PG County Micro Social Impact Bond for STEAM: A Feasibility Study | Infinite 8 Institute

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African-American and Latino workers also now represent 29 percent of the general workforce population, but just 16 percent of the advanced manufacturing workforce, 15 percent of the computing workforce and 12 percent of the engineering workforce – all rates that have remained essentially flat. – USNews

Feasibility Study – Major Areas I. II. III. IV. V.

Bayes’ Theorem………………………………………………………………………………………………………………..1 Market Analysis………………………………………………………………………………………………………………..1 Organizational/Technical Issues………………………………………………………………………………………..30 Financial Issues………………………………………………………………………………………………………………...31 Conclusion………………………………………………………………………………………………………………………..37

I. Bayes’ Theorem (Conditional Probability) Bayes’ Theorem – PG County Micro-Social Impact Bond for STEAM Prior Probability Initial estimate of how likely it is X 75% the project will be successful New event occurs: Raise $2.5 million in capital to sustain 3-year pilot programming Probability of raising capital y 60% Probability of not raising capital z 40% Posterior Probability Revised estimate of how likely it is that the project will be Xy 82% successful, given that $2.5 Xy + z(1-x) million is raised in capital *Bayes’ theorem is concerned with conditioned probability. That is, it tells us the probability that a theory of hypothesis is true if some event has happened.

II. Market Analysis a. What is the current or projected demand for your proposed products or services? In other words, how many units can you reasonably expect to sell each month? What is the social impact demand forecast? 

STEM Demand (Local, Nationally, Internationally) o Local Level  In April of 2014, the Maryland legislature last week approved a 2015 budget, and it includes $12 million to help create jobs in Maryland's innovative biotech and science sector. That's a smart use of resources. For lawmakers looking to put residents back to work, our state's high-tech sectors have been bright spots — especially our vanguard biotech industry, which accounts for more than 11 percent of the Maryland economy.  Source: www.Baltimoresun.com.

Maryland schools produce  According to a report by Gov. Martin O’Malley’s STEM Task Force, just 4,000 STEM graduates Maryland schools produce just 4,000 STEM graduates for 6,000 for 6,000 annual STEM job annual STEM job openings. The newly agreed upon budget includes openings.

Governor O'Malley's record funding for education, with a strong emphasis on building STEM skills.  Also, in the fiscal 2016 allowance is $4.9 million for the Maryland Innovation Initiative, advancing Technology in Maryland.  The FY 2016 allowance includes $12 million in biotechnology tax credits to leverage investment for life science companies, $9.4 million to further develop stem cell technology, and $2.5 million, after contingent reductions, in investments and tax credits to promote cybersecurity research.  The allowance also includes $9.0 million in research and development tax credits, $8.5 million to create endowed research

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250 Baltimore youth are held in detention each day at a cost of $464 per youth per day.

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chairs at universities, and $4.9 million to commercialize research conducted at participating universities through the Maryland Innovation Initiative. The allowance maintains $4.5 million in funding for the Employment Advance Right Now (EARN) program, an industry-led workforce development initiative to help develop the skilled workforce businesses need to remain competitive.

The budget also includes $2.8 million for adult instructional services and General Educational Development (GED) testing programs as well as $1.2 million for the Conservation Jobs Corps to teach green jobs skills to at-risk youth.

The FY 2016 allowance provides $15.9 million, after contingent reductions, for the Maryland State Arts Council as well as $2.0 million to fund distinctive cultural arts organizations. The budget includes $9.0 million for the Sustainable Communities Tax Credit to leverage private investment and revitalize our State’s cities and towns as well as $1.1 million to provide financing to new and expanding small businesses in those communities.

The FY 2016 allowance for the Maryland Energy Administration (MEA) includes $19.9 million for Renewable and Clean Energy Programs and Initiatives; $19.6 million for Energy Efficiency and Conservation Programs; and $4.1 million for the Jane E. Lawton Conservation Loan Program and State Agency Loan. The Department of Housing and Community Development receives $41.2 million for weatherization and energy efficiency programs.  Source: www.Maryland.gov.

In their analysis of HB 517, the Maryland Department of Legislative Services analyzed numerous factors. They researched a program for prisoner recidivism in Great Britain and they worked with the Maryland Department of Public Safety and Correctional Services.

In January of 2013, the Department of Legislative Services advised against SIBs for the following reasons:  SIBs cause an increase in budgetary pressure compared to direct program financing due to the necessity of funding contingent liabilities and the added expense of features unique to SIBs;  SIBs do not produce cost savings when outcomes are achieved, even under highly optimistic assumptions;  SIBs could effectively exclude new providers and program types that do not have a well-established record of success with investors seeking to minimize risk; and  SIBs potentially distort evidence used in policy decisions For example, 250 Baltimore youth are held in detention each day at a cost of $464 per youth per day. This amounts to an annual bill to the state of about $42 million. If a SIB provided enough funding to offer alternative programs for just 50 percent of this daily population in accordance with proven programs already demonstrated through the MOC, the state could use the $21 million

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in savings to fund 21,000 summer jobs or 4,200 Little League teams.

The uses are endless, and so too would be the accomplishments of our youth and the potential for an improved quality of life in Baltimore—if we invest in opportunity.  Source: www.spotlightonpoverty.org, Maryland.gov o

National Level  STEM Nationwide – STEM fields directly employed more than 7 million Americans in 2012. And job openings in science and techrelated fields are projected to grow by nearly 20 percent by 2018 — nearly double the growth in non-STEM occupations.  According to a report by the Information Technology & Innovation Foundation in 2010, the number of STEM graduates will have to increase by 20-30% by 2016 to meet the projected growth of the US economy.  Overall, STEM employment grew three times more than non-STEM employment over the last twelve years, and is expected to grow twice as fast by 2018.  Source: www.itif.org.  Drone Technology  Analysts predict the Unmanned Aerial Vehicle (UAV) spending will reach $89 billion worldwide by the year 2023 – The TEAL Group  Forecasters estimate the domestic market for UAV’s will reach $82.1 billion by 2025 – Association for Unmanned Forecasters estimate the Vehicle Systems Int’l. domestic market for UAV’s  UAV’s are forecasted to created hundreds of thousands of will reach $82.1 Billion by high paying jobs in the US market – Fortune Magazine 2025.  70,000 of the estimated 100,000 jobs will be created within the first ten years of wide-spread commercialization – AUVSI  American regulators plan to phase in commercial use of drones weighing 55 pounds or less – Business Insider  3D Printing Technology  Global 3D printing market to grow from $2.5B in 2013 to $16.2B by 2018 – Canalys  U.S. Market for 3D printer manufacturing to reach $1.4B in 2014, a 28% increase from 2009 – IBIS World  67% of manufacturers surveyed are currently implementing 3D printing either in full production or pilot and 25% intend to adopt 3D printing in the future – PriceWaterhouseCooper  Over the next decade manufacturing is expected to quadruple its share of the total 3D printing market, accounting for a projected 46% of the market in 2025 – Lux Research

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Global low-carbon investment totaled roughly $500B in 2013, and is expected to double by 2020 to 1.6 Trillion.

Digital Currency Technology  Bitcoin has a 90% share of the digital currency market – CoinDesk  Roughly 60,000 companies now accept the currency – Futuremoneytrends.com  The term “Bitcoin” was mentioned online over 3.4 million times in 2013 – PwC  96% of online discussion of Bitcoin occur among US/Chinese males, ages 26-50 – PwC  On average there were 55,000 daily Bitcoin transactions in 2013. Daily average was less than 100 in 2009. – Congressional Research Service Green Technologies  Global low-carbon investment totaled roughly $500B in 2013, and is expected to double by 2020 to $1.6T – IEA  There are currently 1.4B people without access to electricity – World Wildlife Fund  Nuclear waste will remain dangerous for another 10,000 years – WWF  The global population is set to reach roughly 10 billion by 2050 – UN  10-foot Sea Level Rise Now Unstoppable Due to Glacier Collapse – Popular Science Magazine Art & Design  This year’s findings suggest that art buyers and collectors are increasingly acquiring art and collectibles from an investment viewpoint (76% said so this year, compared with 53% in 2012).  It is particularly interesting to see that the wealth management community is already responding to this new demand, with 88% of the family offices and 64% of the private banks surveyed said that estate planning around art and collectibles is a strategic focus in the coming 12 months.  Focus II reports that the nationwide demand for graphic designers/web art directors is expected to grow as fast as average through 2018, with people established in their career generally earning between $33,130 and $58,140 per year. Employment prospects for Exhibit Designers are expected to improve in the near future, with O*Net projecting above average growth in the field through 2016 (www.onetcenter.org). According to the Occupational Outlook Handbook, average wages for Exhibit Designers as of 2010 were $23.31 hourly and $48,480 annually.  Source: www.bemidjistate.edu

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o China now stands behind only the United States in the number of science and technology journals published annually, and is expected to overtake the US in scientific output within a few years…

 Art & Finance Report 2014-15 United States and Europe: there is a positive outlook for art wealth management services in the United States and Europe, as art market values are moving towards an all-time high. Wealth managers expect their clients to increase their total wealth allocated to art, providing a fertile ground for Art & Financerelated services aimed at protecting, leveraging and enhancing art and collectibles wealth.  Another blow to the arts has been the decline in government funding. During the Great Recession alone local government support for the arts fell 18 percent, while state funding dropped 27 percent. Between 1992 and 2012, adjusted for inflation, total government support declined 31 percent.  Source: www.americantheatre.org.

