Financial Fumbles

Tulsa's penchant for philanthropic giving has always served as one of its distinguishing characteristics. Dozens of foundations have been established during the years, awarding millions of dollars in grants each year to help fund projects designed to end the cycle of poverty, improve education or create recreational opportunities for young people, among others.

But an economic downturn that has been described as America's worst since the Great Depression likely has impacted the ability of many of those foundations to be as generous with applicants as they have been in the past. And with only modest signs of a recovery developing, that could lead to a major challenge for those who envision an arts and cultural renaissance taking place in Tulsa's Brady district.

Dr. Kerry Joels, a former division director and curator at the Smithsonian Institution in Washington, D.C., now serves as chairman and executive director of the planned Cain's Ballroom Music Museum and Historical Society, one of dozens of projects that organizers hope to open in the Brady district in the years to come. Joels understands that local foundations that were heavily invested in the market may have a period of recovery ahead of them before giving returns to a more normal level.

"Right now, it's just a tough row to hoe," explaining that he knows of several projects seeking funding that have been put on hold because of the economic downturn.

Even so, the situation here doesn't seem to be as dire as many people might imagine.

"It does present a challenge, but at the same time, Tulsa has been a little bit counter-cyclical in regard to the recession," Joels said.

Phil Lakin, CEO of the Tulsa Community Foundation, said he didn't know what the specific ramifications of the faltering economy have been in Tulsa for foundations, but he said he has seen a good deal of national data, and "I imagine it's pretty darn close to what we're experiencing locally."

Lakin said things seemed exceptionally bleak in March, when the Dow Jones had tumbled to a level of around 6,800 points from a mark of 12,000 or 13,000 points in August 2008. That was very bad news for many local foundations, especially those that had not employed a moderate investment strategy, he said.

"The market just eroded in value so quickly," he said.

The impact of that decline on the portfolio of some foundations was probably severe, Joels said.

"If you're a foundation and you're putting 5 percent of your revenue out each year in donations, and suddenly your assets are worth 40 percent less, then you don't have as much," he said.

So for those hoping to raise funds for such planned projects as the Oklahoma Pop museum, a children's museum and Joels' own Cain's Ballroom museum, that development was sobering. Joels said that with a more modest donor pie, projects such as his--expected to cost $2.5 million--would necessarily have to take a funding back seat to organizations engaged in the business of clothing people, providing them with medical care, feeding them or educating children.

Lakin said there was no meaningful measuring stick for how Tulsa's foundation community has weathered the economic storm, given the differences in the holdings and even purposes of those organizations.

"Nobody has money in just the Dow," he said. "All foundations are diversified in the assets they hold, be it public equities, bonds or CDs. Hopefully, if one of those goes down, the other is going up.

"But for a while there, there was nowhere to run for any investor. From October to March, everything was going down. There weren't a lot of places to put your money where it wasn't going to depreciate."

He said the market's sharp drop probably resulted in many local foundations paying more attention to how their assets were being handled.

"I think that caused a lot of foundations to look at their investment policies and verify that their investment attitudes were where they wanted them to be," he said.

Any foundation that had been advised to sell its shares and put the proceeds into cash or treasury notes wouldn't have lost a dime and perhaps would have made money, Lakin said. But those instances were extremely rare.

Lakin said the situation is much better than it was five months ago, with the Dow having recovered about half its former value and some normalcy having been returned to the market.

"Things have gotten a lot better recently because the market has come up so much," he said.

Lakin said in some cases, even a sharp decline in a foundation's net worth was not necessarily a devastating development. Many local foundations are not intended to operate in perpetuity, he said, meaning they have been charged with exhausting their funds by a certain date.

Ironically, the recession probably has helped them meet their goal, he said.

"So if you have $50 million less than you had the year before, so what?" he asked rhetorically. "That's the good news side of the story. It seems like we're different in Tulsa than most other cities."

That's not to imply that foundation managers are reckless with their assets, he said. In fact, Lakin believes many of them are more careful with those funds than they are with their own money.

"I think there's a realization that these assets aren't ours, they're the community's," he said. "So there are often higher standards that one takes with regard to managing the community's money. Sometimes it hurts worse when it hurts others."

At least two prominent local foundations appear to have come through the economic downturn without having experienced major problems.

"We're fortunate to be in the situation we're in, and we're steady as we go on all our major projects," said Ken Levit, executive director of the George Kaiser Family Foundation.

Megan Washbourne, spokesperson for ONEOK Inc., said the corporation's ONEOK Foundation has continued to fund the projects it was committed to before the recession, including ONEOK Field, the new downtown ballpark that will serve as the home of the Tulsa Drillers starting in April. But she acknowledged the downturn may place the foundation in the position of having to reduce the amount of donations it makes in the future.

The ONEOK Foundation, established in 1997, has awarded more than $35.5 million in grants and pledges to nonprofit groups in that time. It focuses its giving on such areas as education, health and human services, arts and culture, and community improvement. The foundation awarded $6.8 million last year.

The good news, Washbourne said, is that the ONEOK Foundation has not seen a corresponding increase in requests for help since the economy began its slide.

"It seems nonprofits are taking into account the state of the economy and focusing on basic needs," she said.

Although the recovery from the recession is expected to be a lengthy one, Joels plans to be prepared for a time when the outlook is better. He hopes to help engineer a coordinated fundraising plan for the many new attractions planned for the Brady district, so that Tulsa's donor community isn't overwhelmed with requests.

"To quote the founding fathers, 'either we all hang together or we all hang separately,'" he said. "Some of what I'm doing involves looking at a more holistic approach to fundraising."

Joels said he has been talking informally with representatives of many of those projects to get their business plans and see what it will take to get them into operation and maintain them. He already has a well-rehearsed argument for officials of foundations who question the value of contributions to arts and cultural organizations.

"At some point, their portfolios will recover," Joels said. "These things tend to be cyclical. For me, a lot of numbers get bandied about, but the most reliable ones I've seen show the arts return a 16-1 ratio (for every dollar invested), while sports gives you only a 3-1 return."

Putting that into easier-to-grasp terms, Joels said a $40 million ballpark would likely result in a $120 million economic impact for Tulsa. But if that same $40 million were invested in the arts and culture field, the impact would be staggering, he said.

"That's where you get some of these rolling multipliers," he said. "All of these things generate returns and should not be seen as drains."

Cautious as he is about the near term, Joels still believes in the ability of local foundations to meet the community's various needs over the long haul.

"We've got a tremendous donor infrastructure in Tulsa," he said. "It's not going away, and it will get stronger and it will be able to support a lot of these activities that will make Tulsa a much more livable city."