5 Lessons from Detroit’s Community Benefits Ordinance

In 2019 Stellantis (then known as Fiat Chrysler) announced a $2.5 billion plan to expand and modernize two of its auto assembly plants in Detroit. This triggered the city’s Community Benefits Ordinance (CBO) — a unique law that requires companies launching major development projects to negotiate benefits for nearby residents.

In this case, Stellantis promised to create nearly 5,000 new jobs and invest $13.8 million in the local community, including in workforce development, education, youth programs, scholarships and more. It also committed to protect residents’ quality of life and to comply with all federal, state and local laws.

This was in some ways a boon for the area, a low-income and majority Black community in Southeastern Detroit. The promise of new jobs generated hope and excitement among residents who had witnessed a significant drop in auto manufacturing jobs over the last two decades. Since its launch, they’ve seen funding flow in for workforce training and education.

But Stellantis did not fulfill all its promises.

After the Mack Avenue plant expansion was completed in 2021, locals started complaining about strong odors and air quality impacts — effects a state investigation linked to dangerous pollution from the facility. Michigan’s government fined Stellantis several times for air quality violations. The U.S. Environmental Protection Agency even opened an investigation into whether the state racially discriminated against residents by issuing the factory a permit.

But despite all this, the city of Detroit did not take action against Stellantis for breaking air quality laws — which clearly violated its agreement under the community benefits ordinance.

These outcomes, both good and bad, can offer critical lessons for similar efforts that are now underway across America.

Detroit Is an Early Mover in a Growing Field

While Detroit was the first U.S. city to roll out a city-wide community benefits ordinance in 2016, it’s not alone in testing out such a system. Different kinds of community benefits frameworks have been cropping up nationwide in recent years, especially in the clean energy sphere.

Under the Biden administration, many project developers have been required to submit community benefits plans (CBPs), which lay out how they will engage with and deliver benefits to local communities, to receive federal funding. The future of this mandate is uncertain under the Trump administration; however, work around community benefits frameworks will likely keep gaining traction at the state and local levels. A few cities, including Cleveland, have already adopted community benefits ordinances like Detroit’s. And a growing number of local governments are exploring similar laws for their jurisdictions. Interest in community benefits agreements (CBAs), which are legally binding agreements between developers and local communities, is also very high for clean energy projects.

Detroit is showing how giving communities a seat at the table can help shift long-standing paradigms of development. Its early experience offers valuable insights about how to center community voices and deliver real benefits through these frameworks, as well as how to ensure they’re monitored and enforced. But it has also revealed pitfalls that need to be avoided.

WRI and Data for Progress took an in-depth look at Detroit’s community benefits law to learn where it has succeeded — and where it falls short.

How Detroit’s Community Benefits Ordinance Works

Detroit’s CBO applies to any development project that is valued at or above $75 million and receives at least $1 million in financial support from the city. Once the CBO process is triggered, Detroit’s Planning and Development Department determines the project’s “impact area” — which includes all census tracts or census block groups in which a project is located — and sends a public meeting notice to its residents.

Nine people from the impact area are then selected to serve on a neighborhood advisory council (NAC), a group of community representatives that meets with city officials, the developer and community members to discuss project impacts and negotiate potential benefits. To serve on an NAC, people must be over 18, live within the project’s impact area and be nominated by other residents.

Once the NAC and the developer have agreed on a final benefits package, it must be approved by the City Council before the project can move forward. The entire process — from the CBO being triggered to an agreement between the NAC and developer — typically happens over two to three months, with NAC meetings often occurring weekly. After an agreement is formalized, the Planning and Development Department holds annual public update meetings with the NAC and developer, at least for the first two years of the project.

The fact that developers enter into a formal agreement with the city sets Detroit’s CBO apart from traditional community benefits agreements, which are forged directly between developers and the community. Some see this as a drawback: Advocates of community benefit agreements say direct negotiation gives communities power and self-determination that is lacking in a CBO.

