Philanthropy is the practice of applying the assets of knowledge, passion, and wealth to
bring about constructive change.
– Peter Goldmark, Rockefeller Foundation
This is a story about uncommon giving. |
It begins in July of 1976 with a stroke of incredible good fortune. While the country is marking its bicentennial, valuable oil and gas reserves are discovered on property owned by the Traverse City Rotary Club, and used for years as a Boy Scout camp.
Thanks to the foresight of key club members, a public foundation named Rotary Charities was formed.
Its purpose was to distribute interest income generated from the oil and gas royalties, to organizations in a five county region of Northwest Michigan whose mission could be best characterized as life enhancing. Over the years grants have been given in these categories: affordable housing, education, environment, culture and recreation, strengthening families, community capacity building and health. Today, some 29 years since Rotary Charities’ inception, total grants have crested the $36 million mark.
But this history is about far more than gifts of money. It’s about service, people helping other people for the common good. In fact, it’s a reflection of service above self, the creed of Rotary International, the world’s largest service club organization.
Rotary Charities story is one of extending a financial helping hand to organizations whose mission is helping people. And virtually everyone throughout its five-county service area of Northwest Michigan, have benefited in one way or another from this extraordinary largesse.
Traverse City’s Jack Freethy played a key role in securing title to the camp property for Rotary that would later become the site of Camp Greilick, the Scenic Trails Council’s Boy Scout Camp site.
A Rotarian, Jack was best known as the piano player for the club’s annual Minstrel Show. Those were the days when the show was held at the State Theatre. During intermission, Ken remembers, Jack would slip out to a nearby social club. “Sometimes he’d come back, and sometimes they’d have to get ‘em, He never used any music and would play in different keys, just to keep the chorus on their toes.”
But it was Freethy who was responsible for gathering the scattered stock from the Community Camping Association, which at the time was operating what was to become known as the Boy Scout Camp property. Pete Strom, a founding member of the Rotary Charities Board and the youngster of that group, figures Rotary decided to gain control of the camp stock, and Jack Freethy had the time to do the legwork.
“But there’s no doubt, that Jack, who was known for always doing a lot of interesting things in the community, was key to rounding up the camp property for Rotary,” he says.
Regardless, in the mid-50’s title of the East Bay Township camp property was transferred to Rotary Camps, Inc., followed by a long term lease with the Boy Scouts, which to this day operate it as Camp Greilick, named after the Traverse City Rotary Club’s third president, Clarence Greilick.
It was the active work of those early Rotarians who were responsible for the purchase of the original camp lands. Rotarian Ron Sondee, author of “To Whom Much Is Given,” the story of the club’s history since its founding in 1920, notes that the initial camp land of 450 acres was purchased for $1,100 in 1923.
It as on this land that in 1976 oil was discovered.
Initial response to oil developers’ interest in the Rotary Boy Scout camp property was not universally receptive.
Dr. Ken Taylor, who would later serve as Rotary Charities president, recalls the opposition. “Rotary had numerous offers from oil well companies to develop it. But some members of the camps committee didn’t want to do it for fear of disrupting the Boy Scout camp.”
Later when the committee was satisfied that the camp would not be despoiled by drilling activity, a contract was drafted with tight restrictions on the oil developers
Bill Kildee was president of the club in 1977 when Rotary Charities was formed. The “Willie” of “Willie and Wally,” for years a popular stage act in the local Rotary Show, he remembers the eagerness of oil drillers to sign Rotary to a drilling contract.
“It was really funny at the time, because we thought we might even get a $1 million if we were lucky. Little did we know.”
Following a lapsed lease with Consumers Power Company, which performed no drilling activity, Rotary signed with A.G. Hill, an oil exploration company based in Texas. They would later sell the oil from what would grow to be Rotary’s six wells, to the Alma, MI based Total-Leonard Petroleum company.
“That first well was a dry hole,” recalls Bill. “But the driller had been so anxious to get the contract, that we figured there must be something there.”
