The City of Dallas is set to renew an annual program that issues taxpayer-backed loans to select businesses that must be owned by women or someone in a minority group — a policy some legal experts say may be unconstitutional.
The Predevelopment Assistance Program costs taxpayers up to $100,000 annually. It provides “vital flexible capital to enable project feasibility” for “community developers and certified women and minority owned businesses” that are in the predevelopment process of construction projects. The City’s Office of Economic Development touts the program as one of its “budgeting for equity” initiatives, according to the proposed budget for the next fiscal year.
Devon Westhill, president and general counsel of the Center for Equal Opportunity, said the program appears to be a type of “minority set-aside” that has grown in popularity among governments advancing equity initiatives.
He said there could be a legitimate legal challenge to the policy over violations of the Equal Protection Clause and Title VI of the Civil Rights Act of 1964 due to its explicit preference of certain groups of people over others.
“I wouldn’t say they are able to do this legally,” Westhill told The Dallas Express. “These programs are vulnerable to legal action because oftentimes they violate the Equal Protection Clause. At the very least, these are the types of things that could lead to a Justice Department investigation, depending on who is in office.”
Catherine Cuellar, director of communications, outreach, and marketing for the City of Dallas, claimed the program is legal because such equity measures have a “compelling governmental interest” — a common legal argument used to uphold minority set-aside programs.
“The eligible pool of predevelopment assistance and incentive applicants include community developers, as well as certified [Minority and Women-Owned Business Enterprises],” Cuellar told The Dallas Express. “The program complies with federal law because the goal of affording opportunities to permit equitable participation in Dallas’ economy, as set forth in the policy, is a compelling governmental interest and is narrowly tailored to meet that interest.”
The Predevelopment Assistance Program provides interest-free loans of no more than $25,000 to qualifying businesses. The loans cover market studies, site assessments, design work, and similar third-party predevelopment expenses approved by staff. Recipients who repay the loan and successfully advance their development project are eligible for “other economic development incentives to support the development of the project.”
Erin Wilcox, an attorney at Pacific Legal Foundation, said there is reason to expect a new wave of legal challenges against equity programs that prioritize certain groups over others, especially in light of the Supreme Court decisions this year that ruled race-conscious college admissions were unconstitutional.
“The idea that diversity for diversity’s sake is not a strong enough reason to treat people differently based on race was a key part of the Supreme Court’s decisions,” Wilcox told The Dallas Express. “In reality, all this does is divide by race and make it harder for people to compete in the marketplace.”
Westhill and Wilcox pointed to a few legal cases that cast doubt on the legality of Dallas’ program.
The Supreme Court ruled in 1989 that a program in Richmond, Virginia, that set aside 30% of government construction projects for minority-owned businesses violated the Fourteenth Amendment. The nation’s highest court also ruled in 1995 that the Department of Transportation illegally prioritized “socially and economically disadvantaged individuals” in one of its subcontractor programs.