In July 2018, Jeremy Nowak and I launched a Metro Finance Lab at Drexel University. The Lab had the active support and encouragement of John Fry, then President of Drexel and a good friend of both of ours. Earlier that year, Jeremy and I had co-authored The New Localism: How Cities Can Thrive in the Age of Populism, which contended that cities and metropolitan areas had emerged as the vanguard of problem solving in the United States for one overarching reason: they were not just governments but networks of institutions and leaders that cut across sectors as well as jurisdictional and disciplinary lines.
We dedicated a chapter of the book to an emerging field which we labeled Metro Finance. As we observed,
“New Localism requires capital to finance inclusion, infrastructure and innovation. Some of that capital will require public funding; much of it will require financial investment. But there are barriers – linked to both public budgetary constraints and private investment incentives – to making those investments. To overcome some of those constraints, new public purpose sources of capital have emerged to catalyze private investment and extend public capacity. Like other aspects of New Localism, these are multisectoral collaborations often managed through hybrid institutions, with one foot in private enterprise and one foot in civil society. We refer to these innovations and practices as metro finance.”
In other words, cities and metropolitan areas require capital in many forms and from a variety of sources, often pooled and combined in intricate mixes, to shape their economies, make quality, affordable places and equip workers with the skills they need to succeed.
Our vision for the Lab was ambitious but succinct: accelerating the evolution of Metro Finance as a vehicle for inclusive and innovative growth through new diagnostics, tools, products and partnerships. We were particularly excited about building an enterprise that was practitioner-led and closely aligned with market trends, policy signals and capital possibilities. Having built The Reinvestment Fund, Jeremy ascribed to the view best expressed by one of the characters in Jennifer Egan’s brilliant book, Manhattan Beach: “Nothing is out of the question if there is someone to ask the question.” Jeremy, to put it mildly, was financially fearless and relentlessly curious.
As many of you know, Jeremy passed away during the month the Lab started. John Fry made the decision, supported by Jeremy’s family, to carry on. He graciously renamed the Metro Finance Lab in honor of Jeremy and raised the seed capital necessary to get the Nowak Lab off the ground.
For the past seven plus years, I have strived to realize the vision set in 2018 as best I could. It has been a highly productive period due to the work of a remarkable group of colleagues and partners.
President Fry smartly nested the Nowak Lab within the Lindy Institute for Urban Innovation (headed by Harris Steinberg) and the Westphal College of Media Arts & Design. This gave us access to leaders and faculty across the university and funders and partners across Philadelphia and beyond. I am grateful to our colleagues at Drexel who championed the Lab’s work and served as helpful thought partners, including Aleister Saunders, Alan Greenberger, Michael O’Bryan, Lucy Kerman, Jason Schupbach, Andrew Zitcer and so many others. A special shoutout is owed to funders who helped bring the Nowak Lab to Temple and support its expansion, most notably Betsy Cohen, Allan Domb, the Lindy family, Spring Point Partners, Wexford and the Wyncote Foundation.
I am particularly in debt to Michael Greenle, Ryan Debold and Mary Tredway who built and sustained a steady administrative infrastructure for the Lab and to the dozens of exceptional individuals who made the Nowak Lab their professional home through the years. Each of these individuals brought a level of creativity and commitment to urban and metropolitan research and practice and made the work consistently fresh and novel. They are at the beginning of their professional journeys and will shape and guide the development of cities and metropolitan areas for decades to come. That, by far, is the Nowak Lab’s greatest legacy. (A full list of Nowak Lab staff is provided at the end of this newsletter).
In the end, President Fry and Harris gave us a special gift: the intellectual freedom to explore a broad array of topics and release a voluminous set of reports, papers and tools. That work will continue to be accessible, through the archived Nowak Lab website and through its publications search tool. All my New Localism newsletters will also be available through the New Localism website.
With the Nowak Lab set to close its doors at the end of this month, I thought it would be appropriate to reflect on our work by answering three questions: what did we do, what did we learn and what happens now?
What Did We Do?
The ambition of the Nowak Lab was always to be relevant in addressing the most pressing metro finance questions of the day, not just in theory but in practice. We tried to demystify and unpack capital innovation, so that, inter alia, new ways of supporting local businesses and entrepreneurs, driving housing production and preservation, enabling community reinvestment and wealth-building and financing industrial companies and transportation and energy infrastructure could be spread and scaled.
