Triad Talk
As stocks plummet, foundation chiefs fret
The Business Journal of the Greater Triad Area - by Justin Catanoso Staff writer
For the Triad’s community foundations, Thanksgiving is typically the time of year when their most affluent donors review their investment portfolios and decide how much wealth they intend to share.
In normal times, these gifts, which total millions of dollars, come in the form of appreciated shares of stock in top local and national corporations.
Of course, these are not normal times, and foundation leaders are justifiably worried.
“Wachovia stock has been a major tool for people in this region in terms of supporting charitable causes for many years,” says Scott Wierman, president of the Winston-Salem Foundation. “We haven’t gotten any Wachovia stock in about 10 months. Same with Triad Guaranty. When you think about the big companies here whose market cap has shifted downward, a lot of charitable tools have been taken away.”
How bad is it? A year ago this time, Wachovia was trading above $40 a share, eight times more than its $5 share price this week. Meanwhile, Triad Guaranty, the ailing Winston-Salem-based mortgage insurer, was trading at roughly $9 a share last Thanksgiving. Now, with the company no longer writing new business, its stock was at $1.65.
The picture is no less grim in Greensboro.
“This is one of the most important times of the year to give,” says Walker Sanders, president of the Community Foundation of Greater Greensboro, “and those in the position to do so are just scared. They are panicked. Portfolios are down 40-50 percent. Wachovia. AIG, Lincoln Financial, you name it. It’s really going to be a tough December.”
Sanders says that as of Sept. 30, gifts to his foundation were running about even with last year, but a month later were off by 30 percent. With most gifts coming in the last quarter, he holds out little hope that he will reap anywhere near the $17 million in contributions the foundation received in 2007.
“We’re still at $7 million, which puts us about $10 million behind,” Sanders says. “We will make up some of that. We will likely see some real estate gifts and more cash gifts. But donors have no need for capital gains deductions because they are seeing only capital losses.”
This shortfall in gifts comes as the foundations’ own endowments are sinking as well — perhaps by as much as 20 percent — thus limiting the grants that can be made to support nonprofit agencies and an array of community projects. The endowment in Winston-Salem stands at less than $250 million; in Greensboro it’s down to about $100 million; and at the High Point Community Foundation, it’s roughly $60 million.
Foundations are required to give away 5 percent of their assets annually. Because of contributions and asset growth, foundation endowments usually grow every year even if grants exceed 5 percent. Not this year, and most likely, not next year either.
“This might be the first year that we don’t increase the amount of grants awarded,” says Paul Lessard, president of the High Point foundation. “Each year, we’ve gone up at least $50,000, but we won’t this year. I think it’s a right thing to do. Donors expect us to be prudent and careful.”
In Greensboro, Sanders says overall giving from his foundation ranged between $10 million and $12 million in 2006 and 2007. He expects grants to be about the same this year — which will take a bite out of the endowment, which peaked at $120 million early this year.
In Winston-Salem, Wierman says, “We did grants of $30 million two years in a row (2006 and 2007) for the first time in our history. I don’t think we will approach that amount this year.”
There is some national data to suggest foundation giving tends to hold up relatively well in recessionary times. The New York-based Foundation Center issued a report recently that stated: “With no clear bottom yet in sight (for the economic decline), it can be tempting to conclude that the work of many institutions will be imperiled or, at a minimum, substantially compromised.
“But short of a complete economic collapse, the behavior of institutions during prior economic downturns does provide some perspective on how they may weather today’s challenges.”
The center noted that in the five previous U.S. recessions between 1975 and 2001, “U.S. foundation giving in inflation-adjusted dollars did not decline, and in fact, increased slightly.” Giving did sink modestly in 2002 and 2003, but far less than the drop in foundation assets during that time — illustrating that foundations were willing to dig into endowments to meet community commitments as much as possible.
Yet given the size and scope of this economic downturn — and the fact that financial institutions themselves are being hit the hardest — past experience may offer less of a glimpse into the future. At least the near future.
“People are still going to give; they are still going to support what is most important to them,” Wierman says. “They are just going to be more cautious and creative in how they give and how much. It would be foolish for us to think that we can stay even.”
Meanwhile, Sanders senses an opportunity: “2009 is going to be a time when we really need to figure out how to do things together and to leverage existing money. We’re going to need some real leadership — in both the private and public sectors. The demands aren’t going to be any less. We still need to get things done.”
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