Issue #146, Summer 2006


Following the Money Trail

Chicago’s community organizations are learning to actively engage in the local budgeting process to fund neighborhood improvements.


If you want to know what your local government cares about – follow the money trail. That is what the Neighborhood Capital Budget Group (NCBG) has been doing since 1988 – helping residents of low-income Chicago neighborhoods understand the power and the importance of influencing government’s bottom line. NCBG’s goal has been to open up the budgeting process to a substantive public debate on the most important and effective expenditures to improve our neighborhoods, transparency and disclosure about where public revenues are coming from and how they’re being spent, and more equitable distribution of the public wealth to communities.

Public budgets are dynamic instruments of social control and economic engineering and are government’s most important tool for the reallocation of wealth and resources. Spending priorities and revenue sources are two critical dimensions of local budgets. To figure out what the priorities and resources are in a community, you must learn how and where the government is spending the public’s money, and who pays for what.

What could the money already in your local budget buy in neighborhood revitalization benefits? What shifts in the way revenue is generated could provide more resources, more equitably? These are some of the questions that must be answered to successfully engage in the fight for a more equitable share of the public wealth. The choices that our federal, state and local governments make in redistributing wealth will shape the future of our cities, neighborhoods and families. Getting the money spent on the right things, and paying for those community improvements in smart ways, makes our communities safer, healthier and more economically empowered.

A Strategic Organizing Opportunity
A form of participatory budgeting in Chicago began in the 1970s, when the federal Community Development Block Grant (CDBG) program became an important funding source in the renewal of blighted urban neighborhoods. Chicago community organizers seized the opportunity to organize low-income communities around the public participation process required by the federal government. Organizers explained to community residents how CDBG dollars could be spent, had residents survey and assess the needs of their communities and held community meetings to prioritize the programs and initiatives CDBG could fund. Thousands turned out to support their communities’ plans and influenced the CDBG budgeting process. As a result, local health clinics, neighborhood park facilities, nonprofit housing development agencies and youth programs received CDBG funds.

By the early 1980s, as the CDBG process had become entrenched in City Hall, grassroots community organizing around CDBG waned. CDBG grants decreased, and city and state governments spent less on revitalizing low-income neighborhoods. In 1988, veterans of the CDBG organizing campaign created the Neighborhood Capital Budget Group to reignite public interest in the budgeting process and to rebuild a grassroots voice in determining how the public’s money could and should be spent. For the past 18 years, NCBG has held citywide training sessions on participatory budgeting, training hundreds of community leaders to engage in the public budgeting process. Leaders are taught how and when to testify at public budget hearings and about proactively advocating for specific budget goals. The leadership training sessions explain:

• the procedural and political decision-making steps in local agencies’ budgets;

• the revenue sources that government uses to fund the public budget;

• how to use budget documents to challenge spending priorities;

• how to conduct a community survey, document local needs and prioritize what projects and services should be funded; and

• how to develop organizing campaigns and media strategies around the community’s budget priorities.

This training has helped community leaders win over $1 billion in new public transportation investments to modernize rapid transit lines serving their neighborhoods, convince the city to invest over $9 billion in public works projects – from sidewalk repairs to the construction of a new neighborhood library – and influence the Chicago Public Schools’ capital budget to build new schools to relieve overcrowding and repair aging neighborhood schools.

Chicago’s Tax Tool
Since 1997, NCBG has focused heavily on educating community groups about Tax Increment Financing (TIF) – a tool used to spur urban economic development in designated geographic areas. Used in 49 states, TIF allows municipalities to capture all new property tax dollars generated from redevelopment for a specified time period (23 years in Illinois) and to use them for specific projects. TIF dollars are used for physical public infrastructure (streets, bridges, viaducts); land acquisition; public facilities (usually schools and parks); private residential, commercial or industrial redevelopment projects (often by lowering the interest rate on developers’ borrowing); job training and even day care services for workers. Chicago aggressively expanded its use of TIF in the late 1990s, and more tax dollars became available to local TIF districts. To ensure that low-income residents in TIF districts benefit from redevelopment, NCBG began organizing grassroots community groups and community development corporations to apply participatory budgeting to TIF district planning, budgeting and oversight.

For nearly a decade, NCBG has maintained a library of all the official plans and budgets for local TIF districts that community organizations can use to learn about the TIF-funded redevelopments in their neighborhoods. NCBG developed a TIF Handbook, a TIF Encyclopedia and a TIF Almanac to help organizations understand how it works. There are fact sheets that explain the steps to designate and manage a TIF district and how TIF affects schools, industry, affordable housing, commercial development and residents’ property taxes. NCBG’s TIF District Profiles give a quick overview of the status of each TIF district.

NCBG helps community leaders convene several times during the year to do peer training and to share their successes with other groups engaged in TIF organizing. Some of those successes include getting City Hall to create TIF-funded direct grants to low-income homeowners to improve their properties and a TIF-matching grant program for local retail and small manufacturers to improve their businesses. The Randolph/Fulton Market Association, a member of the Chicago’s West Side Coalition, organized with other groups in NCBG’s Campaign for Better Transit to demand that their TIF district budget provide funds for a new rapid transit station.

