It all started with a highly unusual offer from two business executives – both worth billions of dollars – to bail out a bankrupt city government. Five years later, the marriage of government and philanthropy that resulted from that $70 million gift appears to be eternal.
On the steps of their nearly century-old Art Deco city hall in Kalamazoo, Michigan, officials gathered on Wednesday to announce an anonymous $400 million commitment to an endowment established in 2017 to generate annual revenues for the city indefinitely. According to officials, the Kalamazoo Foundation for Excellence is close to reaching its $500 million goal and is expected to generate about $25 million per year. The city’s budget for 2021 is $214 million.
In an unusual twist, the funds will also cover revenue losses incurred by the city as a result of a 38 percent property tax cut enacted in 2017. The goal of this direct payment to the city’s coffers is to assist Kalamazoo, population 75,000, in competing for jobs and talent with the many other communities in Southwest Michigan.
Officials from the city provided no information about the donor (or donors), other than to say that the gift was made by one or more long-term residents. Former Mayor Bobby Hopewell, who helped engineer the original $70 million donation and establish the foundation, described the commitment as a show of loyalty to Kalamazoo that those living outside the close-knit city may not understand.
Kalamazoo has one-of-a-kind charitable support, with a half-billion-dollar endowment, which every mayor “would die for,” according to Hopewell. In comparison, ten foundations, many of them national grand makers like Ford and Knight, teamed up with the Detroit Institute of Arts in 2014 to put up $466 million to pay Detroit’s then-bankrupt pension debts. That was a one-time bailout for a city with a population nearly ten times the size of Kalamazoo
Making philanthropy a permanent line item in the municipal budget, one that pays for basic services and tax relief, is a novel idea. “It’s historic in the sense that I don’t know of any other city having its operations funded by philanthropy on this scale,” said Michelle Miller-Adams, a philanthropy expert and Kalamazoo resident who teaches political science at Michigan’s Grand Valley State University.
For nearly five years, philanthropy has been directly infusing cash into Kalamazoo’s government. Since 2017, the city has spent or budgeted more than $120 million in gifts made to the foundation and passed directly to the foundation. Half of that money was used to cover up the property-tax losses. Indeed, taxpayers are informed right away that philanthropy is footing the bill for a tax cut: Their tax bills show how much money each household has saved as a result of the foundation.
Longtime major philanthropists in the area known as the “two Bills,” William Johnston and William Parfet, made the first $70 million pledge in 2016. At the time, the city had been forced to cut staff and programs, and it was considering a new income tax, which some feared would drive homeowners and businesses to relocate just outside the city’s borders.
Johnston is the chairman of a Kalamazoo holding company that includes a wealth management firm. He also owns a minor-league hockey team in the area. His wife is billionaire Ronda Stryker, the heir to the family’s medical-devices fortune. Parfet, who founded a pharmaceutical testing company, inherited a portion of the fortune amassed by the Upjohn pharmaceuticals company, which was founded in Kalamazoo in 1886 and is now a subsidiary of Pfizer.
Since that initial gift in 2016, the city has received an additional $85 million in commitments from the Stryker Johnston Foundation, Ronda Stryker and William Johnston’s family foundation.
The Johnston-Parfet pledge included the establishment of the Foundation for Excellence. The two had promised Hopewell and other city officials that within three years, they would create a $500 million endowment that would fund city operations and projects in perpetuity. A fundraising consultant was hired after Johnston and Parfet discussed launching a national fundraising campaign. Only one gift, a $87 million anonymous gift in stock in 2020, was made public. According to tax filings, the foundation’s assets stood at $96 million at the end of 2020.