urbanphilanthropy

*Philanthropy*
in
*Urban Revitalization*
UNC-CH / DCRP / PLAN 261 Urban and Regional Economic Development Cynthia Langlykke April, 1999

This site explores the role and value of philanthropy in urban revitalization, emphasizing the particular advantages of corporate philanthropy. After examining the processes and strategies of philanthropy in revitalization, four examples of philanthropic community-building projects are presented. Finally, the importance of the learning and communicative role of strategic philanthropy is described.	Some Philanthropic Links The Foundation Center Philanthropy Journal Online The Pew Charitable Trusts Pfizer Community Ventures

	*Contents*
	*The Urban Problem*		*A Correction*
	*Social Solutions Fall Short*		*Market Conditions Display Ethnic Monopoly*
	*Banking Practices Contribute* *to Decline*		*Philanthropy Identifies an Inner City Niche*
	*Philanthropy is Big Business in the United States*
	*The Corporation Plays a* *Dual Role*		*“Venture Philanthropy” Combines Funding with Business Savvy*
	*The Business Ethic Provides Social Value*		*Venture Philanthropy Brings Risks*
	*Philanthropy Rewards the Community and the Corporation*		*Philanthropy Works with the Market*
	*The Government Plays a Partnership Role*		*Private and Corporate Philanthropy offers Advantages over Public Funding*
	*Urban Philanthropy Identifies* *a Variety of Applications*
	The Atlanta Project, Atlanta, Georgia Pfizer Inc.Community Ventures Fund Center in the Square, Roanoke, Virginia The Pew Partnership for Civic Change
	*Strategic Philanthropy Tests, Evaluates and Informs*
	*References*

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The Urban Problem

A Correction

The economic distress of America's inner cities may be the most challenging domestic issue facing the nation. A combination of imperfect market conditions and misguided urban policy has influenced a general redistribution of wealth out of center cities and into suburban areas. Urban poverty has resisted ameliorative efforts of local, regional and national governmental aid programs over the last half century. The problem is daunting in its scale, in its reluctance to causal determination, and in its stubborn resistance to treatment. The uncertainties of rapid societal change, the geographic mobility allowed by computer technology and the constant shifting of governmental programs pose further threats to the marginally functional districts of our cities. The lack of economic activity, businesses and jobs, in disadvantaged urban areas sustains a cycle of poverty and social dependency. The myriad of problems confronting inner cities - crime, inferior education, drug abuse, illiteracy, homelessness, joblessness, and a faltering economy - encourage their further deterioration. As many inner cities continue to decline, the debate over the best means of assistance continues to grow.

To help correct this decline, sources of capital, knowledge and skills must be identified and channeled into urban areas through a variety of mechanisms. Both governmental and philanthropic intervention must be considered as means to access capital and innovative business skills. The public sector and the private sector must each play a role, the public through policy initiatives and incentive funding, and the private through funding and business skill infusion. Of these sources of assistance, the private sector is better suited to introduce innovative business practices.

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Social Solutions Fall Short

Market Conditions
Display Ethnic Monopoly

“We must stop trying to cure the inner city’s problems by perpetually increasing social investment and hoping for economic investment to follow,” states Michael Porter, professor at the Harvard Business School (1995). He believes that programs designed to provide social support, such as income assistance and housing subsidies, have inadvertently undermined the creation of economically viable businesses. His market-oriented strategies echo the 1968 campaign platform of Richard Nixon, proposing Black Capitalism as the way to “rescue the ghetto from its despair”, to provide “the hand up,” not “the handout,” and to “get private enterprise into the ghetto and the ghetto into private enterprise” (Roberts, 1998). Porter cites four unique and unharnessed advantages of the inner city: strategic location, local market demand, integration with regional clusters, and human resources. He recognizes that limited access to capital is a major barrier to firm growth and entrepreneurship in inner cities (1995).

Market processes in the United States have shown themselves to be socially biased (Dymski, 1995). Income and wealth distributions, displaying concentrations of poverty in inner cities, are at least partially based on institutional class injustices. Subtle race and class discrimination that permeates social and economic systems results in limited access to capital for minorities. Similarly, divisions that exist between ethnic groups and income groups prevent shared economic advantage. Pervasive residential segregation reduces income levels in the inner city and hence contributes to the reduction of economic activity. This segregation and historical exclusion have resulted in an ethnic majority monopoly position with high barriers to minority entry. Part of the scope of inner city development efforts should be targeted to helping remedy these monopolistic tendencies (America, 1995).

