Strategic spark – Pooled funds

By Todd Cohen

GREENSBORO, N.C. — Over the past year, Jim Melvin of the Joseph M. Bryan Foundation has spent at least 10 hours a week talking to chief executives at five other Greensboro foundations about how to boost the region’s future.

The time those executives devoted to their talks, rare in the busy world of philanthropy, reflected their shared belief that fixing the region’s skidding economy required more than business as usual.

The fruit of their talks – a commitment by the Bryan, Cemala and Weaver foundations to invest $22 million over three years in an effort known as Action Greensboro, and help raise another $14.6 million – represents an emerging breed of philanthropy that some nonprofit leaders hope will take deeper root throughout North Carolina.

“A lot of foundations don’t view themselves as playing this kind of role in their community,” says Tom Ross, executive director of the Z. Smith Reynolds Foundation in Winston-Salem, who is spearheading an effort to create a network to help foundations throughout the state work together more closely.

For the six Greensboro Foundations, which also include the Community Foundation of Greater Greensboro, the Moses Cone-Wesley Long Community Health Foundation and the Tannenbaum-Sternberger Foundation – leading the way has meant defining critical problems facing the city.

In creating Action Greensboro, it has meant enlisting the community to find solutions to attack those problems at their roots, pooling their own resources and mobilizing financial support from corporations, individuals and other foundations.

“We’re talking about turning the economic fortunes of our community around,” says Melvin, Bryan’s president and CEO. “We felt if these things were going to get done, we would have to lead the way.”

Reflecting their commitment and new approach, Bryan, Cemala and Weaver are expected to take the unusual step of dipping into their endowments’ principal to support Action Greensboro initiatives in addition to using income from the investment of their endowments – which is the typical method of funding grants.

Private foundations are required by law to give away 5 percent of their total endowment each year. But because foundations can grow by more than 5 percent through investments, foundation leaders typically aim to build their endowment principal each year, not reduce it.

“We feel the situation justifies that because we truly believe that our economic and employment situation is serious,” Melvin says of Greensboro’s economy.

Bryan, with roughly $110 million in assets, expects to make “considerably more” in grants this year because of the new initiative than the $7.5 million it handled out in 2001, Melvin said.

That could more than double the annual “payout” in grants – 5 percent of total endowment – that federal law requires foundations to make, he said.

Cemala, which has $43 million in assets and awarded $1.5 million in grants last year, will at least double its annual payout over the three years of the initiative, says Bill Rogers, a Cemala trustee and president emeritus of Guilford College in Greensboro.

Weaver, which has roughly $23 million in assets and makes about $1 million a year in grants, is expected to take a similar approach.

And each foundation is expected to conti8nue to make grants to projects other than Action Greensboro.

The foundation-led community development initiative reflects the growing practice of “strategic” philanthropy that targets complicated problems.

“I think it is and I hope it is a shift in paradigm for foundations to work on fundamental trends and fundamental structures and to act in ways that will stimulate economic, educational, governmental and nonprofit work on those issues,” says Rogers, former head of the boards of the Moses Cone-Wesley Long Community Health Foundation and the Mary Reynolds Babcock Foundation in Winston-Salem.

Ross of the Z. Smith Reynolds Foundation says it aims to have a greater impact throughout the state by working for systemic change in partnership with other funders.

The Greensboro initiative, he says, “can serve as an excellent example of how foundations can collaborate on a mission that’s important to all of them.”

The collaborative initiative in Greensboro is rooted in an effort the six foundations began in July 1999 in the face of fears about the region’s declining textile, furniture and tobacco industries.

Those foundations’ leaders worried that the decline of those core industries was eroding the region’s tax base, and thus its ability to support its public schools, said Walker Sanders, the community foundation’s president.

What’s more, he says, the “image of public schools that are broken created a ripple effect,” making it tough to recruit new industry to the region.

So the foundations commissioned a McKinsey & Co. study of community needs, coordinated a community effort to produce recommended changes and backed a visit by 170 civic leaders last March to Chattanooga, where a handful of foundations had spearheaded an urban revival.

This time last year, the foundation chiefs – particularly Skip Moore at Weaver, Priscilla Taylor at Cemala and Melvin – said the foundations no longer wanted to play the lead role, and they insisted that they alone would not finance a Greensboro revival.

But their position changed over the summer and fall as specific projects emerging in the wake of recommendations from six task forces.

“Our intention all along has been to light the spark that’s going to ignite a much larger community response,” says Sanders.

A private effort already is underway to raise private funds and create a financing package for a new $20 million minor-league ballpark.

And last spring, many of the city’s top firms — including VF Corp., General Dynamics, Jefferson-Pilot, RF Micro Devices and United Guaranty — have agreed to invest $2 million in a variety of programs to assist the public schools as part of the three-year Action Greensboro initiative.

The community foundation also plans to provide additional funding for public schools.

Justin Catanoso, editor of The Business Journal in Greensboro, contributed to this report.

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