$400 million donation to fund Kalamazoo government projects – KIRO 7 News Seattle

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It started with a highly unusual offer from two businessmen – both of whom have billions – to fund a troubled city government. Five years later, the government and philanthropy marriage that grew out of this $ 70 million gift looks like it will last forever.

Kalamazoo, Michigan, gathered on the steps of their nearly centenary Art Deco City Hall on Wednesday to announce an anonymous $ 400 million pledge for a foundation established in 2017 to spin off the city’s annual revenue indefinitely. The Kalamazoo Foundation for Excellence is now close to its target of $ 500 million, according to officials, and is expected to generate about $ 25 million per year. The city’s 2021 budget is $ 214 million.

The Philanthropy Dollars will support the city’s general fund and pay for the city’s “emerging” projects, including poverty reduction and infrastructure rebuilding.

In the most unusual element of the deal, the dollars will also cover the city’s lost revenue through a 38 percent land tax cut in 2017. The goal of this direct payment to the city coffers: Kalamazoo, 75,000 residents, to help fight for jobs and talent with the many other places in southwest Michigan.

At a press event to announce the gift, a giddy Mayor David Anderson stated that Kalamazoo had now secured the philanthropic support for the long term. “We are putting stakes in the ground for our children and our children’s children,” he said.

City officials did not provide any information about the donor (or donors) other than that the gift came from one or more long-time residents. Former Mayor Bobby Hopewell, who helped construct the original $ 70 million donation and set up the foundation, described the engagement as a show of loyalty to Kalamazoo that those living outside the dense city may not understand .

“We all know whoever the donors are, you can live anywhere you want with that kind of money,” said Hopewell. “You could give your money for anything you want. But instead you gave it to the community. “

With half a billion dollars in endowment, Kalamazoo has a unique charitable endeavor that any mayor “would die for,” noted Hopewell. For comparison, 10 foundations – many of them national grantors like Ford and Knight – partnered with the Detroit Institute of Arts in 2014 to provide $ 466 million to pay the pension debts of then-bankrupt Detroit. This was a one-off rescue operation for a city with a population nearly ten times the size of Kalamazoo.

Making philanthropy a permanent community budget, a post that pays basic services and tax breaks, is something entirely new. “It’s historic in the sense that I don’t know of any other city whose operations are funded by philanthropy on this scale,” said Michelle Miller-Adams, professor of political science at Grand Valley State University, Michigan, who studies philanthropy and is a resident by Kalamazoo.

Philanthropy has provided direct cash to the Kalamazoo government for nearly five years. The city has spent or budgeted for more than $ 120 million in donations to the foundation since 2017 that goes directly to the city. Half of that dollar carried property tax losses. In fact, taxpayers are told upfront that philanthropy will pay for a tax cut: your tax bills calculate exactly how much each household has saved through the foundation.

William Johnston and William Parfet – longtime great philanthropists in the area sometimes referred to as the “two bills” – made that initial $ 70 million pledge of a new income tax in 2016 that some feared could drive homeowners and businesses to themselves to settle outside the city limits.

Johnston is chairman of a holding company for Kalamazoo companies, which includes an asset management company. He also owns the local minor league hockey team. His wife is billionaire Ronda Stryker, an heir to the wealth of the family’s medical device maker. Parfet, who started a pharmaceutical testing company, inherited part of the assets of the pharmaceutical company Upjohn, which opened in Kalamazoo in 1886 and is now part of Pfizer.

Since that gift in 2016, the city has received an additional $ 85 million in pledges from the Stryker Johnston Foundation, the family grant donor of Ronda Stryker and William Johnston.

The Foundation for Excellence was created as part of the original Johnston Parfet Promise. Along with Hopewell and other city officials, the two had said that within three years they would create a $ 500 million foundation that would fund city operations and projects on an ongoing basis. Johnston and Parfet discussed starting a nationwide fundraiser and a fundraising advisor was hired. Only one gift, an anonymous gift of $ 87 million in 2020, has been publicly announced. The foundation’s net worth at the end of 2020 was $ 96 million, according to tax returns.

Big gifts made with the goal of making Kalamazoo a better place to live are fairly commonplace, and donors often remain a mystery. In 2005, anonymous donors established the Kalamazoo Promise, a fund that pays tuition fees at Michigan public and private colleges for residents who graduate from the city’s public schools. The scholarships – more than $ 150 million awarded – are a selling point for the city and its brokers, and graduation rates have steadily increased.

Last month, Western Michigan University, one of the city’s anchors, announced it had received a $ 550 million gift from anonymous alumni – one of the largest donations to a U.S. public college. Western Michigan’s Endowment Fund is less than $ 500 million.

When the Kalamazoo City Elected Commission approved the foundation of the Foundation for Excellence in 2017, critics feared that multi-billion dollar donors would dictate decisions to elected officials and undermine the will of voters. Others feared that residents would shy away from future taxes and expect a philanthropic rescue for all problems.

With Wednesday’s announcement, some raise questions about the anonymity of the gift and the added impact it could offer the city’s rich on Kalamazoo affairs. City officials counter that the foundation’s board of directors, which is mainly made up of private individuals, holds open meetings and publishes details of their expenses. The dollars for the “emerging” projects are distributed according to the city’s strategic plan, which has been developed with significant public contributions. The foundation’s website shows how much money is being spent in each neighborhood. Transparency should show residents that the funding is fair.

Miller-Adams said the city had taken care to structure decision-making so that donors would not have a direct impact on the city’s budget and charitable projects. “The donors are quite absent from these discussions,” she said.

Programs and projects that were funded with $ 45 million of donated funds were generally well received. Last fall, city officials found that nearly three-quarters of the 145 specific actions outlined in the city’s strategic plan had been completed. This includes the renovation and construction of city parks, the expansion of vocational training for young people, the replacement of dangerous lead pipes and the repair of sidewalks. In its bad times, the city had zeroed its sidewalk budget – not ideal when walkability has become a popular measure of a city’s quality of life.

At the start of the pandemic last year, the city partnered with the local United Way to create a special low-interest loan fund practically overnight to help businesses while they await state and federal aid. Funding was also allocated to providing Wi-Fi hotspots for distance learning students and supporting nonprofits that provide food, utilities and accommodation. “That definitely saved lives – there is no doubt about it,” said Steven Brown, the foundation’s manager. “And it prevented the standard of living from falling for generations.”

The city has partnered with the Kalamazoo subsidiary of Local Initiatives Support Corporation and other nonprofits to find out how best to spend the nearly $ 8 million earmarked for affordable housing. With this money, LISC raised an additional $ 31 million in Kalamazoo to support its national organization, said managing director Zac Bauer.

Bauer said the grants “catalyzed” funds that have brought together many affordable housing groups to determine how best to use the new money. “These funds created the space to think about big ideas,” he said.

The most immediate result has been an increase in new construction, home renovation and the development of new rental apartments. Almost 650 apartment buildings and single-family houses were built or renovated by the foundation, according to the city. “Without this money, we would not have been able to do a fraction of this work,” says Bauer.

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This article was made available to The Associated Press by the Chronicle of Philanthropy. Drew Lindsay is a senior writer for the Chronicle. Email: draw.lindsay@philanthropy.com. The AP and Chronicle receive support from the Lilly Foundation for coverage of philanthropy and nonprofits. The AP and the Chronicle are solely responsible for all content. For all of AP’s philanthropy coverage, please visit https://apnews.com/hub/philanthropy.