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Sunday, December 21, 2014

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Alexander Hermann: A foundation for greater cooperation

By Alexander Hermann, Columnist
Published January 30, 2014

The scope and size of the largest municipal bankruptcy in U.S. history requires innovative, creative and bold solutions of a similar magnitude. It looks like that’s what Judge Gerald Rosen, appointed mediator of Detroit’s ongoing bankruptcy proceedings, is currently devising.

On Wednesday, the Detroit Institute of Art pledged $100 million toward a fund set aside to protect the museum’s artwork and Detroit retiree pensions from significant cuts — assisting Emergency Manager Kevyn Orr’s thankless task of hammering out a compromise agreeable to the city, its many creditors and ultimately, bankruptcy judge Steven Rhodes. The money was pooled with the $370 million already committed by national and local foundations, plus an anticipated $350 million from the state championed by Gov. Rick Snyder — pending a difficult road to approval in the legislature.

When the Detroit Free Press first announced Rosen’s pursuit of this “grand bargain” in early December, with the explicit intention of raising $500 million from foundations, I was extremely skeptical of the apparent pipe dream. After grant writing for a Detroit-based nonprofit before returning to graduate school, I learned firsthand how stingy foundations can be when presented with new, uncertain and risky ventures. Further, simply impacting Detroit’s pension systems — underfunded by $3.5 billion according to city estimates — enough to appease Rhodes would require substantial investments. At the same time, the foundations must avoid jeopardizing the important work these foundations already do in Detroit and cities across the country.

In one sense, the foundations’ commitment to Detroit pensions and DIA artwork represents an unprecedented level of regional cooperation, an elevated arrangement of public-private partnerships and an impressive expansion of traditional foundation clout unseen in Southeast Michigan.

The foundations’ acquiescence is especially surprising when considering the vast differences in the foundations themselves — the 10 foundations have starkly varying geographic interests, programmatic priorities, budgetary constraints and ties to Detroit.

The Kresge and Ford Foundations, representing a combined $225 million pledged to Rosen’s deal, seem like the two most natural allies. Kresge, based in Troy, has worked extensively toward Detroit’s revitalization, most visibly as a primary backer of Detroit Future City, a near-comprehensive strategic framework guiding community development, investment and charitable giving citywide. The Ford Foundation’s obvious connections to Detroit, despite being currently located in New York, are more than just symbolic, but show continued investment in Detroit-based institutions and causes.

However, somewhat more surprising contributions have come from the John S. and James L. Knight Foundation — headquartered in Miami but prioritizing 26 communities across the United States — and the Mott and Kellogg Foundations, based in Flint and Battle Creek, respectively.

Each foundation recognized the gravity of the challenges facing Detroit, the need for greater regional cooperation and the real demand for foundations to step outside their normal scope of giving to help protect retiree pensions and Detroit’s most important landmark.

That’s why Snyder, and even the DIA itself, should be applauded for bolstering the foundations’ efforts through near-matching commitments — recognizing that what’s good for Detroit is good for the state as a whole.

In an interview with the Daily, University Prof. Barry Rabe, director of the Center for Local, State and Urban Policy, said these actions could potentially be viewed in the context of increasing metropolitanism in the region. Rabe cites the Tri-county millage, approved in 2012 by residents of Macomb, Oakland and Wayne counties to directly support the DIA during a period of uncertain funding for the museum, the recently created regional transportation authority and current discussions to develop a regional water authority as key examples.

At the very least, the foundations’ unprecedented move helps prevent the collapse of the DIA millage, which generates $22 million annually for the museum. Largely due to Rosen’s efforts, current trends dictate that DIA artwork will remain entirely intact, and circling creditors will be kept at bay. Alternatively, selling DIA art would have destroyed the millage, if not the DIA entirely.

Regardless, it’s clear that foundations have a key role to play in an increasingly regional Detroit.

“[Metro Detroit has] basically gone from being anti-regional or non-regional to having a bit of a presence of significant regionalization,” Rabe said. “I think we've been going through a period where foundations are beginning to think more strategically, and not just about grant strategy more broadly, but linking it to more localized or community themes.”