Faltering Economy Slows Asset Growth at Community Foundations

As the nation’s economy slowed last year, net assets in community foundations

rose only 5 percent, to $31.5-billion, compared with annual growth of nearly 20 percent in 1999.

In fact, 2000 was the first year since 1994 that net assets of community foundations grew by less than 10 percent, according to a survey, conducted jointly by the Columbus Foundation, in Ohio; Community Foundations of America, a Louisville, Ky., group that provides assistance to such funds; and the Council on Foundations, in Washington.

Gifts to community foundations rose 13 percent, or $466-million, to $4.1-billion. The foundations paid out $2.2-billion in grants, up 12 percent from 1999.

“There is unease in the stock market, which both makes it more difficult for donors to decide to transfer stock and also has affected the growth in market value of stocks foundations already own,” said James I. Luck, president of the Columbus Foundation.

Silicon Valley Funds

Still, while high-technology companies have been hit particularly hard by the economic downturn that began last fall, two Silicon Valley community foundations — the Peninsula Community Foundation, in San Mateo, Calif., and the Community Foundation Silicon Valley, in San Jose — thrived last year. Officials of those foundations said they were able to continue their rapid growth for two reasons: They have been aggressive in seeking out individual donors and partnerships with local companies, and the worst effects of the slowdown did not hit the technology industry until well into their fiscal years.

Indeed, a large portion of the overall growth in assets and gifts among community foundations in 2000 was driven by the two foundations. The Peninsula Community Foundation’s net assets grew 48 percent, to $449-million, while the Community Foundation Silicon Valley’s assets rose 26 percent, to $583-million. Taken together, the two foundations accounted for 10 percent of the total increase in net assets among the 664 community foundations in the survey.

The two California foundations accounted for an even larger share of the increase in gifts received by all community foundations in 2000. Gifts to the Peninsula Community Foundation more than doubled, to $230-million, while Silicon Valley saw a 50-percent increase to $254-million. Their combined increases accounted for 45 percent of the total rise in giving to all community foundations in the survey.

“The shift of assets and gifts to the West, actually to California, is unprecedented,” said Mr. Luck. “Silicon Valley and Peninsula are particularly well-positioned geographically near the new high-tech businesses, and they have directors and staff who have been active in approaching the executives of those businesses.”

Sterling K. Speirn, president of the Peninsula Community Foundation, said his organization has benefited from more than simply being in the right place at the right time. “We’ve really strived to work closely with these donors,” he said. For example, he pointed out that the foundation asks new donors to fill out surveys identifying the issues in which they are interested. Based on that information, it sends out monthly updates to every donor, both noting programs the foundation is supporting and providing information about potential new activities to which donors might want to contribute. “Sometimes we can’t even wait for the monthly cycle,” Mr. Speirn said, adding that the foundation sends e-mails to donors when pressing issues arise. In one case, a nonprofit group that the foundation supports needed $700,000 within a short period to relocate its offices. Mr. Speirn said his organization sent e-mails to several donors, and raised the funds. One donor responded immediately with a $100,000 contribution.

Peninsula has also tried to develop innovative ideas that will attract donors, Mr. Speirn said. Two in particular have drawn the attention of donors, he added. Under one approach, the foundation contributes $2 for every $1 that people with low incomes put into a savings account, with the condition that the money can be spent only to buy a home, start a business, or pay for college. The other approach, operated through a local library, lends books to children from low-income neighborhoods to take home and read with their parents.

Mr. Speirn acknowledged, however, that severe declines in the high-technology economy will make it more difficult for them to continue to grow at last year’s pace. “A lot of us need to step back and look carefully at our budgets,” Mr. Speirn said. “Maybe we’ll have to suspend funding of research-and-development activities and focus on supporting existing programs. We have to be there as a stabilizing force.”

The Columbus Foundation plans to mail copies of the report to other community foundations in November. The report will be available to the public free beginning in mid-November from the Columbus Foundation, 1234 East Broad Street, Columbus, Ohio 43205; (614) 251-4000; or info@columbusfoundation.org.