Capital Strategies

Introduction

Introduction to Capital Strategies

Capital strategies are the ways that cities combine multiple funding streams to support a wide range of initiatives, from infrastructure projects to social programs. By leveraging a diverse mix of funding sources, cities can build a robust financial framework that is both resilient and sustainable.

This approach moves beyond relying on a single funding source, like sales taxes or single grant funding, which can be vulnerable to economic shifts. Instead, a well-designed strategy integrates a mix of funding types, providing greater funding stability that allows the city to support a wider range of initiatives. This not only creates a robust financial framework that is resilient and sustainable, but also ensures resources are allocated effectively and equitably to address complex community challenges.

This guide identifies three primary capital strategies cities use to improve resident health and community wellbeing- Blending and Braiding, Cluster Initiatives, and Capital Stacking.

Navigation Tip: Use the links at left to jump to a specific capital strategy. Once you finish this section, go back to Chapter 2: Funding Streams to consider additional opportunities you might bring together or jump to Chapter 5: Resources to access tools and supports that can help you to implement your strategy.

Braided and Blended Funding

While blending and braiding are two distinct capital strategies, they are often discussed jointly because they share a common goal, to combine resources from multiple funding streams to address complex, interconnected challenges. Both models are particularly effective in tackling issues that cross traditional departmental or sector boundaries, such as housing insecurity, public health disparities, and workforce development. They achieve this by aiming to break down financial silos and maximizing resources towards a shared objective.

The key difference between blending and braiding is in their approach to tracking and managing funds:

• Braided Funding: This model keeps multiple funding streams distinct while coordinating their use to achieve shared goals. This approach allows cities to address funder-specific requirements while still leveraging multiple sources to deliver comprehensive solutions. It is particularly effective for programs where funding sources have clear restrictions, such as federal grants for housing or state funding for education. For example, a city might braid federal, state, and local funds to address homelessness by combining housing support, healthcare services, and employment training programs.

• Blended Funding: Blended funding models consolidate resources from multiple funding streams into a single pot, allowing cities to address complex, interconnected challenges with a unified strategy. This approach simplifies funding allocation and facilitates the design of holistic, cross-sector programs that address multiple needs simultaneously. While widely recognized, examples of the widespread use of blended funding are limited due to the complexity of coordinating multiple funding sources and compliance requirements.

Pathways for Action

• Mapping Resources: Identify and assess all potential funding sources, including federal, state, local, and private contributions. Ensure that both braided (keeping funds distinct) and blended (integrating funds) approaches are considered when choosing funding sources.
• Coordinated Strategy: Develop a unified strategy that outlines how each funding stream will be used and tracked, whether braiding distinct sources to target separate program components or blending them to create a comprehensive funding solution.
• Cross-Departmental Collaboration: Establish cross-departmental teams to work collaboratively, ensuring that different sectors (e.g., health, housing, workforce development) align their goals and use the funding streams effectively to achieve shared objectives.
• Stakeholder Engagement: Engage key stakeholders such as funders, community organizations, and service providers to align on goals, ensuring transparency and shared understanding of the funding model being employed.
• Compliance and Reporting: Establish systems for tracking and reporting on outcomes for each funding source. For braided funding, this involves managing separate compliance requirements for each fund. For blended funding, this involves integrating the compliance structures into a cohesive reporting system that can track fund utilization in alignment with the funding source requirements.
• Governance and Oversight: Set up centralized or coordinated governance structures to oversee both the allocation and proper utilization of resources. This ensures accountability and clear guidance for all involved.

Challenges

• Administrative Complexity: Both funding models introduce complexities in managing multiple sources. In braided funding, these complexities stem from keeping funds distinct. In blended funding, the challenge is coordinating across sources that are integrated.
• Misaligned Objectives: Different funders may have differing priorities and requirements, creating difficulties in aligning goals. In blended funding, these may be addressed through integration. In braided funding, separate funder requirements need careful management – and likely investment in accounting processes, systems, and personnel.
• Sustainability and Stability: While blending and braiding strengthens financial resilience, it is not without risk. For braided funding, individual fund sources may be vulnerable to reductions. For blended funding, any changes to one stream can disrupt the entire integrated funding model.
• Equitable Allocation: Ensuring that funding is distributed equitably among communities and program areas is essential but can be a challenge when balancing multiple funding priorities and guidelines.
• Resource Management: Preparing for and managing the increased workload to coordinate, track, and report on fund utilization may strain resources.

CASE EXAMPLE: Tacoma, WA

Funding Model: Braided Funding (WIOA, ARPA, General Funds)

Tacoma’s Healthcare Apprenticeship Pathways (IHAP) pilot offers a powerful model for how workforce development, public health equity and regional partnerships can come together to meet urgent local needs.

