Article: Star Tribune: McKnight is hit on Broadway
May 4, 2009 - Curt Brown, Star Tribune. Decisions to use a loan tool for housing and to help buy a vacant library has reassured charities the Minnesota foundation hasn't lost its local focus.
Sarita Turner, head of a nonprofit coalition trying to revive part of north Minneapolis, was scared. So was Minneapolis Mayor R.T. Rybak.
Kate Wolford could sense their concern. When she took over as McKnight Foundation president more than two years ago, she left a career of international relief work to become the first non-Minnesotan to lead the state's philanthropy giant. Would the old 3M family fund, begun as a tax shelter in the 1950s and now Minnesota's top charity cash pool, turn away from spending much of its nearly $100 million in annual grants on inner-city needs?
"There was some initial consternation in the community," Wolford said. "Who is this unknown entity whose prior work was all international? Rumors about a great change in focus at McKnight began."
When Wolford stunned the funding world six weeks ago, announcing a $100 million, five-year McKnight pledge to address global climate change, those worries intensified. After all, everyone knew McKnight had less money to work with now, the stock market collapse having taken a $700 million chomp off its $2.3 billion endowment.
"We know environmental work is important and has a local impact," said Turner, who runs the West Broadway Business and Area Coalition. "But when the economic downtown left the foundation losing money, it was pretty scary and continues to be."
People "rightfully looked up and wondered whether this new generation of leadership at McKnight would really keep the work going," Rybak added.
Two developments in the last week -- a McKnight $10 million housing loan announced in St. Paul's Aurora-St. Anthony neighborhood and the foundation's decision to help buy a stately vacant library off Broadway in north Minneapolis -- have the mayor and the nonprofit world breathing a little easier.
Experts warn that the recession's aftershocks might not be truly felt by foundations-supported charities until 2010 or 2011. And Wolford understands why many of McKnight's grantees continue to walk on eggshells.
"It's a totally legitimate concern because there's no perfect choice and the resources are always limited," she said.
Although McKnight will dole out $98 million in grants 2009, about the same as the $99 million given in '08, "we've had to shorten our grant horizons," Wolford said. So some non-profits accustomed to three-year grants will get only two years of funding and two-year grants could become one-year checks.
Dusting off old tool
The housing loans signaled a departure in McKnight's typical grant giving, a change prompted by the sluggish economy. The goal is to buy up foreclosed homes, both in the inner cities and outstate, to get them out of the hands of predator lenders and into the hands of working families that can stabilize neighborhoods.
But instead of simply giving money as usual to affordable housing groups, McKnight dusted off a tool it hasn't used since the early '80s. Known in tax-code parlance as Program-Related Investments (PRIs), the 2 percent, 10-year loans are a way for foundations to target money at a social problem.
"With our grants budget constrained because of the economy, I teed up this idea for our board," Wolford said.
McKnight's board -- seven of 10 heirs of 3M founder William McKnight -- agreed to use the PRI tool back in November when the stock market was nosediving.
"The market was a rollercoaster, and it would have been easy for the board to hunker down and say we can't take the risk," Wolford said. "But they stepped up and I'm proud of that."
As is Rybak.
"The reassertion of McKnight into this foreclosure crisis right now has been incredibly important," the mayor said. "They have a lot on their plate, but having them aggressively at the table illustrates that McKnight has stayed committed to the one area they have had more impact than anything else -- housing."
Money and credibility
On Thursday, with little fanfare, the EMERGE Community Development nonprofit closed on the $585,000 purchase of the castle-like old North Branch Library on Emerson Avenue N., just off Broadway. The brick landmark dates to 1893, but has been shuttered since 1975 and used to store old boiler parts and salvaged junk.
The $4.2 million renovation plan calls for a high-tech jobs training center combined with office space. The group is 47 percent through its capital campaign -- thanks to a $300,000 grant from McKnight.
"We're sticking our neck out, but McKnight is right there taking the risk with us," said Mike Wynne, EMERGE's director. "What they did is absolutely pivotal. If they don't come in, all bets are off."
Up and down Broadway, McKnight grants are helping groups restore facades, paying for everything from artistic murals to tuck-pointing. After decades of disinvestment caused crime to swell on the North Side, McKnight has invested in groups developing new neighborhood leaders and energy. Similar efforts to turn around Franklin Avenue area of Minneapolis are being called a model for Broadway's rebirth.
Wolford, 51, came to McKnight in 2006 from Baltimore, where she ran Lutheran World Relief. She watched areas of north Baltimore lose the battle, leaving block after burned out block. She's willing to roll the dice on blighted areas others might give up on.
"We actually wouldn't be using the power of philanthropy if we didn't take risks," she said.
Curt Brown is at curt.brown@startribune.com.