In East Garfield Park, the local faith-based organization, Garfield Area Partnership, won the support of the aldermen for an annual TIF budget that local residents created. Community stakeholders have also won support for developing and issuing their own Requests for Proposals from developers so they can screen and review the redevelopment projects and the level of TIF support developers receive.

Through these and other efforts, Chicago now has Community Oversight Committees that provide input to TIF district budgets and monitor TIF spending and revenues in nearly 30 districts. Many Chicago aldermen are forming their own ward-level TIF committees or cooperate with those formed by grassroots organizing campaigns.

Challenges in American Cities
At the time that NCBG was creating strategies to give Chicagoans a voice in local budgets, participatory budgeting was already emerging in developing countries. Found largely in the literature about international development and democracy building, the term is defined as a mechanism of local government for bringing local communities “closer to the decision-making process around the public budget.” The practice of directly engaging community residents in deciding how government should spend the public’s money is traced to Brazil’s progressive, leftist local governments in the 1980s. It has attracted the support of the World Bank and the United Nations. Communities in India, Albania, the United Kingdom, Canada and some African nations have embraced participatory budgeting as a way to teach democracy, promote civic participation and redress longstanding practices of inequitable distribution of public wealth.

The fundamental difference between participatory budgeting in America and in developing countries is that local governments in the United States are seldom supportive of the process. To overcome that, communities have to organize to win, and continually build and expand coalitions to create enough political will to gain budgetary concessions from government. Grassroots community organizations must become more literate about public financing and the varied and ingenious ways that government can invent to raise revenues. Community organizers need to educate people about the budgeting and legislative processes and train grassroots community leaders to speak to those in key public offices who control the public purse. We must provide research and analysis that give community leaders solid backing for their vision of how our public wealth should be invested.

An effective participatory budgeting campaign should provide concrete examples of how government could shift its spending priorities or generate additional revenues to fund the community’s budget plan. To win fundamental legislative reforms or immediate commitments that will allow the public to participate in local budgeting, groups should:

Be strategic – Focus on budgeting priorities that will make a real difference in your city. Track how much money is spent on public works improvements, public facilities, public school buildings, affordable housing, mass transit or economic development. Start with something you can organize to win, and give the community a sense of accomplishment.

Combine organizing with planning – Empower community residents to assess local needs and document their neighborhood’s local assets – such as parks, cultural institutions, job centers, access to good transportation, even vacant land and human capital. A compelling community plan prioritizes public spending goals that address local needs and enhance local assets.

Demand disclosure and transparency – Organize to get the budget and revenue numbers you need to do meaningful, geographic-based analysis.

Insist on meaningful community participation – Go beyond the traditional public hearing or citizen advisory commission. Build relationships with local and state legislators who are interested in mandating public participation and stronger reporting requirements for local and municipal agencies that benefit from state funding.

Develop a communications and media strategy – Never underestimate the influence of the media. Don’t ignore your neighborhood newspapers. Let the broadest possible audience know about your participatory budgeting campaigns and community investment goals. And when you win, celebrate – make sure you publicize the new library, clinic, youth summer job program or new affordable housing that you made happen.

In a democracy, the power of the public purse should reside with the people; it is a key component of the social contract we have made with our government. U.S. citizens have very few examples of statutory requirements on government to include them in budgeting decisions. California has Citizen Oversight Boards that review and approve school construction expenditures and Minneapolis and Akron allow community planning boards to make recommendations on neighborhood budgets.

America’s local governments rely on representative democracy: If you don’t like how politicians spend your money, throw the rascals out. Far too often low-income communities suffer from the limitations of that idealized notion. Instead we must continue to empower the public and insist on policy reforms that will require our government to include our communities in budgeting decisions, and organize to demand the resources to meet people’s real needs.

Jacqueline Leavy is executive director of the Neighborhood Capital Budget Group. To learn more about NCBG’s research and coalition building around the issue of participatory budgeting, visit www.ncbg.org.


Participatory Budgeting: The International and NCBG Approaches

International Approach...
• Uses “geographical and complementary political boundaries to facilitate decision-making and service delivery”

• Uses public meetings to initiate and carry out the budget process

• Relies upon annual budgeting cycles to provide a framework for planning, implementation and local involvement

• Relies on a network of “support agencies”

• Informs local efforts with a “budget matrix” for an entire city that puts local needs and demands into perspective

NCBG Approach...

• Uses the neighborhood or electoral district as a unit of budget analysis, organizing and planning

• Meets with grassroots organizations to discuss neighborhood priorities

• Mobilizes community participation in annual budget hearings and advocates for government reforms to make the process more accessible

• NCBG is the support agency for community organizations

• Convenes citywide leadership teams to coordinate and discern the policy barriers, government spending patterns and needed changes in the decision-making process