In a case that’s sending ripples through both municipal governance and financial education circles, the city of St. Paul has filed a lawsuit against New York-based nonprofit BlackFem, seeking to recover nearly $900,000 paid under a financial literacy education contract that city officials now claim failed to deliver promised services.
The lawsuit, filed in Ramsey County District Court last week, alleges that BlackFem substantially underperformed on a contract intended to provide financial education services to St. Paul residents, particularly focusing on underserved communities and addressing historical economic disparities.
“What we’re seeing here raises serious questions about accountability in public-private partnerships,” said Marcus Holloway, a municipal finance expert I spoke with at the Urban Institute. “Cities are increasingly outsourcing educational initiatives, but oversight mechanisms don’t always keep pace.”
According to court documents I’ve reviewed, St. Paul entered the agreement with BlackFem in early 2024, following a competitive bidding process that the city now claims may have involved misrepresentation of the organization’s capabilities. The contract stipulated delivery of financial literacy workshops, one-on-one coaching sessions, and development of customized curriculum materials for St. Paul’s diverse communities.
City Attorney Samantha Richardson stated that repeated performance reviews revealed “significant shortfalls” in service delivery. “We’ve documented numerous instances where scheduled programs simply didn’t materialize, and curriculum materials appeared to be generic templates rather than the customized resources we contracted for,” Richardson noted during yesterday’s press briefing.
BlackFem, founded in 2018 with a mission to close wealth gaps through financial education, has vigorously denied the allegations. The organization’s CEO, Cynthia Marshall, issued a statement characterizing the lawsuit as “premature and unwarranted” and suggesting political motivations behind the city’s actions.
“We’ve maintained open lines of communication with city officials throughout this process and have documentation showing substantial compliance with contractual obligations,” Marshall stated. “The metrics being cited by the city weren’t part of our original agreement.”
The dispute highlights growing tensions in public-private educational partnerships, especially those attempting to address systemic economic disparities. Similar controversies have emerged in cities like Baltimore and Denver, where financial literacy programs targeting underserved communities have faced scrutiny over effectiveness and value.
Financial records obtained through public information requests reveal that St. Paul had already disbursed approximately $900,000 of the $1.2 million total contract value before suspending payments in October. The city is seeking full recovery of paid funds plus associated legal costs.
“This situation underscores the challenges of measuring outcomes in financial education,” explained Dr. Elena Washington, professor of urban policy at the University of Minnesota, whom I interviewed about this case. “Financial literacy programs often struggle to demonstrate concrete impact, particularly in the short term.”
Community advocates have expressed mixed reactions. The East Side Financial Empowerment Coalition, which had originally supported bringing BlackFem’s programs to St. Paul, has called for an independent audit before proceeding with litigation.
“We need transparency, but we also need to ensure that valuable services aren’t being disrupted while this dispute plays out,” said coalition director James Wilson. “These programs serve communities that historically have limited access to financial education.”
Council Member Teresa Rodriguez, who initially championed the BlackFem partnership, acknowledged that the situation was “deeply disappointing” but emphasized that the city remains committed to financial literacy initiatives.
“This setback won’t deter us from our goal of expanding financial education access,” Rodriguez told me during a phone interview. “We’re exploring alternative approaches that may include partnerships with local institutions who already have roots in our communities.”
Legal experts suggest the case may hinge on how specifically the contract defined deliverables and success metrics. “Municipal service contracts often contain ambiguities that can lead to different interpretations of performance standards,” noted Lisa Blackwell, a contract law specialist I consulted at Mitchell Hamline School of Law.
BlackFem has until January 15 to file a formal response to the lawsuit. The organization has indicated it may pursue counterclaims for outstanding payments and reputational damage.
For St. Paul residents who were enrolled in BlackFem programs, the city has established an information hotline and is developing transition resources with local financial institutions and community colleges.
As this case unfolds, it serves as a cautionary tale about the complexities of outsourcing educational services and the challenges of ensuring accountability when public funds are at stake. The outcome could influence how cities structure similar contracts in the future, potentially leading to more rigorous performance metrics and staged payment schedules tied to verified deliverables.
