Kalamazoo Unit Uses New Sources

October 23, 2007
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KALAMAZOO — Community foundation plus capitalism equals a healthier community?

 The Kalamazoo Community Foundation has added that formula to its repertoire to support the area’s economic vitality.

“Economic community development is really at the core of what we believe, long-term, makes for a healthy community,” said Jack Hopkins, executive director of the Kalamazoo Community Foundation. “If we can solve issues around employment, sustainable jobs, sustainable income for families — and people have work and can save for retirement—it really is at the center of all of what we do.”

With $22.5 million of its $289 million in endowment assets now set aside for program and business-related investment, Hopkins said the foundation has made low-interest loans to nonprofits for low-income housing; invested in the Air Zoo tourist attraction and the Southwest Michigan Innovation Center Inc., an incubator for life sciences businesses; and invested in downtown and commercial redevelopment.

Through an arm called Kalamazoo Community Foundation Real Estate Holdings Inc.—which Hopkins said has been vetted by lawyers and the Internal Revenue Service— the foundation in 2006 invested $5.7 million in venture capital funds and other economic development programs.

The money is used to support economic development projects that mesh with the foundation’s objectives but have a different and longer-term payoff than the $15.8 million in grants distributed last year, Hopkins said. He compared the stories of Dr. William E. Upjohn, who founded pharmaceutical firm Upjohn Co. in 1885, and Dr. Homer Stryker, who founded medical device maker Stryker Corp. in 1941, to today’s life sciences entrepreneurs.

“That’s the story of these companies that are developing in Kalamazoo,” Hopkins said. “Some will be successful, some won’t. But they will create jobs. Jobs create wealth. Wealth creates philanthropy.”

While Stryker’s company continues to grow, Upjohn’s enterprise was swallowed by larger pharmaceuticals, first Pharmacia, and then Pfizer. It was Pfizer’s downsizing that prompted the Kalamazoo Community Foundation to reconsider adding economic development to its grant-making role, Hopkins said.

“Go back in time to 1999, 2000. We were in the midst of that merger mania and buyouts, the dislocation of executives and families —and volunteers and patrons of the art. The stock market went crazy in 2000, and we were faced with assets that went from $260 million to $192 million virtually overnight,” he said.

That forced the foundation’s board to seek ways to respond to an overriding community need: economic development. Still, those new investments are viewed through the lens of the foundations goals, Hopkins said: “How do we impact our community?”

Devoting that portion of the foundation’s assets — which were $289 million, according to the 2006 annual report — to economic investment reduces the foundation’s grants budget by about $50,000, Hopkins said.

“That could grow over time. It’s a very modest figure in terms of the leverage ability we’re getting,” Hopkins said. “For every investment we’re making, it’s bringing other people to the table. In 2009, we’re projecting that our grant-making ability is going to increase.”

With communities all over Michigan reeling because of the state’s economic downturn, many community foundations are weighing ways to turn their assets into a positive force, said Robert S. Collier, president and CEO of the Council of Michigan Foundations.

“Besides doing grant-making, there are foundations trying to figure out how to use the investment side of their portfolios in supporting economic development in Michigan,” Collier said. “There are foundations supporting venture-capital investments in Michigan. There are several doing what is called program-related investment, in the form of loans.

“I don’t think the idea is a new idea, it’s more a question of a new application of an idea that’s been tried before. We’re seeing now a renewed focus on economic transformation.”

The Community Foundation of Muskegon County, for example, is investing in the redevelopment of the former Muskegon Mall site. The foundation in 2002 joined with the Paul C. Johnson Foundation and the Greater Muskegon Chamber of Commerce to form Downtown Muskegon Development Corp.

The Community Foundation ended 2006 with $111 million in assets and distributed $3.9 million in grants, according to its annual report. Community development accounted for $563,320 in grants.

Hopkins said he has made presentations across the country about the Kalamazoo Community Foundation’s approach to economic development. He would like to engage more foundations and government leaders to explore the impact of such programs.

“I think this is a long-term, big-bang effect we can have in Michigan,” Hopkins said, “if Michigan’s private and community foundations would come together with the government, the Legislature and the Michigan Economic Development Corp. and basically put a long-term goal on stimulating this economy.” 

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