Key Practices for Advancing Racial Equity Frameworks in Municipal Bonds


  • Samantha Pedrosa
November 2, 2022 - (8 min read)

Every year cities, towns and villages throughout the nation issue bonds to fund capital projects for  affordable housing, water, sewer, education, sidewalk repairs, economic development, and other areas. As municipalities strive to make progress in addressing issues of racial equity among residents they often find themselves looking for new ways to integrate racial equity into their current practices, including when they access the capital markets. Integrating a racial equity lens to municipal bond investments that fund infrastructure at scale can potentially serve as a powerful intervention for historically underserved groups—especially residents of low-income communities and racially and ethnically diverse neighborhoods.

Over the past year, NLC served as a partner to the Public Finance Initiative in a research project that convened focus groups with more than 100 public officials from cities, states, public authorities  and municipal market stakeholders from across 34 states. Based on findings from these discussions, and other research avenues, the project proposes a new framework to enable municipal bond issuers to leverage markets as a catalyst for changing racially inequitable conditions in their communities informed by the perspective of cities, states, public authorities and other municipal bond market participants.

Our upcoming brief, Racial Equity and Bond Markets, will be published in November 2022 highlighting the wide range of practices we uncovered in this area that will inform the design of the framework, and a wider program of work, including the following:

  • The majority of jurisdictions that integrate racial equity in a bond issuance focus on the use of the proceeds. Many creative and novel approaches are emerging in this area across smaller to mid-size cities who are centering racial equity in other proceeds of the issuance, including investment earnings from the bonds. Innovative strategies are also emerging in large cities, where racial equity considerations are being included in funding raised from bonds together with other revenue sources to support a equitable investment strategies.
  • Many cities have policies, frameworks, and plans that address racial equity, equity, social equity, social justice, or other values in their fiscal and governance processes. Where present, this can serve as an important foundational element for a jurisdiction to create new practices that extend to municipal bond markets.  
  • Some cities are centering racial equity in community engagement strategies that provide avenues for residents to provide meaningful feedback with respect to infrastructure projects that are financed with bond proceeds.

There are several noteworthy examples of these practices at work in cities, and other issuers across America:

Integration of Racial Equity via the Use of Proceeds: In 2021, the City of Chicago received a $1.887 billion allocation from the State and Local Fiscal Recovery Fund of the American Rescue Plan (“SLFRF”) to respond to the negative impacts of the COVID-19 pandemic. After engaging in extensive community engagement, the city of Chicago developed a recovery plan to guide the expenditure of its SLFRF allocation focused on making investments in the well-being of people, communities, and equitable economic recovery for neighborhoods hardest hit by the pandemic.[1] To amplify the SLFRF federal funding opportunity, the City of Chicago proposed to issue a $660 million general obligation bond to raise additional funding to catalyze equity-based investments in the recovery plan.[2]  Many of the projects and strategies in the City of Chicago’s recovery plan are anchored in the racial justice principles identified by the City’s Office of Equity & Racial Justice, which seeks to advance institutional change that results in an equitable transformation in how the city does business, and strives to achieve equity as both an “outcome and a process that results in fair and just access to opportunity and resources that provide everyone with the ability to thrive.”[3]

Racial Equity frameworks: Having an existing racial equity framework before going to market that has been integrated to broader fiscal and governance processes can be a helpful precondition for an issuer or potential issuer who wants to center racial equity principles in bond issuances for the first time. During the focus groups, participants expressed being in varying stages of implementing frameworks focused on equity, racial equity, social justice, and other values.[4] For example, the City of Madison, Wisconsin adopted a resolution in 2014 establishing racial equity and social justice as core principles for all decisions, policies, and functions of the city via the Racial Equity & Social Justice Initiative (RESJI). The City of Madison invested heavily on training staff in racial equity, equity analysis, and equity in public participation. It has shared documents and frameworks to help staff and policymakers work through and incorporate racial equity in policy making and project development, in creating budgets, in hiring and in public participation. The city also solidified Department Equity Teams to have the specific knowledge of the ways to enhance equity in specific citywide departments and utilized Neighborhood Resource Teams to stay informed of the needs, issues and priorities for residents most impacted by racial inequities. While Madison has not yet issued a bond with proceeds designated to advance racial equity, cities that have comprehensive approaches like RESJI often have important foundational elements in their toolbox  that could potentially be extended to bond issuances or capital projects.

Community engagement:  Engagement with the community is a vital component of a racial equity strategy and can prove particularly meaningful when executed at two key levels of a bond issuance – at the authorization and related to the capital project. The City of Chandler, Arizona, serves as a model of how community engagement can be targeted to elevate the voices of residents in major infrastructure improvements. Subcommittees comprised of volunteers that support community engagement functions are often tasked with going into neighborhoods around the city to generate a conversation around the capital projects under consideration and gathering feedback from Black, Latino, Asian, indigenous and other populations of color and residents who historically had low rates of participation and engagement. Volunteers aim to include and integrate public feedback at three levels – the authorization of the bond measures, infrastructure project needs, and targeted feedback on equity needs.

These examples are only a few of the strategies cities and other issuers are adopting to advance racial equity in bond issuances, highlighted in the brief.  The framework we are creating in response to what we have learned is being developed with one guiding purpose: to enable municipal bond issuers to leverage bond markets as a catalyst for changing racially inequitable conditions in their communities, resulting in the improvement of material conditions for populations and the enhancement of material risks in their jurisdiction. You can learn more about our findings, additional bond market practices being adopted by issuers and more by reading our Racial Equity and Bond Markets brief which is available online as a resource for issuers looking to learn new practices from their peers.

Also as part of this project, we will be hosting a panel at the National League of Cities 2022 City Summit conference. Join us on Thursday, November 17 from 4:00 – 5:15 PM as we welcome experts in municipal finance and local officials with experience integrating racial equity into bond markets during “Municipal Bonds, Infrastructure and Racial Equity: Making the Connection.”

Written with Lourdes Germán, Executive Director of the Public Finance Initiative. She also teaches at the Harvard University Graduate School of Design.



[3] and

[4] Equity, equality, racial equity, social justice are terms that were often used interchangeably by focus group participants in our conversations, but they carry many different meanings. To report our findings accurately, we present those terms in this blog in the manner that they were introduced by the focus group participants in our conversations. We share prevailing definitions for those terms below from leading partners in the field to highlight the important distinctions among them:

Equality: Providing the same resources and opportunities to all.[i]
The state, quality or ideal of being just, impartial, which is achieved by giving people what they need to enjoy full, healthy lives and providing them with resources that are proportional to what they need.[ii]
Racial Equity:
When race can no longer be used to predict life outcomes and outcomes for all groups are improved.[iii]
Racial Justice:
The systematic fair treatment of people of all races that results in equitable opportunities and outcomes for everyone.[iv]
Social Justice: A vision of society in which the distribution of resources is equitable and all members of a space, community, or institution, or society are physically and psychologically safe and secure.[v]

[i] Source: The Government Alliance on Race & Equity
[ii] Source: The Annie E. Casey Foundation
[iii] Source: The Government Alliance on Race & Equity
[iv]  Source: The Annie E. Casey Foundation
[v] Source: Brandeis University

About the Author

Samantha Pedrosa

About the Author

Samantha Pedrosa is a Program Manager at the National League of Cities.