The Federal Reserve Bank of Boston will inject $1.8 million into six struggling Massachusetts cities as part of its first-ever effort to transform urban neighborhoods by encouraging local officials to work more creatively with businesses and nonprofit groups.
If the initiative is successful, Boston Fed officials hope to expand the competitive grant program throughout New England and provide a model for the 11 other Federal Reserve banks across the country to extend their roles in community development.
“Our desire is to have a more direct impact, real impact on these cities,” said Eric S. Rosengren, president of the Boston Federal Reserve Bank.
Rosengren on Wednesday will announce the first six municipalities to win grants of between $100,000 and $700,000, using funds provided by private foundations and the state. Twenty mid-size Massachusetts cities, including Lawrence, Somerville, Chelsea, Worcester, Holyoke, Fitchburg, and Fall River, competed for grants.
But the money is only a small part of the point. Federal Reserve officials and their partners in the program are trying to push community leaders to think more imaginatively about how to repair civic psyches and rebuild economies. Proposals in some places could be tailored for use in others.
Many of the cities are combatting high unemployment, low student achievement, and an uncertain future.
Chelsea, for example, has experienced spurts of hope, replacing dingy, industrial buildings with condominiums and attracting the first Starbucks coffee shop to what city leaders hope will become a mixed-use development of housing, retail, and offices.
The former shipbuilding city has already enlisted a network of nonprofit agencies, backed by multimillion-dollar grants, to provide financial counseling to families, employment training to troubled teens, and tutoring to children.
Yet even with these efforts and resources, unemployment in Chelsea, at 8.2 percent in November, is more than a percentage point above the state average, while the homeownership rate, 32 percent, is half the state average. One in four people live in poverty, more than double the state poverty rate.
Chelsea officials say that winning a Boston Fed grant would provide a “seal of approval” and help them bring together disparate factions to build durable civic institutions and leadership to tackle the deeply ingrained problems that could take years, if not decades, to solve. Chelsea wants to use the money to reach out to residents and businesses to clean litter off the city streets, link up schools and nonprofits to help children and families access financial resources, and boost the city’s housing inspection to address unsafe conditions.
“There’s a lot of good things happening in Chelsea today,” City Manager Jay Ash said. Still, “we are frustrated that we haven’t had the deep impact on the lives of residents who live in our neighborhood.”
The Boston Fed’s initiative is part of a renewed focus under Rosengren to apply the bank’s economic research to the real world and improve New England communities.
The effort grew out of out of a two-year study of Springfield that examined why that Western Massachusetts city, the state’s third-largest, continued to fail even as state government and nonprofits poured millions of dollars into revitalization efforts.
The study compared Springfield to similar aging industrial cities, such as New Haven, that were making progress.
The Boston Fed’s economists found that it did not matter where the city was located, whether it was predominantly white or Hispanic, or even what types of industries were based in the community. The primary driver of success: sustained leadership and collaboration between businesses, government, nonprofits, and community groups.
The research found that in more thriving cities such as New Haven, colleges and universities worked with government officials and private industry to provide workforce training and funding to lure companies. In Providence, a nonprofit foundation worked with business executives to develop ideas and a consensus on downtown development projects. And in cities such as Evansville, Ind., dynamic mayors forged public-private partnerships with businesses and charitable foundations.
But few urban revitalization programs focus on the more systemic issues that can help communities to build their own social, economic, and civic resources, Rosengren said. Instead, they direct money to a particular building project or a specific need, such as education or health care, Rosengren said.
Rosengren acknowledged that solving such problems could take decades, extending far beyond the three-year grant program. But, he said, “We cannot ignore these cities.”
Through the year-long application process, Fed officials have worked with all 20 Massachusetts cities that applied for grants, encouraging them to bring different partners to the proposal, pushing them to reach out to business executives, and asking them to hone in on the data to track and measure success.
In Chelsea, that meant not bringing in only the nonprofit and government officials, but also business owners in the Shurtleff-Bellingham neighborhood between Route 1 and the Mystic River, where revitalization efforts are aimed.
If the city hopes to address unemployment, education, and problems such as overcrowding in housing, businesses will have to get involved, said Ann Houston, executive director of Neighborhood Developers, which builds affordable housing and offers financial literacy programs. “It really got us to think about how you have to have every sector involved,” Houston said. “People’s lives aren’t segmented into agencies.”
The grants are funded by several donors, including the Living Cities, a New York foundation; Massachusetts Competitive Partnership, a Boston nonprofit that promotes economic growth; and MassDevelopment, the state’s quasi-public development agency.
Boston Fed officials said they believe they have the right formula to give mid-size cities the necessary boost, but they add that the program is still an experiment.
The Fed will monitor the award recipients over the course of the grant to determine what works, said Richard Walker, senior vice president of the Boston Fed.
“This will put them in a position to map their potential,” Walker said.Deirdre Fernandes
can be reached at email@example.com. Follow her on Twitter @fernandesglobe.