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Banking Practices
Contribute to Decline

Philanthropy Identifies
an Inner City Niche

Banking practices have changed in the past thirty years, shifting away from personal service toward mechanized processes based on standardized criteria evaluated by computer programs, thereby favoring those who have already established some level of financial strength. “Mainstream” firms have more capitalization alternatives available to them while smaller firms with weaker balance sheets have less access to capital. In effect, just as firm expansion occurs in path-dependent clusters, so too does bank lending and expansion. Financial structures, like other industry clusters, tend to reinforce the reduction of capital investment in the city, accentuating suburban growth and worsening inner city decay (Dymski, 1995). As “redlining” was used in past decades to direct investment away from many inner city neighborhoods, now “greenlining”, or attracting financing from “mainstream” sources to the inner city, is necessary to compensate for unequal distributions of wealth and the accompanying unequal access to capital.

One effect of entrenched social and economic problems in our cities has been an interest in philanthropic applications and a shift toward innovative corporate and foundation philanthropy programs. Philanthropic programs have, until recently, avoided inner city opportunities. Since the problem conditions have defied solution, city initiatives seem doomed to failure and threaten to be a serious drain on financial and human resources (Badshah, 1997). Increasingly, some philanthropic programs are finding an effective niche in promoting the economic and social welfare of the inner city.

Corporations are getting involved in urban initiatives for a number of reasons. In addition to the public good will gained through financial assistance, many corporate boards want their companies and employees directly involved in community development. Some of the reasons are self-serving: to preserve economic stability and thereby protect their own investments; to ensure that a competent, healthy and educated work force will be available to them in the future; and to have a more directed outlet for their philanthropic dollars. Today however, most corporations making commitments to community building, whether direct or indirect, have community service as part of their corporate mission statements. The key for corporations is to make profit maximization and community building compatible.

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Philanthropy is
Big Business in the United States

In 1995 there was a documented $144 billion in private philanthropic giving.
In comparison, in 1996 there was a total of $103 billion in public entitlement programs (not including Medicare.) 44 percent ($63 billion) of all philanthropic gifts went to religious organizations; thirteen percent ($18 billion) went to education; nine percent ($13 billion) to health care; eight percent ($12 billion) went to human service organizations (Alexander, 1997). Philanthropic programs are offered by foundations, corporations and individuals; there are more than 40,000 grant-making institutions in the country. As a result of changing demographics, changing tax structure, and changing welfare policies, the field of philanthropy is likely to see steady growth in the future.

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The Corporation Plays a Dual Role		“Venture Philanthropy” Combines Funding with Business Savvy
The role of the corporation within society has been an issue since the advent of the modern corporation. Corporate pioneers like James Cash Penney, founder of J.C. Penney, and Julius Rosenberg, founder of Sears, believed that business could not be successful without a thriving community (Altman, 1999). They believed that firm success and community prosperity are closely intertwined. Penney and Rosenberg acted on this ethic by taking an active role in supporting community activities with both their time and their money. This kind of corporate citizenship has evolved over the decades and now finds its biggest challenges and best opportunities in the inner city. The relationship between the corporation and society has become an increasingly important issue for corporate leaders. Pioneers in philanthropy and community service, like Penney and Rosenberg, took an active role in the development of their communities, and likewise expected their managers to do the same, with both their time and their money. As a result of these founders’ values, the ethic of community responsibility and being a “corporate citizen” became institutionalized at such American corporate organizations as JCPenney and Sears. In keeping with this model, many corporations have evolved to serve two purposes -- to be economically successful and to be socially responsible. This corporate culture holds that community involvement is among a set of fundamental responsibilities of the firm.		With its roots in the dual societal role of corporations, this brand of philanthropy, “venture philanthropy”, moves beyond the traditional philanthropic model of granting money. It is innovative and unique in the level of human resource involvement and participation beyond financial donation. In the course of giving communities more than checks, foundations or corporations make grants of special skills, knowledge and networks that bring empowerment to the grantees (Smith, 1998). In this way, philanthropy can make significant contributions to developing, applying and transferring skills and knowledge to attain and sustain positive change. Technical assistance, leadership development, networking, planning and visioning, research and policy education are some of the means offered to facilitate change and growth. In this model, passive or reactive financial contributions are supplanted by proactive partnering. This longstanding ethic of community responsibility is shared in the philanthropic sector between corporations and foundations. Foundations exist to further their stated missions of social improvement by means of financial assistance. Corporations have a multiple purpose involving both economic and social growth. Both foundations and corporations have discovered that for assistance to be effective it must include much more than money. While foundations are organized to exist into perpetuity, corporations must adjust their practices regularly to survive in the competitive market. Both organizations benefit by agility in a changing economic system. Both can use this flexibility to the greater advantage when working to improve economic and social conditions.

