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Sunday, 18 March 2018 18:31

Philanthropy as Economic Development? Foundations increasingly step up to kickstart risky community initiatives

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The philanthropic efforts of nonprofits and foundations throughout Michigan are increasingly addressing bigger issues such as affordable housing, community revitalization and employment. 

While these initiatives traditionally fall under the economic development umbrella, the philanthropic sector has always been engaged in them on a smaller scale, according to industry sources.

“As the number of nonprofits in the state has continued to grow, we have a lot of foundations that have a couple of million a year generated by endowments and they’re looking around and not feeling the need for a public charity mission. It’s now about a cause,” said Jeff Williams, CEO of Lansing-based Public Sector Consultants Inc. “Many of the foundations in Michigan are through that first cycle and are now looking at what else they can do.”

Decades ago, nonprofits might have gotten involved in a single project, Williams said. Now, they are taking a look at systems as opposed to being site-specific.

“It’s just an extension of what they’ve been doing for a long time and now they have more money and can take on bigger projects,” he said.

These projects are often collaborations involving the public and private sectors, as is the case with the Ottawa Housing Next initiative to benefit residents in Ottawa County who need affordable housing. Holly Johnson, president of the Grand Haven Area Community Foundation, and Mike Goorhouse, president and CEO of the Community Foundation of the Holland/Zeeland Area, serve as co-chairs of the initiative.

Johnson describes the project as a cross-section collaborative involving the nonprofit, business, and governmental sectors.

“These nonprofits and foundations get involved in a housing trust to make housing affordable for those people who most need it,” said Eric Lupher, president of the Citizens Research Council of Michigan Inc. based in Livonia. “Foundations and nonprofits are getting involved to bridge those gaps.”

While these economic development-focused philanthropic pursuits capture plenty of attention, leaders of nonprofits and foundations said they remain true to addressing health and human service needs such as mental health services, quality preschool education and teen suicide prevention. Rather, they are striking a balance between meeting those basic needs and expanding their reach to make positive impacts.

Williams said nonprofits are really taking the idea of placemaking to heart and trying to create a buzz and positive energy in their communities. Meanwhile, community foundations increasingly are serving as the kickstarters for economic development projects that no one entity wants to be the first to commit to because of the potential for failure.

“I call this market failure where literally no one person is willing to jump in and take the risk and nobody wants to go first,” Williams said. “In this new era of cynicism, a lot of community foundations are seen as neutral or trusted parties. If a community foundation says they’re going to put matching money up, suddenly developers, governmental units and others will join in.”

EMBRACING INCLUSION

One example of the far-reaching impact foundations can have is the New Economy Initiative, a special project of the Community Foundation for Southeast Michigan, which formed in 2007 with $100 million in initial contributions from 10 foundations, including the Ford Foundation, W.K. Kellogg Foundation and the Charles Stewart Mott Foundation.

NEI Director Pamela Lewis said the formation of her organization was in response to the loss of 367,000 manufacturing jobs in Michigan between 2000 and 2010.

“What was happening in metro Detroit at the time was we had the auto industry going through an implosion, high unemployment and low education,” she said. 

NEI is the one of the largest philanthropy-led economic development initiatives in the U.S. with a mission to grow a culture of entrepreneurship in Southeast Michigan that benefits all residents and strengthens the regional economy.

Lewis said the initial pool of funds has increased to $160 million. NEI grantees run the gamut of organizations and universities, including Ann Arbor SPARK, Business Leaders for Michigan, Michigan State University and the Michigan Economic Development Corp.

One of the largest projects funded through NEI is TechTown in midtown Detroit, a 150,000-square-foot facility that supports tech and innovation entrepreneurship.

“A thriving new economy has got to be one that includes everybody,” Lewis said. “We are creating a talent base and an economy that’s more inclusive. I’ve been in this work for seven years and it’s been in the last three years that this whole notion of inclusion has been a focus. Now we’re seeing entrepreneurial activities referring to that.”

Additionally, NEI grant dollars are directed toward low-income communities.

“We want to play the cards that make the most sense for us as philanthropists. This work doesn’t make sense in a high-income community,” Lewis said. “We’re talking about high poverty communities that draw talent to them and work with talent in them.”

UNCHARTED WATERS

While philanthropic leaders in Michigan have expressed concerns in recent years about being called upon to fill a void in programming and services that government used to provide, Lewis said NEI does the work that the government isn’t doing.

“Government is involved in very early-stage investing in specific industry sectors, and that is space where NEI has pulled out because government is already there,” she said. “We don’t see government pursuing inclusion and low-income communities. That’s what we want to do more of.”

The bigger question is when should the private sector be picking up some of this work. Lupher of the Citizens Research Council thinks it comes down to a consideration of sustainability.

“Certainly, as in the case of the Flint water crisis, we can see nonprofits bridging the gap between the time of the crisis and when government gets fully engaged,” he said. “You could see with the community foundation in Grand Haven addressing an immediate need and creating a system that they can hand off to local government.

“Is this something a foundation could and should be doing long term? The answer is no.”

Lewis said NEI is a project that is not meant to last forever. The initiative continues to capture data on a quarterly basis to see what impact the grantmaking is having on the populations the programs are designed to serve. 

While organizations may run the risk of alienating people that support their philanthropic efforts but may not agree with a certain direction the group is taking, Lewis said backers have remained supportive because NEI communicates very clearly about its focus.

“What we’re starting to see is job creation in communities that were struggling. We’re starting to see women and people of color getting grant assistance to start and grow businesses,” Lewis said. “Some of those high-tech entrepreneurs who are succeeding are putting money back in.” 

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