International Level  Europe  Europe is in a similar position to the US, but with less flexible immigration policies. Unemployment is on the rise across Europe but in STEM fields the real problem is a shortage of skilled talent Cedefop, the Thessaloniki-based European Centre for the Development of Vocational Training, predicts that by 2015 there will be a shortage of between 380,000-700,000 ICT workers in Europe. Germany alone was short 114,000 STEM-skilled workers in 2011.Principles for Responsible Investment represent a $30 trillion dollar or 20% share of global capital markets, showing a clear international demand to invest in socially responsible companies and/or projects.  China  The results are already visible. A staggering 41% of all degrees awarded by Chinese institutions in 2011 were in a STEM subject, almost twice the proportion of STEM degrees awarded in the UK and three times the rate in the US.  China now stands behind only the United States in the number of science and technology journals published annually, and is expected to overtake the US in scientific output within few years, according to a recent study by the Royal Society, the UK's science academy. The study notes however that China still lags behind most developed countries in terms of job-creating quality research.  Brazil  Accenture predicts that Brazil will increase its engineering graduates by 68% by 2015 and will produce more PhD engineers than the US by 2016.

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Source: obhe.ac.uk.

Singapore  The Singapore educational system is currently 2nd Overall in Math and Science on global international educational assessments.  Source: Pharma.org.

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Fiscal Opportunities for Social Impact Initiatives o Local Level Prince George’s County, MD 2012 GIVING PROFILE Giving ratio 5.24% Total contributions $984,015,000 Total adjusted gross income (AGI) $18,771,912,000 Median contribution $4,808 Median AGI $70,136 Giving ratio 10.15% Total contributions $31,817,000 Total AGI $313,582,000 Average contribution $2,436 Average AGI $16,367 DEMOGRAPHICS Population 865,443 Political leaning Democratic Race Black 64.2% Hispanic or Latino 15.0% White 15.0% Other 6.9% Asian 4.1% Multiracial 2.6% American Indian and Alaska Native 0.3% Native Hawaiian and Pacific Islander 0.1% Age ranges Under 18 23.8% 18 to 24 11.6% 25 to 44 29.0% 45 to 64 26.0% 65 and older 9.6% Religion Baptist 11.3% Christian Non-denominational 10.9% Catholicism 9.7% Methodist/Pietist 5.5% Other Groups 2.4% Pentecostal 1.6%

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Adventist Latter-day Saints Episcopalians/Anglicans

1.0% 0.8% 0.6%

Lutheran Presbyterian-Reformed Holiness Judaism Eastern Liturgical (Orthodox) European Free-Church Liberal NEIGHBORING COUNTIES District of Columbia Charles County Howard County Montgomery County Anne Arundel County Calvert County Fairfax County Alexandria city

0.6% 0.5% 0.2% 0.2% 0.1% 0.1% 0.1% GIVING RATIO 4.00% 3.54% 2.71% 2.69% 2.56% 2.48% 2.40% 2.36%

*AGI = Adjusted gross income: A person’s gross income minus some business expenses, unreimbursed medical expenses, retirement-plan contributions, and other deductions. *Giving ratio: The percentage of AGI given to charity as determined using the charitable deductions reported on the income-tax forms. Source: Philanthropy.com

 Maryland maintained its first place ranking in millionaires per capita for 2014 with 7.7% of households having $1 million or more in investable or liquid assets.

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Maryland has the highest median household income for 214 at $73,971, which is 38 percent above the national median.  Source: U.S. Department of Commerce, Bureau of the Census, 2014 American Community Survey.

Maryland maintained its first place ranking in millionaires per capita for 2014 with 7.7% of households having $1 million or more in investable or liquid assets.  Source: Phoenix Marketing International, Ranking of U.S. States by Millionaires per Capita 2010-2014.

Maryland has the second lowest poverty rate for 2014, with 10.1% of the population living in poverty, compared with 15.5% for the U.S. as a whole.  Source: U.S. Department of Commerce, Bureau of the Census, 2014 American Community Survey.

Maryland is home to three of the top 20 large counties in the nation for median household income. Howard County ranks fourth ($107, 490), Montgomery 11th ($97,765) and Calvert 16th ($95,110) among 800+ counties with a population of 65,000 or greater.  Source: U.S. Department of Commerce, Bureau of the Census, 2014 American Community Survey Maryland ranks seventh among states in per capita personal income ($54,176).

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 Source: U.S. Department of Commerce, Bureau of Economic  

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Maryland has maintained its second place ranking in the Milken Institute’s biennial State Technology and Science Index for 2014.

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Analysis, 2014; ranking excludes Washington, DC. In May of 2015, Maryland approved the development of a $30 Million dollar prison facility with 60-beds for juvenile offenders.  Source: baltimoresun.com.

PG County Economic Development Incentive Fund  Most of the awards will be made as loans to small and medium sized businesses located in the County. On occasion, in particular and extraordinary circumstances involving large numbers of jobs, grants may be considered.  The loan process is approximately 90 days.  The priorities for funding are projects that grow the County’s commercial tax base, add County jobs, and meet other specified goals. Any business or development project that meets those priorities can apply for funds from the program. Non-profits are eligible for funding of projects that result in growth in the County’s commercial tax base and in new jobs, but not for funding operations.  The County Executive and County Council have set aside $50 million as a multi-year commitment for the EDI Fund.  Approximately $7 million to $11 million will be available each fiscal year. This will ensure that the Council has an opportunity to review the status of the program before additional funds can be spent.  Sources: Maryland.gov, Hyattsville.org Maryland has maintained its second place ranking in the Milken Institute’s biennial State Technology and Science Index for 2014.

According to study results, Maryland received top five rankings in all of the index components, including human capital investment, research and development inputs, risk capital and entrepreneurial infrastructure, technology and science workforce, and technology concentration and dynamism. The Index measures the technology and science assets for states, ranking them on their ability to foster and sustain a technology sector, which is crucial in determining a region's future economic success.  Source: The Milken Institute, State Technology and Science Index: Enduring Lessons for the Intangible Economy, November 2014.

Maryland/Suburban Washington DC places fifth in a ranking of the top ten U.S. biopharma clusters based on criteria including patents, NIH grant funding, venture capital, lab space and number of jobs.  Source: Genetic Engineering and Biotechnology News, March 9, 2015.

Maryland ranks fifth in the 2014 State New Economy Index a measure of a state’s economy as knowledge-based, globalized, entrepreneurial, information technology-driven and innovationbased.

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 Source: Information Technology and Innovation Foundation, the 2014 State New Economy Index.

Maryland ranks third among the states in the square footage of LEED-certified commercial and institutional green buildings per capita for 2014. By using less energy, LEED buildings save money for businesses and taxpayers; reduce greenhouse gas emissions; and contribute to a healthier environment for workers and the larger community.  Source: U.S. Green Building Council press release, February 9, 2015.

Suburban Maryland/Metro DC, spanning the Rockville and Gaithersburg areas in Montgomery County northwest to Frederick County, ranks eighth among U.S. life sciences clusters with top five rankings in the component factors of life sciences establishment concentration, life sciences venture capital funding and NIH funding.  Source: Jones Lang LaSalle, Global Life Sciences Cluster Report 2014.

Maryland ranks highly in the technology intensity of its business base. The state ranks fourth in high-tech businesses as a share of all business establishments (11.6%), and third in employment in hightechnology businesses as a share of all employment (16.0%).  Source: National Science Foundation, Science and Engineering Indicators 2014, using data from 2010; ranking excludes Washington, DC. According to a Brookings Institution study, Baltimore ranks in the top ten among large metropolitan areas for the concentration of STEM (Science, Technology, Engineering and Math) jobs, with 23% of jobs requiring high-level STEM knowledge. The report cites Baltimore for being home to Johns Hopkins University and other hospital systems, and having a strong defense industry cluster in the suburbs.  Sources: Brookings Institution, The Hidden STEM Economy, June 2013.