Conceived in the wake of the pandemic, IHAP was Tacoma’s response to a critical healthcare workforce shortage—and to long-standing structural barriers faced by low-income residents trying to enter living-wage careers. The city intentionally launched the initiative with an “Earn and Learn” approach, ensuring that participants would not have to choose between income and skill-building.

Coordinated City-Led Action

IHAP’s design and success reflect Tacoma’s commitment to coordination, equity, and authentic partnership. The city brought together Pierce County, local employers, the workforce development board (WorkForce Central), community colleges, and hospital systems. Together, they shaped a program that was both strategically aligned with regional needs and directly responsive to community voices.

Tacoma’s Equity Index was instrumental in targeting the program geographically and demographically. City staff noted their desire to use the Equity Index to intentionally and strategically place the work in areas with health disparities, educational disparities, transportation issues, and lack of access to technology.

Diversified and Braided Funding

Funding for IHAP came from multiple braided sources, including federal Workforce Innovation and Opportunity Act (WIOA) funding, American Rescue Plan Act (ARPA) allocations and both city and county general funds. Tacoma led efforts to align these streams, reducing silos and ensuring a long-term commitment beyond one-time dollars.

Every Tacoma resident enrolled in the pilot receives full wrap-around support during the training and for up to six months after the program. This support includes access to transportation, childcare, technology, including computers and internet access, and cash stipends.

A Healthcare Workforce Pipeline With Lasting Impact

Since its launch, IHAP has created a replicable pathway into high-demand healthcare roles—certified nursing assistants, medical assistants, and community health workers. More importantly, the program has set a new standard for what equitable, city-led workforce development can look like.

Outcome Tracking and Next Steps

Tacoma continues to monitor the program through completion rates, employment data, and participant feedback. Retention in healthcare roles remains high, and the city is now using these insights to shape a larger, region-wide workforce infrastructure that centers equity from the start

Cluster Initiatives

Cluster initiatives focus on bringing together businesses, nonprofits, and government entities within specific sectors or geographic regions to address shared challenges, foster innovation, and drive economic growth. While cluster initiatives are not a capital strategy in the traditional sense, as their primary goal is to build up a specific industry or ecosystem within a community or region, by nature of their formation these efforts offer a unique opportunity to leverage assets across partners to create sustainable, community-driven impact.

Pathways for Action

• Focus on Sector Strengths: Identifying key sectors, such as technology, healthcare, or manufacturing, where local businesses and educational institutions can collaborate on innovation.
• Create Shared Infrastructure: Cities can invest in physical and digital infrastructure that supports cluster development, such as innovation hubs, coworking spaces, or transportation networks.
• Foster Collaboration Across Sectors: Acting as a neutral convener, a city can bring together stakeholders from business, government, and academia to co-develop solutions and share resources.
• Encourage Regional Investment: Incentivizing private-sector investment in key industries through tax breaks, grants, or access to public funds to accelerate the growth of cluster initiatives.

Challenges

• Diverse Stakeholder Interests: Ensuring alignment among a variety of local actors, businesses, educational institutions, and government entities—can be challenging.
• Sustaining Engagement: Keeping stakeholders committed over time and through the inevitable setbacks of long-term projects requires constant effort.
• Infrastructure Limitations: Ensuring that local infrastructure can meet the growing demands of developing clusters, such as transportation, utilities, or housing, requires careful planning and coordination.

CASE EXAMPLE: Milwaukee, WI

Funding Model: Cluster-based Blended and Braided Funding 

Milwaukee’s Water Technology Cluster is a nationally recognized effort to position the city as a global leader in freshwater innovation. Spearheaded by The Water Council (founded in 2009) and rooted in deep partnerships with local universities, businesses and city government, the cluster combines research, entrepreneurship, and infrastructure investment to solve pressing water challenges while fueling economic growth. 

Cross-Sector Collaboration 

The initiative brings together a wide range of partners: The Water Council, the City of Milwaukee, Milwaukee 7 (regional economic development agency), the University of Wisconsin-Milwaukee, Marquette University, local utilities, and international firms. Through shared vision and coordinated action, the city of Milwaukee has built a dynamic innovation ecosystem centered around water technology. 

The City of Milwaukee supported the initiative through infrastructure investments and policy alignment. It established the Global Water Center—a hub for startups, researchers, and corporate partners—and promoted international visibility by forging partnerships abroad and hosting global water innovation forums. These efforts positioned Milwaukee as the preeminent U.S. destination for water research and commercialization. 

Smart Investment and Resource Coordination 

Milwaukee’s funding model blends and braids diverse resources—leveraging Tax Increment Financing (TIF), federal grants from agencies like the U.S. Economic Development Administration, corporate and philanthropic support, academic resources, and leasing revenue from the Global Water Center. 

