Academic journal article ABA Banking Journal

Community Foundations Are Tool for Economic Growth

Academic journal article ABA Banking Journal

Community Foundations Are Tool for Economic Growth

Article excerpt

Community foundations are tool for economic growth

Several years ago, at one of our annual strategic planning retreats, we attempted to define our business. After much debate, we determined our primary business to be "community building." A statement to that effect is now part of the bank's Statement of Values, which hangs in every office in the organization.

Having done this, we knew that the words had to come to life. Like most community banks, we were active participants in our community. For example, we served as the catalyst for "Red Wing 2000," a community-wide formalized planning process. In addition, I have served as the chair or co-chair of most major fund-raising projects in town.

We emphasize community service as "part of the job," involving our entire staff in community projects and contributing hundreds of hours to these projects.

Even so, we realized that more needed to be done. A community's economic vitality depends upon the quality of life in that community. Businesses that would consider Red Wing as a potential site for their headquarters or for an expansion would be very concerned about the environment in which people would live.

Environmental issues, schools, health care, recreational facilities, and the arts would all bear on a company's ability to attract and retain good people. A community bank such as ours had a role to play, but what its expanded role should be was, for a time, unclear. The answer turned out to be involvement in a community foundation. Filling a gap. All too often, existing charitable and governmental agencies are not equipped to deal with the extensive needs of the community. Funding restraints or the rules that they must operate under preclude them from serving various sectors of the community's needs. This void can be filled by community foundations and the various organizations affiliated with them.

Community foundations, which enjoy "public charity" status under U.S. tax laws, act as umbrella organizations for local donor-designated funds and family foundations. The community foundations both advise the local funds and raise money themselves. In our town, the Red Wing Area Fund was formed in 1981 by the chairman of the Red Wing Shoe Co., the town's largest employer. Subsequently, the fund became part of the Saint Paul Foundation, one of the country's largest community foundations, with assets of more than $140 million.

The mission of the Red Wing Area Fund is to provide seed money for worthwhile projects that add to the community's quality of life and its ability to grow economically, but that are not fully supported by other local funding efforts.

I have served on the board of the Red Wing fund for six years and have learned firsthand what such an entity can accomplish. While the bank itself has no formal link with the Red Wing Area Fund other than my serving on its board, the benefits of our association with it are great.

Key attributes. The community foundation concept is simple. It is a means of accumulating substantial sums of money over time from small and large contributions, the income from which can be used to help meet a community's charitable needs. The almost 400 community foundations in the United States serve all large metropolitan areas; some also serve entire states.

Community foundations have six characteristics:

(1) A flexible, yet permanent collection of funds supported by a wide range of donors;

(2) The relative independence to determine the best use of those funds to meet community needs;

(3) A governing board of volunteers, knowledgeable of its community and recognized for its personal involvement in civic affairs;

(4) An organizational commitment to provide leadership for community problems;

(5) A commitment to assist donors to create funds and distribute proceeds in accordance with the donor's intent; and

(6) Adherence to a sense of "community" that overrides individual interests and objectives. …

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