Jafar Abbas has noticed a distinct change in attitude among his students. No more yelling out the window, fewer obscenities, and much less negativity in general.

The more positive tone is a good sign not just for the class, put potentially for society. Abbas isn’t an instructor in just any classroom — he’s teaching teenage inmates at New York’s Rikers Island.

“I see a lot of kids thinking differently,” said Abbas, an instructor in the city’s new Adolescent Behavioral Learning Experience (ABLE) program, aimed at reducing the risk of reincarceration among youth under 18 — the cutoff for being tried as an adult.

“It’s not just fully about everything negative. You start to talk about stuff that’s positive. And that’s something that you weren’t hearing too much when we first started this program,” he said.

This type of program isn’t new. ABLE is a 12-step cognitive-behavioral intervention, also known as Moral Reconation Therapy, that has had an impressive track record since first developed more than two decades ago.

What is different is the way the program is being funded — through the country’s first social impact bond. With the innovative financing option, Goldman Sachs’ [Urban Investment Group] is lending the city $9.6 million to fund the program for four years. The bank would only get repaid — plus interest —if the program succeeds in reducing recidivism.

New York City hopes to get a return on the investment, as well. While it has become one of the world’s safest large cities, this achievement comes at a cost — not just financial.

The city operates the most expensive jail system in the country, costing over $1 billion a year. Mostly housed on Rikers Island, more than 80,000 detainees are processed after arrest each year as they await their turn in an overloaded court system.

Like most cities, New York allocates most of its corrections budget toward operational expenses, with precious little left over for preventive measures — much less experimental ones.

“This is always a good deal for the city,” said David Butler, a senior advisor at MDRC, a leading social policy research organization that is overseeing the program. If the program succeeds, he says, the savings for taxpayers from a lower incarceration rate would exceed what the city must pay Goldman.

For example, if the program is able to reduce recidivism rate by 20%, Goldman would earn $2.1 million, but the city would realize $20.5 million in savings. The bank’s potential earnings for the bank are capped at level, close to the $2.4 million it risked on the program after Bloomberg Philanthropies guaranteed $7.2 million of the loan......

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