Maryland has the highest concentration of employed doctoral scientists and engineers. The state ranks first in employed PhD scientists and engineers per 100,000 employed workers (1,288), with a first place ranking for PhD scientists (1,031) and third for PhD engineers (178). Maryland also holds rankings in the following fields for employed doctoral scientists per 100,000 employed workers:  first in biological sciences (466)  first in mathematical sciences (75)  first in health (83)  fourth in physical sciences (221)  fifth in computer and information sciences (28)  Sources: National Science Foundation, data for 2013, and U.S. Department of Labor, Bureau of Labor Statistics; ranking excludes Washington, DC.

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Maryland ranks first in the concentration of technology establishments, comprising 8.45% of private-sector establishments, and fourth Maryland ranks first among in the concentration of the states in the percentage technology jobs, which of professional and employ 8.6% of the private technical workers (28.3%) in sector workforce. the workforce.

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Maryland ranks first among the states in the percentage of professional and technical workers (28.3%) in the workforce.  Sources: U.S. Department of Labor, Bureau of Labor Statistics, 2014 Geographic Profile of Employment and Unemployment; ranking excludes Washington, DC. Maryland ranks third among the states in the percentage of the population age 25 and above with a bachelor’s degree or higher (38.2%) and second in the percentage with a graduate or professional degree (17.5%).  Sources: U.S. Department of Commerce, Bureau of the Census, 2014 American Community Survey; ranking excludes Washington, DC. According to the Cyberstates 2015 report, Maryland ranks first in the concentration of technology establishments, comprising 8.45% of private-sector establishments, and fourth in the concentration of technology jobs, which employ 8.6% of the private sector workforce. The state ranks eighth in average wages for high-tech workers at $101,849, and seventh for tech GSP as a percentage of total GSP (9.0%). Maryland's top rankings for employment in specific industries are:  Communications equipment manufacturing (8th - 3,160)  Measuring and control instruments manufacturing (9th 12,230)  Reproducing magnetic and optical media manufacturing (7th - 955)  Computer systems design and related services (9th - 68,842)  IT services (10th - 75,838)  Engineering services (9th - 32,700)  R&D and testing services (9th - 26,829)  Source: CompTIA, Cyberstates 2015.

Maryland ranks fourth among the states in federal government employment, with 142,745 non-military federal jobs in 2014. On a per capita basis, the state ranks first with 239 federal jobs per 10,000 residents. Non-military federal jobs generate $13.4 billion in total wages in Maryland, ranking fourth among the states. Further, these jobs pay better in Maryland than in any other state, with an average annual wage of $94,156, which is 24% higher than the national average.  Source: U.S. Department of Labor, Bureau of Labor Statistics, Employment and Wages, Annual Averages 2014; U.S. Department of Commerce, Bureau of the Census; ranking excludes Washington, DC. According to the CBRE Research report "Scoring Tech Talent," Baltimore ranks eighth as a top tech talent market based on the ability to attract and grow its tech talent pool. Components of the scorecard in which Baltimore ranks the highest include second in tech degrees (in the Washington-Baltimore metro area), fourth in

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The assets engaged in sustainable and responsible investing practice currently represent 11.3 percent of the $33.3 trillion in total assets under management.

gender diversity in tech occupations, and tenth in tech labor concentration.  Source: CBRE Research, 2015 Scoring Tech Talent.  In a ranking of "Best Cities for Women in the Workforce," Baltimore ranks sixth among large cities and Greenbelt, Maryland is seventh among small cities. Cities were evaluated on several factors including women's earnings as a percentage of men's, labor force participation, and unemployment.  Source: NerdWallet.com, Best Cities for Women in the Workforce, March 16, 2015.

National Level  One out of every nine dollars under professional management in the U.S. is invested according to strategies of sustainable and responsible investing (SRI) (Social Impact) – US Forum for Sustainable and Responsible Investment.  $3.31 trillion in US-domiciled assets at year-end 2011 held by 443 institutional investors, 272 money managers and 1,043 community investment institutions that apply various environmental, social and governance (ESG) criteria in their investment analysis and portfolio selection; and  $1.54 trillion in US-domiciled assets at year-end 2011, held by more than 200 institutional investors or many managers that filed or cofiled shareholder resolutions on ESG issues at publically trades companies from 2010-2012 (Thompson Reuters).  The assets engaged in sustainable and responsible investing practice currently represent 11.3 percent of the $33.3 trillion in total assets under management tracked by (Thompson Reuters).  From 1995, when US SIF Foundation first measured the size of the US sustainable and responsible investing market, to 2012, the SRI universe has increased 486 percent, while the broader universe of assets under professional management in the United States has grown 376 percent (Thomson Reuters).  From 2010 to 2012, there has been a pronounced upward trend in vote support on environmental and social issues, with 24 percent or more of such resolutions each year receiving the support of more than 30 percent of the shares voted, up significantly from the levels of 2007 to 2009, when only 15 to 18 percent of environmental and social issues resolutions won such support levels (Thompson Reuters).  80% of investors considered sustainability as a factor in one or more contexts within the past year (PriceWaterHouseCooper – Sustainability Goes Mainstream: Insight into Investor Views).  Consistent with prior studies, investors have expressed a high level of dissatisfaction with the sustainability-related information being provided by companies (PriceWaterHouseCooper).

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The International Energy Agency (IEA), estimated sustainability-related investment in the area of energy to grow to $45 trillion from 2010-2050.

95% of investors surveyed believed that regulatory risks due to climate change should be periodically assessed (PriceWaterHouseCooper).  89% of investors surveyed believed that market risks due to climate change should periodically be assessed (PriceWaterHouseCooper).  84% of investors surveyed believed that physical risks due to climate change should periodically be assessed (PriceWaterHouseCooper).  92% of investors surveyed believed that human health impacts should be periodically be assessed (PriceWaterHouseCooper).  89% of investors surveyed believed that impacts on water quality should be periodically assessed (PriceWaterHouseCooper).  74% of investors surveyed believed that impact on other social issues such as income inequality and human rights inequality should be assessed (PriceWaterHouseCooper).

International Level  While global challenges related to sustainability are manifest, defining how businesses can meet the challenges can be daunting.

Sustainability can encompass a broad range of issues that affect business—from pollution and climate change to education, poverty, health and human rights. (PriceWaterHouseCooper – The Sustainability Agenda: Industry Insights).  The International Energy Agency (IEA), estimated sustainabilityrelated investment in the area of energy to grow to $45 trillion from 2010-2050 (PriceWaterHouseCooper – Vision 2020).  In the case of agriculture and food, a recent FAO report, suggested that feeding the growing world population up to the middle of this century would require an average net investment of about $83 billion per annum, over the period to 2050, which would equate to around 0.6% of average projected world GDP of around $130 trillion over the period from 2008 to 2050 (PriceWaterHouseCooper).  PWC estimates that the share of the world DGP accounted for by emerging economies might rise from around 45% in 2008 (23% from the BRICs) to around 60% in 2050. Total emerging market GDP in 2050 might on this basis rise to around $125 trillion by 2050. A rise in the share of this on health and education of around 5.4 percentage points, would therefore translate to around $6.7 trillion in 2050 (PriceWaterHouseCooper).  ‘The most frequently cited benefits that firms expect from sustainability policies relate to improve business outcomes: the ability to attract and retain customers (37%), improved shareholder value (34%) and increased profits (31%),’ (Economist Intelligence Unit Survey, Doing Good: Businesses and the Sustainability Challenge, 2008).

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‘Two-thirds (66%) of transportation and logistics CEOs are worried about the potential threat to business growth as a result of increased carbon emissions regulation,’ (PriceWaterHouseCoopers 11th Annual Global CEO Survey).

Banks and capital markets have also seized on new products linked to sustainability. These products respond to the new priorities of many investors, including a second generation of wealthy families who are intent on deploying their inheritance in socially responsible ways, institutional investors (pension funds) looking for long-term above-average returns, and sustainable companies looking to deliver on those priorities. Products already with track-records including sustainability indices such as the Dow Jones Sustainability World Index, renewable energy funds, water business funds and socially responsible investing (SRI) funds. Further opportunities lie in venture financing of alternative energy and other businesses aimed at protecting the environment as well as in carbon emissions trading (PriceWaterHouseCooper).

The Economist Intelligence Unit (EIU) found in a survey that 57% of top executives believe that the benefits of efforts to achieve sustainability outweigh the costs (PriceWaterHouseCooper).

Only 6% of companies surveyed by the EIU rate themselves as outstanding in reducing emissions, waste and pollution. And only a third of executives worldwide say their sustainability policies extended to their supply chain (PriceWaterHouseCooper).