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The Business Ethic Provides Social Value		Venture Philanthropy Brings Risks
Philanthropic involvement has grown to recognize the importance of establishing and capitalizing on the mutual interest and mutual goals of improved economic viability. Corporations and foundations are becoming community partners, not merely funding sources. Similarly, urban communities are considered and treated as viable markets, not civic liabilities. Corporations are particularly well-suited to this endeavor, since, while in the business of creating profits, they also generate social value in the form of good jobs, innovative products and services and ultimately, new wealth. In the best of situations, underlying the creation of social value is a work ethic that rewards initiative, perseverance, personal and social responsibility. As inner city role models, economically successful and socially responsible business ventures represent the best examples of community and economic regeneration. Of all the institutions involved in urban revitalization, business is perhaps the best positioned to offer the expertise needed to help catalyze community-based solutions to economic problems. The most effective solutions are the ones that reflect the greatest willingness to be innovative and take risks. Corporations can bring a focused energy and goal orientation that can lend effective organization to a wealth building strategy. The business community is uniquely equipped to aid these efforts with an updated and retooled version of traditional philanthropy (Kosminsky, 1997). The goals of venture philanthropy are not simply to serve the poor but to give people the tools they need to create increased wealth.		Like the field of venture capital, venture philanthropy can be financially risky. Working with untested ideas in an uncertain market, venture philanthropy must be prepared for occasional failure. Commensurate with the risk, these ideas also bear tremendous upside potential. When successful, these efforts do not simply treat the symptoms of the problem, but rather aim to treat the cause. They can do more than ease the problems associated with urban poverty; they aim to create new opportunities, new ownership, new wealth, and a new level of participation by those previously excluded by the system (Kominsky, 1997).

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Philanthropy Rewards the Community and the Corporation		Philanthropy Works with the Market
Philanthropic efforts can play other roles besides creating wealth. Corporate philanthropy can widen economic opportunity and participation, invest in human capital, promote sustainability, and enhance social cohesion. Corporate philanthropy that combines both social and economic objectives can enhance a company’s reputation, competitiveness, productivity, efficiency, innovation and long-term survival. Many businesses and foundations are joining with government and community groups as mutual stakeholders in regional economic conditions. This commitment acknowledges that the work of such partnerships effects the success or failure of an entire urban region. The symbiotic relationship among the urban community, government and business is recognized as key to local and regional economic health.		A market oriented approach to philanthropy starts with the commitment to build an economically viable economy with the eventual goal of self-sufficiency. Companies that view urban areas as civic liabilities may evolve through a series of steps that begins with charity and ends with charity, and will not result in a market presence or have any effect on economic conditions (McNeil, 1995). Successful market-oriented philanthropy takes the position of driving the economic benefits of the partnership back into the community, hiring and purchasing locally when ever possible, seeking the benefits of compounded growth.

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The Government Plays a Partnership Role		Private and Corporate Philanthropy offers Advantages over Public Funding
Local government also plays a role in creating conditions to improve the urban environment. The roles of city managers and local elected officials are changing in response to the opportunities of community partnerships. The new roles have been described as at once entrepreneur, conductor, cook, magician, doctor, inventor and partner (Badshah,1997). As entrepreneurs, the government is “working with the private sector to develop both the formal and informal economies. As conductors, they are developing a good ear to discern silent majorities from noisy minorities. As cooks, they are seeking out different ingredients and trying new recipes, creating new possibilities for the future” (Badshah, 1997). As magicians, they are balancing inadequate budgets; as doctors, they are diagnosing and treating, or referring to specialists, various urban “diseases”. As inventors, they are seeking new solutions to problems that in the past have been considered insolvable.		Philanthropic gifts are typically motivated by a strong organizational mission or vision of improved quality of life. When there is a good match between a philanthropic mission and the needs of an urban area, many advantages can accrue. In contrast to the restrictive and burdensome conditions of public funding sources, private organizations can sponsor creative, responsive and innovative revitalization efforts, adapted to local conditions, that can be directed to bolster a lagging market economy. Unlike governmental programs, private efforts can look beyond enforcement of uniform eligibility requirements and quantified, but sometimes misrepresentative, results. Instead of the public subsidy approach of transferring wealth from the middle class taxpayers to the lower classes, a philanthropic approach can be used as seed funding to create new wealth in the community.

