MACKINAC ISLAND — It’s been nearly one year since Kalamazoo became a “laboratory” for a new form of philanthropy-backed municipal finance.
Since that time, the Southwest Michigan city has cut its property taxes in an effort to be more competitive with surrounding communities. Prior to the formation of the Kalamazoo Foundation for Excellence, the likely outcome for the city was the addition of an income tax to support municipal operations.
Formed by Bill Johnston and Bill Parfet, two billionaires with deep Kalamazoo roots, the Kalamazoo Foundation for Excellence aims to fund city government operations while allowing for lower taxes and working on longer-term community aspirations, such as ending generational poverty.
Parfet, an Upjohn heir who went on to found Mattawan-based MPI Research Inc., said that his and Johnston’s decision to support municipal operations stemmed from Kalamazoo’s dire fiscal situation and a belief that the foundation could spur economic development.
“We’ve got great people, we’ve got a new world,” Parfet told MiBiz in early June while attending the Mackinac Policy Conference, the annual business and political confab held on Mackinac Island and hosted by the Detroit Regional Chamber.
Parfet said that by allowing the city to lower its taxes while knowing that funds would be there to cover the difference, Kalamazoo now has a chance to reinvent itself.
“Hopefully, that will give us a fresh start — and it has already,” Parfet said, adding that he believes new people have moved to Kalamazoo since the formation of the foundation last August.
Quantifying the population growth or economic impact of the foundation — which plans to raise $500 million by next year — is tricky, as the U.S. Census Bureau has not updated its statistics for the city since July 2017.
Ron Kitchens, CEO and senior partner of Southwest Michigan First, a Kalamazoo economic development organization, said the foundation has yet to show any tangible economic spin-off in just nine months, but he believes the model will have impact and be widely replicated.
“It’s a completely different way of doing government and community — it’s unheard of. But it will be a model, just like the (Kalamazoo) Promise,” said Kitchens, referring to the anonymously endowed foundation that allows any graduate of Kalamazoo Public Schools to attend a fouryear Michigan university at no charge.
“I’ve lost track now, but there’s over 100 communities that have replicated some form of the Promise, including Detroit,” Kitchens said. “But they’ve all done it in a slightly different way, so (the Foundation for Excellence) will have that same impact.”
However, not all municipal watchdogs agree.
While applauding Parfet and Johnston for stepping up with philanthropic dollars to fund municipal government, just the fact that they had to so is emblematic of what’s wrong with Michigan’s municipal financing model, according to Tony Minghine.
Minghine serves as the deputy executive director and COO of the Michigan Municipal League, an Ann Arbor-based policy and lobbying organization for the state’s municipalities.
“Unless there’s a foundation like that in every single place — and there’s not — that’s not the model we should be looking to. Services the government provides are something we need to fund,” Minhgine said, adding there’s “zero” chance the model is replicable around the state in any considerable scale.
“It’s wonderful they’ve been able to step into Kalamazoo and provide that, (but) very few places would be able to replicate that,” Minghine said. “I’d even go so far as to say that in a perfect world, they’d rather spend their philanthropic dollars in a different way anyway.”
Parfet disagreed, noting that there’s been considerable, widespread interest from people looking to donate to the foundation, many with just small donations.
While Parfet didn’t have figures on hand when speaking to MiBiz, he said at present the foundation has raised enough for the two benefactors to meet their three-year obligation.
To Parfet, the Foundation for Excellence is a model that aligns with growing interest in urbanism and placemaking happening around the state and nationwide.
“(The Foundation for Excellence) gets the community excited about its future and it gets people recognizing that these cities are important and that we’ve got to make them vital,” he said. “You live there, you work there, you recreate there and you play there. And it’s working in Kalamazoo incredibly well.”