The origins of the Lab coincided with the enactment of Opportunity Zones, a then untested tax incentive that had the tantalizing promise of attracting private investors to distressed communities. Jeremy and I had already started working with Accelerator for America, co-founded by then Los Angeles Mayor Eric Garcetti, to invent a new market tool, an Investment Prospectus, to enable cities to identify concrete projects that could unlock the special assets of neglected places and ultimately match projects with tax advantaged capital flowing through Opportunity Funds. With the active support of Greg Fischer, David Holt and Pete Buttigieg (then mayors respectively of Louisville, Oklahoma City and South Bend), we pulled together and tested a beta version of the tool. In the end, dozens of cities created their own Prospectuses and new networks of economy shaping entrepreneurs, practitioners and investors began to form organically. (NB: David Holt is still the mayor of Oklahoma City and recently took the helm of the U.S. Conference of Mayors).
When COVID hit, the Nowak Lab pivoted our work to focus on funding small businesses and commercial corridors devastated by the shutdown of whole communities. With partners like The Enterprise Center in Philadelphia and the indefatigable Della Clark, we strove to break down the barriers between local enterprises and the vast amounts of small business relief funds enacted by Congress through the Paycheck Protection Program and enable the regeneration of commercial corridors where many impacted businesses were located. We modeled, convened and documented how investment on corridors could be organized for community wealth through the 52nd Street Investment Playbook and, separately, provided a profile of the Kensington Corridor Trust, led by colleague Karen Black.
We then, building off our collaborative work with Catalyze to produce the Innovative Finance Playbook and with the re-enactment of the State Small Business Credit Initiative and support from the Kauffman Foundation, expanded the focus on small businesses to include states trying to align federal resources to different market realities and networks of entrepreneurial support organizations. Finally, with the support of Grow America (formerly NDC), we learned from a national community of practice about the operational constraints and opportunities of local, small business capital providers.
With the enactment of the Bipartisan Infrastructure Law, the CHIPS and Science Act, the Inflation Reduction Act and a series of expanding defense appropriations bills, our work pivoted again, in several interesting ways.
Given the volume of federal investment and spending, we created a simple-to-use Funding Tracker to give local leaders notification of federal resources coming down the pike with information they could use. We also tried to identify and codify best practices, contributing to the Local Infrastructure Hub with Accelerator for America.
Our principal focus was on using expanded federal investment and spending as a vehicle to grow local businesses and minority business enterprises. To that end, we helped catalyze the formation of the Equity in Infrastructure Project with partners like Phil Washington, John Porcari and Rick Jacobs. We also began work with the Aspen Institute Latinos and Society Program, then headed by Domenika Lynch, on a series of Procurement Playbooks.
The Playbook work, initially started in Philadelphia with the Philadelphia Equity Alliance, quickly evolved to include efforts in San Antonio, El Paso, Camden and the States of Maryland and California. In these places, we had committed partners that ranged from Congressman Joaquin Castro and Henry Cisneros in San Antonio to business leader Woody Hunt in El Paso to Maryland State Comptroller Brooke Lierman to the Latino Community Foundation in California headed by Julian Castro.
As always happens, good partners lead to new opportunities. With Aspen, for example, we also worked with Reverend Luis Cortes on a community preservation effort in North Philadelphia. For this procurement and community work, the support of many national and local philanthropies, including Comcast, JP Morgan Chase, Irvine and Rockefeller, was invaluable.
Given ramped up investments around reshoring and reindustrialization, we became coaches to the Economic Development Administration’s Build Back Better competition and, ultimately, began mapping the spatial geography of the industrial transition and defense manufacturing.
Significantly, our work did not just focus on where the federal government was making historic and unprecedented investments. We observed the worsening of the housing affordability crisis due to the widening gap between supply and demand and wrote a series of reports on the rise of investor-owned housing. Given the absence of additional federal funding for housing, this gave rise to a new collaboration with Accelerator for America, now headed by Mary Ellen Weiderwohl, to launch a National Housing Crisis Task Force in July 2024. This bipartisan Task Force, headed by Utah Governor Spencer Cox, Atlanta Mayor Andre Dickens, Cleveland Mayor Justin Bibb and Fifth Third Bank’s Susan Thomas, is already carving out a special niche given its focus on practitioner led policy and impact. Since the Task Force’s inception, it has been ably led by two Executive Directors, first Ben Preis and now Colin Higgins, both Nowak Lab alumni.
