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On September 17, 2015 , a year after the murder of Michael Brown, Moody’s suddenly downgraded the bond rating of Ferguson from Aa3 or “Prime” to Ba1 or “Junk.” For Activest co-founder Napoleon Wallace that moment was revealing. First, it was timed not to the actual incident of injustice, but rather to a financially crippling consent decree handed down by the federal government. But inherent risks that led to the consent decree were not due to the sudden financial burden, but rather they involved long-standing and well-documented practices of extraction that had caused financial impact and social harms. Perhaps most shocking, the downgrade did not impact Moody’s rating of other municipalities in the same state (Missouri) that were engaging in widespread practices very similar to those that led to the crisis in Ferguson.

In total, these glaring inconsistencies reflected the lack of consideration for how shortsighted and harmful practices undermine the financial health of our communities. And to make a finer point: Black and brown communities and places led by BIPOC officials experience a significantly higher cost of capital when issuing bonds, even when controlling for other factors.

Those insights form the core of Activest’s approach. We turn community-specific fiscal justice research into opportunities for public budgets sustained by social justice. We partner with nonprofit and philanthropic institutions interested in place-based impact to produce reports, organize with activists on the ground, and encourage cities and counties to make more sound financial decisions.

We imagine a world in which financial practices that harm communities of color are a thing of the past. We work to realize a financial ecosystem in which all communities have access to the capital that they need to thrive. This is our collective vision of fiscal justice.

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Founded

2015

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HQ

NORTH
CAROLINA

Advancing
Fiscal Justice

Racial injustice in U.S. cities is built on a long history of troubling financial practices. Municipal budgets often serve as the supply lines to fueling state-sanctioned, taxpayer-funded racial oppression. U.S. cities annually lose $70 billion in corporate tax giveaways, $11 billion from exclusionary school discipline policies, and $2 billion for municipal settlements, while bringing in $7 billion in predatory revenue from excessive fines and fees — all disproportionately harming BIPOC communities.

Municipal finance experts have demonstrated that a handful of financial indicators can predict over 95% of local government fiscal health, specifically the local economy, tax base, fund balances, debt profile, and pension obligations. Yet absent are local government’s extra-financial and off-balance-sheet policies and practices across core city functions including criminal justice, economic development, public health, education, water, or climate change.

Rating agencies are just starting to consider how social unrest and economic inequality are indicators of and accelerants to fiscal decline. For example, Moody’s considers climate change as having created the broad based conditions for increased financial risk, while extreme weather events are considered the specific, unpredictable, destabilizing events that actually result in massive losses. Similarly, social and economic equality in cities have created the conditions for increased risk, while police brutality, police settlements and the often ensuing social unrest are the specific, unpredictable, destabilizing, costly events that result from inequality.

In short, racism is costly and inequity is expensive. Many of the very practices that rating agencies and investors reward actually erode the tax base, lead to fatal police encounters, and are early indicators of city-wide social unrest.