Local News
| More

New York City Tests Social Impact Bonds

BY: | New York City | August 23, 2012



Following in the footsteps of the United Kingdom and then Massachusetts, The Economist reports that New York City is the first municipality to test social impact bonds -- an experimental financing method that reverses how traditional government funding works and allows governments to take less risk with taxpayer money.

Instead of paying for a social program upfront, these bonds allow government agencies to contract with private investors and nonprofits to secure the initial funding. The government is only required to reimburse contractors if the program meets certain measurable success rates.

In New York City, Wall Street giant Goldman Sachs is fronting $9.6 million for the Adolescent Behavioral Learning Experience -- a program that uses cognitive behavioral therapy to help reduce the re-incarceration rate for juveniles at Rikers Island jail. If the rates drop by ten percent, then the city will pay Goldman back all of the money it invested. If they fall by an even greater margin, the city will pay Goldman a bonus, resulting in a profit for the company.

But because New York City Mayor Michael Bloomberg believes so strongly in the pay-for-success approach, he has agreed to use funds from his philanthropy to guarantee $7.2 million of the loan, according to The Economist.

Massachusetts is the first state to experiment with social impact bonds, as detailed in an earlier Governing feature.


If you enjoyed this post, subscribe for updates.

GOVERNING Logo
Brian Peteritas

Brian Peteritas is a GOVERNING contributor.

E-mail: bpeteritas@governing.com
Twitter: @governing

Comments



Add Your Comment

You are solely responsible for the content of your comments. GOVERNING reserves the right to remove comments that are considered profane, vulgar, obscene, factually inaccurate, off-topic, or considered a personal attack.

Comments must be fewer than 2000 characters.
Most Viewed
This Section    |    Whole Site
Comments


Featured on Governing.com





GOVERNING Data

Events & Webinars

  • It’s A Paperless, Paperless World..... Thinking Outside the Box to Gain Efficiencies through Prepaid Cards
  • April 23, 2013
  • Public sector organizations are under intense scrutiny to operate as efficiently and effectively as possible and with maximum transparency. An important consideration is the way in which payments are made and managed. Prepaid cards can offer flexibility, security and accountability to governments as a method of dispersing benefits, healthcare and social care payments, child benefits and housing benefits to their constituents.


More Events & Webinars


© 2011 e.Republic, Inc. All Rights reserved.    |   Privacy Policy   |   Site Map