Kalamazoo

Transformative: $400M gift to City of Kalamazoo will keep taxes low, pay for dream-big projects

City officials believe this to be the largest donation in history given to support a municipality.
Editor's note: This story is part of Southwest Michigan Second Wave's On the Ground Kalamazoo series.

There were whoops of excitement and sheer delight from those gathered on the steps of Kalamazoo City Hall as they heard the announcement that anonymous donors are set to give $400 million to fully fund Kalamazoo’s Foundation for Excellence, a gift that will make the foundation self-sustaining for years to come.

City officials believe this to be the largest donation in history given to support a municipality and it funds a foundation that very well may be unique to any city as well.

The Kalamazoo Foundation for Excellence is the vehicle through which the city is achieving long-term fiscal stability and something loftier, dollars for programs intended to help end the cycle of generational poverty.

Founded in 2017, the foundation has raised money philanthropically to pay for essential city services so the city does not have to raise taxes, take dramatic budget-cutting measures, or cut city services. It also has tackled those projects citizens have said are important to them. 

Chief cheerleader, Mayor David Anderson, at the July 29 announcement  teased that those on the steps were a choir there to sing “To Dream the Impossible Dream.” Some on the steps even began to hum. Then Anderson went on to encourage those present to take note because they would always remember that on a hot summer day (it was 88 degrees)  in front of “a beautiful city park” that they were present the Kalamazoo Foundation for Excellence (FFE) has received a $400 million commitment to its endowment.

The mayor who described himself as fired up as his remarks got underway was so excited he repeated the news. “$400 million has been committed to the endowment for the Kalamazoo Foundation for Excellence.”

Former Mayor Bobby Hopewell encourages the city to explore bold ideas in keeping with the innovative nature of the gift of $400 million donated to the Foundation for Excellence.He continued saying, “What will be different tomorrow other than that our hearts are lifted? We have already been doing this work. Now, due to the fact that we have generous people that live in this community, we are putting a stake in the ground. We’re putting a stake in the ground for our children, and our children’s children by creating and funding this endowment that will put us in the position of having a fund that will last in perpetuity, entirely aligned with our values in the city of Kalamazoo, to make this a great place for all of us to live.

“I’m a hopeful, optimistic person and whenever I get discouraged I look to what we can do, what we can start doing now. This gives us the means to dream big.” 

Standing beneath the banner proclaiming “Securing a Future of Excellence for All Kalamazoo”, City Manager James Ritsema called it “a truly amazing day.” He said residents will be the ones lifted up by the historic gift and that the endowment will allow the city to carry forward the vision of Imagine Kalamazoo, the process that went into the city’s updated master plan, that was built on the input of citizens from across the community, and spelled out citizen’s priorities for their neighborhoods.

Ritsema noted that with the $120 million in FFE funds spent in the past four years the city has not only stabilized its budget it has been able to pay for affordable housing construction, youth development programs, park improvements, support for small businesses during the pandemic, and take on projects like repairing sidewalks and removing lead water pipes.

City Manager Jim Ritsema talks about how the community’s residents will benefit from a $400 million donation to the Foundation for Excellence.Former Mayor Bobby Hopewell, a founding director of the Foundation for Excellence along with Ritsema, said the gift offers the city the opportunity to “be bolder than we have been, to be courageous.” It can try new approaches that are inventive and different. After the official comments, Hopewell suggested that the city could become a laboratory for innovative ways to address residents’ needs and progress will come through a combination of “will and grace” — the will to act and the grace to accept some failure should bold new plans not go as anticipated rather than submit them to “trial by Facebook.” He also emphasized the bold ideas for what will improve the community will be generated by residents.

Deputy City Manager Laura Lam described how in 2015 the city took a leap of faith and asked residents “to dream with us.” Through a 16-month process, the city heard from more than 3,500 diverse voices telling what needed to be done to improve the quality of life in the community. From that work, 145 action steps were developed and so far more than three-quarters of those have been completed. Following the official remarks, Lam was looking ahead to the next planning process. She suggested that with FFE funding in place the city could reach even more residents. 

During a question and answer period for members of the press some raised a question that has persisted since the FFE was announced — does the donation give a handful of donors undue influence in city matters? 