Quotes by Prominent CEO’s on Social Impact o “This agenda of sustainability and corporate responsibility is not only central to business strategy but will increasingly become a critical driver of business growth… I believe that how well and how quickly businesses respond to this agenda will determine which companies succeed and which will fail.” – Patric Cescau, CEO of Unilever o “Sustainability is the single biggest opportunity of the 21st century, and will be the next source of competitive advantage.” – H. Lee Scott, President and CEO of Wal-Mart. o “If you want to continue to succeed as an energy company in the coming decades, you need to understand and meet people’s expectations for environmental and social performance, as well as delivering solid technological and financial performance. That means putting solid business principles, including sustainable development, at the heart of how you do your business.” – Jeroen Van der Veer, CEO of Shell o “I am convinced that helping address societal problems is a responsibility of every business, big and small…Financial achievement can and must go hand-inhand with social and environmental performance.’ – Indra K. Nooyi, President and CEO of PepsiCo. o “Business has the prime responsibility to come up with the technologies, the know-how, the products and services, the business models and management pg. 13

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solutions that will help meet the sustainability challenges.’ – Gerard Kleisterlee, President and CEO of Royal Philips Electronics “The positive correlation between sustainability and financial performance will provide an enormous boost to the sustainability investment sector.’ – Markus Knisel, Director of Morgan Stanley Private Wealth Management

Human Demand in Target Area o Total Public School Enrollment  Prince George’s County – 125,136 students  Grades 7-12 – 52,667 o Students by Race  African-American – 80,821 (64.6%)  Asian – 3,509 (2.8%)  Hispanic – 32,330 (25.8%)  Native/Hawaiian/Other Pacific Islander – 282 (0.2%)  Two or more races – 2,084 (1.7%)  Total Non-white – 119,026 (95.1%) o Maryland School Assessment Results: 2011, 2012, 2013  Students Proficient in Mathematics  2011 – 33.7%  2012 – 46.0%  2013 – 36.4%  2014 – 32.8% o Maryland Public School Graduate  2013 Total – 8,081  2013 w/ diploma – 7,952 o PG County Drop-out  5.54% o Maryland Public School 2013  $1,481,789,761 o PG County Cost Per Pupil  $13,784 o Local Wealth  $45,490,140,424  Note: Local wealth is the amount used in the cement expense formula (Section 5-202 of the Education Article) and includes county assessable base for fiscal year 2013 (September 13, 2013) and met taxable income for tax year 2012 (September 11, 2012). o Career and Technology Education in Public Schools: 2012-2013  PG County  Information Technology Program – 110 participants  Environmental and Natural Resources – 26 participants  Average Attendance: 2010-2011  Maryland 2012-2013 – 93.9%

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 U.S. Average – 96.7%  National Rank – 25  Source: marylandpublicschools.org. b. What are the target markets for this product or service? What demographic characteristics do these potential customers have in common? How many of them are there? 

Target Market

o Local Venture Capital  Venture capitalists provide capital to startup ventures or support small companies that wish to expand but do not have access to public funding.

Allegis Capital HIG Capital Arborview Capital LLC In-Q-Tel Bessemer Venture Partners JMI Equity Boulder Ventures Kinetic Ventures Camden Partners NaviMed Capital CNF Investments, LLC New Atlantic Ventures Core Capital New Enterprise Associates Edison Ventures New Markets Epidarex Capital Novak Biddle Fortify Ventures Paladin Capital Foundation Medical Partners Revolution Ventures Grotech Ventures TEDCO Harbert Ventures SWaN & Legend Ventures Anthem Capital Montagu Newhall Conscious Venture Lab Panacea Capital Advisors Dominion Group Portview Communications Partners Grande Ventures Questmark Partners Meridian Venture Partners  Source: http://www.angelresourceinstitute.org  Total annual venture capital funding in Maryland increased by about 63 percent, from $407,752,600 in 2012 to $663,413,200 in 2013.

The number of total deals rose by roughly 25 percent, from 57 deals in 2012 to 71 deals in 2013.  Maryland far outpaced the national average increase year over year, the MoneyTree Report shows.  Nationally, venture capitalists invested $29.4 billion in 3,995 deals in 2013, an increase of 7 percent in dollars and a 4 percent increase in Total annual venture capital deals over the prior year, according to a statement on the report. funding in Maryland  As in 2012, the software industry remained the single largest increased by about 63 investment sector in 2013, followed by biotechnology. Internetpercent, from $407,752,600 specific companies also reached their highest investment levels to $663,413,200 in 2013. since 2001. Networking and equipment, financial services, and business products and services also saw significant year-over-year gains, the statement showed.

pg. 15

 

Information on the industry sectors receiving venture capital funding in Maryland was not released in the report.

Find quarterly data for Maryland below:

Venture Capital Funding in Maryland 2012-2013 Year

Quarter Funding

Deals

Annual Total Funding

2012 Q1 Q2 Q3 Q4

$119,745,400 $50,448,400 $161,558,900 $75,999,900

16 9 22 10

$407,752,600

2013 Q1 Q2 Q3 Q4

$148,278,200 $320,180,000 $140,490,000 $54,465,000

13 13 26 19

$663,413,200

Source: MoneyTree Report Regional Aggregate Data

o Local Angel Investors  These angel investor groups may be able to locally provide the capital that is necessary to fund the 3-year pilot initiative.

Active Angel Investors Angel Venture Forum Baltimore Angels Blu Venture Investors (VA) Chesapeake Emerging Opportunities Club Dingman Center Angels 

This past year (2013), the 14 community foundations that serve Maryland and comprise the Maryland Community Foundation Association, held over $795 million in charitable assets and donated $138 million to local communities.

Georgetown Angels Mid Atlantic Bio Angels Mountain Maryland Angels NextGen Angels New Dominion Angels New Vantage Group

Source: http://www.angelresourceinstitute.org

o Local Philanthropy  This report provides data that is important to our field to assist us in understanding the growth in grant making as well as community investment both in Maryland and across the country.

Having several of the 14 community foundations that serve Maryland highlighted in the report shows the generosity of communities in our state, and the important leadership role that Maryland’s Community Foundations play.  This past year, the 14 community foundations that serve Maryland and comprise the Maryland Community Foundation Association, held over $795 million in charitable assets and donated $138 million to local communities  Source: nccsweb.urban.org.

pg. 16

Number of Nonprofit Organizations in Maryland, 2003 - 2013

All Nonprofit Organizations 501(c)(3) Public Charities 501(c)(3) Private Foundations Other 501(c) Nonprofit Organizations Small community groups and partnerships, etc.

501(c)(3) Public Charities 501(c)(3) Public Charities Registered with the IRS (including registered congregations) Reporting Public Charities Operating Public Charities Supporting Public Charities Non-Reporting, or with less than $25,000 in Gross Receipts Congregations (about half are registered with IRS)* 501(c)(3) Private Foundations Private Grantmaking (Non-Operating) Foundations Private Operating Foundations Other 501(c) Nonprofit Organizations Civic leagues, social welfare orgs, etc.

Fraternal beneficiary societies Business leagues, chambers of commerce, etc.

Labor, agricultural, horticultural orgs Social and recreational clubs Post or organization of war veterans All Other Nonprofit Organizations

2003 2013 Number Percent Number Percent Pct. of Orgs. of All of Orgs. of All Change Orgs.

Orgs.

27,638 100.0% 32,387 100.0% 17.2% 17,274 62.5% 24,058 74.3% 39.3% 2,307 8.3% 1,872 5.8% -18.9% 8,057 29.2% 6,457 19.9% -19.9% Unknown NA Unknown NA NA 17,274 17,274

62.5% 62.5%

24,058 24,058

74.3% 74.3%

39.3% 39.3%

6,758 5,902 856 10,516

24.5% 21.4% 3.1% 38.0%

16,404 14,787 1,617 7,654

50.6% 45.7% 5.0% 23.6%

142.7% 150.5% 88.9% -27.2%

-

0.0%

0

0.0%

NA

2,307 2,220

8.3% 8.0%

1,872 1,727

5.8% 5.3%

-18.9% -22.2%

87 8,057 2,103 1,300 1,317

0.3% 29.2% 7.6% 4.7% 4.8%

145 6,457 1,548 812 1,151

0.4% 19.9% 4.8% 2.5% 3.6%

66.7% -19.9% -26.4% -37.5% -12.6%

1,076 1,234 452 575

3.9% 4.5% 1.6% 2.1%

672 1,427 390 457

2.1% 4.4% 1.2% 1.4%

-37.5% 15.6% -13.7% -20.5%

Note: Excludes out-of-scope organizations. The number of congregations is from the website of American Church Lists (http://list.infousa.com/acl.htm), 2004. These numbers are excluded from the totals for the state since approximately half of the congregations are included under registered public charities.