Rather than relying on a single funding source, partners intentionally layered multiple streams—each with its own goals, timeframes and restrictions—into a unified financing strategy. TIF funds supported infrastructure; federal and academic grants powered research; and corporate dollars fueled entrepreneurship and commercialization. The Water Council helped align these streams, acting as a hub to coordinate efforts and demonstrate collective impact. The city played a catalytic role, investing TIF dollars in the Reed Street Yards water district and removing development barriers to enable innovation-focused growth. 

Results and Recognition 

The cluster’s impact is measurable: more than 175 water-related firms now operate in the region (up from 120), employing over 20,000 people and generating an estimated $10.5 billion in annual revenue. The city’s leadership and the Council’s coordinated programming have attracted delegations from over 80 countries and earned international recognition for Milwaukee’s water innovation model. 

By linking workforce development, infrastructure, research and entrepreneurship under a cohesive strategy, Milwaukee’s Water Technology Cluster demonstrates how cities can build global leadership around a shared challenge. The model’s success has become a blueprint for other communities exploring cluster-based innovation supported by cluster-based funding. 

CASE EXAMPLE: St. Louis, MO

Funding Model: Braided Funding (Philanthropic, Public and Private Investments)

St. Louis has established itself as a global leader in agriculture technology and biosciences through a coordinated cluster strategy that aligns funding, infrastructure, and institutional expertise. At the heart of this success is a braided funding approach, integrating philanthropic contributions, venture capital, federal grants, and local economic development funds to drive research, development, and commercialization in AgTech.

Building the AgTech Cluster

With a strong foundation in plant sciences and a concentration of key institutions such as the Donald Danforth Plant Science Center and the Missouri Botanical Garden, the St. Louis region leveraged its research capacity to attract corporate investment and spur innovation. The cluster’s growth has been fueled by partnerships between universities, major agribusiness firms, nonprofit organizations, and government agencies working together to build capacity and remove barriers to innovation.

The City of St. Louis and regional partners played a key role in anchoring the cluster’s development. By providing infrastructure, supporting shared research facilities, and coordinating stakeholder engagement, the city created the conditions for sustained growth. Investments in facilities like the 39 North innovation district helped centralize resources and strengthen regional identity.

Funding Coordination

Cluster development was supported through a blend of philanthropic capital (including major commitments from foundations), federal science and technology grants, state and local economic development funds and private investment. This braided model enabled the region to attract venture capital, fund targeted R&D and support startup incubation and growth.

St. Louis benefitted from philanthropic capital that helped de-risk early-stage investments and fill funding gaps not addressed by the market. Entities like BioSTL used philanthropic dollars to launch initiatives that later attracted federal and private funding. The region also saw a significant increase in early-stage investment activity, thanks in part to the emergence of local angel investors and the presence of specialized venture capital firms focused on life sciences and AgTech. This mix of capital types helped fuel innovation, lower barriers for entrepreneurs and promote inclusive economic development.

Outcomes and Impact

The initiative has helped create more than 15,000 biosciences jobs in the region, many of them high-paying positions that contribute to long-term economic sustainability. Additional outcomes include an increase in startups launched, venture capital secured, patents filed and foreign direct investments. St. Louis is now internationally recognized for its leadership in agricultural innovation, with a growing ecosystem of entrepreneurs, scientists and investors committed to solving global food and climate challenges through technology.

Capital Stacking

Capital stacking, also called sequencing, involves leveraging multiple funding sources—federal, state, local, and private—sequentially to maximize project funding while ensuring compliance with each source. This approach allows cities to fund large-scale, multi-phase projects and navigate complex funding landscapes effectively.

Pathways for Action

• Identify Synergistic Funding Streams: Cities can pinpoint available funding sources and prioritize those that align with project goals. For example, using federal housing tax credits alongside city-issued bonds for affordable housing.
• Coordinate Stakeholder Engagement: By aligning the interests of government entities, private investors, and nonprofits early on, cities ensure a seamless flow of funding and a unified vision for project goals.
• Maximize Local Resources: Cities can leverage municipal bonds, tax credits, or direct city funding to complement federal and private investment, reducing financial risk.
• Ensure Compliance and Transparency: Developing systems for tracking and reporting on each funding stream ensures compliance and accountability, while also providing transparency to stakeholders.
• Engage Community Partners: Collaborating with nonprofits, service providers, and local businesses ensures that the projects address community needs and receive local support.

Challenges

• Complexity in Execution: Coordinating multiple funding streams, ensuring compliance, and managing stakeholder expectations can be resource intensive.
• Risk of Delays: Delays in securing one funding stream can impact the overall project timeline, creating bottlenecks.
•  Managing Long-Term Commitments: Large-scale projects with multiple funding sources require sustained oversight and long-term commitment from all stakeholders involved.