Barring a legislative miracle, the recent Supreme Court decision to overturn AB 27 has ended redevelopment as we know it in California.   So rather than continuing a protracted legal and political struggle that ultimately only will do harm to California, why not use this development as an opportunity to rethink redevelopment so that it better serves the public good?

Poverty is caused by a complex web of factors – low education, poor nutrition, crime, unemployment, etc. – and the policy tools we use to combat poverty need to be equally nuanced.  Luckily, England is pioneering a new model for development finance with the potential to do just that.  Social Impact Bonds align investor returns with social outcomes by capturing the value that positive social change offers government bottom lines.

The initial pilot created in 2010 aims to reduce criminal reoffending in the city of Peterborough by short sentenced prisoners.[1]  Investors earn a return if the Social Impact Bond reduces reoffending by 7.5% or more, garnering increasing returns the more reoffending is lowered and derivatively tax dollars are saved.

To achieve this outcome, bond proceeds are funneled through the One* Service, which was created to manage, coordinate, and contract with service providers.  These contracted non-profit organizations provide flexible, locally-driven services to meet the unique needs of the Peterborough population; moreover, the One* Service creates a central locus of accountability and provides the broad perspective necessary to bring all these service pieces of the puzzle together.

Petersborough provides a concrete template for leveraging the social sector to achieve Governor Brown’s goals with prison realignment.  More broadly, unlike the recently abolished redevelopment model that focuses on revenue growth, Social Impact Bonds are predicated on lowering government expenses by creating positive social change – well suited for today’s times of austerity.

It is still too soon to tell how history will judge the efficacy of England’s experiment, and there are numerous technical issues that would need to be worked out to apply this concept in California.  Yet California’s current model of government has grown rusty, and we should not be afraid of the hard work needed to build a new model.

Put bluntly, the roughly nine billion of unspent bond proceeds that George Skelton unearthed last October – cash that California voters approved and are sitting idle while we pay millions of dollars in interest every year – demonstrates the need for innovative thinking in our service delivery mechanisms.

So why not have the courage to pioneer something new?

[1] These are criminals sentenced to terms less than one year; this population was targeted because reoffending is high (around 60%) and no-one has statutory responsibility for this group after they leave prison – a situation similar to California.