Foundation for Excellence Manager Steve Brown detailed the process the city uses to make sure the FFE board represents the community and said it operates with open meetings as other city boards do. That is unlike most foundations. He also pointed to an online dashboard that spells out how FFE funds have been allocated over the years.
  
The details

The endowment will be fulfilled over the next 10 years. Receiving the endowment means the city will be able to use the funds to balance its budget and to maintain the property tax cut that went into effect in 2017 to keep city taxes competitive with neighboring communities and continue to provide a property tax decrease for all home and business owners.

The donation comes in addition to previous investments in the city. After reviewing its options for stabilizing its budget and finding no satisfactory options — $19.12 million budget shortfalls were anticipated from 2017 through 2021 — the city subsequently announced in 2016 that local businessmen William Johnston and William Parfet had agreed to provide $70.3 million over a three-year period and help marshal the resources of various Kalamazoo institutions and other citizens to grow that investment. 

They had at that time set 2019 as the year they hoped to grow funding to the $500 million level. Wednesday’s announcement was that the earlier commitment has been fulfilled and the Foundation for Excellence is now expected to have funding in perpetuity.  

Kalamazoo City Commissioner Eric Cunningham and Shared Prosperity Kalamazoo Project Coordinator Kevin Ford on the city hall steps before a press conference in front of Kalamazoo City Hall.Members of the Kalamazoo City Commission went on to approve the formation of the foundation in August of 2017. Since then, the total community investment in the fund has grown to about $100 million and has provided more than $25 million annually. Before the endowment was fully funded the city had been receiving grants from the Stryker-Johnston Foundation to fill the funding gap.

Raising the level of the endowment to $500 million is expected to help the fund generate more than $28 million each year and eliminate the need to seek grants from other sources. That is slightly above the $25 million that has been spent on FFE projects each year since its inception.  

City Commissioner Jeanne Hess gives a hug to one of those in attendance at a press conference to announce a $400 million donation to the Foundation for Excellence.The Foundation for Excellence funding has shored up the city’s fiscal shortfalls. To date, it has resulted in:

• $60.1 million in property tax savings (largely a result of a decrease in individual and business property tax mills from 20 to 12 mills.)

• $44.8 million spent on “aspirational” community projects, including neighborhood revitalization efforts and youth employment programs.

• $16.2 million allocated to help manage budget deficits and stabilize the city budget.

Since 2018, FFE in collaboration with its partner LISC (Local Initiatives Support Corp.) has added hundreds of units of affordable housing to Kalamazoo and started new programs to help keep people in their homes. During that time there have been no homes that have gone to tax foreclosure, 508 homes have been built or preserved, and 140 homes have been built or rehabbed. Another 109 residents have been assisted so they could keep their homes and $500,000 in wealth has been created for homeowners through a program to clear titles and clarify homeownership.

The donation announced Wednesday afternoon at a press conference was described as an opportunity “to celebrate the next chapter for our city and community,” similar to a gift of $550 million to Western Michigan University that a group of anonymous alums announced on June 8. Asked if the donors of that gift (which is intended to provide scholarships and services to help students graduate and find meaningful careers) are among those who will contribute to the Foundation for Excellence, city officials said they did not know.

When it was announced in 2016, FFE was said to be modeled after The Kalamazoo Promise, the free college tuition program for Kalamazoo Public Schools graduates. It was started in 2005 and has been funded by anonymous donors.

After the official remarks, when asked if the gift was expected Ritsema said that it was always hoped that the day would come when the Foundation For Excellence was fully funded but when it happened it was a “pinch yourself” to make sure its real kind of moment. The budget woes that plague many Michigan cities should now be a thing of the past for Kalamazoo. “We have funding now and into the future. We’re on solid ground.” 

As the official portion of the press conference wound down, Anderson encouraged the community to make the most of the gift that has been donated.

After a final jump for joy and a yell of excitement, Anderson turned serious. “With this great gift comes great responsibility. This gift will not be effective unless people lead with their hearts and work to make sure that no one is left behind. It will only be effective if people pull together. This can be the greatest place to live on the planet. Let’s do that work together.”

Photos by Fran Dwight. See more of her work here.

On the Ground Project Editor Al Jones contributed to this report.
 

Read more articles by Kathy Jennings.

Kathy Jennings is the managing editor of Southwest Michigan's Second Wave. She is a freelance writer and editor.