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New York City is giving nonprofits a reprieve.  But will the City get any bang for its buck?

In the past, 501(c)3’s were eligible for tax-exempt financing from New York City’s Industrial Development Agency (IDA), the agency responsible for economic development in the Big Apple.   The Agency had been able to offer the financing using bonds approved by the State Legislature.  But when its authority to issue debt expired in January 2008, Albany failed to renew it.  Without the State’s permission, the IDA and NYC have had their hands tied, unable to assist the nonprofit sector.  As a result, nonprofits have looked to development agencies in other states to bankroll their expansion. 

On Thursday, June 16th, Mayor Michael Bloomberg announced the city’s plans to level the playing field for nonprofits in New York.  The Mayor created a new entity to help non-profit organizations expand or upgrade their facilities.

This should be a boon for nonprofits in NYC (which are the City’s largest private employer). City Comptroller John Liu, commended the good intentions behind creating this new entity, but the lack of scrutiny left something to be desired: 'The goal is laudable but at least for now the devil may be in the details, which we hope can be worked out with an eye to accounting for the use of taxpayer dollars.'

Perhaps that something is metrics. By tying eligibility for tax exempt financing from the new bond issuing entity to development of performance measurements, NYC could push nonprofits to demonstrate that their initiatives have high social impact.  Bloomberg, himself, is a big believer in performance metrics.  As he announced to a gathering at the Clinton Global Initiative earlier this month: 'I firmly believe that if you can’t measure it, you can’t manage it…That is true in business and it is true in government. Only by regularly and rigorously measuring and analyzing our efforts can we learn what works, what doesn’t and why, and take effective action.'

The Economist noted recently in a review of several books examining philanthropy after the economic downturn that nonprofits all too often shy away from measuring outcomes that determine whether or not their organizations are creating real social value.  In business, a company fails when no profits are made. In the nonprofit sector, there is no “profit” to measure.   

Because resources are so scarce, it is important to show concrete ROIs from nonprofits for both public and private investors alike. New York City could help its nonprofit sector even more by nudging them in this direction.  Social impact bonds, anyone?