The Business Development & Reinvestment Agency

Introduction

While the Biden Transition Team continues to churn out appointments for Cabinet positions and various other roles in the administration, it is integral to assess and strategize all possible pathways to social progress. Even if we are able to secure a majority in the U.S. Senate, it is highly unlikely that we will be able to abolish the filibuster and pass meaningful legislation, at least for the first two years. In the meantime, cities and counties can and should ride the momentum of the movements demanding big, structural change and act with resilience to address systemic racism, economic inequality, child poverty, the climate crisis, and our various other social crises. Municipalities are uniquely capable of testing out progressive ideas because they are the most connected to ordinary Americans. It is far easier to meet and get to know your city counselor than your senator. In the following weeks, I will illustrate an assortment of policy programs and ideas that municipal governments can and should pursue to yield a more egalitarian society. My first essay will define and describe a municipal program I call the Business Development & Reinvestment Agency.

The Demand for Change

Municipal governments are facing an inordinate degree of strain in the wake of a seemingly unending pandemic and the economic recession caused by it. We’ve seen an unprecedented level of small business closures disproportionately impacting minority-owned businesses; meanwhile, big corporations are receiving zero-interest loans without enforceable requirements to retain their employees or pay them a livable wage. Cities are placed in the precarious position of having to balance the interests of public health and sustaining their local businesses, the latter being critical to accumulating the tax revenue they need to fund general operations and basic services. Even after the majority of the population is vaccinated, hundreds of thousands of small businesses will have shut their doors for good leaving fewer and fewer options for workers and consumers than the big corporations. Corporate consolidation is more than just a feature of the economic fallout to COVID-19; it’s been a central, economic trend for the past forty years. When just a handful of big corporations dominate an industry, employers are able to wield monopsony power to stave off wage increases and curry favor with politicians to receive regulatory carve-outs, special tax breaks, or subsidies. Consequently, the rate of small business development has been on the decline. Our country benefits socially, culturally, and economically when innovators and entrepreneurs are able to start and sustain small businesses. In order for us to reinvigorate small businesses and combat wage suppression, we should reimagine the relationship between local governments and local businesses.

A New Agency

The Business Development & Reinvestment Agency (BDRA) reevaluates the role of local governments in sustaining local businesses. Here’s how it works. Small and mid-sized businesses can opt-in to their municipal BDRA wage subsidy program by signing into a contract with the city. The contract would require participating businesses to provide collective bargaining rights, transparent reporting requirements for sexual harassment/assault and any other form of workplace aggravation or discrimination, and a cap on managment/executive pay. If the businesses meet those requirements, the BDRA would provide direct grants to wage increases in exchange for profit shares. Wage increases for small and mid-sized businesses would create competition with big businesses for quality employees, reduce turnover and its associated cost, and improve worker productivity. The owner would be required to report profits quarterly and provide the city with the agreed upon percentage of the profits. To incentivize business participation in the program, wage grants would equal to 150% of the value of the profit shares. To finance the program, municipalities could raise revenue through elevated property tax brackets on residential properties in excess of $2.5 million, a gross receipts tax on business profits with a large exemption so as to exclude most small and mid-sized businesses, a marginally higher sales tax with exemptions for groceries and pharmaceuticals, and an annual fee on high-combustion vehicles. As an additional incentive, chartered businesses would be granted a gold star from the city in recognition of their patriotism and be granted free publicity in local publications and be granted rights to advertise on or near some public buildings (schools, city hall, parks, etc.). The funds accumulated from the BDRA would be placed in a special fund called the Community Development Trust (CDT).

Community Development Trust

This CDT would exist separately from the city budget and would not be subject to appropriations from the city/county elected officials. Under the BDRA’s charter, CDT funds can only be authorized for appropriation through direct ballot referendum. Through direct democracy, municipalities can guarantee that the benefits of their programs are appropriated towards projects with the greatest level of public authority. Residents interested in proposing a project for the CDT funds would have 90 days to accumulate 300 signatures (that may be electronically signed) as well as a green light from the BDRA’s budget officer for their proposal to be placed on the ballot. The BDRA’s budget officer would be required to assess whether project proposal costs do not exceed the amount secured in the CDT. Elections for residents’ authorization of CDT projects could be administered quarterly or as frequently as the BDRA’s charter requires (up to the discretion of the counselors/commissioners).

Projects for Municipal Advancement

Project proposals are required to be categorized as either social assistance or city amenities/public goods. Social assistance programs could include but are not limited to down payment assistance, student allowances, rental subsidies, nutritional assistance, home repairs/retrofits, affordable housing development, and/or debt relief. Amenities/public goods could include but are not limited to expanded funds for parks and rec facilities, beautification projects, building an amphitheatre, building a performing arts center, creating a butterfly garden, erecting a local public bank, financing subsidized municipal broadband, and/or planting community gardens. These are just a few examples of the sort of projects municipalities can advance through the BDRA program.

Municipalities that chose to establish a BDRA program can tackle multiple social and economic quandaries at once.

  • Closing the wage premium will help curtail a generation-long trend of wage stagnation and lead to rising incomes for low and middle-class workers.
  • Leveling the playing field for quality workers and productivity with big businesses will reduce monopoly and monopsony power as well as the power to influence governments with the goal of securing handouts.
  • Cultivating these relationships with local businesses would allow governments to act quicker to rescue them should their operations be stymied by a pandemic or a trade war.
  • Establishing contracts with the BDRA would allow municipalities to rely on the business to continue to provide remunerative employment without fear of exploitation or relocation.
  • Raising workers’ wages through BDRA contracts would increase aggregate demand and stimulate economic growth.
  • Projects pursued through CDT funds will improve the quality of life for residents and attract new people to the municipality.
  • Frequent elections to gain residential authorization of CDT projects will improve civic engagement and political education.

A Path Forward

The federal government is bogged down in partisan gridlock with politicians entrenched in corporate money and beholden to their donors. We shouldn’t rely on them to solve our problems. It’s time for cities to lead the way. That being said, states like Florida prohibit cities from enacting progressive reforms like the BDRA through preemption laws. In order for municipalities to pursue an agenda that reflects the movement for social and economic justice, progressives and their allies must do everything in their power to strip these insidious laws from the books. Preemption laws are an infringement on local government’s autonomy and the most direct form of democracy. With a smartly-targeted campaign, states with anti-preemption ballot referendums can successfully remove these draconian rules through popular demand. Only then will municipalities be empowered to churn the national outcries of injustice and inequality into big, structural change in their own communities.

Progressive Organizer, Policy Writer, Political Scientist