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Home My WebLink About1996-04-16; City Council; 13603; COMMUNITY FOUNDATIONS7, U x .rl d @ 0 V a P (d v) .;! u a s a) U u. u, a, M 0 U 0 U [II C a, 5 c) 0 a .Uh c. 2 *$ 2 $ d *$ $22 b.u oa, MO LIM wu 0 ow aw a, a,w 4J 3m7 UC c)U a, om [II a- a0 m .s : 3 g2 a, 2.2 G gd 'u" .rl c) a U .rl rd Gd 'C 0 0 a33 WVk Q- cnm \\ a- 14 *> z 0 5 a 6 z 3 0 0 WY OF CARLSBAD - AGVA BILL { /. 9; AB # 1; bo3 CIT DEPT. '7 MTG. q.*? CM -% TITLE: COMMUNITY FOUNDATIONS I I I I ~~ ~ ~ ~~ 1 RECOMMENDED ACTION: 1. Consider alternatives for creating endowment funds to provide finar support for community groups, supplemental library services or o community activities, 2. Direct staff to return with documents to implement the alternative of 1 choice. ITEM EXPLANATION: Council Members have expressed an interest in the possibility of establishin Community Foundation with an endowment which could help fund a wide rangc community services and activities. Council currently appropriates $75,000 each : to fund community support organizations. It is possible that if a portion of these fL were used to create an endowment in a community foundation, the foundation CI encourage donations of matching funds from other sources interested in providing I to specific community support groups or services. The Library Board of Trustees has also expressed an interest in establishin! foundation to fund supplemental library activities for which City General Funds are available. Although the Carlsbad Municipal code already gives the Library Board ability to accept gifts on behalf of the Library (Sec. 2.1 6.0551, the Board is purst the creation of an independent foundation because they believe that it can be IT successful in attracting doners. If the council wishes to form a single community foundation, it could be split into i separate funds to satisfy the needs of the City and Library Board. One could pro\ funds for community support groups, and another to support supplemental lib1 activities such as providing educational, cultural, and recreational materials and ever . Monies held within each of the funds would not be commingled. Cities have created endowment funds in a number of ways. Some have found SUCCI in appropriating an endowment to create a fund in an established commul foundation or creating their own community foundation, while other attempts to cre community foundations have not been as prosperous or have been dissolved due management problems and/or lack of donors. Barbara Harison, author of an article in Western Cities Magazine entitled "How to M; Your Community Foundation a Partner in Philanthropy" suggests that cities interesl in creating an endowment fund should consider forming a partnership with established community foundation. She lists the following advantages to suct partnership: PAGE Two o&DA BILL NO. /? ~03 0 rn A Board of Governors with staff support in place to attract and prudently man’ the fund. Foundation publications such as annual reports and newsletters will report { to your fund and help in bringing the message to prospective donors. rn Professional foundation staff offer expertise in attracting future donations. rn A foundation offers consistency and permanency to the fund as a H Collaboration with a foundation builds credibility for your agency programs established and financially sound community trust. can lead to additional private grant funding for programs. ADVANTAGES TO THE DONORS rn Provides the maximum tax benefit allowable for charitable contributions. I Opportunity to give to nonprofit that will benefit community programs wit1 giving to the government. rn Assurance that the fund will be managed by credible and professil endowment managers committed to community projects. rn No cost to the donor that would occur if creating a separate private foundai rn Opportunity to give now and in perpetuity. Community foundations charge an annual administrative fee which generally amouni between one and two percent of a funds value. For example, the San Diego Comml Foundation’s annual administrative fee is one percent of a fund’s value. Dependin! the size of the fund balance, this could amount to less than what it would cost the in staff time and fees to establish and manage a foundation. Groups could apply tc advisory committee to the Board of Directors on what groups should receive the grg Council could also appoint residents to serve as members of an advisory committe The San Diego Community Foundation is planning on opening an office in Encinitas I to better serve donors and community groups in North County. The Foundation provided grants to organizations in North County