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Urban Philanthropy Identifies a Variety of Applications
The Atlanta Project, Atlanta, Georgia	The Atlanta Project (TAP) is a collection of community development projects, emphasizing revitalization and focusing on poverty reduction, sponsored by the philanthropic efforts of local corporations. TAP, which was started by former president Jimmy Carter, inverts the traditional top-down corporate philanthropy model by determining what communities need and then asking corporations to finance projects to address those needs. The corporations are connecting resources with residents to implement community goals and priorities. The process uses an empowerment model promoting ownership, decision making and responsibility at the community level. TAP counts many large corporations and academic institutions as partners in its projects. This pioneering grass-roots initiative has brought together thousands of individuals to identify the needs and create the avenues for change in education, housing, community redevelopment, economic development, public safety, and health. The principles of TAP - empowerment, collaboration, volunteerism, and partnerships - are the driving forces behind everything TAP attempts to accomplish. The corporate commitment to the empowerment partnership approach to urban revitalization at work in Atlanta is an example of the way that corporations are interested in having a positive and meaningful impact on improving the lives of the urban poor.
Pfizer Inc. Community Ventures Fund	Pfizer Inc. created the Community Ventures Fund (CVF) to support enterprises that create new opportunities for the neighborhoods they serve. This program is directed toward organizations based in New York City, located within the communities that they serve, working to break the cycle of poverty by creating wealth locally. Their approach is to work with groups closest to the problems that they seek to solve (Kosminsky,1997). The grants support business and marketing plan development, program planning and expansion, and organizational development, often the hardest money for small organizations to budget. As of 1997, CVF had granted funds to 25 organizations working within New York City on local economic development. Some of the organizations to receive grants are Bedford Stuyvesant Restoration Corporation (the country’s oldest community development corporation), The Bowery Mission Transitional Center, Bronx Council on the Arts, Citizen’s Advice Bureau, East New York Urban Youth Corps, and Fund for the City of New York Midtown Community Court. The funds have been directed toward development of job skills, management skills and entrepreneurial skills. One project initiated and supported by Pfizer’s CVF initiative is the Broadway Triangle Urban Renewal Project in Wiliamsburg-Brooklyn, New York City. Williamsburg was the site of the original Pfizer plant. After suffering economic and physical decline, the neighborhood partnered with Pfizer to develop a renewal plan that would be sensitive to the neighborhood’s needs and would maintain the traditional industrial/residential mix of uses. The redevelopment included affordable housing, educational facilities, and business relocation. Other companies and organizations to join Pfizer in sponsoring the redevelopment have been Brooklyn Union Gas Company, American Express Company, the Federal National Mortgage Association, and the Enterprise Foundation.
Center in the Square, Roanoke, Virginia	Roanoke, Virginia is home to the Center in the Square, a downtown revitalization project completed with strong support from the business community and much public participation. Led by the Central Roanoke Development Foundation, the community and business partnership charted a plan that developed into Virginia’s largest cultural complex. The Center, opened in 1983, houses five arts, history, science, and cultural organizations and annually attracts hundreds of thousands of visitors to Roanoke. Since it opened, the business community has invested more than $250 million in capital improvements downtown and approximately 165 new businesses have located in and around the downtown area. The project’s impact has been estimated at $25 million annually (Badshah, 1997).
The Pew Partnership for Civic Change	Funded by the Pew Charitable Trusts, The Pew Partnership for Civic Change is a national program organized to address problems in smaller American cities with populations of 50,000 to 150,000. The Civic Change project is designed to promote collaboration between public, private, and not-for-profit sectors in communities; to profile urban issues in the context of developing strategies for systemic change; and to suggest new models for strengthening communities. The Partnership has determined that, while smaller cities are experiencing many of the same problems as large urban areas, they often exhibit a number of positive characteristics that are not as evident in big cities. Some of these characteristics are a strong sense of identity, an involved corporate sector and involved citizens. The Partnership has found that cities of this size are large enough to face the challenges confronting many urban areas, yet small enough to have the community will, manageability and flexibility to effectively define and address the problems (National Civic Review, 1993). Cities of this range of population are the home of 40 million Americans.