 

Source: http://www.fundingpost.com/; http://mdbiznews.commerce.maryland.gov/.

Source: IRS Business Master File 10/2013 (with modifications by the National Center for Charitable Statistics at the Urban Institute to exclude foreign and governmental organizations).

pg. 17



Target Market Demographics

People QuickFacts Population, 2014 estimate Population, 2010 (April 1) estimates base Population, percent change - April 1, 2010 to July 1, 2014 Population, 2010 Persons under 5 years, percent, 2014 Persons under 18 years, percent, 2014 Persons 65 years and over, percent, 2014 Female persons, percent, 2014

Prince George's County 904,430 863,519 4.7%

Maryland 5,976,407 5,773,785 3.5%

863,420 6.7% 22.7% 11.2% 51.8%

5,773,552 6.2% 22.6% 13.8% 51.5%

White alone, percent, 2014 (a) Black or African American alone, percent, 2014 (a) American Indian and Alaska Native alone, percent, 2014 (a) Asian alone, percent, 2014 (a) Native Hawaiian and Other Pacific Islander alone, percent, 2014 (a) Two or More Races, percent, 2014 Hispanic or Latino, percent, 2014 (b) White alone, not Hispanic or Latino, percent, 2014

26.9% 64.7%

60.1% 30.3%

1.0%

0.6%

4.6% 0.2%

6.4% 0.1%

2.6% 16.9% 14.2%

2.6% 9.3% 52.6%

Living in same house 1 year & over, percent, 2009-2013 Foreign born persons, percent, 2009-2013 Language other than English spoken at home, pct age 5+, 2009-2013 High school graduate or higher, percent of persons age 25+, 2009-2013 Bachelor's degree or higher, percent of persons age 25+, 2009-2013 Veterans, 2009-2013 Mean travel time to work (minutes), workers age 16+, 2009-2013

84.9%

86.7%

20.2% 20.8%

14.0% 16.7%

85.5%

88.7%

29.8%

36.8%

Housing units, 2014 Homeownership rate, 2009-2013 Housing units in multi-unit structures, percent, 2009-2013 Median value of owner-occupied housing units, 2009-2013 Households, 2009-2013 Persons per household, 2009-2013 Per capita money income in past 12 months (2013 dollars), 2009-2013

330,516 62.5% 32.5%

2,422,194 67.6% 25.5%

$269,800

$292,700

61,842

427,068 35.8

303,441

32

2,146,240 2.81

$32,344

pg. 18

2.65 $36,354

Median household income, 2009-2013 Persons below poverty level, percent, 20092013

$73,623 9.4%

$73,538 9.8%

Business QuickFacts Private nonfarm establishments, 2013 Private nonfarm employment, 2013 Private nonfarm employment, percent change, 2012-2013 Nonemployer establishments, 2013

Prince George's County 14,281 243,260 1.1%

Maryland 135,421 2,182,260 1.4%

71,062

456,511

Total number of firms, 2007 Black-owned firms, percent, 2007 American Indian- and Alaska Native-owned firms, percent, 2007 Asian-owned firms, percent, 2007 Native Hawaiian and Other Pacific Islanderowned firms, percent, 2007 Hispanic-owned firms, percent, 2007 Women-owned firms, percent, 2007

72,759 54.5% 0.9%

528,112 19.3% 0.6%

6.2% 0.1%

6.8% 0.1%

8.8% 37.8%

4.9% 32.6%

Manufacturers shipments, 2007 ($1000) Merchant wholesaler sales, 2007 ($1000) Retail sales, 2007 ($1000) Retail sales per capita, 2007 Accommodation and food services sales, 2007 ($1000) Building permits, 2014

2,504,675 10,449,816 9,209,683 $11,060 1,205,022

41,456,097 51,276,797 75,664,186 $13,429 10,758,428

1,292

16,331

Geography QuickFacts Land area in square miles, 2010 Persons per square mile, 2010 FIPS Code Metropolitan or Micropolitan Statistical Area

Prince George's County 482.69 1,788.8 33 Washington-ArlingtonAlexandria, DC-VA-MD-WV Metro Area

Maryland 9,707.24

(a) Includes persons reporting only one race. (b) Hispanics may be of any race, so also are included in applicable race categories.

FN: Footnote on this item for this area in place of data NA: Not available D: Suppressed to avoid disclosure of confidential information X: Not applicable S: Suppressed; does not meet publication standards Z: Value greater than zero but less than half unit of measure shown

pg. 19

594.8 24

F: Fewer than 100 firms Source: US Census Bureau State & County QuickFacts

o







Source: http://quickfacts.census.gov/.

In Prince George’s County, the rates of detention and longer-term incarceration have remained high and have risen in the more than five years Judge Dawson has presided as the primary juvenile court judge, according to an analysis by the Maryland Department of Juvenile Services.

Commitments to institutional settings increased 55 percent from 2009 to 2014, while, statewide, commitments dropped an average of 5 percent over the same period and complaints filed with the Juvenile Services Department — an indicator of juvenile crime — decreased 63 percent.

Detentions of juveniles from Prince George’s County in secure facilities have risen 115 percent since 2005 — despite a slight decline since 2012 — though they have dropped 29 percent statewide. Only 12 percent of the juveniles were detained for committing new crimes. The rest were locked up for violations stemming from old offenses.

PG County Committed Youth Population

 

Average Daily Prince George’s County Juvenile Detention is up 115% since 2005.

Overall daily population of County youth committed by the juvenile court to out of home placement rose 70%, from 107 FY2009 to 182 in FY2014.

pg. 20

   

The rate of Prince George’s County youth in a juvenile committed placement increased 55% since FY2009.

Youth detained in Prince George’s County during the study period were disproportionately African American and male (91%).

Average length of stay: 29.9 days.

Types of Writs and Warrants:  AWOL/Runaway: 42%  Failure to Appear: 39%  Failure to Comply with Court Order: 14%  State Attorney Office Requested: 4% 

Sources: http://www.djs.maryland.gov/.

c. What is the projected supply in your area of the products or services needed for your project? 

Social Impact Organizations o Benefit Corporations and Benefit LLCs formed as of August 20, 2014 Afghanistan First, Benefit LLC DAANA Benefit Corporation Allies for African Diaspora Deeper Green, Benefit LLC Development Group Benefit LLC Do Good, Benefit LLC Allison Sosna Group, Benefit LLC Dragonfly Solutions, Inc. Americans All Benefit Corporation Elizabethtowne Benefit Corporation Awesome Wonder Eco Enterprise, Emory Knoll Farms, Inc. Benefit, Inc. Ethical Electric, Inc. Bagopolis Benefit LLC Fenton Street Market, Inc. BBWoof Rock Creek, Benefit Forbidden Root, A Benefit LLC Corporation Frank Hayward III Benefit Inc. Big City Farms Inc. General Bueno, Benefit LLC Blessed Coffee, Inc. God’s Word Shall Always Rule, Benefit Brick House Title, LLC. A Benefit Limited LLC Liability Company Good-Thrift Benefit Corporation Cambio Co. Benefit Corporation HCB Secured Payment Systems, Benefit Change University Benefit Inc. LLC Changematters, Benefit LLC Healthy Markets, Benefit LLC Chesapeake Compost Works, Benefit Humane Strategies, Benefit LLC LLC Impact Trader, Benefit LLC Clean Currents, Benefit LLC Income for Outcomes, A Benefit LLC Coconut Orchard Benefit Co. Innov8Energy, Benefit LLC ColbyCorp, A Benefit Corporation Jacob’s Ride, Benefit LLC Commons Foundation, Benefit LLC Jerome Canady Research Institute for Conscious Ventrue Lab, A Benefit Advanced Sciences, Benefit LLC Corporation Khan Mentors Benefits Inc. Curious Iguana, Benefit Corporation Launchpad: Maryland, Benefit LLC Curriculum Compass, Benefit LLC Mama Organic Market Benefit Cyitek, Benefit LLC Corporation pg. 21

Maryland Integrity Benefit Inc. Mason Consulting, Benefit LLC Metty’s Limos, Benefit LLC MF Fire, Benefit LLC Mob Rules Games Benefit Corporation MPower Sports and Recreation Benefit LLC My Great Green School, Benefit LLC Neelamga & Community Benefit Corporation New Spin Robotics Oliver-Grayson Holding Company, Benefit LLC Peacemakers Benefit Corporation Perpetual Life Benefit LLC Pivot Point Financial Group, Benefit LLC Roundpeg Benefit LLC Semana Tica Benefit Corporation Small Small Benefit Co SocioEconomic Benefit Corporation Solarfire Engineering, Benefit LLC 

Spirits in the Sky, Benefit LLC Substance151, Benefit LLC Sustainable Systems International Benefit LLC Sustainable Transportation Research and Planning Organization Benefit LLC Tag I’m It, Benefit LLC Taharka Brothers Ice Cream The Capital Consortium Benefit LLC The Farmer’s Table, Benefit LLC The Good Gifts Education Project, Benefit LLC Tigra Promotions, A Benefit Corporation Triple Impact, Benefit LLC UBenefit LLC Venture Funding Network, A Benefit LLC Vera Solutions, Benefit LLC Verdant Benefit Corporation Whole Social Benefit LLC World Footprints Media, A Benefit LLC Zarif Design, Benefit Corporation

Project Team o Intermediary: Infinite 8 Institute, L3C o Service Provider: College and Career Pathways, a 501(c)(3) o Upfront Investors: Angels, VCs, Banks, Insurance, Impact Funds o Outcome Payors: Local/National Philanthropic Partners o Secondary School Partner: Northwestern High School, Hyattsville, MD o Financial Administrator: CFO Systems, LLC o Contract Construction: Georgetown University Law

d. What competition exists in this market? Can you establish a market niche which will enable you to compete effectively with others providing this product or service on the local, national, and international level? 

Competition o Local Competition  Maryland: In 2013, Social Impact Bond legislation was introduced to the Committee on Appropriations in the Maryland House of Delegates.  Mark Fisher, from the Maryland House of Delegates, summarized the critical findings of a Maryland state analysis of the potential of SIBs:  “In January of 2013, the Department of Legislative Services advised against SIBs for the following reasons: SIBs cause an increase in budgetary pressure, compared to direct program financing, due to the necessity of funding, contingent liabilities, and the added expense pg. 22







features unique to SIBs. SIBs do not produce cost savings when outcomes are achieved, even under highly optimistic assumptions. SIBs could effectively exclude new providers and program types that do not have a well-established record of success with investors seeking to minimize risk. And SIBs potentially distort evidence used in policy decisions…. In conclusion, SIBs are well intended, but they unnecessarily blow bureaucracies. Moreover, they have the potential of leading to crony capitalism. And as the Maryland Department of Legislative Services concluded, they do not save money.”

Although now an analyst with the Texas Legislative Budget Board, Kyle McKay was one of the Maryland researchers who did that state’s analysis:  “For governments facing revenue constraints, social impact bonds may appear to be the silver bullet for social services.

However, the benefits may be based largely on wishful thinking.

Yet, the risks and costs to governments who are engaging in this type of model are real…Forgive me for stating the obvious here, but if a program funded by a social impact bond works, the government will have to pay for the program. Thus, governments should budget for this potential payment by appropriating funds in advance…Because the government may have to pay back investors with interest and a bonus, or a return on investment, and the mechanics of this model require a large number of consultants and intermediaries, the government must budget for the potential payment using an amount that is greater than the investors provide to the program. In Massachusetts, for example, the state is liable for up to $27 million in payments for their social impact bond pilot program. Yet, the investors are providing only $12 million in funding. A social impact bond will therefore add pressure to a cash-strapped budget….”

McKay’s trenchant analysis pointed out the limitations of single-project SIBs:  “Proponents argue that social impact bonds will result in decreased expenditures, and thus, cost savings to the state.

There’s a basic mathematical problem with this claim, though.

Pilot programs do not operate at a scale large enough to produce significant cost savings to the government. In Maryland, we used well-established, cost-estimation techniques with our state agencies to model a high-impact pilot program.

The program came nowhere close to paying for itself, which is consistent with Rand’s finding that Peterborough [the first SIB from the UK] is too small to produce savings.”  Source: http://nonprofitquarterly.org/.

According to McKay’s research, a reentry program financed using a SIB would not produce sufficient benefits to justify the operational costs or risks of engaging in this form of high-stakes contracting. A social impact bond financed program would:

pg. 23

 Increase budgetary pressure compared to direct financing, due to the necessity of funding contingent liabilities and the added expenses of features unique to SIBs;  Not produce cost savings when outcomes are achieved, even under highly optimistic assumptions;  Be unlikely to shift outcome risk;  Possibly exclude new providers and program types that do not have a well-established record of success through investors seeking to minimize risk; and  Potentially distort evidence used in policy decisions. The primary weakness of a SIB is in the complexity of its moving parts and the high-stakes nature of the financing mechanism. A SIB contract would only be advantageous to Maryland, if, at minimum, all of the following conditions were met:  Maryland could create a contract that guarantees investors and providers will continue program operations for the entire life of the contract, even when it is apparent after the program starts that the outcomes are unlikely to be achieved. 18 Department of Legislative Services  Nonprofits would continue service delivery when reimbursements are below costs or all parties could effectively and efficiently renegotiate the contract without jeopardizing the evaluation and value of the risk shifting to the government.  An independent program evaluation could definitively show that the program either did or did not cause the target outcomes to be achieved.  The additional costs inherent to the SIB financing mechanism would be sufficiently lower than the cost of providing the service, so as to justify the value of these services to shift the outcome risk.  A private market can be created for investing in unproven forms of reentry programs.  The department has the operational capacity to engage in a SIB pilot program while undertaking other organizational and policy changes.  There is sufficient State funding in the operating budget available to fund the contingent liabilities of a SIB program.  The value of shifting the risk for a negative outcome is monetarily large enough to the government to risk the added costs of the SIB and the potential for an investor ROI given a positive outcome. If any one of these conditions cannot be met, then a SIB model is not an ideal financing or contracting mechanism for reentry programs in Maryland.

Given the difficulty of shifting the outcome risk and the countervailing incentives for many of these conditions, it is unlikely that these conditions will be met.

pg. 24



o



Source: Department of Legislative Services Office of Policy Analysis Annapolis, Maryland January 2013: http://works.bepress.com/kylemckay/2/.

Office of STEM Initiatives, Division of Instruction, Maryland Department of Education  The Maryland State STEM Standards of Practice are process standards that define the combination of behaviors integrated with content that is expected of a STEM proficient student. The Maryland State STEM Standards of Practice Frameworks and Instructional Guides explain in detail the essential skills and knowledge of a STEM proficient student for grades K, 1-2, 3-5, 6-8, and 9-12.

Source: http://mdk12.msde.maryland.gov/.  Maryland State STEM Standards of Practice  1) Learn and Apply Rigorous Science, Technology, and Mathematics Context.  2) Integrate Science, Technology, Engineering, and Mathematics Context.  3) Integrate Science, Technology, Engineering, and Mathematics Context.  4) Engage in Inquiry.  5) Engage in Logical Reasoning  6) Collaborate as a STEM team.  7) Apply Technology Strategically.  Source: http://mdk12.msde.maryland.gov/.

National Competition o Social Impact Finance  Founded in January 2011, Social Finance US is a 501(c)(3) nonprofit organization that is dedicated to mobilizing capital to drive social progress. We believe that everyone deserves the opportunity to thrive, and that social impact financing can play a catalytic role in creating these opportunities.  The organization is dedicated to designing public-privatenonprofit partnerships that tackle complex social challenges such as poverty, crime, education, health, and workforce success. As market intermediaries, we structure these partnerships by aligning the unique interest of all stakeholders – service recipients and providers, government and investors – to create innovative social financing solutions. This work reflects our commitment to driving social progress through a marketbased approach, as well as our deep experience in the governmental, capital markets, social services, and philanthropy sectors.  New York State reentry employment services  Massachusetts adult basic education

pg. 25

      

o

New York State maternal and child health South Carolina maternal and child health Connecticut child welfare Fresno – demonstration project for asthma management Feasibility study with BOA concerning veterans Memphis – Feasibility of Early Childhood Initiatives Mexico – Identifying opportunities with Inter-American Development Bank  WK Kellog Foundation grantees – Providing for four grantees  Oklahoma – Substance Abuse Third Sector Capital  Third Sector is a 501(c)(3) nonprofit whose mission is to accelerate America’s transition to a performance-driven social sector. In order to realize this vision, Third Sector is making Pay for Success a reality in the United States. Third Sector serves as a trusted advisor that leads governments, high-performing nonprofits, and funders in building collaborative initiatives that re-write the book on how governments contract social services, by funding programs that work, saving taxpayer dollars, and measurably improving the lives of people most in need.  Alameda County Asthma PFS Initiative  Austin/Travis County Health and Human Services  County of Los Angeles Blueprint  County of Los Angeles Pay for Success Feasibility  Cuyahoga County Partnering for Family Success Program  First Five Los Angeles and Families Commission of Orange County  Massachusetts Juvenile Justice PFS Initiative  National Council on Crime and Delinquency  New Haven Mental Health Outreach for Mothers Partnership (“MOMS”)  New York State  Orange County Early Childhood  Oregon Early Childhood  Salt Lake City Early Childhood  Salt Lake County PFS Initiative  San Francisco City and County  Santa Clara County Acute Mental Health PFS  Santa Clara County Homelessness PFS  State of Illinois Dually Involved Youth PFS Project  State of Nevada, Clark County and Las Vegas Early Childhood  United Way of Bay Area  Virginia Pay for Success Council

pg. 26

  

