This is the final blog in a four-part series that highlights recommendations from NLC’s task force report “Keeping the American Dream Live: Expanding Economic Mobility and Opportunity in America’s Cities.”
Almost half of families in the United States do not have enough savings to support themselves for even three months in the event of a job loss or other economic crisis. Financial insecurity can threaten the well-being of families, undermine local economic development efforts, create blighted neighborhoods and jeopardize public safety.
Building a Financially Inclusive City
City leaders can build a culture of financial health within their communities by championing programs that build and protect financial assets both now and in the future. Programs and services that cities have pioneered to meet this goal include connecting low-income residents with mainstream financial services, promoting financial education and innovative savings strategies, and ensuring access to other critical services and benefits.
The National League of Cities’ (NLC) Economic Mobility and Opportunity Task Force report, “Keeping the American Dream Alive: Expanding Economic Mobility and Opportunity in America’s Cities,” features several recommendations of what city leaders can do to build a more financially inclusive city.
Connect residents to income-boosting benefits and tax credits through citywide outreach campaigns and direct enrollment efforts
Some residents may be eligible for certain federal benefits and work supports that can boost help them become more financially secure. With information about and help enrolling in programs like the federal Earned Income Tax Credit (EITC), the Supplemental Nutrition Assistance Program (SNAP) and other nutrition benefits, energy assistance and other local resources, families can maximize their income and increase savings.
The Boston Tax Help Coalition (BTHC) provides free tax preparation and financial counseling to low income residents. The BTHC designed an outreach effort, the Ambassador Program, utilizing trained volunteers who help more than 12,000 residents in targeted neighborhoods like immigrant communities that may need translation services or additional financial assessments.
Assess and restructure city’s strategies for collecting debt from residents
Cities have a unique — and often missed — opportunity to reach struggling residents by examining payment patterns of locals in debt to the city and considering payment collection strategies that financially empower families rather than impose harsh penalties for nonpayment.
Debt collection for services such as utilities or court fees and fines can be paired with readily available financial counseling services for those facing challenges. With access to these services, and restructured payment plans, families are more likely to keep up with payments and/or repay their debt, giving cities an opportunity to recoup lost revenue – a win-win for everyone.
The City of Houston was one of five cities to partner with NLC to implement Local Interventions for Financial Empowerment Through Utility Payments (LIFT-UP). Through this pilot, the city identified residents in debt to municipal water utilities and connected them to financial counseling and restructured payment plans to help them pay back the debt. As a result, the city was able to reduce the occurrences of water utility shut-offs, reduce outstanding debt and increase revenue.
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Limit predatory financial practices through local ordinances
Residents can be drawn to the convenience of high-cost, alternative finance services like payday lenders and check cashers. However, cities can curb these practices by restricting payday lenders, or adopting an ordinance which limits interest rates for loans.
The City of Dallas passed two ordinances restricting payday lenders which placed limitations on where new payday loan storefronts can open in the city and required these stores to both obtain and register with special use permits. By regulating the access alternative finance services entities have, cities can reduce the number of residents borrowing at predatory rates.
Implement city-wide Children’s Savings Accounts
Children’s Savings Accounts (CSAs) incentivize parents to begin saving early for their children’s education while also instilling in young people educational aspirations and a better understanding of financial concepts. Municipal CSAs are often universal and begin with young children of a certain age, such as at birth, or all children in public kindergarten. They generally include an initial seed deposit, savings matches, and financial education opportunities that reinforce parents’ efforts to save on behalf of their children, and develop a financially sound foundation for the next generation.
San Francisco’s Kindergarten to College (K2C) program provides every Kindergarten student in the city’s public schools with a college savings account seeded with a deposit of $50, as well as opportunities and incentives to earn additional deposits. In the first five years of the program, San Francisco opened more than 30,000 accounts with a total of $5.2 million saved.
Designate a city department or staff person to lead financial inclusion efforts
A dedicated department or staff person can develop new financial inclusion programming, coordinate services across communities and hold service providers accountable. Having a “home” for financial inclusion efforts in a city can make these initiatives more sustainable, even with changes in city leadership, and underscores the city’s dedication to the financial health of residents.
Former Lansing, Michigan Mayor Virgil Bernero created an Office of Financial Empowerment (OFE) in 2013 with the intention of increasing the financial stability of residents. The office oversees several city programs such as Bank On which helps residents gain access to safe and affordable banking accounts, CSAs through Lansing SAVE and free one-on-one financial counseling through the city’s Financial Empowerment Center (FEC).
Please refer to the full Task Force report to learn more about how cities can implement these strategies. Click here to read the three other blogs, each highlighting 5 key recommendations on how cities can take action to expand economic mobility for all residents.
About the authors:
Kyna Xu is the intern for the Economic Opportunity and Financial Empowerment team in NLC’s Institute for Youth, Education, and Families. Contact Kyna at xu@nlc.org.
Courtney Coffin is the senior associate for Economic Opportunity and Financial Empowerment in NLC’s Institute for Youth, Education, and Families. Contact Courtney at coffin@nlc.org.