Foundations think out of box to aid Detroit

Jennifer Chambers
The Detroit News

The M-1 system now being built has been primarily planned and funded by private and philanthropic sectors.

Bailing out city pensions. Planning and funding a light-rail system. Attacking blight.

Foundations — traditionally low-key, behind-the-scenes supporters of Detroit — have stepped into the spotlight thanks to their unprecedented role in the city's historic bankruptcy.

The city's deep financial crisis gave birth to a new kind of philanthropy in Detroit, one that has foundations and nonprofits taking on new, riskier and more assertive roles in non-traditional areas such as city insolvency, transit, law enforcement and real estate.

And it's changed the landscape of giving, especially for major players including The Kresge Foundation, The Ford Foundation and the Community Foundation for Southeast Michigan.

"The entire philanthropy community is behaving differently than they did seven years ago," said Rip Rapson, president of Kresge, a $3 billion national foundation based in Troy. "We are taking more and different kinds of risk."

“The entire philanthropy community is behaving differently than they did seven years ago,” says Rip Rapson, president of The Kresge Foundation in Troy. “We are taking more and different kinds of risk.”

Foundations are giving differently in Detroit, in a manner unseen in other American cities. And the $366 million "grand bargain," is a prime example of that.

It's philanthropy's biggest calling and its biggest collaboration in Detroit history, credited as the cornerstone in the city's bankruptcy.

The joint agreement by 12 foundations, in which private funds as well as $195 million from the state and $100 from the Detroit Institute of Arts, will be used to shore up city pensions and protect the art collection from creditors.

"As little as people know about philanthropy, this is not typical of what philanthropy does," said Lawrence T. McGill, vice president of research at the Foundation Center, an organization that tracks, analyzes and collects data on philanthropy efforts worldwide.

Traditionally, McGill said, foundations remain focused on specific missions social issues. Education, child welfare and the environment, for example. The scope of the work they support every year is relatively the same from year to year.

"Acting in an extraordinary fashion like this is just different," McGill said of the grand bargain collaborative. "As far as I can tell it's pretty close to unprecedented in terms of the foundations trying to solve the solvency issues."

The major foundations and their committed contributions to the grand bargain deal include The Ford Foundation, $125 million; The Kresge Foundation, $100 million; W.K. Kellogg Foundation, $40 million; John S. and James L. Knight Foundation, $30 million; William Davidson Foundation, $25 million, and Community Foundation for Southeast Michigan, $10 million.

The scope of the giving in Detroit is unmatched, McGill said, when considering that during the five-year national economic crisis of 2008 to 2012, foundations gave $550 million nationally.

"The thing made my eyes pop out is when I saw the extent of those investments (in Detroit), and when you think of the national economic crisis we went through," McGill said.

One unique aspect of the grand bargain commitment, McGill said, is that it involved a significant art anchor organization like the DIA and the art of a world-class museum being threatened.

"It's important to recognize the symbolic aspects of this museum being threatened. It was incredibly galvanizing in putting their request together. It wasn't just a response to a city in trouble," he said.

Rapson said the challenges in Detroit forced foundations to consider thinking outside the box.

"When a community is faced with these difficulties — the financial collapse, the foreclosure crisis, disintegration in City Hall, combined with the auto industry collapse — it called the question as whether philanthropy ... (is) prepared to step out in a slightly more assertive way and be helpful?"

The answer, in Detroit, was yes.

Philanthropy can be flexible

The decision to step forward and commit to the grand bargain took time.

The proposal — which started in a conversation between U.S. District Judge Gerald Rosen and Mariam Noland, president of the Community Foundation for Southeast Michigan — had to be taken back to foundation boards for approval.

Noland, who runs the only regional foundation in the group, said that when presented with very unusual circumstances such as the grand bargain, foundations had to judge whether it was appropriate to get on board.

"In the case of Detroit, we were looking at the potential of six to 10 years of litigation or a mediated settlement to allow the city to move ahead. It was persuasive enough that we said it doesn't make any sense. ... If we have the opportunity, we push for a mediated settlement," Noland said.

"When you have this opportunity to really make a difference, philanthropy is — by its nature — able to step up. That's what philanthropy did and that's what it ought to do," Noland said. "What it showed is that philanthropy at its best is flexible. It can move quickly when the need is so compelling."

Sue Mosey, president of the nonprofit community-development organization Midtown Detroit Inc., said foundations and nonprofits have always played a key role in Detroit's economic revival.

Yet the new roles being taken on by foundations have moved the bankruptcy along to allow Detroit to start its newest chapter.

"It's a stroke of genius, the grand bargain. Retirees win. The DIA is being preserved. Just moving the bankruptcy along and getting the city into a new stable era will help everyone have a baseline to work off of," Mosey said.

"I wouldn't have come up with that idea. It doesn't matter who is doing what. What matters is collectively what will people do together."

And together, with the business sector and others, philanthropy is stepping into new territory outside the grand bargain.

The M-1 rail, a transit system primarily planned and funded by private and philanthropic sectors, is rising on Woodward.

Blight assessment, clearing and remediation is being funded and fueled by the nonprofit sector.

The foundation-supported Detroit Crime Commission is tackling the investigation of criminal enterprise "to lessen the burdens of government."

Short-term help extended

Some foundation leaders caution that the huge injection of philanthropic giving can't sustain Detroit forever, though they expect to be involved in the city's recovery for some time.

Tonya Allen

Tonya Allen, president of the Skillman Foundation, a Detroit-based organization that invests $17 million a year in education, safety, neighborhoods and community leadership, sees the role of philanthropy tapering off when it comes to stepping in for government.

"The nonprofit sector is subsidizing government work. You can do it on occasion but you can't do it in the long run," Allen said.

"Eventually when you take philanthropy out of the role of innovating and making connections on key things that need to happen in the city, you lose your role for innovation and risk," Allen said.

Darren Walker, president of the Ford Foundation, the second largest philanthropy in the United States with more than $11 billion in assets and the largest contributor to the grand bargain, said it provided the opportunity to get Detroit back in the starting block — but it does not set a precedent for bailing out other cities.

"It would be hubris to call philanthropy a 'savior' here," Walker said when asked whether foundations had become civic saviors in Detroit. "We are partners with the city and public and private sector to help build ... It is not a template for other cities. There are lessons for other cities."

"We have to get out of our narrow boxes. Bold problems require bold actions. They require us to extend ourselves in way we normally don't," Walker said.

The large investment by Ford, $125 million over 15 years, will not take away from other areas of investment for the New York-based foundation, he said.

Bruce Babiarz, a spokesman for police and fire retirement systems, said the pensioners are glad to have the money.

"The city stopped paying into the fund as of November 2012. ... This is one way of making that whole," Babiarz said.

McGill said the foundation world is watching what's going on in Detroit. Asked whether the work done in Detroit would mark the start of philanthropy as a solution to public insolvency, McGill said no.

"There is quite a bit of danger in thinking that. ... The scope of the problem is beyond the means of foundations to intervene," he said of the challenges faced by cities nationally. "Foundations will be looking to Detroit to take lessons."