One constant thread: a consistent focus on innovation districts and their evolution domestically and globally. For that, I’ve been privileged throughout this period to serve on the Board of the Global Institute on Innovation Districts, formed by Julie Wagner. The gathering earlier this year in Monterrey, Mexico was truly a global event, with district leaders from all over the world.
These disparate efforts resulted in a plethora of reports, tools and playbooks which, as described below, continue to have impact and resonance today. We particularly appreciate the decision by the Philadelphia Citizen, which Jeremy co-founded, to republish many of our biweekly newsletters.
As one can tell, the work was, like communities themselves, multi-sectoral and multi-dimensional. We decided intentionally to tease out Metro Finance across disparate sectors of urban and metropolitan economies (e.g., housing, infrastructure, industrial and commercial real estate, workforce development) and different kinds of businesses (e.g., Main Street enterprises, manufacturing firms, technology startups).
While the areas of focus changed, our inquiries remained the same.
What was the mix of capital (e.g., private debt and equity, direct or indirect government subsidy, concessionary capital) that enabled the financing of quality outcomes (e.g., a successful small business, a regenerated commercial corridor, an industrial expansion, a signature affordable housing development)?
Were these capital stacks bespoke, or could they be codified and routinized for scaled impact?
Beyond capital, what other constraints prevented projects or businesses from moving forward?
What was the government’s role? Which level of government? Which other urban or metropolitan stakeholders were critical to moving a quality project to financing fruition? Were these institutions or intermediaries themselves conducive to routinization?
Which place was innovating? Who was leading the innovations? Why?
As these questions imply, we were looking for patterns that could be captured, simplified and repeated. In our view, the work of constructing the financial architecture of the United States is not settled or finished. Our financing of place and all that entails needs a reboot, and the only way to do that is to distill the elements of what comes next.
What Did We Learn?
Over the past seven years, we have witnessed the evolution of Metro Finance during one of the most turbulent chapters in our nation’s history, characterized by alternating periods of federal largesse and scarcity and of simultaneous market disruption, technological acceleration and economic restructuring.
Seven lessons stand out.
First, the nation is awash with innovative practitioners. It is impossible to recognize all the people who crossed paths with the Nowak Lab; they literally number in the thousands. But I am constantly struck by the vast array of Metro Finance pioneers who are doing path breaking work and unveiled, without any hesitation or reservation, their promising solutions, agonizing failures and plans for transformative impact. Individuals like Beth Bafford, Ross Baird, Janie Barrera, Jay Bernas, Kofi Bonner, Della Clark, Charisse Conan Johnson, Sarah Dessault, Rachel Diller, Joanna Doven, Alex Flachsbart, Rebecca Foster, Andrew Gibbs, Ira Goldstein, John Grady, Josh Humphries, Ray Leach, John Lettieri, Nate Lowentheil, Frances Mennone, Rachel Reilly, Jamie Rubin, Michael Saadine, Aaron Thomas and Florian Schalliol — just to name a few — had a seminal impact on how we framed issues and organized our work. The Nowak Lab played a role, substantial in some cases, in connecting these remarkable innovators to like-minded practitioners and investors around the country, multiplying the effect of their work in predictable and unpredictable ways.
Second, the U.S. doesn’t have a capital problem for many urban and metropolitan challenges; we have an organizing challenge. Opportunity Zones, for example, worked well for those communities (e.g., Birmingham, AL, Erie, PA and San Antonio) where Opportunity Funds were capitalized from local investors, who then had the knowledge and confidence to drive investments in projects that remade entire blocks of downtowns. In other places, the failure of Investment Prospectuses to move the dial revealed the chasm between traditional, debt focused community development financial institutions and the tax-return focus of Opportunity Zone investors. Oftentimes, incredibly, this divide existed in one institution, say a major bank, where traditional Community Reinvestment Act lenders did not speak or collaborate with wealth managers on financing projects and businesses in the same zip code. These structural barriers have grown over decades and need to be torn down, particularly as the next round of Opportunity Zones begins.
