July 2013 Coalition Power Breakfast – Dr. Cedric Herring
This month’s focus is on the challenges of realizing the goals of Chicago’s Minority and Women-owned Business Enterprise Programs given inherent discrimination in business credit markets. These problems are not unique to the City, as evidenced by additional analysis performed using the Chicago Transit Authority as representative of the sister-agencies. COAL is honored to partner with and host Dr. Cedric Herring, Professor at UIC’s Institute of Government and Public Policy, as our guest speaker.
Breakfast Recap (COAL Intern Charles Preston):
In observance of the 4th of July holiday, COAL held its monthly Power Breakfast a week earlier on June 29th. The topic of the Coalition Power Breakfast was Chicago’s MBE/WBE Programs and Discrimination in Business Credit Markets.
Heading this topic was Prof. Cedric Herring, who along with Prof. Lauren Henderson, performed noteworthy research in this subject area. COAL additionally invited a panel of experts to participate in the Q&A portion of the program. The panel consisted of Rob Rose, VP – Chicago Community Loan Fund, Bill Jones, President – Bill Jones and Associates, and Daryl Newell, VP – Urban Partnership Bank.
Prof. Herring used the Chicago Transit Authority (CTA) as an example of how a number of public sector agencies and municipalities have strong MBE/WBE guidelines and yet if you look at actual performance, their respective track records are woeful in the percentage of contracts that go to black-owned companies.
Between 2005-2010, the Chicago Transit Authority spent more than $1.3 billion. The predominant market areas for CTA procurement were construction, goods, professional services, and other services. About 90 percent of that spending went to firms in Cook County. So, as I talk about these dollar amounts and percentages, I want you to keep in the back of your mind that Black people make up more than 25% of the residents of Cook County. More than 75% of spending, that is more than $750 million of CTA’s spending, was on construction contracts to in-state firms. More than 75% of that went to white-male-owned firms. Black-owned firms received less than seven percent. Female firms, regardless of race, received 8.8 percent of the construction dollars over the period.
In other words, what Prof. Herring’s research uncovered is that in no sector are Black-owned firms getting anywhere near the 25% that Black people represent in Cook County. This is despite the fact that Black customers make up a disproportionate number of customers for CTA.
CTA claims that this reflects the lack of availability of Black firms in the predominant markets and industries for CTA spending. But not only should we question this, but also, we need to be about the business of pushing CTA to bring about change in this situation.
Across the board, white-male-owned firms received much larger contracts, regardless of industry. In construction, white males averaged contracts of more than $30 million while Blacks averaged less than $2 million per contract.
What can be done? Herring posits that rather than showing up at the worksite after jobs have been given out, that we have to be at the table when projects are being designed and contracts are being granted. Additionally discrimination in credit markets is another main reason for poor performing minority business programs. This must be addressed if we are to systemically improve our community’s portion of City, County and State contracts. Please see Prof. Herring’s report here.
Why is this important? Increasing CTA business for black contractors will not only increase job growth in the black community and improve the chances for black business, but it will also establish parity between ridership (CTA customers) and employment. In other words, our tax dollars and where we spend our monies should benefit our community in parity with other groups and communities.
Unity and relationship building as important to growing our businesses were also key areas of focus during the Q&A. A reason why many Black-owned businesses in the community are undergoing hardship is because they are in competition with one another or isolated. If the spirit of cooperation (in addition to the competitiveness) is developed, in many instances, black-owned business would be able to increase capacity, and in turn, be able to produce more jobs and services for the community.
To many African-Americans, the banking industry can be an entirely different and intimidating world. Daryl Newell offered his personal services and guidance to everyone attending the Breakfast.
Rob Rose provided the COAL community with his insights into the challenges of black businesses obtaining funding and took the opportunity to introduce CCLF’s Small Contractor Bridge Program. The program provides working capital and bonding for contractors looking to prime potential contracts. This is an opportunity for Black contractors to strategically build their bonding capability.
Bill Jones provided a perspective from a business owner, one who has successfully negotiated his way through a business landscape often set against our success. One of Jones’ recommendations is to not look for private sector opportunities in addition to the public sector. Often times, the payment cycles in the private sector are much shorter than with government contracts and consequently small businesses will not have the issues around cash flow.
As always, the monthly Power Breakfast was productive, informative, and much needed. The expert panel offered services and provided a vast amount of knowledge to the Breakfast audience.
As a follow-up to this meeting, COAL suggests that 1) everyone should read Prof. Herring’s research to become better informed on some of the why’s behind the poor performance of MBE/WBE programs for the our community, 2) black contractors looking to prime business opportunities should look into the Chicago Community Loan Fund’s Small Contractor Bridge Program, 3) any interested individual or organization should contact their respective elected officials and ask what they are doing to increase access to capital for our black businesses and use this as one of their measures of performance of said elected officials, 4) COAL will host a meeting of black contractors with CCLF and its program partners to facilitate access to program funding, and 5) COAL will meet with Prof. Herring, Bill Jones, and others to further discuss an idea that Herring has that would create the community infrastructure required to support our businesses in the area of improved access to capital; the goal here is to determine how this infrastructure might be developed.