such as the Carlsbad Senior Ce North County Health Services, North San Diego County Special Olympics, North Co Housing Foundation, and the Oceanside Senior Citizen Association. An Ocean resident recently established a fund in the Foundation to generate money for an museum. The City of San Diego has had success with the Foundation’s help in rai money for a number of funds to help them maintain a number of City of San Diego p; If Council does not wish to enter into a partnership with an established comrnl foundation, they could create one or more endowment funds in a new comml foundation. Council may wish to appoint a group of community leaders to work with staff and create a community foundation, which requires the following steps: San Diego Community Foundation for grants and the City Council could act a: PAGE THREE &ENDA BILL NO. 13, b 03 A. Select a corporate name and call the Secretary of State's Name Availak B. Prepare Articles of Incorporation and Bylaws, including names and signatL Section to determine if the name is available. of five directors. (The directors could be the group of commun'fy leac selected by Council or the group could recruit others for the Board.) C. Prepare and file California State Tax Exemption Application and Article: Incorporation. Application package must also include Bylaws, proposed year budget, purposes of the foundation and description of planned fundrai: or other activities. All documents must be submitted to the Secretary of St who certifies Articles of Incorporation and forwards the Tax Exemp Application to the Franchise Tax Board. Application fees total @35. Applica review process takes approximately 30 to 60 days. D. Prepare and file Federal Tax Exemption Application. A copy of Article: Incorporation with the Secretary of State's certification stamp must be submi with an application for approval. Application fee is $1 50 if foundation is expec to earn less than $10,000 per year for the first four years, and $465 if ( $10,000 per year is expected. Application review process can take from 2 months. E. Mail Federal Determination Letter to State Franchise Tax Board F. Once the foundation is established, the Council could approve an appropria to create one or more endowment funds within the foundation. A foundation established as a result of Council action would have its advantages, there would be several potential disadvantages as well. ADVANTAGES Establishing a community foundation would provide interested individuals businesses with a tax exempt organization where they may donate prop1 money, or securities to help fund community support groups, suppleme library programs or other activities important to Carlsbad residents. Money in a fund could be used to leverage donations from other sources. Foundations can respond more quickly to urgent needs in the commr because there is less "red tape" required for expenditure of foundation fl than public agency funds. Some corporate policies prohibit donations to public agencies, so it mi$ easier for a foundation to solicit funds from those organizations. PAGE FOUR 0 a, GENDA BILL NO. 13; b 0 3 o POTENTIAL DISADVANTAGES Some experienced with establishing community foundations, including aut1 Barbara Harison and staff from other California cities, believe that a cit involvement with a foundation somehow taints it in the eyes of private donc and those donors are less likely to contribute to a fund if a city is in control how funds are distributed. Other cities have found that foundations are most successful when they created by a group of residents in reaction to a pressing need in the commun and that cities should avoid involvement in a foundation except for donat seed money to it. The pool of potential donors has already been greatly reduced from recruitment of donors by the San Diego Foundation. Research indicates that foundations created to support specific programs more successful in recruiting donors than foundations aimed at supportin wide range of activities. Additional administrative responsibilities would be assumed by City staff \r have no experience in such an operation. If Council agrees that they are interested in appropriating money to create an endowrr fund, it is recommended that Council direct staff to work with the San Diego Founda and Library Board of Trustees to establish one or more funds in the foundation to pro support for Carlsbad community service groups and supplemental library program: FISCAL IMPACT: If a fund or funds are established in the San Diego Community Foundation, Council I wish to appropriate money for donations to the fund or funds to help attract pri donors. EXHIBITS: 1, Western Cities Magazine