FEATURE-Detroit's foundations spread money through broken city
DETROIT May 27 (Reuters) - When Kevin Ward fulfilled his dream by opening a rib joint in one of Detroit's poorest and most blighted areas, he could not afford extra meat. If the ribs ran out, he closed for the day.
"We were doing real well considering, but inventory was a problem," said Ward, 40, who perfected his ribs while at college in Alabama and opened Slabbee's five months ago in Brightmoor.
But with advice from SWOT City, a pilot program run by foundation-backed small-business incubator TechTown Detroit, Ward has received microfinancing to solve his inventory problem. Now he plans to buy a delivery van and hire a second employee.
Ward's rib joint is just one example of new ways in which Detroit's philanthropic foundations are trying to create jobs and boost schools in a city facing potential bankruptcy. In doing so, they are conducting a sort of civic triage, choosing areas, schools and businesses with a good chance of survival.
The foundations' efforts address the breakdown of civic life that Detroit's emergency manager, Kevyn Orr, pointed out earlier this month in his first report on Detroit's financial health.
Detroit's foundations hark back to an era when the city was an economic beacon and the auto industry's birthplace. The Kresge Foundation, for example, was started in 1924 with money from the founder of what eventually became retail giant Kmart.
Some other initiatives in Detroit are paying off. The city's downtown is experiencing a small boom thanks largely to mortgage lender Quicken Loans, whose co-founder and Detroit native Dan Gilbert has moved in 7,000 employees and invested $1 billion in an attempt to attract other businesses.
But most of Detroit's 80 percent black population of around 700,000 live outside downtown, many in blighted areas.
"Downtown is critical, but there are a whole host of problems out in the neighborhoods that need to be dealt with," said Leslie Smith, CEO of TechTown Detroit, whose SWOT City pilot has led to one new small business with six more planned.
These efforts to design strategy and measure results mirror a broader shift in the charitable world, said Michael Moody of the Johnson Center for Philanthropy at Grand Valley State University. In the past, foundations were satisfied giving away food and clothing. "The history of philanthropy, especially in the Depression, has shown that doesn't work," Moody said.
The Detroit-based Skillman Foundation has focused on schools in six neighborhoods and seen graduation rates rise 14 percent from 2007 to 2012 in four of them, compared to a 1 percent rise citywide. The New Economy Initiative, which has committed $100 million to promote entrepreneurs in Detroit, says it has measured the results so far: It has helped 423 small firms and contributed to the creation of more than 7,000 jobs.
Local foundations have been criticized in the past for throwing their weight around, but Moody said they have become more collaborative and responsive as a result.
SAFETY ISSUES UNDERMINE PROGRESS
Detroit native Adriana Alvarez left her post-college job in Hawaii in 2010 to return to work for non-profit Congress of Communities, which focuses on Southwest Detroit, a neighborhood that has attracted many Hispanic immigrants in recent decades.
"If I don't give back, then others won't get a chance to learn what I have," said Alvarez, 24.
Her group has become a conduit for other local non-profits, with projects to help children avoid joining gangs through youth groups and sports, and patrolling streets to prevent crime.
Congress of Communities is one of six neighborhood groups the Skillman Foundation has invested in. Dedicated to helping Detroit's children and founded by the widow of an early executive at 3M Co who settled in the Detroit area, Skillman selected these areas for their high concentrations of children.
Skillman used to give millions of dollars annually to Detroit's ailing public school system, but found the results unsatisfactory. It chose instead to back individual schools. In order to help the communities around these schools, Skillman has funded community groups of local activists.
"The question was how do we reinvent the social contract in Detroit?" said Chris Uhl, a former banker and now vice president of social innovation. Since 2007, Skillman has issued $124 million to its six target areas.
Tonya Allen, due to become Skillman's next president, estimates the grants the foundation has made have leveraged an additional $450 million in grants from other groups since 2007.
Skillman's approach is mirrored by General Motors Co, which like Detroit's other automakers has joined efforts to help the city. GM has committed $27.1 million over five years to a United Way program to raise graduation rates at seven city schools to 80 percent from 50 percent.
The Kresge Foundation has focused on boosting the economy along Woodward Avenue, a major city thoroughfare. It has kicked in $35 million toward a $137 million, 3.5-mile (5.6-km) light rail line along Woodward, along with private companies like Quicken Loans and truck rental firm Penske. These private contributions - as well as the U.S. government's $25 million stake - will count toward further extensions of the line, said Kresge's senior director for community development Laura Trudeau.
"Our influence is limited but we try to leverage it to have a greater impact," said Trudeau.
Kresge also has committed $150 million over the next five years toward Detroit Future City, a citywide planning blueprint.
Foundations here say when they fund projects, others follow suit. New Economy Initiative Executive Director David Egner said the group has committed $7 million since 2010 to entrepreneurial seed fund Invest Detroit and attracting "tens of millions" more.
NEI, a joint effort by 10 foundations, eight of them based in southeast Michigan, now claims it has $110 million in total, a combination of investable funds and tax credits for business expansion. It is planning a second, $60 million round of fundraising to continue supporting Detroit-area entrepreneurs.
Foundation leaders say the biggest hurdle to success today is endemic violence and crime in some areas. Detroit's murder rate in 2012 was 10 times the U.S. average. Seemingly mundane facts of street life - broken street lights and inoperable fire hydrants - compound the city's problems.
"If the lights don't work and the streets aren't safe, people won't come here," said NEI's Egner.
Bill Nowling, spokesman for Kevyn Orr, acknowledges public safety is a "paramount concern."
"The region's philanthropic community is fully committed to Detroit's turnaround, but we cannot let its effort be for naught," Nowling said.
Skillman's Uhl says lack of safety undermines progress. One telling example: True Whitsey was a graduate of Frederick Douglas Academy, a Skillman-funded school, and went on to study at Ferris State University. But when he returned home for Christmas break last year, he was shot and killed while being robbed at gunpoint in the street.
"Our work is meaningless if we can't keep these kids safe," Uhl said. "If they don't fix that it doesn't mean a damn thing." (Additional reporting by Bernie Woodall; Editing by Mary Milliken and Lisa Shumaker)
- Citing security threat, Obama expands U.S. role fighting Ebola
- Tesla prevails in top Massachusetts court over direct sales
- Russia needs government investment to avoid recession, says former finance minister
- Stocks end higher on bet Fed won't change rate stance
- U.S. general says cannot rule out larger ground role in Iraq