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Transaction Structure
The Goldman Sachs loan is structured as a $9.6 million multiple-draw term loan to MDRC, an experienced intermediary known for bringing together public and private funders to test new policy ideas. MDRC will use the proceeds of the loan to provide funding to the service provider, the Osborne Association, which has extensive experience in providing services to incarcerated youth. MDRC, through a contract with New York City, will oversee the
1 The Rikers Island transaction is technically not a bond; it is a loan. But the expression social impact bond is in such regular use that for ease of recognition, we refer to the transaction as a social impact bond.
ated on Rikers Island. The loan will be repaid based on the actual and projected cost savings realized by the New York City Department of Correction as a result of the expected decrease in recidivism. This unique public-private partnership between the City of New York, MDRC, the Osborne Association, Bloomberg Philanthropies, and Goldman Sachs leverages high-quality nonprofit capacity, private-sector capital, and philanthropic support to address a pressing community challenge.
FEDERAL RESERVE BANK OF SAN FRANCISCO
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Community Development INVESTMENT REVIEW
day-to-day implementation of the project and is responsible for any payments to Goldman Sachs. The Vera Institute of Justice, an independent, nonpartisan, not-for-profit center for justice policy, will serve as the evaluator of the program and will evaluate the extent to which the program has reduced the rate of recidivism among Rikers Island inmates participating in the program. Based on the results of the evaluation (at twelve- and twenty-four-month postrelease intervals), New York City will provide success payments to MDRC based on the actual and projected cost savings from the reduced recidivism rate, according to the payment schedule shown in Figure 1. MDRC then repays the Goldman Sachs loan from the New York City success payments.
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