to avoid separation or to reunify with their children.

The announcement was preceded by years of planning and meetings with numerous stakeholders , led by Cuyahoga County government, funded by  local foundations and  facilitated by Third Sector Capital Partners.

Click here for a press release

 

New York City Recidivism Project: Adolescent Men at Rikers Island Jail

The first official Social Impact Bond undertaking in the US was announced in August 2012 by the City of New York.

The proposed program consisted of a four-year project designed to reduce the recidivism rate for adolescent men incarcerated at New York’s Rikers Island jail. Goldman Sachs committed to providing a $9.6 million loan to finance the program, which was based on a program called “ABLE” (Adolescent Behavioral Learning Experience) piloted by the Bloomberg administration’s Young Men’s Initiative. Notably, the Goldman Sachs investment was backed by a $7.2 million guarantee from Bloomberg Philanthropies, thus significantly reducing the financial exposure of Goldman Sachs should the program fail to meet its targeted objectives.

The intermediary designated to report the results of the intervention was MDRC, a leading social policy organization with experience in measuring transitional job programs. More Information

 

Massachusetts SIB Programs: Juvenile Justice and Homelessness

Beginning in 2011, the Commonwealth of Massachusetts began soliciting information from potential service providers about possible interventions, resulting in an August 2012 Request for Proposals for two projects – one in the field of juvenile justice, and the other in the area of chronic homelessness.

Third Sector Capital of Boston was named as the financial intermediary and fundraiser for both programs. The Commonwealth authorized a commitment of up to $50 million to repay potential investors for providing the upfront funds to launch the intervention.

In January 2014, the  juvenile  justice project was finalized, with nonprofit Roca to provide intensive outreach, like skills and employment training based on cognitive behavioral intervention, to re-engage young people and help them move out of violence, incarceration and poverty and into education, like skills and employment training. The project will serve 929 young men aged 17-23 and the target is to reduce the number  of days the young men are incarcerated. Third Sector Capital Partners it the intermediary and other partners are the Commonwealth, the US Department of Labor and various  private and philanthropic funders and investors. Click here for the press release and click here for the executed Roca contract.

 

Fresno County California: Asthma Intervention Project

Billed as the “first-ever” SIB project in healthcare, Fresno County California announced pilot program in asthma intervention.

Fresno County spends an estimated $35 million a year on asthma-related costs, and one in five children in the county are reportedly suffering from the condition. Led by Connecticut-based Collective Health, the Fresno program will seek to reduce costs for asthma hospitalizations.

The California Endowment has pledged $660,000 to finance a pilot for the two-year program which will involve approximately 200 lower income children with asthma.

Insurance claims data will be used to evaluate the program, and if significant cost savings are realized, the program will be increased in size and will be financed using social impact bond techniques.

The intermediary involved in this transaction is Boston-based Social Finance U.S., sister organization to Social Finance U.K., the originator of the Peterborough Project. More Information

 

Utah Early Childhood: Special Education Intervention

In June of 2013, Goldman Sachs announced a second investment in the SIB space. This time, the focus area was early childhood development. Specifically, the project proposed to avoid the special education costs when, through intervention, they can be helped to remain in regular school programs.

Partnering with Goldman in the project will be the United Way of Salt Lake City, Utah, as financial intermediary, and also the Granite School District of Salt Lake.

The program will be financed with two classes of debt — $4.6 million of senior debt from Goldman, and $2.4 million in junior debt from the Chicago-based Pritzker Foundation.

The special education cost for an elementary school child in the Granite School District is $2,600. The district will pay the United Way $2,470, plus a 5% interest component, for each year a high risk student avoids special education. After the debt is fully repaid, the financing contract calls for additional “success payments” equal to 40% of the avoided costs, or $1,040 per student. More Information

 

New York State Social Impact Bond: Employment of Reentry Populations

The year 2013 closed with the announcement of a major New York State Social Impact Bond project with CEO, a nonprofit devoted to securing employment for reentry clients.

Based in New York City, but expanding nationally, CEO has developed a sophisticated program for providing training and support and securing employment for formerly incarcerated individuals, and for tracking the progress and needs of its participants.

The financial intermediary in this transaction is Social Finance U.S., which has been working with CEO on the project for more than two years. (The project was originally conceived as an effort to replicate the New York program in Connecticut as the nation’s first Social Impact Bond, but was not consummated when Connecticut failed to receive a federal Second Chance Act grant that was to have paid for program design and initial implementation.)

The newly-announced New York State Social Impact Bond adheres more closely to the classic protocols for SIBs which were initially advanced at the outset of the SIB movement in the U.S. More Information