MWBE Replacement Ordinance: Questions About What to Expect

For the past two weeks, I have unsuccessfully sought information about how the new “community-based” replacement for the city’s Minority-owned and Women-owned Business Enterprise (MWBE) program would likely work. The currently suspended MWBE program helped steer contracts to vendors owned by women and racial minorities. While flawed, the city’s MWBE program represented an important tool that helped diversify the notoriously white group of firms that benefit from the city government’s considerable purchasing power.

An Atlanta-based law firm Griffin & Strong, P.C. has been hired by the city to prepare an alternative program that will replace the MWBE program. At the time of the program’s suspension, Mayor Spencer committed that “the legislation will be ready to file on the first day of the Board of Aldermen’s legislative session.” As of now, a little over a week away from the session’s September 12th start, the public has heard little in the way of hints about how this new ordinance will both meet the Trump administration’s anti-DEI demands and still deliver a program that continues diversifying the city’s pool of suppliers.

For many years, I worked in the field of Community Reinvestment Act (CRA) advocacy. For those who are unfamiliar with the CRA, it is the nation’s primary anti-redlining law. Redlining is when banks accept deposits from customers in majority-minority areas, while refusing to lend to customers in those same areas. In effect, the practice helps underwrite development in majority-white neighborhoods, while non-white neighborhoods face a reality of being unable to access credit to purchase or maintain homes. Likewise, small business lending was also systematically denied in non-white neighborhoods. This disparity in access to credit helps drive the nation’s stubborn racial wealth gaps.

Due to the history behind the CRA’s passage, it was drafted in a way that is “race blind”. This meant that advocates often found themselves using various proxies to help direct investment into St. Louis’s majority-Black neighborhoods and municipalities. The coalition I staffed would reach agreements with lenders calling for investments in certain ZIP codes or census tracts containing high levels of concentrated poverty. Because of the region’s intense geographical and economic segregation, these geographic proxies would allow us to get lenders to agree to make investments and increase lending in overwhelmingly Black communities, while avoiding the explicit usage of race in our agreements.

Unfortunately for those who support the cause of racial equity, the Trump administration’s memorandum to federal fund recipients makes clear that the administration considers usage of these proxies to be “potentially unlawful“ under the current administration’s interpretation of the nation’s civil rights laws. The Department of Justice letter explicitly states the following proxies to be “potentially unlawful”:

1. Cultural Competence Requirements –  The memo states that cultural competency statements are problematic in the Trump administration’s view. “For instance, requiring faculty candidates to describe how their ‘cultural background informs their teaching’ may function as a proxy if used to evaluate candidates based on race or ethnicity.”
2. Geographic or Institutional Targeting – The memo then explicitly takes aim at geographical targeting, one of the most popular ways to avoid explicit use of race. “A federally funded organization implements recruitment strategies targeting specific geographic areas, institutions, or organizations chosen primarily because of their racial or ethnic composition rather than other legitimate factors.”
3.  “Overcoming Obstacles” Narratives or “Diversity Statements” – This would impact programs that require applicants to describe “obstacles they have overcome” or submit a ‘diversity statement’ in a manner that advantages those who discuss experiences intrinsically tied to protected characteristics, using the narrative as a proxy for race or other protected groups.

With the Board of Aldermen’s new session about to begin, the public has heard little from policymakers about the direction that this new ordinance might take. I contacted local academics and national organizations that specialize in the intersection of demography and public policy. None of them responded to my questions about the impact of the DOJ’s proxy restrictions on a potential new ordinance. While it is understandable that many would be hesitant to go on the record with recommendations that essentially validate the Trump administration’s legal interpretations, I was surprised at the uniform lack of response.

Maybe I shouldn’t have been surprised, though. The overwhelming majority of jurisdictions that have received the memorandum from Attorney General Bondi haven’t taken action. Some have filed suit to protect their contractor diversity program, and a handful have taken the path chosen by our city’s leaders, essentially acquiescing to the Trump administration. Most have decided to wait and see how court challenges are decided. This last camp even includes the state of Missouri, despite its conservative government.

This leaves us back at the question of what to expect from a new ordinance. Attorney General Bondi’s memorandum does leave a small amount of leeway that would allow some reasoning for targeting geographical areas and other methods that could help continue to steer city dollars to firms owned by women and/or racial minorities. At the same time, these methods would defy the memo’s clear intent and would likely draw the ire of the Trump administration and the very legal challenges the Spencer administration is trying to avoid. The Spencer administration has made it clear that it is interpreting the Department of Justice memo in a maximalist manner. If the decision to steer clear of potential conflicts with the Trump administration continues through the process of crafting and passing the new ordinance, then the ban on commonly used proxies makes it unclear how the new program could be constructed with an eye towards greater equity.

If this all seems fast, it’s because it has happened at a relatively breakneck speed. At the current pace, the city will have suspended and replaced the MWBE program prior to courts ruling on the validity of the Trump administration’s legal interpretation. With the Board of Aldermen’s new session rapidly approaching, voters won’t have to wait much longer to learn about the city’s plan to move forward.