Indeed, the Boy Scout camp straddled the Niagran Reef, an oil/gas rich crescent that crossed the state. “All the wells after that first one turned out to be free flowing,” says Bill.
“No pumps were needed. And when they hit, my how that oil flowed”
Talk with any Rotarian who remembers when oil was discovered, and one of the first names mentioned will be Al Arnold.
He was the Traverse City business attorney and Rotarian who led the negotiations that resulted in an unprecedented 40% royalty to Rotary. Oil percentages to land owners at that time were in the 20% range.
“Originally we wanted 25%,” recalls Dr. Taylor. “But at the last minute, Al Arnold, remarked that we should ask for more.”
He had had experience in the West with mineral rights leasing. “I recall him saying to this day----‘No, I think we should ask for more. Land owners in the West get 20%, and they may have one chance in ten of hitting oil. We know we’re going to be successful.’”
That observation resulted in an addendum to the original contract that called for 25% royalties until all production costs were recovered. At that point the royalty rate would increase to 40%.
“This was an unheard of rate at the time,” remarks Ken. “But they (the drillers) got the contract and they were glad to get it because they knew from their surveys they were going to be successful.”
Leon Michael, another Charities’ board president, recalls various oil field appraisers telling the board the oil was going to run out in five years. “I don’t think any of us ever imagined it would grow to the scale it has.”
For the next twenty-some years, Charities’ board member Bob Hilty would serve as volunteer monitor of the oil and gas wells, and became expert at scanning the oftentimes cryptic reports.
THE FOUNDING OF ROTARY CHARITIES
As oil revenues began to accumulate, the original camps’ committee was savvy enough to know they needed help in managing the anticipated windfall.
Bill Kildee was president of Rotary in 1977, the year Rotary Charities was formed.
The year before, he had mentioned to then-president, Preston Tanis, the need for creating a separate board, autonomous from Rotary, to administer the oil revenues. That remark, along with gathering support from other key Rotarians, was no doubt accountable in part for the birth of Rotary Charities in April of 1977.
Even before that, however, one of the first outside resources the camps committee turned to was Eugene Struckhoff of New York, who at the time was president of the National Council of Foundations.
He was an amateur ornithologist, recalls Dr. Ken Taylor, and was only to happy to spend some time here since he wanted to take photos of the famed Kirtland Warbler in Roscommon County.
“They invited him here for a weekend. And they grilled him over every meal and every time he had a free moment.”
Among the advice he dispensed, Pete Strom remembers, was telling Rotarians to not use their philanthropy to fund budgets. “If you do that,” Struckhof said, “you take away peoples’ desire to raise money. The community still needs to do that. If you do bricks and mortar and facilities, your community will be farther along.”
Strom asserts that Rotary Charities is far more than the individuals that run it, and that the organization has moved ahead in ways not conceived by its founding board, and continues doing “more and more good.”
He likens the original principles of Charities as the landmark philanthropy framework for Northern Michigan. “The tenants that we established 25 years ago became in essence the constitution for grant making in Northern Michigan.
“How do you take large sums of money, give them away appropriately, support as many people as you can---and do it without ego?
“We got this money. We’re lucky to have it. And how can we use it wisely?”
A systems of checks and balances, designed in part to keep politics as much as possible out of the grant review process, was established by that initial board. Terms were fixed. Rotarians had to be club members for five years before eligible for Charities’ board membership. In order for a grant request to be approved, seven of Charities’ ten board members had to support it. Those tenants are still in use today. Board membership was also split up among the entire Rotary Club roster.
In June of 1978, Charities received word from the IRS that it qualified as a federal income tax exempt charitable organization, 501 (c) (3). Even more importantly, it also qualified as a supporting organization under Section 509 (a) (3) of the Internal Revenue Code.
“That exactly what we wanted,” explains Ken. “We were not a community foundation or a private foundation.” He credits attorney and Rotarian Pat Wilson with helping Charities gain that designation.
ROTARY CHARITIES’ GRANTMAKING YEARS
There was money to be given away for good causes, lots of it, and the oil and gas revenues were increasing by the month. As word spread of Rotary’s good fortune, the grant requests started flowing.