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Strategic Philanthropy Tests, Evaluates and Informs

Just as the philanthropic organization and the community are striving to achieve effective community building, both are also learning about the process. The learning is a vital component to complement the funding and skills transfer. Through the learning process, some organizations receiving assistance have evolved from a problem-centered approach to a more comprehensive approach. This kind of evolution is seen as an indicator of both need and capacity to meet broader problems and to make broader connections. There is a long-term advantage to linking the community to broader resource bases to assist with sustainability. An essential part of strategic grant-making is to preserve responsiveness, to build social capital, and to avoid top-down prescription of a process for funded projects.

Foundations and corporations can also support sharing of information and learning between communities. Organizations that are testing and implementing strategies for problem solving and positive change can become learning laboratories for change agents in other communities, as well as learning laboratories for researchers, educators, students, evaluators, journalists and policy makers at all levels. Some grant-making foundations are concentrating on strategic planning, strategic grant-making and strategic evaluation. In this case the definition of strategic involves multiplying the impact and the good from funded projects by connecting them into larger efforts and other arenas. One purpose of strategic grant-making is to increase the power of community-based demonstrations to inform the field and inform policy. Another purpose of strategic grant-making is to increase the likelihood that the funded project progresses on a sound course of development and ultimately is institutionalized and sustained within the community. Several foundations are working to learn how community change occurs and how charitable investments, technical assistance and leadership development can be timed and tailored to stages of change to provide greatest support for both immediate and long-term success of what a community is trying to achieve. The combination of community action and policy decisions can contribute to moving tested problem-solving strategies into the mainstream. Foundations can help communities both pursue unique solutions and band together to share approaches and to address social, economic and urban policies that mutually affect them.

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References

Alexander, Lamar; Coleman, Reed, et al., The New Mission for Philanthropy, Policy Review, Sep-Oct 1997.

Altman, Barbara, W., Transformed Corporate Community Relations: A Management Tool for Achieving Corporate Citizenship. Business and Society Review, Spring, 1999.

America, Richard F., Reparations and the Competitive Advantage of Inner Cities. The Review of Black Political Economy, Fall-Winter, 1995, vol. 24.

Badshah, Akhtar, Building Corporate Sector Partnerships, Public Management, Oct., 1997, vol. 79, num. 10.

Dymski, Gary A., Business Strategy and Access to Capital in Inner-City Revitalization., The Review of Black Political Economy, Fall-Winter, 1995, vol. 24, num. 2-3.

Forbes, Gift list. (Philanthropy of the Wealthy) Oct. 23, 1989, vol. 144, num. 9.

Kosminsky, Jay, Venture Philanthropy: A New Model for Corporate Giving, Fund Raising Management, Aug. 1997, vol. 28, num. 6.

McNeil, Ronald D. Partners in the Marketplace: A New Model for Business-Civic Leadership, National Civic Review, Summer-Fall, 1995, vol. 84, num. 3.

National Civic Review, Pew Partnership for Civic Change Announced, Winter, 1993, vol. 82, num. 1.

Porter, Michael, The Competitive Advantage of the Inner City, Harvard Business Review, May-June, 1995.

Roberts, Johnnie L., A Touch of Magic (Magic Johnson), Newsweek, June 15, 1998, vol. 131, num. 24.

Smith, Gloria, Strategic Grantmaking and Community Building, National Civic Review, Summer, 1998, vol. 87, num. 2.

Sweat, Dan E., and Anthony, Jacquelyn A., The Role of Corporations in Urban Revitalization: The Experience of the Atlanta Project., National Civic Review, Summer-Fall, 1995, vol. 84, num.3.

www.pewtrusts.com.

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This page updated on 26 April 1999.

Please send comments to
langlykk@email.unc.edu.