In Detroit’s CBO, the city is also tasked with tracking and enforcement. Its Civil Rights, Inclusion and Opportunity Department monitors all projects subject to the law and publishes biannual reports on companies’ progress. If projects aren’t hitting targets, the department labels them “off track” and notifies the company, giving it a chance to address the issue.

However, this department doesn’t have the power to penalize developers when they are off track; it can only report a developer to the City Council and recommend enforcement action. The City Council ultimately decides whether to impose penalties, such as canceling land transfers or sales, requiring developers to pay fees or repay subsidies, or even suing them for breach of contract.

5 Lessons from Detroit’s CBO — and the People It Impacts

Detroit’s ordinance has had many positive impacts over the last eight years. Across 11 projects subject to the law so far, communities have won investments in jobs, education, training, affordable housing, green space, childcare, scholarships and home improvement. Community members and other stakeholders see the law as having given them a seat at the table, one that they did not have before.

But the system is not perfect. Detroit — and all cities and states — can learn from its shortcomings and continue to improve community benefits frameworks for the clean energy transition.

Here are five key takeaways from our analysis of the CBO and interviews with community members who have engaged in benefits negotiations:

1) Negotiating groups need to accurately represent the local community.

One major community concern with Detroit’s ordinance is whether local people are truly represented in the negotiating process. While all nine members of an NAC come from a pool of people nominated by impact area residents, only two are directly elected by them. The remaining members are selected by the city’s Planning and Development Department and city council members. Some see these appointees as reflecting the city’s or developer’s point of view more than the community’s.

Residents interested in serving on the NAC also have to appear and make their case at an in-person meeting. There are concerns that this selection process skews membership, as some may not be able to attend or participate in-person due to language barriers, childcare or work obligations, and other factors. Some interviewees in Detroit called for expanding the number of negotiators directly elected by community members and improving the accessibility of the CBO process to address these concerns.

In all cases, benefits agreements should be created by a representative and diverse group of stakeholders, including (but not limited to) labor unions, environmental groups, community members, faith organizations, community groups and local businesses. Accurate representation can help ensure that the resulting benefits framework truly reflects community needs and is not just “the last checkbox that [developers and the city] need to check off,” as one interviewee put it.

Communities must also be met where they are through trustworthy liaisons and leaders. And materials and information need to be in languages and locations accessible to all community members.

2) Communities need better resources to level the playing field with developers.

Some former NAC members we interviewed felt undercut during the negotiating process, especially in the Stellantis project. They didn’t feel they had enough information to know what types of benefits they could ask for or how to quantify those benefits into a monetary ask for a developer. With an average of three months spent on negotiations, they also reported feeling rushed through the process.

In Stellantis’ case, the city of Detroit and the company agreed to complete the community benefits process on an expedited timeline, within just 60 days of announcing the project. By giving Stellantis the freedom to walk away during the CBO process and forcing the NAC to make rapid decisions — without sufficient time to look into potential environmental and human health impacts — this agreement made some members feel like they were at a significant disadvantage.

Beyond having enough time to understand a project and negotiate, communities need added capacity and resources to level the playing field with developers. They should have access to legal experts who can help craft sound agreements and third-party experts who can help educate them on the technical aspects of projects, identify specific benefits tailored to their needs, and share best practices from previous agreements. Philanthropies, developers and governments could pay into a “community benefits fund” to cover the cost of legal aid, third-party experts and compensation for residents who participate in benefits negotiation processes.

3) Monitoring and enforcement are essential for follow-through.

Several interviewees felt that the city fell short in enforcing Stellantis’ commitments. In several of its progress reports, Detroit’s Civil Rights, Inclusion and Opportunity Department marked Stellantis “off-track” for violating federal and state air quality laws. But it didn’t refer the company to the City Council for punitive action, instead relying entirely on the state for enforcement. In the eyes of the local community, this is evidence that the CBO’s enforcement mechanisms are ineffective, or not always fully brought to bear.

Unlike in a traditional community benefits agreement, where the community and the developer both hold enforcement power, the city is often the enforcement authority in a community benefits ordinance like Detroit’s. That means its effectiveness hinges on whether a city has robust enforcement tools and is willing to deploy them.