Washington State Department of Early Learning and Thrive Washington Year Up

International Competition o Social Impact Finance  Social Finance UK  Essex Social Impact Bond for children at the edge of care  Supporting Torbay’s vulnerable children  Manchester Social Impact Bond for looked after adolescents in residential care  Greater Mancester early years interventions  CVAA/Baker Tilly “It’s all about me” Adoption Social Impact Bond  The Shared Lives Incubator  Salford Health Matters  Reconnections Social Impact Bond  End of Life Social Impact Bond  Peterborough Social Impact Bond  Mayor’s Office of Police and Crime to reduce drugrelated crime  Blackpool Housing Regeneration Company  Local Solutions Social Impact Bond  St. Basil’s Social Impact Bond  Depaul UK Social Impact Bond  Building Homes for Generation Rent  SCLG Private Rental Sector Investment Project  Greater London Rough Sleeping Social Impact Bond  Youth Engagement Fund  Teens and Toddlers Social Impact Bond  Energise Social Impact Bond  Gen Community  4 Children  Empower Community  East Lancs Moneyline/Moneyline Cymru  Jam Jar Accounts  Rhino Impact Bond Project  Sleeping Sickness in Uganda  Social Finance Isreal  Employment opportunities for the Ultra-orthodox community  Employment opportunities for Arab citizens of Israel  Prisoner rehabilitation

pg. 27

o

 Reducing development of type 2 diabetes in high-risk pre-diabetics  Higher Education  Instiglio  Girls in India – Gender Equality  Youth in Mexico- Reduction in High School Dropout’s  Employment in Colombia – Workforce Development  Poverty in Burkina Faso – Poverty Reduction  Diabetes in Mexico – Improve Type 2 Diabetes  Poverty in Sub-Saharan Africa – Poverty Reduction  STEM in Colombia – Educational Development  Foster Care in Chile – Child Development Other International Activity  Australia - In March 2013 the New South Wales government signed an A$7 million contract for the country’s first Social Benefit Bond. The SIB will fund a parent and infant program called Newpin, which is delivered by UnitingCare Burnside and works intensively with struggling families to keep them safely together. The capital was raised by June 2013. Also in June, The Benevolent Society and Westpac Institutional Bank announced a second New South Wales SBB meant to reduce the need for out-of-home care for 400 families over a five-year period. The AUS$10 million offering closed in October with just under 60 investors. Another SBB to reduce adult re-offending is still under development.  Belgium - A SIB has been launched in Brussels, Belgium that aims to tackle the dual problems of integration and employment among recent migrants aged 18-29. The SIB will employ "Duo for Job," a one-on-one coaching/mentoring program designed to improve employment outcomes. Using a matched control group experiment, the SIB will measure whether the intervention increases employment when compared to the public agencies which normally have responsibilities for the target population. The 3-year, EUR 400,000 SIB aims to match 320 mentor-young person pairings.  Canada - In November 2012 the Government of Canada signaled its interest in financial innovations, including SIBs, to drive progress in facing social and economic challenges that defy easy resolution. The government invited proposals from the business and nonprofit communities to meet these objectives, and will reveal the results of this research in mid-2013. In April 2013 Nova Scotia announced its plans to issue the first Canadian SIB.  India - In June 2014 the UBS Optimus Foundation, the Children’s Investment Fund Foundation (CIFF), Educate Girls, and Instiglio

pg. 28



Numerous federal, state, and local governments around the world, including India, Ireland, Colombia, Scotland, and South Korea, are exploring the benefits of Social Impact Bonds. 

launched the world's first Development Impact Bond (DIB) in education. The DIB—managed by nonprofit intermediary Instiglio—is a three-year project aimed at addressing the challenges of high dropout rates and poor education quality in Rajasthan, India. UBS Optimus raised an upfront investment of $238,000 to fund Educate Girls, a Rajasthan-based NGO. Starting in June 2015, Educate Girls will work to retain 10,000 girls and improve results in basic English, Hindi, and math for 20,000 students in close to 150 of Rajasthan’s poorest performing schools. CIFF will pay for the social outcomes achieved by the program.

Mozambique - While the UK and Commonwealth countries are in the forefront of overseas SIB development, other nations are not long behind in pursuing the use of innovative social finance.

One project of special interest is in Mozambique, where a global consulting firm is exploring the possibility of launching Africa’s first SIB. The target is malaria, which causes nearly one-third of hospital deaths in Mozambique and takes a punishing toll on worker productivity, industry profitability, and quality of life.

Early discussions envision the government of Mozambique investing $20 million and impact investors another $10 million for preventative malaria-fighting work, based on the knowledge that it costs much less to equip a household with bed nets and to spray at-risk communities, than to treat sick people. The idea is that mining companies will repay investors out of the cost and efficiency savings they reap from a healthier and more productive workforce.

Global Momentum is Growing - Numerous federal, state, and local governments around the world, including India, Ireland, Colombia, Scotland, and South Korea, are exploring the benefits of Social Impact Bonds. Additionally, in Spring 2012 Social Finance UK and the Center for Global Development launched the Development Impact Bond Working Group, which aimed at exploring the possibility of deploying SIBs toward development goals.



Corporate Responsibility & Sustainability Programming (Fortune 2000) o Example: IBM’s Corporate Service Corps, a corporate version of the Peace Corps, to train and deploy thousands of IBM’s future leaders; the IBM Smarter Cities Challenge, which is helping more than 100 cities worldwide become more effective; and the Pathways in Technology Early College High School (P-TECH).



Market Niche

pg. 29

o o o o o

Only Social Impact Bond in U.S. for STEM/STEAM; Only Social Impact Bond in Maryland Only Social Impact Bond concerning Drones Technology Target area provides maximum opportunity to create social impact; Summer onsite residency, creates a greater immersive experience;

e. Is the location of your proposed business or project likely to affect its success? If so, is the identified site the most appropriate one available? 

Location: o The programming will be held at the University of Maryland, a previous partner of the project service provider, College and Career Pathways. o The University of Maryland is directly located within walking distance of Northwestern High School, the partnering school for the pilot initiative, and a pre-existing partner of College and Career Pathways.



Conclusion: o As a result of the previous relationship with the Secondary and Postsecondary host and partnering institutions, geographic proximity, and programmatic design, are all factors leading to a high probability of success.

III. Organizational Structure/Technical Issues a. What organizational structure is right for you? 

Maryland Limited Liability Company (LLC) o The LLC will serve as the trust for project funds. o Community Development Financial Institution (CDFI)  Will apply for CDFI certification in order to participate in CDFI Fund programs that inject new sources of capital into neighborhoods that lack access to financing.

b. Who will serve on the board of directors? 

Board of Directors o Positions: 8 Seats  1 Youth  2 Parents  3 Organizational/Partner Representatives  1 Public School Board Member  1 Social Impact Investors Representative (Impact Investing Representative)(Non-voting Member)

pg. 30

IV. Financial Issues a. Start-up/Operational Costs 

Operational Budget o Infinite 8 Institute, L3C is requesting $850,245 a year for the total of 3 years, serving a total of 50 participants per year, which will go toward STEAM programming to be implemented by College and Career Pathways. The proposed project budget is adequate to support the planned scope of service. Additionally, the expenses are cost-effective and reasonable in relation to the objectives and proposed outcomes of the project. Below is the budget narrative:

PERSONNEL

$322,839

Executive Director (Summer)

80%, 2 months FTE @ $5000 per month

$10,667

Executive Director (School Year)

50%, 10 months FTE @$3333 per month

$33,333

Project Director

100%, 12 months FTE @ $4,500 per month

$54,144

Assistant Director

100%, 12 months FTE @ $3,500 per month

$42,000

Program Assistant (Summer)

100%, 2 months PTE @ $2,000 per month

$4,000

Program Assistant (School Year)

100% 10 month PTE @ $1,500 per month

$15,000

Psychologist/Social Worker (Summer)

100% for 1 PTE @ $25 per hour, 15 hours per week, 6 weeks

$2,250

Psychologist/Social Worker (Saturdays)

100% for 1 PTE @$25 per hour, 5 hours per week, 40 weeks

$5,000

STEM Instructors (Summer)

100% for 5 PTEs @ $25 per hour, 4 hours per week, 6 weeks

$3,000

STEM Instructors (Saturdays)

100% for 5 PTEs @$25 per hour, 1 hour per week, 40 weeks

$3,125

pg. 31

Fine and Performing Arts Instructors (Summer)

