Use Dividends from Major Industry for Funding

Use Dividends from Major Industry to Fund Programs

Harnesses the growth of major industries to fund equitable development programs.

Amazon Headquarters in Seattle (photo by authors)

What's the issue?

Part of the reason that cities struggle to address the equity problems connected with gentrification is lack of funding. Some of the most important solutions that help folks stay in their neighborhoods include constructing affordable housing units, providing funding for maintenance of private homes, increasing local subsidies like vouchers, and decreasing the cost of transit. However, for these programs to be effective, the city must increase the funding they have available for them.

How do dividends help?

This policy, based on the Alaska Permanent Fund, is designed to generate more revenue from large businesses or industries that are based in a particular city. In Alaska, the state generates revenue from oil drilling on public land. This revenue is reinvested in a permanent fund, and every member of the public receives a payout from the fund's dividends each year.

With this policy, a city would be given the right to purchase shares in a major employer company at a discounted rate. Annual earnings from those shares would create a dedicated fund for programs to combat gentrification. Major businesses and industries in American cities receive benefits from locating in cities, from idea exchanges across industries to access to a large and well-educated labor pool. In this model, major businesses share a portion of their profits with the cities in which they are headquartered in exchange for access to these urban assets, especially when these companies benefit from public subsidies. Such returns to cities are particularly important because the high-income jobs and population growth that major companies bring, while desirable, can have negative consequences for cities and residents through gentrification.

Matthew Berman and Random Reamey, "Permanent Fund Dividends and Poverty in Alaska," Institute of Social and Economic Research, University of Alaska Anchorage, 2016.

When and where does this policy work best?

This policy works best when there is a major industry or company present in your city. For instance, this would allow Seattle to use Amazon’s growth, which has fueled gentrification, to combat displacement.

In cities without a major industry, other options might be available. In Los Angeles, a good source of anti-gentrification funding might be creating fees for parking, especially since the population and demand for parking has grown.

What are some possible problems and how can we address them?

Major companies might push back against this policy or threaten to leave a city. Ideally, cities across the country would implement such a policy in order to decrease incentives to locate elsewhere. Another potential issue is having a major employer whose stock isn't particularly valuable. In this case, cities might want to have companies contribute to housing funds directly in exchange for public benefits and locational benefits.