article, "How to Make Your Community Foundatic Partner in Philanthropy", by Barbara Harison. ,I 1 4 1 4 \. Partner In PA ila n th x by Barbara M. Harison ,c 4 re your fund raising efforts thwarted by public distrust of gov- ernment, by the recession and by limited grant funding? While the demand for community services increases, the public funds available to finance the services are decreasing. With voters stub to find alternatives to government funding of community programs. You can brave today's competitive fund raising climate on your own; or you can approach your community foundation and consider a col- laborative effort to help position your agency to seek private funding. bornty resistant to bond financing and taxes, public officials are eager Manv agencies find themselves caught in the web of supply and demand in today's com- petitive fund raising climate. Public and pri- vate agencies need to position themselves to get the maximum benefit from private giving. Success is possible. but only with creativity, collaboration and credibility. This is most challengmg for public agencies as philan- thropists often do not wish to gwe to the gov- emment and want assurance of the maximum tax benefit for their donations. Consequently, foundations are often created to benefit public programs. They are established to support programs in the arts. parks. libraries. educa- tion and other community service areas. Many have been successful and others have struggled to raise and manage their funds. and maintain a board of directors to provide leadership and continuity. If your agency does Barbara M. Harison, Principal. Harison 6r Asociates specializes in project management, public/pnvate partnerships and .fund develop- ment for public and nonprofit agencies, She has not have the resources. expertise or time to organize your own foundation. a partnership with your Community Foundation may bepst what you need to get your iund raising out of the recession doldrums. over20 years of eerienee in the management - of parks. recreation and community service wkaf A~~ ~~~~~~i~~~ facilities and programs. Before founding Harison & Associates, she was Director qf Foundations ? Parks and Recreation for the City of There are over 400 community foundations Ventura and previously served as Director of nationwide. Foundations are established with 4 Community Servicesfor the City of Campbell. the Internal Revenue Service (IRS) tax status as 501 (c) (3) public charities endowments, trusts and bequ foundations were started by sought a better mechanin accounts for managing and gr new and growing foundati Ventura County Community Fc assets of S.5 million to tl Community Foundation in Lo: $130 million in assets. Found: have a variety of options for CI ments or trusts to meet the donors, who may be individua Donors benefit from the maxin tion and the funds benefit from of scale achieved by pooling in1 reduced administrative costs. professional management. The concept of public agen with community foundations is and some foundations may nc st *?-~ce. There are various optio organizations. with most found several types of iunds to meel ble funds. The size of foundatic the individual or organization example discussed below. ; agency endowment was used. With this iund mechanism in retains control of the funds and a1 earnings used for programs can withdraw principal under creating an endowment fund. I ILAGl :I' OF c~ll,1~oRw~\ Cll-11;- ,I 0 tions. The agency can also choose to reinvest the earnings in the fund to allow the fund to build for greater returns in the future. -4 donor advised fund is another option that might be feasible for your agency. The key benefit of this fund is the ability of the individual or orga- persing the funds for a variety of charitable purposes, w<thout the annoying paper work of running a private foundation. Foundations are in business to attract and manage capital for charitable giving. You should not hesitate to explore the possibilities for your agency. How Partnerships Work While serving as Director of Parks and Recreation for the City of Ventura. I initiated a partnership with the Ventura County Community Foundation OTCF). This part- nership was an important piece of our fund raising thrust for the 90s. Recognizing the need to tap private giving to sustain commu- nity programs, we evaluated several approach- es to meet our fund raising needs. After care- ful study of the options available, including setting up our own foundation, we decided to established three endowment funds to benefit city programs. At that time. fiscaI year 1990 91, the Department had several trust funds totaling approximately S60.000. We trans- ferred