As Ross Baird observed in The Innovation Blind Spot, the reinvestment of local wealth into the communities where the wealth was generated in the first place is mostly an unnatural act; wealth is routinely exported to places like Silicon Valley in the search of higher returns when smart investments are hidden in plain sight. As Opportunity Alabama has demonstrated, the disconnect between the investment patterns of local wealth (e.g., family funds, philanthropies, locally based corporations, pension funds) and local demands can be mitigated by mediating structures and networks that seek to match return seeking investors with quality projects and enterprises. Scaling a new class of capital intermediaries should be a central organizing mission over the next decade, just as the growth of Enterprise, LISC and CDFIs was part of earlier notions of impact. This is an achievable objective which could, if smartly designed and implemented, unlock vast amounts of capital for a broad array of quality projects and small businesses.
The organizing of local capital for local purposes, of course, is not just an American issue. Our work naturally led to multiple collaborations with the Canadian Urban Institute headed by Mary Rowe, including retreats focused on keeping Money in Place led by the visionary Zita Cobb.
Third, an organizing challenge needs capital organizers. The Nowak Lab revealed the emergence of network connectors around the country who wake up every morning bridging silos, building trust, spotting opportunities and delivering results. These are uniquely capable of moving fast, working across and knitting together fragmented constituencies and catalyzing transformative change. They come from distinctive backgrounds, with varied areas of expertise and experience, and occupy disparate positions, as local or state elected officials or heads of metropolitan business alliances or nonprofit organizations. Despite these differences, they share common characteristics — pragmatism, commitment to place, impatience, a penchant for tangible transactions and visible results and the ability to mobilize people, ideas, capital and impact – that are deeply rooted in the American DNA. Building an army of Network Connectors remains one of the most pressing issues for the nation, particularly as conventional federal forms of financing are under stress.
Fourth, capital organizers need new tools to both read the business and project possibilities in neglected communities, design fundable and repeatable capital stacks and get worthy investments financed. Investment Prospectuses and Procurement Playbooks were a good start, and advancements in AI and other technologies could enable their design and implementation to happen cheaper, faster, more efficiently and with greater effect. This is its own organizing challenge, since technologists and urban financiers and practitioners often travel in different circles and parallel universes. But this challenge is eminently resolvable and urgent, given market and political dynamics.
Fifth, capital organizers need to deploy a new math that takes account of the different challenges associated with different kinds of capital. As our work showed, government or institutional procurement is a different animal than the delivery of government programs which, in turn, differs markedly than the design of financial products (whether those “products” are government backed loans or tax advantaged funds). Since the founding of the Nowak Lab, cities have been introduced to new federal tax incentives, new federal small business relief programs, new loan programs at DOT and DOE, an avalanche of federal subsidies and countless state and local, private and civic innovations. Using these resources — some scaling up, some scaling back — to build new capital stacks should not depend upon practitioners reinventing the wheel in place after place. This doesn’t need to be as hard as it is.
Sixth, capital organizers need new institutional partners. Many of our public, private and civic institutions are simply not adequate to the task of building a robust Metro Finance system. Decades of ossified programs and incentives have engendered complacency among many practitioners. In the housing sector, for example, many public housing authorities are almost 90 years old and show the wear and tear of aging. In most cities, new projects are financed via the critical but prescriptive Low Income Housing Tax Credit, which often stifles rather than inspires new capital formation. The creation of new institutions like the Atlanta Urban Development Corporation and the San Francisco Downtown Development Corporation gives me hope that the next phase of the American experiment will be populated by institutions with greater bandwidth and access to disparate sources of capital.
Finally, the evolution of Metro Finance needs to reflect and ultimately conquer the complexity of a modern society. As Jeremy and I wrote in March 2018. Opportunity Zones were a strange mix of federalism, localism and capitalism.
With Governors and states taking different approaches to the designation of zones, the federalist element is clear. Once zones are selected, the localist component will come into sharp relief. We expect that the most forward-looking cities and counties will develop Investment Prospectuses that build upon the distinctive assets of selected areas (e.g., strategic location, land availability, anchor institutions) and tease out specific investable projects and propositions. Most cities will go further and design inclusive growth strategies that maximize the positive impact that private investment could have on low-income residents living in or near selected areas.
