In Massachusetts, about 4,000 young men age out of the juvenile justice system or exit the probation system each year and many face poor employment prospects and life opportunities, leaving them at high risk of reoffending; it’s anticipated that 55% will return to prison at least once within three years. The Massachusetts Juvenile Justice PFS Initiative is targeting 929 of these men aged 17 to 23. Using its High Risk Youth Intervention model, Roca Inc. is engaging in intensive street outreach and providing targeted life skills, education, and employment programming with the goal of reducing incarceration by 40% and increasing job readiness and employment over a seven-year period. If successful, these young men will be better prepared for employment prospects and the Commonwealth of Massachusetts will see great societal benefit, as well as cost savings, allowing for the possibility of extending the project to an additional 391 young men.
- Year Launched2014
- Service Delivery Term (Years)7
- Motivation for Project55% of young adults who age out of juvenile justice system or are on probation will return to prison at least once within three years. Only 30% are employed within one year of their release from prison or jail.
- Project Objective(s)Reduce incarceration by 40%; Increase job readiness and employment
- Individuals Served929
- GeographyBoston, Chelsea and Springfield, MA
- Issue AreaRecidivism
- Initial Investment ($ millions) [Note 2]21.7
-  This category captures the initial private investment raised to support the project that has the potential to be repaid if the project achieves its pre-determined outcomes. Many projects, particularly those in the supportive housing and health arenas, leverage existing public resources, such as subsidized housing and health insurance, to achieve program impact; the value of these resources is not included in these dollar values but are discussed in more detail in Sections 7, 8 and 9 of this report.
- Service Provider(s) [Note 1]Roca Inc.
- Payor(s) [Note 2]Commonwealth of Massachusetts; US Department of Labor [Note 9]
- Transaction Coordinator(s) [Note 3]Third Sector Capital Partners
- Evaluator [Note 4]Sibalytics LLC; The Urban Institute
- Validator [Note 5]Public Consulting Group
- Project Manager [Note 6]Third Sector Capital Partners
- External Legal Counsel [Note 7]Goulston & Storrs P.C.; Nixon Peabody LLC ; Goodwin Procter LLC; Ropes & Gray LLC
- Technical Assistance Provider(s) [Note 8]Government Performance Lab; Chapin Hall
-  Delivers program interventions to target population over the course of the PFS contract
-  Makes payments when pre-determined outcomes have been met
-  Both New York State and the Commonwealth of Massachusetts were the recipients of grant funds from the United States Department of Labor, awarded through a competitive process through the Workforce Innovation Fund. Grant funds received through this process are being used in whole or part to fund outcome payments, in combination with resources committed by the states themselves. In both cases, the PFS contract is held by the state, so the federal agency is not the payor of record.
- Roles and responsibilities may include: design and structure of PFS project and financing model; capital raise; stakeholder management; on-going performance management
-  Design and implement plan for determining whether outcomes have been met
-  Verify accuracy of data used in evaluation plan, or evaluation plan itself
-  Intermediary during service delivery phase, and/or fiscal sponsor for project funds
-  Provide assistance in drafting, reviewing and negotiating PFS contracts
-  Provide support and expertise to project stakeholders in the project development and/or project implementation phases
Evidence and Program Design
- Service Intervention(s) Model and/or TypeTransitional Work and Case Management: High Risk Youth Intervention Model
- Evidence base for interventionProvider performance data
- Has effectiveness of the intervention for PFS project target population been evaluated?Yes
- Has the service provider provided this intervention previously?Yes
- Is PFS project: Scaling an existing intervention by replicating at a larger scale? Demonstrating the effect of a new program model or combination of services? Transplanting an existing intervention(s) to a new target population and/or service delivery setting?Scaling
- Evaluation Design MethodologyRCT
- Data Source(s) for EvaluationMassachusetts unemployment insurance database; Service provider
- Outcomes Tied to Success Payments1) Number of jail/prison bed-days avoided; 2) Job readiness [Note 2]; 3) Increases in employment
- Outcomes Tracked, Not Tied to Success PaymentsGED/High School completion; College enrollment
- Length of Evaluation Period7 years
-  Job readiness is measured by the intensity of engagement and level of participation that a participant demonstrates with their assigned service provider staff person during a given period.