these funds to the Foundation and ini- tially set up a Senior Citizen Endowment Fund. Special Olympics Fund and Youth Scholarship Fund. The combined total of the funds in 1993-94 is $85.000. an increase of i;25,000, approximately 40 percent growth over three years even in a depressed econe my. The Youth Scholarship program is the most active and benefits about 70 disadvan- taged youth a year. providing them the oppor- tunity to attend camps and participate in recre- ational classes. Kate McLean. President of VCCF describes the benefit of the partnership as "an opportunity to bring added value to the community by maximizing charitable giving Because of the cooperative working rela- tionship with the Foundation. when it came time to initiate a capital campaign for the Ventura Pier. the Foundation was on board as our partner and established the Pier Endowment Fund. The capital campaign ior the pier, initiated in June oi 1993. has raised over .$400,000 for maintenance of the pier. LVith the Foundation as a partner, donor con- tidence in the campaign was enhanced and fund management resolved. enabling the community steering committee to concen- trate on marketing and promotion. Not onlv has the partnership enhanced the city's tund raising potential. there is 'an added benetit oi the good will. credibilitv 'and positive identity ,gained from working with a well-rvspected c-ommunity organization. Ihis !Vpe oi parr- nization to maintain active involvement in dis- develop an agreement with the VCCF and through collaboration." 0 *$j A +- +, 0 - CI '" -4 " . nership can become 'your avenue to private giving." The intent of this fund is to ensure that the pier will be repaired and maintained in perpetuity. Funds will be withdrawn as needed for repairs. On a larger scale the California Com- munity Foundation. one of the oldest iounda- tions in the nation. stepped forward as a part- ner in response to the 1994 Northridge earthquake. This foundation is a collection of permanent charitable funds created by pee viduals and communities in Greater Los Angeles. The Board of Governors approved an unprecedented invasion of pMcipai to pr@ vide S800.000 in grant monies for nonprofit organizations to respond to damage caused by the earthquake. Besides the initial fund- ing the Foundation raised $850.000 for the Earthquake Relief Fund from current donors, other foundations and the public. Grants have been allocated to a vast array of community- based agencies for repairs, equipment replacement and relocation. Many agencies receiving grants provide services that support public facilities and programs. Some exam- Foundation oi Los Angeles for bilingual read- ing material and inventory for four bookmo- biles serving the San Fernando Valley, where eleven branches are closed due to damages; and grants to arts organizations including Actors Alley in North Hollywood and the ,han Folk Ensemble: and in severely affect- ed communities. such as El Project0 del Bani0 in Pacoima and Clinicia del Camino Real in Fillmore. ple and organizations for the benefit of indi- ples are a grant oi S9.000 to the Library wl* r, Wi Lh A Partnership A Foundation? Because it is not possible to meet all the needs oi the community with public tax dol- lars. creating a partnership provides the op portunity to obtain kmds from private donors through the endowment fund set up with a ment v&h a foundation offers several advan- tages to the agencv and to potential donors. Advantages to the Agency: Ability to attract private donors through the IRS 501(c) (3) tau L' ::nation of the ioun- dation. .Alleviates the burden oi the legal and tinan- cia1 administration oi a separate trust or foundation. Interest earnings or foundation assets are pooled. offering the potential for higher cwnings. A Board of GovPmors with staff support in place to anract nnfl prudentlv manage the cndonment fund. Foundation publications such as annual reports and newsletters will rc'port gifts to foundation. The creation of a fund or endow- your fund and help in bringing the to prospective donors. Professional foundation staff offer in attracting future donations. A foundation offers consistency rnanency to the fund as a well est Collaboration with a foundation bui ibility for your agency programs lead to additional private grant fur your programs. and financially sound community 1 Advantages To The Donors: Provides the maximum tax bene able for charitable contributions. Opportunity to give to nonprofit < benefit community programs witt ing to the government Assurance that the fund will be IT by credible and professional endl managers committed to commur jects. No cost to the donor that would