And, finally, capitalism. Investors are being asked simultaneously to do well and to do good. This incentive is certain to spur new concrete, routinized ways of linking long neglected markets and large pools of capital and matching investor expectations with investment reality. The recent explosion of impact investment in support of environmental issues and climate change could conceivably find a place-based focus as a result of the new tax bill. And it may also spur creative pooling of local and national philanthropic resources focused on social returns. It’s a reminder that the United States has not suffered from an absence of capital but a lack of connectivity.
This is tough stuff, which is rarely taught in universities or discussed among practitioners on the ground. But it is the business we have chosen and needs to be elevated to spur more connections, innovations and impact.
What Happens Now?
It is something of a cliché when an institution ceases to exist to say that the work will live on. In the case of the Nowak Lab, however, that is true.
From the very beginning, the orientation of the Lab was to work with smart practitioners, raise up replicable innovations, sort through issues around routinization and scaling and spin off initiatives.
As described above, the Nowak Lab and Accelerator for America created the National Housing Crisis Task Force. The Task Force is now a free-standing nonprofit, with growing reach and impact.
Other substantive work will be expertly continued by groups like the Milken Institute, Next Street and the Economic Innovation Group.
My consulting firm, New Localism Associates, will continue to work on Investment and Procurement Playbooks, with brilliant colleagues like Victoria Orozco, Michael Saadine and Florian Schalliol, all of whom I initially met through the Nowak Lab. More on that to come.
Most significantly, the work lives on through the talented people who signed up with the Nowak Lab, either as staff or partners or fellow travelers or funders. To paraphrase the insights of Henry Cisneros, the former Secretary of Housing and Urban Development (and my former boss), city building is a people business. Institutions and intermediaries matter. Procurement, programs and products matter. Ultimately, however, change happens — and projects and businesses get funded — when people do the hard work.
I strongly believe that Jeremy Nowak would be proud of what we have accomplished over the past seven-and-a-half years. We have tried to follow his lead: grand things can happen when people, data, ideas and capital get organized. The work of the Nowak Lab has been messy at times, but persistently inquisitive, impact oriented and forward moving.
It is my firm conviction that Metro Finance is more needed than ever. The United States is witnessing a Big-ReSort of responsibilities as the federal government scales back fundamental investments in housing, clean energy, infrastructure, scientific research, education, workforce, small business and more. If the nation is to progress, states, cities and metropolitan areas — and the public, private and civic institutions which lead them — will need to step up at an unprecedented level. This is the work of the nation for the foreseeable future, and I firmly believe we are entering a period of profound institutional reform and financial and capital innovation. To the next stage.
Bruce Katz is the Founding Director of the Nowak Metro Finance Lab at Drexel University.
Nowak Lab Staff
Michael Greenle, Managing Director
Colin Higgins, Deputy Director
Victoria Orozco, Strategic Partner
Mary Tredway, Executive Assistant
Emily Desmond, Strategic Projects Manager
Senior Research Fellows
Karen Black
Benjamin Preis (inaugural Executive Director of the National Housing Crisis Task Force)
Jerald Watson
Research Officers
Karyn Bruggeman
Elijah Davis
Milena Dovali Delgado
Colleen Dougherty
Bryan Fike
Avanti Krovi
Ian O’Grady
Benjamin Weiser
Research Analysts
Chelsea Gaylord
Sarena Martinez
Kevin Myers
Max Nathanson
Brian Reyes
Graduate Research Analysts
Arianna Bollens
Chloe Chai
Steven Gu
Avery Harmon
Ying He
Denise Kelly
Gemma Holt
Aiyah Josiah-Faeduwor
Jihae Lee
Mandi Lee
Lauren Leonard
Max Masuda-Farkas
Diana Negron
Atara Saunders
Naomi Tariku
Michael Tolan
Sharon Velasquez-Soto
Finally, a special thanks to the staff at the Lindy Institute including Ryan Debold, Stephani Peters, Hazel Dequito and Tom Devaney who ably supported the Lab and its work over the last seven plus years.