Something for the Little People

The Twin Cities-based Northwest Area Foundation has a $450 million endowment to use on charitable programs. So why has it been nearly invisible for years?

 On a Monday evening in February, 200-plus people gathered in a ballroom at the International Market Square building in the shadows of downtown Minneapolis. Silver and blue balloons floated above tables draped in white tablecloths. The standing-room-only crowd nibbled on smoked salmon and chicken wings and sipped white wine and bottled water. State legislators Linda Higgins and Keith Ellison worked the crowd, as did Minneapolis Mayor R.T. Rybak and County Commissioner Mark Stenglein.

There was good reason for everyone to celebrate. The event marked an announcement by the Northwest Area Foundation, one of the largest grantmakers in the state of Minnesota, that it would spend up to $10 million over the next decade to battle poverty on the city's near-north side. As Mayor Rybak quipped when he addressed the crowd, "Nobody has to thank me for coming to some place where people are giving away money."

The grant announcement was the culmination of more than three years of planning. Since the Northwest Area Foundation first approached residents of the north side about the possibility of a multi-million dollar commitment, countless meetings had been held, reports generated, and consultants hired. City Council member Natalie Johnson Lee, who worked on the project in its early stages, compared the experience to childbirth. "So now the baby is here and the work begins," she told the audience. City Council member Barb Johnson offered a different analogy for the project: "Going through some of this process I thought I was in purgatory," she said, only half joking.

The February event was also notable because it was one of the first tangible signs of what the Northwest Area Foundation has been up to over the last seven years. In June of 1996, the $425-million, St. Paul-based foundation, which was created in 1934 with proceeds from James J. Hill's railroad and timber empires, hired a new president, Karl Stauber. The next year it stopped accepting grant applications and announced that it was overhauling its philanthropic activities. Nonprofit groups in eight states, stretching from Iowa to Washington, (tracing the route of the Great Northern Railway), were left searching for new sources of revenue. In the 1996-97 fiscal year, more than 240 nonprofit organizations had received some $15 million in grants from the Northwest Area Foundation, ranging from $147,500 for Penumbra Theater Company in St. Paul to $33,055 for the King County Labor Agency in Washington. Roughly a third of these grants were made to Minnesota organizations.

The ensuing years have been mystifying. Northwest Area Foundation has seldom given out grants, while internal costs have skyrocketed. In the 1998-99 fiscal year, the foundation's stingiest, it gave out just $3.2 million dollars, or less than one percent of its endowment, according to Internal Revenue Service documents. Total salaries and benefits, meanwhile, have increased from roughly $1 million to $1.7 million over the last four years, a jump of 70 percent, and the number of employees has more than doubled. Travel expenses have roughly doubled over the same period, to more than half a million dollars. In 2002 Stauber was paid $238,000 in salary and benefits. According to a 2002 survey by the Minnesota Council of Nonprofits, the average compensation for top charity executives at organizations with an annual budget of at least $5 million was $119,417.

The foundation is also spending more than a quarter of a million dollars on rent each year at its recently renovated offices on the west side of St. Paul. There have been other peculiar payments too: McFarlane Media Interests, publisher of Insight newspaper, received $244,000 in the fiscal year that ended March 31, 2001, for "media coverage." And for a foundation whose mission is to fight poverty, the Northwest Area Foundation has made some dubious investments. At the close of the most recent fiscal year, the grantmaker had $350,000 worth of stock in Household Finance, a company that has been widely criticized for exploiting poor people through predatory lending practices.

"They have a super-low profile," says Jon Pratt, executive director of the Minnesota Council of Nonprofits. "It's this sleepy little place that has all this money, and who's watching the store?"

With the state government slashing social services, foundations cutting back on grantmaking because of sagging stock portfolios, and charitable donations in decline due to the poor economy, the disappearance of Northwest Area Foundation has become more frustrating than ever to area nonprofit groups. In March, for example, Catholic Charities announced that it was trimming 88 jobs in Minnesota--15 percent of its total workforce--because of revenue shortfalls. "With the Pawlenty administration, and what's going on with the economy, not having Northwest Area Foundation in the fight, it's something that you feel," says Louis King, executive director of Summit Academy O.I.C., a north Minneapolis nonprofit group that previously received funding from the foundation. George Boody, executive director of the Land Stewardship Project, in White Bear Lake, another former grantee, echoes those sentiments: "We certainly miss them--especially in times like these."

Frustration with the enigmatic foundation came to a head in November when a potential class-action lawsuit was filed by a farmworker in Washington state who had participated in a Northwest Area Foundation-sponsored anti-poverty program in Yakima County. After holding meetings in the area for months, the foundation pulled out of the county in August. The lawsuit seeks at least $1.25 million that the plaintiff claims Northwest Area Foundation promised.

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