KC ating a separate private foundation Opportunity to give now and in per Establishinq The Enaowmen; ~~~d Creating a hnd in a foundation ci less than a day. The initial contf required to create a fund varies; it ca low as $1,OOO or up to S25,oOO. ?he Ca Community Foundation, which cu manages 300 donor advised funds fol ety of charitable purposes requires mum donation of SlO.OO0. An agency an agreement with the foundation to es and manage the fund. stipulating the s purpose for the donarion and deposits rial donation. Depending on the type ( created. the agency can retain an activl in directing the grants from the fund receive annual eamings for a smei table purpose. Policies on the use of pr vary, but many foundations allow its us is the donor's wish. The frequency o drawals from the fund is generally not cem: however, if there is no activity fund and it Ws below SlO.OO0 over a on period, some foundations will request bution of the funds. Policies on fund dis tion vary from foundation to foundatiol best to contact your local foundation fc c5c policies. Foundations will charge a fee for tb vice of managing the iund. The metk assessing the fee may vary but will genl equal one to two percent of total fund 1 The current fee for the California Corn Foundation is ten percent of the in( earned. VCCF fees are 1.75 percent c funds value. The funds are currently ea six to seven percent on the average. Conh 'i - ,I e 0 -.' A il) th y ,v, u -- L - Community Foundation. Continued :I If your agency has no one with a bequest lined up for the initial conmbution, you may consider existing must accounts, private foun- dation funds, or funds generated from a fund raising campaign similar to the Ventura Pier Campaign. I recently worked with the City of San Fernando to create a San Fernando Fund within the California Community Foundation. City Administrator Mary st re^ wants to cap ture private funds for youth programs in the community. The city is considering the pos- sibility of c0mmittin.c -!O.OOO with the chal- lenge to the communin to raise S1O.OOO from corporate or private donors to establish the endowment fund to benefit the youth of the community. An agency can set up as many special pur- pose funds as it wishes or pool the funds into dation without the administrative overhead. Apart kom securing the initial capital, there really are no obstacles to setting up a fund. one iund. essentially having your own foun- -:kJ 2f ~,y,p%-/,7 -:. -:I-/ " - J 4- d J TO: City Council, City Manager FROM Staff SUBJECT: CITYLINK Service A?-=;.< CITYLINK offers California cities unlimited access to legislation; online forums and internet mail, for $600 per year, with no to I or .'< .) , . ?us -: , .. .I:$. connect charges. 1 -7.. ..: RECOMMENDATION: Subscribe immediately. R* %E2 CITYLINK c%*l To subscribe, call 1-800-766-4566 %!m.m , T-h:is Space -For Lease For complete advertising information, call (916) 444-5790 WESTERN citv w 6' I I . . , . ... , ,.. ," . . .. ... 1. . I. ..-... ~~~ ~ Some may be concerned with over the money. However, son provide for agency control ant Many agencies set up their o initially and ultimately transfe community foundation. when 1 tive burden overwhelms then ferring their donations, the ea: increased. Fund development in the increasingly competitive and ( public and nonprofit agencic work collaborariveiy with othel and maintain credibility as ser will succeed. Private and p~ agencies are looking favorabl! that are collaborative efforts. 5 grant criteria speciiically call fc are public and nonprofit partnc The Santa Barbara Foundati example of a foundation suppc tive and nonduplicative projec Foundation has set aside S200.I Agency Project Grant Program cooperation and collaboration cies serving the needs of S County. Charles Slosser, Exec stated that "the Trustees are lc jects which link the nonprofit and private sectors." All the m local government agencies to u muniiy foundations to link witl zations in joint fund raising eff duplication of eiiort. It has bec public agencies to open the d funding. Partnering with you foundation as you hd manai to improve access With a little creativity, yo^ your agency for the competitik of the future and reap the tang gible benefits or a collaboratit fund raising potenrial will be grc and your agency credibility il success in Ventura Santa Barb; collaborative programs and tk Relief Fund of the California Co dation are examples of partne anthropy bringing community through private givmg. For spen$c detaik on the opp~ able to your agenq or other local nizations you should contact yt munity fiundation ofice. A goo1 the search for in.iomation is i Community Foundation at (21: