Foundations navigate community benefit agreements

Key Takeaways

For a small community nonprofit, receiving a gift that’s too large can be like having a side of beef dropped into a life raft. Sure, there’s plenty to eat, but keeping the raft afloat suddenly becomes a much bigger concern.

The same thing can happen when a large private company administering a community benefits agreement hands what it intends to be a life-changing sum directly to an organization.

“If you come into a small nonprofit and you give them $1 million, you just made them need an audit for all of their grants going forward,” said Keralee Clay, president and CEO of the Amarillo Area Foundation. “They now can’t file a postcard [IRS Form 990-N] for their taxes, and then they have to hire [accounting staff]. So you built in this cost and you pushed them into the next level that they’re not ready for, they haven’t built the capacity for.”

Philanthropic organizations play a critical role in distributing money, managing investments and shaping grantmaking strategy, along with keeping records and handling reporting and fiscal responsibilities.

The Amarillo Area Foundation began in 1957 to address the region’s health care needs and grew to serve the 26 northernmost counties of the Texas Panhandle. As community benefits agreements become a standard part of deals that energy-producing companies and data center developers strike to win local support, counties may find foundations a useful intermediary. Foundations can fill a role many assume elected leaders would handle, with an emphasis on long-term planning and community involvement.

“That’s their job, that’s what they do,” said Dan Looten, judge of nearby Carson County, Texas. “Your local government changes on a regular basis — we’re all elected officials who are coming in and out. We don’t want to do all the extra reporting, investing and all that. Let’s go with the pros.”

The Amarillo Area Foundation manages the community benefits program for Pattern Energy’s Panhandle Wind development, which built about 200 wind turbines in Carson County. Pattern contributed an initial $1.5 million to establish two endowments, the Panhandle Wind Education Fund and the Panhandle Wind Civic Fund. It has added $150,000 a year during the facility’s first 10 years of operation to fund grants for Carson County causes. The program has funded $3 million in 130 grants throughout the county through the end of 2024.

“They [Pattern] also knew at that time that that was not the process they could manage,” said Laura Escobar, the foundation’s vice president of community investment. “This is more than just splash and dash. We want to invest long term in this community, because we know companies come and go. So even if Panhandle Wind closes down next week, this fund will continue to support that community for as long as we’re here.”

Clay noted that philanthropies work on longer timelines, often because their missions are oriented toward managing funds indefinitely.

“In our world, we tend to look to the next two years, maybe the next four years, but I think as a community foundation, we’re [working] into perpetuity, so we often are looking 20 years down the road for organizations,” she said. “We’re thinking about what that county may still lack to reach those goals, what projects are going to best support those goals and what things are missing that are outside of the usual public process, and what outcomes the public can track over time.”

Foundations, Clay said, “can also be a supporter and an oversight voice to make sure that what the developer said they’re going to do, they’re actually doing, and also bring in additional public support so that people feel like things are being done with them instead of to them.”

Community foundations can also draw in a broader range of residents and perspectives through a local advisory board that helps decide how the money is spent. Escobar stressed rotating board members every few years, though she acknowledged that’s harder in less populated counties.

“It is not the company making those decisions on grant funding; it’s not the Amarillo Area Foundation making those decisions,” she said. “Having a third party, as a community foundation, we kind of get to be the enforcer, so that the community advisory committee just kind of gets to operate within those terms. While we help manage and bring the information to that local advisory board, those are individuals from that community, and so they bring local perspective and knowledge.”

Escobar noted that foundations can act as a surge protector, shielding small organizations from the financial shock of receiving too large a gift at once. But foundations have limits, too.

“It has to be right-sized for the community and how a community foundation can actually support that,” she said. “So there are lots of issues that we would love to support. It’s just not within our bandwidth.”

Over the long term, flexibility is crucial to keeping a community fund relevant, Clay said, because future stewards may face different conditions and need room to respond. She pointed to a local fund in one county that supports stray dogs.

“We also work with the counties that touch that county, because otherwise, if there were such a thing as reincarnation, I want to go back as a dog in that county, because you’re going to be set,” she said. “A cat, you’re in trouble, but a dog, you’ll be set.”