But lax enforcement isn’t just a problem in Detroit. Even though many community benefits frameworks are legally binding, their monitoring and enforcement provisions can be weak. It can be difficult to enforce agreements if they are written poorly or lack explicit, measurable accountability mechanisms.

All benefits agreements should be carefully drafted to include explicit details on monitoring, measuring and implementing developers’ commitments. Agreements should also establish strong procedures and penalties for noncompliance, like binding arbitration, and make clear who will be responsible for tracking and enforcing commitments.

4) Benefits frameworks should incorporate racial and environmental justice tools to assess project impacts and fairly distribute benefits.

From the get-go, Stellantis’ Mack Avenue expansion was expected to increase air pollution in the surrounding area — a majority Black community with high asthma rates. To get the project approved under the Clean Air Act, Stellantis had to reduce emissions from another facility within greater Metro Detroit to avoid increasing overall pollution in the metro area. It did so — by reducing emissions at its plant in a predominantly white community in nearby Warren. This was possible in part because Detroit’s CBO does not incorporate racial or environmental justice frameworks to identify, assess and address inequitable and unjust impacts.

“Race plays such a critical role in how [agreements] are negotiated. Who deserves to have a say and what the community deserves is all complicated by race and class.” -Community representative in Detroit

Existing environmental justice screening tools, such as Michigan’s MiEJScreen and the federal government’s Climate and Economic Justice Screening Tool, can help avoid such outcomes. These combine population and environmental data to identify communities that face the greatest health burdens, whether from cumulative pollution or other factors, such as high poverty and unemployment.

While not always perfect, environmental justice tools can be used in the context of community benefits frameworks to understand how projects may exacerbate existing inequities, how risks can be mitigated, and how additional benefits can be targeted to historically marginalized communities as a means of restorative justice. For instance, if access to affordable housing is a concern in a particular community, then a project should be assessed for impacts on nearby home values and rents. Or, if a particular community is already facing high pollution burdens, then permits for new or expanded facilities should address pollution impacts within that same community.

In the words of one representative from a community-based organization, “Race plays such a critical role in how even CBAs are negotiated. Who deserves to have a say and what the community deserves is all complicated by race and class.”

5) Governments and other stakeholders should consider partial or full community ownership of projects.

In our conversations with Detroit stakeholders, we found that community members often mistrust both project developers and the local government when it comes to infrastructure projects. Full or partial community ownership of projects can be one way to help mitigate this.

Community ownership, especially for infrastructure projects that serve the public good and receive public dollars, can be explored through cooperative ownership and limited liability corporations. For example, a project could be run by an elected board of community members and workers, through which the community would help determine the project’s scope, location and benefits. A city or local community development finance institution (CDFI) could also provide upfront capital to community-based organizations to enable these groups to take an equity stake in projects. Other financing tools, such as industrial bonds, could be used to earmark funds for public ownership; to directly finance projects; and to pass returns to the community in the form of public services, goods and benefits.

More research is needed to understand how such arrangements work best in practice. The research and policy community, including stakeholders engaged in developing community benefits frameworks, should analyze pathways to community ownership via CBOs and other frameworks. This analysis should compare cases where community ownership has or has not been implemented to identify the advantages, finance flows, legal frameworks and performance of different ownership models.

Done Right, Benefits Frameworks Are Good for Communities and the Climate

A full-scale shift to clean energy in the U.S. will only succeed if it balances infrastructure development with the needs of local communities. That includes accounting for historic inequities and ensuring that projects benefit people who need it most.

Detroit’s CBO has made strides toward a new model of development, but reforms are needed to better engage communities and reach the law’s full potential. This will require work and buy-in from developers, policymakers and residents alike. As one interviewee shared, “Detroit is a love story. So regardless of what happens, I’m always gonna be pro-Detroit and make sure that Detroit is benefiting from policy decisions that impact it.”

As states, cities, businesses and civil society move forward with ambitious and equitable climate action, they can build on these lessons to develop more robust community engagement — and ensure developers are held accountable to their promises.

This article was written in collaboration with Data for Progress.