PAY FOR SUCCESS &

MONEYBALL FOR GOV’T

October 2014

WHAT

IS IT?

OVERVIEW

PAY FOR SUCCESS A NEW FINANCIAL MODEL THAT SHIFTS THE RISK FROM THE COUNTY TO PRIVATE FUNDERS WHILE ACHIEVING SUBSTANTIAL SOCIAL OUTCOMES THROUGH PERFORMANCE-BASED PROGRAMS

“[Pay for Success is] an arrangement between one or

more government agencies and an external organization

where the government specifies an outcome and promises

to pay the external organization a pre-agreed sum if it is

able to accomplish the outcome.” - Center for American Progress

GOVERNMENT INTERMEDIARY SERVICE

PROVIDER PROGRAM

INDEPENDENT EVALUATOR

FUNDERS

1

2

8

6

7

4 5

REPAYMENT IF OUTCOMES ACHIEVED

RFP PROCESS

RFP PROCESS

IMPLEMENTATION

FUNDRAISING 3 FUNDING

ORGANIZATION

AGREED-UPON OUTCOMES ACHIEVED OR NOT

FINDS FUNDERS AND PROCURES CAPITAL

SELECTS SERVICE PROVIDER THROUGH RFP COORDINATES ENTIRE PROJECT

STAKEHOLDERS

SALT

LAKE

COUNTY

IDENTIFIES SOCIAL NEED & DESIRED OUTCOMES DETERMINES INTERMEDIARY ESTABLISHES BENCHMARKS REPAYS FUNDERS BASED ON SUCCESS

INTER MEDIARY

DIRECTLY IMPLEMENTS PROGRAM REPORTS TO INTERMEDIARY

SERVICE PROVIDER

DETERMINES IF BENCHMARKS HAVE BEEN MET

INDEPENDENT FROM ALL OTHER STAKEHOLDERS EVALUATES DATA OVER SPECIFIED TIME PERIOD

STAKEHOLDERS

DATA EVALUATOR

FUND INITIAL CAPITAL

ASSUME RISK OF LOSS & PROGRAM PERFORMANCE

PHILANTHROPIC FUNDERS

SUPPLEMENT COMMERCIAL FUNDERS’CAPITAL

PROVIDE FIRST-LOSS POSITION

COMMERCIAL FUNDERS

BENEFITS

PAY FOR SUCCESS FINANCING MODEL

TRADITIONAL FINANCING

MODEL

BENCHMARKS ARE MET

COUNTY PAYS

COST OF

PROGRAM AND

RECEIVES

BENEFITS

COUNTY PAYS COST OF

PROGRAM AND RECEIVES

BENEFITS

COUNTY PAYS COST AND RECEIVES NO

BENEFITS – COUNTY IS

OUT THE COST OF

PROGRAM

COUNTY PAYS

NOTHING – LOSSES

ARE ABSORBED COMPLETELY BY

FUNDERS

BENCHMARKS ARE NOT MET

SHIFTS RISK OF SOCIAL INTERVENTIONS TO PRIVATE SECTOR

POTENTIAL FOR SIGNIFICANT SHORT- AND LONG-TERM SAVINGS TO COUNTY BUDGET

PROGRAMS ARE SELECTED BASED ON STRICT DATA AND PERFORMANCE INDICATORS, INCREASING LIKELIHOOD OF ACHIEVING DESIRED IMPACT

SALT

LAKE COUNTY

BENEFITS

DIVERSIFICATION • MULTIPLE PROJECTS LOWERS RISK

DOUBLE-BOTTOM LINE

• PROFITABILITY

• SOCIETAL BENEFIT

FUNDERS

LAUNCHED PROJECTS • Massachusetts – Juvenile Justice • New York State – Justice/Workforce

Development • New York City – Juvenile Justice

• Salt Lake County – Early Education

ACTIVE DEAL CONSTRUCTION • Illinois – Dually Involved Youth • Cuyahoga County, Ohio – Family

Homelessness/Foster Care

• Santa Clara County, Calif. – Chronic Homelessness; Mental Health

• New York State – Juvenile Justice • Fresno County, Calif. – Asthma

ACTIVE GOVERNMENT PROCUREMENT • Request for Information (RFI) – Denver, CO;

Colorado; Michigan; Minnesota; South Carolina

• Request for Proposals (RFP) – Connecticut; Massachusetts; Social Innovation Fund

OTHER GOVERNMENT ACTION • Pending Legislation – Idaho; Los Angeles

County, CA; New Jersey; Oklahoma; Oregon; Washington

• Procurement Expected – Ohio, Pima County, AZ

• Federal Interest – Treasury Department; Department of Labor; Department of Justice;

PFS LANDSCAPE – 2014

KEY CRITERIA FOR A PFS PROJECT

SIGNIFICANT UNMET NEEDS

AND TARGETABLE POPULATION

TRACK RECORD OF CREDIBLE

DATA

INTERVENTIONS THAT WORK

SERVICE PROVIDERS WITH

CAPACITY TO SCALE

RISK MITIGATION

NET FINANCIAL AND/OR SOCIAL

BENEFIT

LEADERSHIP

FROM STAKEHOLDERS

Proposal and Parameters

With technical assistance from Third Sector Capital Partners, Salt Lake County would structure and implement three pay for success projects

over the next 18 months

Proposal

Parameters

Costs for structuring the transactions paid for out of a “catalyst fund,” which is seeded with $250,000 from Salt Lake County Costs for approved projects would be paid for out of a combination of: (1) Quantifiable direct / indirect savings to the County budget (2) Offsets to unrelated parts of the County budget (3) Additional revenues from other sources, including State and Federal

governments, other grants, philanthropic donations, etc.

Projects will be within the County’s set of core responsibilities

PATHWAY TO COMPLETED PROJECTS

IDENTIFY ISSUE AREA

ASSESS

TRANSACTION

POTENTIAL

NEGOTIATE

CONTRACTS ADDRESS GAPS

DELIVER SERVICES;

MANAGE

PERFORMANCE

KEY ACTIVITIES

DEMONSTRATION (IF NECESSARY)

FEASIBILITY LANDSCAPE DEVELOPMENT EXECUTION

CAPACITY-

BUILDING (IF NECESSARY)

ISSUE AREA

DECISION

CAPITAL RAISE/

LAUNCH SERVICES

STAKEHOLDERS

FINALIZED

Approximate Project Timeline

Feasibility Procurement Project

Construction Launch

≈[3-6] months ≈[1-4] months ≈[9-12] months ≈[1]+ months

Determine stakeholder

readiness, budget scan, prioritization of issue areas and value proposition

for PFS

Design procurements, develop scoring

criteria and advise on provider selection (Concurrently, pre-

development fundraising)

Execute PFS contract, including project and programmatic design,

evaluation plan, financial arranging, due diligence and

contract negotiation

Ramp-up pilot and/or project, ongoing project

advisory and oversight

Early 2016 2015 Early 2015 2014

POTENTIAL PROJECTS

BEHAVIORAL HEALTH

RECIDIVISM / CRIMINAL

JUSTICE

PUBLIC HEALTH

Currently exploring cost-saving opportunities for the County and potential benefits to the community in each of the following areas: