Big Money, Big Questions Thanks to Pittsburgh’s foundations, we survived the steel crash and fought our way out of the Great Recession. Now, after recent shakeups at some of the region’s major philanthropic organizations, what lies ahead in Pittsburgh’s big-monied world of giving

eden greenhouse oct14As dark clouds threatened thunderstorms, guests from the city’s political and philanthropic elite admired the renovated fountains, the touched-up bronze basins, the restored paving and a new addition — an elevated terrace above Smithfield Street that had been part of the original design but never previously completed. Mayor Bill Peduto and Allegheny County Executive Rich Fitzgerald were there, as were such nonprofit leaders as Meg Cheever of the Pittsburgh Parks Conservancy and Richard King Mellon Foundation Director Scott Izzo. So, too, were members of Pittsburgh’s storied families: Sandy and Seward Prosser Mellon attended, as did Henry Simonds, a member of the Hillman family and grandson of John Ormsby Simonds, one of the original designers of the park.

“It is a great symbol of public-private partnership and all the players who have to come together in Pittsburgh,” says Bill Flanagan, executive vice president of the Allegheny Conference on Community Development and master of ceremonies for the rededication event. “A cool thing about Pittsburgh is that a new group can step in and take leadership, and government and foundations and businesses are willing to get together and look at it. I don’t know if that happens elsewhere, but I think it symbolizes the best of Pittsburgh.”

The Mellon Square gathering was significant for the presence of Mellon family members. It also represented a refreshing change after the upheaval experienced within Pittsburgh’s philanthropic scene over the past two years, when three of the city’s most prominent foundations announced intentions to shut down and the Heinz family turned over the leadership staff of The Heinz Endowments, leaving the area’s second-largest foundation without an executive director for a time.
And it begs the question: As Pittsburgh recasts itself as a cutting-edge American city, what does the future hold for our top foundations — and the storied families and companies behind them?

Pittsburgh is blessed, almost uniquely among small American cities, with one of the strongest and wealthiest groups of foundations in the country. Today, more than 2,579 active foundations make their home in the Pittsburgh region, with total assets of $12.7 billion, according to the Foundation Center, a New York-based organization that tracks and analyzes philanthropy. The region’s total giving was $790 million in 2012, the most recent year for which those statistics are available from the center. And while the Steel City is the 25th-largest metropolitan region in the country, its community foundation, The Pittsburgh Foundation, is the nation’s 14th largest, with current assets of more than $1 billion. “We have a phenomenal group of contributors who built this city,” says Kevin Acklin, Mayor Bill Peduto’s chief of staff. “Some cities have one singular organization — we have [dozens].”

A short history of modern Pittsburgh goes something like this: World War II kicked off Renaissance I, when leaders of local business created massive foundations to help drive urban development. A forerunner of The Heinz Endowments was created in 1941 after the death of Howard Heinz; the first Hillman Foundation was started in 1951. In 1947, meanwhile, Richard King Mellon started his eponymous foundation, which got to work on the original Mellon Square. During that period, Pittsburgh pioneered the creation of strong public-private partnerships and experienced growth and wealth.

That all came crashing down with the steel industry in the 1970s and ’80s. Since then, the region and foundations have spent the past three decades picking up the pieces and diversifying the economy around education, medicine and technology, giving rise to the idea that Pittsburgh’s relatively stable economy was propped up artificially by these foundations.

Philanthropic groups played major roles in economic expansion, and they continued to invest in the city in such areas as the Cultural District and the riverfront trails through Riverlife.

The Great Recession took a major chunk out of that growth. At the moment that the general public’s need was at its greatest due to job losses and the housing crash, endowments lost enormous amounts of money due to tumult in the market. While giving has gone up over the past few years both locally and nationally, many foundations still are struggling to reach their pre-recession heights.

Foundations and governments, in turn, have pressured nonprofits to trim expenses. They’ve also become far more discerning about where they donate their money, and many require impact analysis of their giving. It’s no longer good enough for your nonprofit to have a heart-warming goal — you have to prove that your mission will produce viable results, foundation leaders stress. Entities that once were silent funders now are taking on activist roles, demanding an accounting for how their funds are employed.

“The trend five years ago [for nonprofits was] to trim budgets, trim staff, trim expenses,” says Fred Thieman, president of the Buhl Foundation, which emphasizes a special concern for assisting people in Allegheny County — particularly in Pittsburgh and its North Side neighborhoods. “I think what we’re seeing today is organizations really needing to merge, consolidate and find creative, new revenue sources — or die.”

Even with those difficulties, Pittsburgh recovered relatively quickly from the Great Recession. By the end of 2012, the Brookings Institution reported that Pittsburgh was one of the first three U.S. cities to have bounced back, along with Dallas and Knoxville, Tenn. Today, young people are staying as well as migrating here because of well-paying jobs in the tech, education and health sectors.

The region’s philanthropists now say we’re on the bleeding edge of a whole new era. “[In the past], we were always trying to get out from under the economic decline of the steel industry,” says one philanthropic leader who spoke anonymously due to foundation rules. “What’s changed is that in the past three or four years — after the recovery started — Pittsburgh has emerged as a pretty good place to live and to work. We’re not trying to dig our way out of the hole now. We can see over the edge, and we’re trying to figure out where to go.”

“I completely believe we are on the cusp of a new period of possibility in Pittsburgh,” says Grant Oliphant, who joined The Heinz Endowments as president in April after running The Pittsburgh Foundation for six years. “We have new leadership at both the city and county level, new leadership at the universities and a very different economic environment. Instead of having to beg for development, we’re beginning to see competition for development.”

Still, the bleeding edge can be a risky place to be. Is our region up to the challenge, and does it have the resources to sustain its reinvention?

New eras often are born amidst turnover and upheaval, and Pittsburgh’s philanthropic community is no different. In 2013, three of the city’s most prominent foundations — two of them among the dozen wealthiest — announced that they would be shutting the doors:

■ The Jack Buncher Foundation was created in 2001 following the death of Jack Buncher and was the 11th most-generous foundation in the region, according to the Foundation Center. It announced in February 2013 that it was slowly transferring its assets — worth $192 million in 2011 — to five other area nonprofits.

■ The McCune Foundation, which focuses on promoting economic and community development and was the fifth most-generous in the region in 2012, announced in March 2013 that it would be dispersing its remaining $343 million and shutting its doors in 2029.

■ In October 2013, the 85-year-old Falk Foundation, a group dedicated to social justice, decided to liquidate its $22 million endowment altogether.

To lose three foundations in a relatively short period of time was a bit of a shock, considering that the vast majority of U.S. family foundations operate in perpetuity. According to the Foundation Center, about 12 percent of private foundations have incorporated time limits into their structure. Gregory Curtis, the chairman and managing director of wealth management firm Greycourt and a former chairman of The Pittsburgh Foundation, speaks bluntly of a rationale for sunsetting: “You’ve had a very successful life. You set up a foundation. You want your kids to run it [or] maybe your grandkids to run it. But beyond that, you don’t know those people. You don’t know what their interests are — they could be diametrically opposed to yours.” But all three of the local foundations had good reasons behind their decisions.
PHOTO BY CHUCK BEARD
Falk made the choice to close by giving $15 million to Chatham University’s School of Sustainability & the Environment to fund construction and create an academic environmental endowment at the university’s Eden Hall campus in Richland Township. The foundation also gave $2 million to the Sen. John Heinz History Center. That decision to shut down came in part because Sigo Falk, chairman of the foundation, is nearing age 80. Falk said he and others at the foundation determined the timing was right to close after contemplating the foundation’s soon-to-expire office lease and the difficulty of running an organization indefinitely.

The sunsetting of the McCune Foundation may have been the worst-kept secret in Pittsburgh’s philanthropic community — it was written into the foundation’s charter — but it still will hit the nonprofit community hard. Created in 1979 after the death of Charles McCune, the former president and chairman of Union National Bank of Pittsburgh, the McCune Foundation played a pivotal role as a connector for the philanthropic and nonprofit communities; it awarded $21 million in anonymous grants in 2012. “The further you get down the road from inception, there is a tendency over time for succeeding time and boards to change donor intent,” says foundation Executive Director Henry Beukema. “We surmise that Mr. McCune was aware of some of these trends when he wrote the instructions in the 1970s, and he thought 50 years would be enough — by limiting the foundation’s time span, he would be limiting mission creep.”

“I can’t say how much McCune’s role is important behind the scenes [to nonprofits],” says Kathy Buechel, who runs the Philanthropy Forum at the University of Pittsburgh and is a former president of the Alcoa Foundation. “Their concern for the region [is hard to match]. The McCune people share their ideas, serve as a sounding board and open doors to other groups.”
As part of its disbanding, McCune started a “Big Ideas” program of large grants aimed at transformative projects. Says Beukema, “We’re trying to transfer our DNA to others.”

The Jack Buncher Foundation also is passing along its assets in an effort to leave a permanent stamp on the community. Starting in 2008, the foundation began shifting its shares in Buncher Co. to five groups: Carnegie Library of Pittsburgh, Carnegie Mellon University, the Jewish Federation of Greater Pittsburgh, The Pittsburgh Foundation and the American Jewish Joint Distribution Committee, which is based in New York.

Those gifts, in effect, act as a massive, one-time injection of capital. Says John Denny, who worked for Elsie Hillman for three decades and is principal of a local nonprofit consulting firm, Denny Civic Solutions: “It means more money in the short term and less in the long term.”

The graceful handling of those closures unfolded in contrast to recent transition at The Heinz Endowments. In March 2013, The Heinz Endowments, along with the Environmental Defense Fund and Philadelphia-based William Penn Foundation, announced it that was partnering with a consortium of oil companies including Royal Dutch Shell and Chevron to create a Center for Sustainable Shale Development. Based in downtown Pittsburgh, the center was tasked with the goal of coming up with standards for natural gas drilling that even environmentalists could accept. Unfortunately, the environmentally minded Heinz family apparently was not in the loop for those plans — and apparently was not pleased.

As the Heinz family reasserted control of the organization, the endowments’ director of environmental programs, Caren Glotfelty, and its communications director, Douglas Root, both departed in August 2013. In October, President Robert Vagt announced that he, too, was stepping down; he later became chairman of the board of Rice Energy Inc., a natural gas and oil company in Washington County. Vagt declined and the other former leaders of the endowments did not respond to requests for interviews.

In June, after several months of searching for a new president, The Heinz Endowments hired an old hand, Grant Oliphant. The 53-year-old had worked for both Sen. John Heinz and the endowments before moving on to be president of The Pittsburgh Foundation, which he guided over six years to major success. A few months later, The Pittsburgh Foundation hired Maxwell King — the former editor of The Philadelphia Inquirer who ran The Heinz Endowments from 1999 to 2008 — to replace Oliphant.

“The two of them will be a very formidable pair of leaders,” Flanagan says. “We’re going to see more leadership and more setting of the regional agenda by the foundations in the next 35 years than we did in the last 35 years. I look to them as driving a lot of [the conversation].”

Along with foundation closures and the recent controversy at Heinz, western Pennsylvania’s philanthropic community also is experiencing uncertainty due to generational change.

Its biggest and most obvious fear is that the younger generations of iconic Pittsburgh families no longer will be interested in investing their time — or money — into the region. Few of the grandchildren of Henry and Elsie Hillman live in the area, and the Mellons are spread around the country. While Teresa Heinz Kerry maintains a local home, her three sons do not.
That brings up the concern: Why would someone who wasn’t raised here or doesn’t live here want to pump money into Pittsburgh? Or perhaps, while the foundation benefactor cared about advancing education, the new board members could be far more concerned with environmental causes. “Many of the young people have other interests,” says the Philanthropy Forum’s Buechel, adding that each generation finds a way to define its philanthropy. “The hope is that they will continue to give in Pittsburgh because they see the difference their family has made. But it’s up to each generation to decide.”

Many founders of the largest Pittsburgh philanthropic efforts, thankfully, wrote a focus on the region into their very charters. The Richard King Mellon Foundation, for example, is charged to concentrate its giving in southwestern Pennsylvania; so, too, is Heinz. The Hillmans, meanwhile, have taken a novel approach to the future generations by splitting up their substantial wealth and funding a separate foundation for each of their children and grandchildren. Those smaller foundations can focus on anything — the Juliet Ashby Hillman foundation, for example, focuses on Portland, Ore. But the largest Hillman foundations control the vast majority of the wealth and are focused just on Pittsburgh.

“Most of the large foundations in Pittsburgh have a charter that they will focus primarily on the region,” says Oliphant. “It’s one of the outstanding things about philanthropy in western Pennsylvania.” Denny agrees: “Would it be great to have [the heirs] all here and still be doing all their work here? Yeah. But I don’t think it really changes much for those big foundations.”
And there is a bright side to generational change. “A lot of people who are program officers and in senior administrative positions are getting close to retirement age,” says Marilyn Coleman, a local nonprofit consultant. “When those changeovers happen, new people will bring new ideas.”

That’s already happening and expected to accelerate as a new leadership group steps in to run foundations, both on the boards and the staffs.

Gregg Behr, at age 42, is guiding the Grable Foundation to remake education in the city, drawing national acclaim and such honors such as a Tribeca Disruptive Innovation Award for its initiatives. The 40-something sons of John and Teresa Heinz — John, Andre and Christopher — are now on the board of The Heinz Endowments and will play an increasingly larger role in the future, even if they aren’t local. (Some observers have suggested that Andre Heinz, a supporter of environmental causes, led the charge against involvement in the shale center.) Then, there’s the 53-year-old Oliphant, who now is in charge of The Heinz Endowments after a strong run at The Pittsburgh Foundation.

The most important next-generation leader in the city, though, isn’t on any boards — he’s the mayor. While former Mayor Luke Ravenstahl for the most part did not engage the foundation community before he left office in December, his successor, Bill Peduto, 50, has hit the reset button on municipal-philanthropic relations, including holding quarterly meetings with the largest foundations.

“We are much more engaged with City Hall,” says Behr. “Already in the [Peduto administration’s] first few months, there is a reciprocal exchange of information and meetings with some of the new cabinet officers. In our unique experience, there is much more engagement and attention.”

Peduto also is trying to harness the foundations’ focus on innovation, partnering with The Pittsburgh Foundation on Talent City, a digital hiring board used for senior-level administrative positions, such as the public safety director, sustainability manager and communication director. Talent City screened resumes and conducted initial interviews before presenting its finalists to Peduto and his Chief of Staff Acklin, who committed to hiring from that pool. It was an unusual step for a politician — in many past administrations, such jobs often were patronage positions doled out to supporters and friends of the campaign. “It’s a break from the past,” says Acklin. “This city is not going to be governed by politics but by what is best for the city.” One of the hires from Talent City is Pittsburgh’s first-ever nonprofit and faith-based manager Betty Cruz, who will coordinate between the government and philanthropic community.

So what should we expect next? Observers suggest we will see a new era in which foundations will operate differently in three key ways: approach, goals and new blood.

The approach will contain a more muscular and aggressive advocacy. Witness, for example, the high-profile campaign by The Heinz Endowments and other foundations to rescue the August Wilson Center for African American Culture, which at press time was on the verge of being scooped up by a private out-of-town developer with plans to redevelop it into a hotel. In August, the group of foundations, led by The Heinz Endowments and The Pittsburgh Foundation, announced an alternate plan for the center that, in a statement, their leaders asserted would preserve the center as a “preeminent hub for African American arts and culture.” The consortium of foundations offered a “standby” bid of $7.2 million, which would include a $1.2 million contribution from the Pittsburgh Urban Redevelopment Authority as well as $1 million in county-related funding, according to the statement. Should that bid prevail over the $9.5 million bid offered by New York developer 980 Liberty Partners, the foundations group said it would maintain support for the center’s operations and management but would transfer ownership of the center to The Pittsburgh Foundation, to be operated by a new, independent board of directors.

Also in August, Oliphant wrote a strongly worded opinion essay in the Pittsburgh Post-Gazette, arguing that the center’s sale to the private developer would “shatter the original intent of the center” and “throw away more than $35 million in government, foundation, corporate and private investment in what was always promised to be a charitable asset for the good of the whole community.”

That kind of public leadership isn’t totally unprecedented. In 2002, the organization partnered with the Grable and Pittsburgh foundations to cut off funds to the city school district for two years in what was then a rare and unusually public indictment of the district’s leadership. In the years since then, such advocacy has been more commonplace.

For example, The Pittsburgh Foundation, the Greater Pittsburgh Nonprofit Partnership and the United Way of Allegheny County have created the Campaign for What Works, an effort to reset the debate over support for children, the poor and the elderly. The groups have pushed the state to permanently fund the Aging Waiver Program, which provides home health services for the elderly, as well as rename the Department of Public Welfare as the Department of Human Services to more actively reflect its focus (welfare is a very small part of what the department actually does). Heading many of those efforts is The Pittsburgh Foundation’s Kevin Jenkins, a rising star who was rewarded with a new title at the beginning of this year — the vice president for public policy and civic leadership.

“Getting involved in advocacy, and lobbying on behalf of the issues that are important to their individual communities — this is a new move for the foundation community in many ways,” says Denny.

Local foundations see the focus on sustainability and people as major goals over the next few decades. When it comes to sustainability, the Hillman Foundation is pouring money into Traffic21, a program at Carnegie Mellon, to improve local transportation systems such as buses, biking and parking. And the prioritization of green building, open spaces and clean water and air will only continue.

Expect most attention to be paid to area residents. “Despite the area’s success over the past 10 to 15 years, there are plenty of pockets of people who have been left behind and not participating in the economy,” says the Allegheny Conference’s Flanagan. He points out that even with a flow of new transplants, the region still faces a shortage of workers in years ahead. “We really believe the whole issue of having plenty of prepared people will be the area’s biggest challenge going forward.”

Oliphant, now ensconced at The Heinz Endowments, says: “For me, 20 years from now, what I would like to see is a city that has set a new bar for excellence in sustainability and design in the new development. I would like to see a new model that people refer to as the ‘Pittsburgh Model’ for how we share the prosperity that comes from new development. Instead of gentrification, we get sharing of prosperity in neighborhoods.”

Who will take up the charge, though, when some of our foundations are disappearing? Our standbys will continue their support, but so will new foundations that are springing up. In 2011, steel industrialist William S. Dietrich II left a whopping $500 million to endow a new foundation after his death to plow into education, particularly at Carnegie Mellon and Pitt. According to the Chronicle of Philanthropy, the gift was the second-largest in the United States that year.

“I am heartened that a spirit of philanthropy still seems to be strong in leadership circles,” Flanagan says. “To me, [Dietrich’s gift] was a signal that the Pittsburgh culture of giving back to the community and thinking about it even after you are gone is still here. And that gives me the confidence about where we are headed in the future.”

That confidence is supported by the success of other relatively new groups, such as the Pittsburgh Parks Conservancy, to the philanthropic fold. Since its founding in 1996, the group has raised $74 million to restore the city’s parks, including Mellon Square. “I think Mellon Square is a nice metaphor for some of the changes we’ve seen in the city,” Oliphant says. “We’ve come back to a commitment to public space, but we’ve also come to a different paradigm to how to make those spaces useful and really integral to pedestrian life, and where people come and enjoy. I think the new Mellon park embodies that nicely while still honoring the past and the commitment to public space.

“It also tells you how far back the history of philanthropy goes in this town,” Oliphant continues. “It’s a poignant reminder that this work is the work of ages. Those of us who are involved in it are really privileged to be involved, but we’re also just temporary stewards of work that will continue well beyond when we are gone.”

– See more at: http://www.pittsburghmagazine.com/Pittsburgh-Magazine/October-2014/Big-Money-Big-Questions/#sthash.hPVmSuCy.dpuf

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