New York Owes Nonprofits More than a Parade

Thursday, October 7, 2021

New York Owes Nonprofits More than a Parade
By: Neill McG. Coleman, Executive Director, Trinity Church Wall Street Philanthropies and Norah McVeigh, Managing Director, Financial Services, Nonprofit Finance Fund. This piece was originally published by The Imprint on October 5, 2021.

New Yorkers depend on a network of nonprofits for essential services including food, shelter and safety. The city — while generous about celebrating these nonprofits — owes them hundreds of millions of dollars. 

These debts jeopardize services and threaten the livelihoods of the frontline heroes doing the work. This summer, a Hometown Heroes Ticker Tape Parade celebrated the tremendous efforts and sacrifices made by the New Yorkers who’ve been providing essential services throughout the pandemic. But nonprofits can’t pay their employees or sustain their programs with ticker tape.

One of the many examples of organizations stuck in a funding gap is Violence Intervention Program (VIP), a culturally specific organization working with Latinx survivors of domestic and sexual violence to live free from harm and reach and sustain their full potential. Facing months of delays in payments on government contracts, VIP is often in a position where cash flow scrapes dangerously low — making it precarious to pursue additional government contracts. 

When organizations that are run by and for Black, Indigenous and people of color can’t rely on prompt payments, well-intentioned government resources may never make it to the very communities they are supposed to help. Instead, VIP is focused on diversifying revenue and hopes philanthropic foundations will be more reliable than the City of New York. 

To help cover expenses while waiting for payments on services they’ve delivered, VIP is receiving a no-interest loan from a new Trinity Church Wall Street fund administered by Nonprofit Finance Fund. VIP’s loan is part of $6.5 million provided to 12 Trinity Church grantees working in housing, homelessness and racial justice that are facing financial challenges related to the COVID-19 pandemic.

While we are proud to be able to use some of our resources to help these organizations keep the doors open and provide essential services, it should not be philanthropy’s role to pay city government’s bills. And the bills are piling up.

Thousands of New Yorkers rely on Bowery Residents’ Committee (BRC), one of New York City’s leading nonprofit organizations providing housing and supportive services to people who have faced homelessness.

City government relies on the committee, too. In the early days of the pandemic, the city asked BRC to ramp up delivery of life-saving food and shelter. And it did. But now, unpaid invoices have ballooned from $9 million to over double that in a matter of months, according to BRC President and CEO Muzzy Rosenblatt.

These organizations don’t have large reserves or endowments to fall back on when the city government doesn’t pay its bills. To help, BRC applied for and received a $1 million no-interest loan from the fund, but that doesn’t solve the underlying problem.

It is not reasonable for the government to outsource responsibility for meeting critical community needs and then starve the nonprofits doing the work. The best way for the city to celebrate front-line workers is to meet its most basic obligation to them: pay them, as agreed, for the work they’ve done.

Nonprofits receiving loans from Trinity’s fund face a total of more than $29 million in unpaid contracts, according to NFF’s analysis of loan applications. That’s a small portion of a much larger, well-documented and persistent problem. An analysis by SeaChange Capital Partners estimated that in 2017, the burden imposed on nonprofits due to city contract delays was $675 million: $662 million in negative cash flow associated with the expenditures from the start day of the contract to the registration date, and a further $13 million in associated financing costs. 

SeaChange managing partner John MacIntosh recently proposed creating a $750 million bridge fund to lend up to 90 percent of the money owed to nonprofits under city contracts supported by philanthropy and traditional lenders. We support a range of efforts to relieve the strain on essential nonprofits.

This is an equity issue. The nonprofits that are being stiffed employ a workforce that is predominantly made up of women and people of color. And there are knock-on effects: nonprofits often delay payments to vendors or even furlough staff while waiting to get paid by the city.

The change in city leadership in January provides an opportunity to reset. We call on New York City government, and in particular the incoming mayor and comptroller, to adopt the Human Services Council’s recommendation that the government must pay in full and on time for essential services, and that human services contracts must reflect market rates for goods and services. They should fully embrace these and all of the Human Services Council’s recommendations from its recent Essential or Expendable? report.

The good news is that the leading candidates for mayor and comptroller, Eric Adams and Brad Lander, respectively, have made commitments that would reform the payments process. New Yorkers must hold the new administration accountable to deliver on those commitments.

The city owes it to the heroes we’re celebrating on the streets and on social media to step up and pay — fully and fairly — for the results they’ve delivered in our communities.