100% for 3 PTEs @$20 per hour, 4 hours per week, 6 weeks

$1,440

Fine and Performing Arts Instructors (Saturdays)

100% for 3 PTEs @$20 per hour, 1 hour per week, 40 weeks

$2,400

YEP Instructor (Summer)

100% for 1 PTE @ $40 per hour, 8 hours per week, 6 weeks

$1,920

YEP Instructor (Saturdays)

100% for 1 PTE @$40 per hour, 1 hour per week, 40 weeks

$1,600

Academic Instructors (Summer)

100% for 7 PTEs @$20 per hour, 4 hours per week, 6 weeks

$3,360

Academic Instructors (Saturdays)

100% for 7 PTEs @$20 per hour, 1 hour per week, 40 weeks

$5,600

Summer Tutors/Counselors

100% for 6 weeks for 8 PTEs @ $3500

$28,000

Tutors (Saturdays)

100% for 10 months at $15 per hour, 1 hour, 40 weeks

$6,000

Infinite 8 Consultants

$45,000

Evaluation Consultant

$5,000

CFO Systems Financial Management

$50,000

BENEFITS/Fringe

$54,846

FICA Tax (7.65%)

$272,839 x 7.65%

$20,872

Unemployment Insurance (.94%)

$272,839 x .94%

$2,565

Workers Compensation Insurance (.90%)

$272,839 x .90%

$2,456

Medical Insurance (10.66%)

$140,144 x 10.66%

$14,939

Pension/Retirement (10%)

$140,144 x 10.00%

$14,014

pg. 32

EQUIPMENT AND SUPPLIES

$84,100

38 Laptops

$41,800

50 Tablets

$15,000

Software

Microsoft Office ($38 x 50)/Apps

$2,000

Apple Insurance

$100 per device

$8,800

Printer

$300

Projector

$200

Office Supplies

Paper, ink, files, pens and pencils, etc.

Stamps and Postage

$4,000 $500

Software

STEM, Student Tracking, SAT/ACT Prep

$8,000

Mobile Phones and plans

For Project Director and Assistant Director

$3,500

3D Printers (5 printers)

$1000 each

$5,000

OTHER EXPENSES Office Space

$20,700 On-Campus office space for the summer program

Staff Parking on Campus Communication Systems

$8,200 $5,000

Phone and Internet

$3,000

Liability Insurance

$3,500

Miscellaneous

$1,000

PROGRAM EXPENSES

$367,560

Room and Board for Summer Program

$250,000

pg. 33

Academic Year Student Stipend

50 students @ $25 per month x 8 months

$10,000

Summer Institute Student Stipend

50 students @ $20 per week for 6 weeks

$6,000

Scholarship(s) Student Internship Stipends

$10,000 10 students at $2000

Seed Money for One Participant

$20,000 $5,000

Classrooms/Studio Space on-campus for summer courses

$33,600

Instructional Materials

$2,000

Student Tshirts

$2,000

Snacks

$750

Transportation for Field Trips/College Tours

$4,500

Lodging for out-of-state campus tour

$5,000

Meals for college tours/field trips

$3,000

Planners for Students

$1,000

SAT/ACT Prep Software

$4,000

Student Database

$3,000

Staff Training Guidebooks

$30 each at 31

$930

Minecraft

$26 each

$780

Drones

$5,000

Miscellaneous

$1,000

$850,045 c. Revenue Projections  Arrangement: The Micro-SIB will be a private contractual agreement between multiple parties. o Upfront Capital Requirements: I8I seeks to create a $2.5M model.

pg. 34

o

o o o o o o o Investment per beneficiary: $51,003

o o

o o

o

Investor Shares: $50k-$100k in capital per year, for three years, from sophisticated investors at an interest rate of 5% plus a return of their initial investment upon the achievement of verifiable outcomes.

Total Outcome Payments: $2,677, 657 @ 100% Success Interest Rate Paid per Verified Outcome: 5% Profit per Successful Outcome: $2550.14 Total Payment per Verifiable Outcome: $53,553.14 Investment per beneficiary: $51,003 Number of Beneficiaries: 50 Capital Accrued: The project is actively engaging with interested and sophisticated investors.

Internal Accountability: CPP will have a full-time accountant on staff, who will conduct an internal audit bi-annually provided by CFO Systems.

External Accountability: As well as subjecting itself to a third party audit annually. A non-voting board position will also be reserved for a liaison representing the interest of the investors.

Outcome Assessment: The outcomes will be also be assessed by an independent third party intermediary.

Outcome Payments Protocol: Outcome payments will be given to the upfront investors upon verification of achieved outcomes by an independent third party intermediary.

Government Payments (optional): Non-applicable

d. Sourcing of Financing  Prospective Investment Groups o Social Impact Investing o Angel Investing o Venture Capitalism o Banking Institutions o Community Investment: Community Reinvestment Act o Philanthropy o Secured Online Markets o Sponsorships o Insurance Providers e. Profitability Analysis  Costs/Cost-savings/Profits o Maryland Juvenile Lock-up Costs Per Day.  $229 per day, per capita. o Maryland Juvenile Lock-up Costs Annually.  $83,585 annually. o PG Micro-SIB for STEM Total Cost-savings Annually.  (50) participants = $4,179,250 total. o PG Micro-SIB for STEM 3-year Cost-savings.

pg. 35

Juvenile Detention Cost-savings over 3 years (50 students) = $12,537,750. o

 (50) participants = $12,537,750 total.  Source: Justicepolicy.org.

PG County Public Schools Average Spending Per Pupil = $14,813 annually.



At-Risk Programs: Maryland State Education Association – Thorton Plan o Compensatory Program: The Compensatory program is designed to provide extra support to students coming from backgrounds of poverty.

For every student who qualifies for FREE and Reduced Price Meals, school systems receive an amount equal to 97% of their per pupil foundation. o Limited English Proficiency: For every student who is learning English as a second language, school systems receive an amount equal to 99% of their per pupil foundation. o Special Education: For every student receiving special education services, school systems receive an amount equal to 74% of their per pupil foundation.  Source: Marylandeducators.org.



Maryland Students with Disabilities o In 2016, it’s projected that Students with disabilities cost Maryland $425,548,409. o In 2016, it’s projected that the Federal Government will only pay back $202,365,484. o Maryland will take an estimated loss of $223,182, 925 in special education costs. o Maryland has a total of 866,169 total students state-wide. o Maryland has a total of 102,882 special education students state-wide. o Maryland is averaging payments of $4,136 per special education student. o Maryland is being subsidized $1,966 per special education student.  Source: Maryland.gov.



PG County Special Education Student Enrollment/Expenditures o 125,136 total enrollment. o 14,440 total enrollment. o Special Education represents 11.5% of the total student enrollment. o Under Maryland’s Formula, it costs PG County $59,723,840 annually. o Over 3 years, PG County would save $620,400 in special education expenditures.  Source: princegeorgescountymd.gov.



Total Estimated Cost Savings o Prevention of Juvenile Detention  Juvenile Detention Costs over 3 years per pupil = $250,775.

Special Education costs PG County $59,723,840 annually.

pg. 36



o

o

Juvenile Detention Cost-savings over 3 years (50 students) = $12,537,750.

Special Education Matriculation  Special Education Cost-savings over 3 years per pupil = $12,408.  Special Education Cost-savings over 3 years (50 students) = $620,400.

Total Cost Savings from Juvenile Detention/Special Education  Total Cost Savings per pupil = $263,183.  Total Tax-payer Cost-savings = $13,158,150.

V. Conclusion

In the STEM fields there is not only a lack of minority presence, but there is also dwindling interest among young Americans of any racial make-up. As a result, there is a dire need for innovative initiatives that fill this gap. Additionally, as a growing divide of income inequality become more prevalent, new ways to develop the skill sets of low-income students is more important than ever. Our goal is simple: to produce students who are highly competitive in the new global knowledge-based economy. Today, to be competitive on a global scale means a minimal level of competency concerning the areas of Science, Technology, Engineering and Math. Corporations have an interest in being able to engage with talented minority human capital pools early in their development, and provide them with the skill sets in order to hire them straight out of high school or college. Such an investment in capital as well as in future workforces will always provide a strong return. As governments around the world become more strapped for funding in much needed areas, it is up to the private and philanthropic sector to engage in a way that they have never done so before, in order to achieve results that have never been achieved. America was created to be a platform from which to excel, and this particular project perfectly modernizes and incubates the great American experiment. It is our hope that through this endeavor, that much is learned and realized, and that lives are changed and true impact accomplished.

Prepared By: Ean Garrett, J.D. President/Founder Infinite 8 Institute, L3C ean@infinite8institute.com www.infinite8institute.com

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