November 30, 2016; MLive
A private-public initiative NPQ has been closely watching took a significant next step on October 24th, 2016. The City Commission of Kalamazoo, Michigan approved a memorandum of understanding with the lead donors to the Kalamazoo Foundation for Excellence. Among the details still to be worked out is the answer to this knotty question: Can some of the city’s financial woes be solved using philanthropic resources rather than tax revenues without damaging its democratic institutions?
Kalamazoo’s fortunes have spiraled downward. The city has found it difficult to provide services and invest in revitalization efforts. Offering to solve the city’s problems, local philanthropists stepped forward with a commitment to donate $70 million over the next three years and further support to create an endowment of half a billion dollars to provide an ongoing source of revenue for local investment.
Approximately $20 million of the original $70 million will be allocated directly to the 2017 City budget before the foundation is officially formed. The rest of the donation will then go toward developing a budget through 2019 that incorporates a $12 million property tax—a decrease of more than 37 percent from the current rate. This plan also strives to eliminate the city’s deficit and fund key investments, including allocating $10 million each fiscal year toward “aspirational projects.”
The MOU allows the process leading to the incorporation of the new foundation to move forward, but it doesn’t directly address the thorny issues on the table since the beginning: How will donor influence will be managed, and how will the interests of city residents will be respected? Alison Colberg, deputy director of Michigan United, which works to foster participatory democracy, told MLive, “The city must do everything in its power to ensure the foundation is transparent and can be held accountable by residents. The foundation is moving forward and that does raise serious questions about the construction of the board and the foundation of the entity.”
Also undetermined is the makeup of the new foundation’s board of directors and what its accountability to Kalamazoo’s elected government will be. What protections will government have to shield it from the influence of those contributing to the foundation? City Commissioner Shannon Sykes raised concerns about having both elected officials and donors on the foundation’s board.
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In an era where so many people are so deeply disturbed and disillusioned by the incredible amount of money in politics, this could become a major issue, Who is going to put money into elections to make sure folks who will carry out their agenda for the foundation get elected and put the people they want on the board?
Some, however, see this new arena for philanthropist/government interaction as wholly positive, as it increases the power of the collective will of the people to influence how private donors use their resources. If it works, it could make philanthropy more accountable.
How realistic is it, though, to expect that major donors will not want their vision reflected in how the Foundations’ money is spent? Major political donor (and soon to be U.S. Secretary of Education) Betsy DeVos was very clear that she expects “a return on…investment” when she makes a political donation. Will donors to a civic foundation act and think differently and be ready to truly step back? One of the donors behind this effort, retired businessman William Parfet, said “he understands that some residents are skeptical of his intentions—or fear the implications of such an unprecedented partnership—but [he] would rather be judged on his actions, not his words.”
To make sure government remains the final decision-maker, the Foundation for Excellence must be held to the same transparency standards as public bodies. Colberg spelled out the dangers if the final agreement does not require donors to the Foundation to be identified and its meetings to be public:
It would be impossible to trust the foundation if the public doesn’t know who donors are and how much they are contributing. When the city government becomes dependent on large donations from private individuals we can talk a lot about (creating) charters and documents that say in written language no strings can be attached, but I don’t know that we live in a world in which legitimately there are no strings attached…We can look at many different levels of government and how almost always money comes with an expectation.
Kalamazoo needs this investment. Over the coming weeks, as the details and mechanisms are worked out and crafted regarding the structure of the foundation that will be its conduit, we will learn if this foundation will truly guard the public interest, or whether it will instead speak only to the public-minded but narrow perspective of the Foundation’s private donors.—Martin Levine