The first dozen years the grant making process could be described as reactive. “We took them as they came in,” recalls Dr. Ken Taylor.
Over time, however, the grant process was fine tuned. Surveys commissioned by Rotary began to appear. What did the communities it served need? Were they weak in the arts? Infrastructure? Affordable housing? Health and recreation? Regional planning? The environment?
Good grants, poorly written, and bad grants, well written, made their way into the queue. And Charities’ senses of how its money could do the most good for the most people---were sharpened.
Bricks and mortar types of grants were made to Munson Medical Center for the Biederman Cancer Center; Northwestern Michigan College’s University Center and Dennos Museum; and an assorted range of institutions and facilities throughout the region.
In 1989 Rob Collier was hired as Charities first executive director. One of 40 candidates for the post, he was from Pennsylvania where he had gained valuable community foundation experience.
Assets had grown to the $20 million range by that time, estimates Leon Michael, then one of the Charities’ board members.
“We hired a head hunter and wound up selecting Rob. He turned out to be an excellent choice.”
It was Collier who oversaw the incubation of the Grand Traverse Regional Land Conservancy in 1991, following a survey commissioned by Charities that showed the Northwest Michigan landscape being developed at an alarming rate.
A year later the Grand Traverse Regional Community Foundation followed.
Marsha Smith, who was to become Collier’s successor, was hired to start the regional community foundation. It complements Charities’ grant activities, builds philanthropy and volunteerism, and gives people the tools to do what needs to be done in their towns and neighborhoods.
For its first three years, its operating expenses were covered by Charities. Smith was a Rotary employee “on loan” to the GTRCF.
In its first decade it has distributed some $13 million to regional organizations while amassing a foundation of over $15 million.
Ongoing themes of grant making have always been leverage and impact, explains Marsha.
She cites an impressive range of grants, from small to large, and the impact they’ve had on people and communities. “Rotary Charities has earned the reputation of being the catalyst for improving the quality of life in our region,” she proudly points out.
Among the criteria the board uses in grant making, she notes, is “will this grant serve people, or will it serve the organization”?
Her notion of a Charities’ legacy?
Land preservation and its lasting impact on the region.
She’s particularly proud of New Designs for Growth, and the role Charities played in birthing that organization. Part of its charter is regional land use planning, and looking at new ways to protect and preserve Northwest Michigan and its communities.
“It’s an ecological approach to looking at our entire area as a system,” she explains. “That model will move forward in helping us to build and plan our community much more effectively.”
Several years ago it was even used as a pattern to develop new statewide legislation.
ROTARY CHARITIES - TODAY
Poll virtually any Charities board member, or Rotarian for that matter, who has participated in grant making, and the response will be the same: Their favorite part of the process has been investigating and making grants.
“People helping people is really what it’s all about,” posits John Yeager, a former board president.
He traces the evolvement of the board, noting that the grant process has evolved over the years. “Today’s board is involved with more activities of the complete grant making process. They’ve reached out and gotten a lot of input from other foundations. The result is a very involved board that has refined the grant making and review process.”
As stipulated by that original Charities’ board, only interest income from the principal of the trust funds is to be used for grants. That has averaged about $1 million annually. With the declining stock market in recent years, the amount of available grant money has also been reduced.
Decreasing oil and gas revenue as the wells age, along with a diminished portfolio, are among the challenges currently facing Charities.
Add to that the dilemma of shrinking federal and state sources of revenue, which results in increased grant requests, and the situation the board now finds itself in becomes evident.
“How you balance that has always been an interesting challenge,” notes Marsha Smith. “It’s certainly not unique to this current board, and in varying degrees has always been part of what Rotary Charities has faced.”
This situation is no doubt accountable for a recent innovative program introduced by the board called PRI (Program Related Investment). Basically it’s a loan guarantee program for non-profits, which allows Charities to leverage its wealth to continue helping others.
“It allows us to support non-profits, while basically keeping our assets in circulation in the community and in our portfolio,” explains Marsha. “So it’s really a win-win situation.”