Service Provider Characteristics and Service Delivery
- Single or multiple service providers?Single
- Service provider type(s) (nonprofit, government, private)Nonprofit
- Service provider OR site selection methodRFR from state for criminal justice service provider
- Service Provider Experience with PFS InterventionPFS intervention is proprietary to service provider
- Referral Method for PFS Target PopulationVoluntary enrollment by participants identified as high-risk by evaluator and referred to service provider for outreach
- Did the project have a ramp-up phase? (Y/N; brief description)No
PFS Contracting and Governance
- Operational Oversight Structure [Note 1]Operating Committee includes representatives of project manager, Commonwealth Department of Youth Services, Executive Office of Administration and Finance, service provider, and intermediary; evaluator by invitation
- Frequency of meetings and/or reportsMonthly
- Executive Oversight Structure [Note 2]Oversight Committee includes representatives of project manager, intermediary, service provider executive director, commissioner of Dept. of Youth Services, and secretary of Executive Office of Administration and Finance
- Frequency of meetingsQuarterly
- Investor role in project governance?Can attend quarterly meetings of Oversight Committee, and up to two meetings of Operating Committee, as non-voting member
- Frequency of reporting to investorsQuarterly
- Non-standard Contract Termination Events [Note 3]1) Commonwealth and Senior lender have termination rights if cumulative program attrition exceeds Roca historical baseline by 350% or more at end of year 2 or 3
- Appropriations Risk Mitigation Strategy [Note 4]Success payments backed by full faith and credit of Commonwealth
-  Committee or working group involved in regular and/or day-to-day monitoring of project progress
-  Oversight and decision-making body for PFS project
-  Events that allow stakeholders to exit their contractual obligations, beyond those typically found in loan agreements and contracts
-  Means by which to mitigate risk that funding is not available for investor repayment
- Senior Investor/ Lender and Total Senior Investment ($MM)Goldman Sachs ($9)
- Subordinate Investor/ Lender and Total Subordinate Investment ($MM)The Kresge Foundation ($1.5); Living Cities ($1.5); ($3 total)
- Deferred Fee Source and Total Deferred Fees ($MM)[Note 1]Roca Inc. ($3.26); Third Sector Capital Partners Inc. ($0.05); ($3.31 total)
- Recoverable Grant Source and Total Recoverable Grants($MM)[Note 2]None
- Non-recoverable Grant Source and Total Non-recoverable Grants ($MM)[Note 3]Laura and John Arnold Foundation ($3.7); New Profit, Inc. ($2); The Boston Foundation ($0.3); ($6 total)
- Guarantor and Guarantee ($MM) [Note 4]None
- Illinois Dually-Involved Youth Project
-  Deferred fees are delayed payments for the services provided by service providers, transaction coordinators and/or project managers. Deferred fees are one way of structuring projects so that more stakeholders have a financial interest in ensuring project success.
- Philanthropies can use either their regular grant making protocols, or protocols for program-related investments (PRIs), to contribute to PFS capital stacks. If a foundation does not use a PRI, their investment may be structured as either a loan or a recoverable grant. The distinction between the two is in the expectation of repayment. A loan, even if from a philanthropic source, is expected to be repaid, and structured accordingly. A recoverable grant does not bear the same expectation of repayment.
-  Non-recoverable grants are traditional grants contributed to capital stacks; if the project is successful and generates full repayment, the non-recoverable grants can remain with the service provider or project manager, or be recycled by the original funder.
Basic Repayment Structure
- Initial Investment ($Millions)21.76
- Maximum Repayment Funds Committed by Payor ($Millions)27
- Full service delivery term (years)7
- Full repayment period (years)7
- Interim outcomes reported? Tied to payments?Yes/Yes
- Sustainability/ Recycling of Funds1) State could serve an additional 390 individuals if the project is successful, using federal grant funds; 2) Any repaid philanthropic support will be invested in future PFS projects and/or service provider scaling
Detailed Repayment Terms
- Interest5% (senior) and 2% (subordinate) base annual rate
- Trigger for initial repayment of principal [Note 1]1) Jail Bed-Day Outcome: 5.2% decrease in days incarcerated; 2) Job readiness outcome: Participant engages with youth worker ≥ 9 times in one quarter; 3) Employment outcome: Participant earnings ≥ $1,000 in one quarter
- Threshold for full repayment of principal40% reduction in incarceration days
- Threshold for full repayment of principal plus maximum success payments70% reduction in incarceration days
- Repayment timing1) Incarceration outcome: Bi-quarterly starting in Year 5; 2) Job readiness outcome: Bi-quarterly starting at Q7; 3) Employment outcome: Bi-quarterly starting in Year 5
- Return to Investor [Note 2]11% maximum (senior lenders); 18% maximum (subordinate lenders)
- Success Payment to Other Stakeholders? [Note 3]Yes: Service provider and project manager
-  Initial repayment does not equate to full principal return. Investors may recover only part of their principal if projects do not meet a certain level of success.
-  There is no standard methodology for calculating investor return. These numbers are what is publically reported, and comparing from one project to another may not be an apples-to-apples comparison for the reason of potentially different calculation methodologies. Calculation methodologies may be provided in investor agreements, which are not available publically and were not available for this report’s analysis.
-  Success payments for other stakeholders such as project managers and service providers create a financial incentive for project success.
- Project Development Costs Not Covered by PFS Capital RaiseGovernment Performance Lab fellow; Legal services
- Funding source(s) for project development costs, if anyPro bono legal support
- Project Implementation Costs not covered by PFS CapitalNot available
- Funding sources for implementation costs not covered by PFS capitalNot available