U.S. District Chief Judge and federal bankruptcy mediator Gerald Rosen planned to bring together a number of philanthropic leaders to discuss a bold idea to help resolve Detroit’s bankruptcy proceedings quickly, save the pensions of retired Detroit city workers, and prevent the selloff of works from the Detroit Institute of Arts (DIA) to pay off creditor claims. But Rip Rapson, president and CEO of IS member, the Kresge Foundation, had prior plans to be out of the country and would be unable to attend. Rapson knew of Rosen’s unconventional proposal, however, because the judge had already tried it out on his long-time friend at a prior dinner meeting.
Would it be crazy, Rosen wondered, to think the foundation leaders might consider assembling a pool of capital to help the judge create leverage with all of the creditor classes to help bring the bankruptcy to a close?
“I assured him it was not,” Rapson said. “But I also assured him it was likely to be out of the comfort zone of most foundations.” To make Rosen’s unconventional idea more palatable and less of a stretch, Rapson suggested that he place less emphasis on saving the pensions of retired city workers or the museum’s art collection, and focus more on the role the philanthropies’ might play in resolving the bankruptcy – Rosen’s ultimate goal.
Rapson’s sound advice to Rosen planted the seed for the development of a framework that the judge could bring to his larger meeting with the foundation heads. And the rest, as they say, is history.
Collectively the philanthropies contributed $366 million – including $100 million from Kresge – to a pool to minimize pension reductions and prevent the selloff of DIA treasures. The contributions of the philanthropic sector, along with the collaboration of many other private and public partners led to a final pool of more than $800 million in what was dubbed the “Grand Bargain.”
And just as or even more importantly, according to Rapson, the Grand Bargain enabled the city to move on to the crucial work of restructuring Detroit’s municipal services and convincing the bankruptcy court that the long-term building blocks for the city’s renewal were in place.
Of course, Kresge’s commitment to the city began long before the Grand Bargain. The philanthropy was founded in Detroit in 1924 by Sebastian Kresge, founder of the pioneering five-and-dime store chain that is now known as Kmart. “This is the Kresges’ home,” Rapson said. “They have always had a presence in Detroit.” Rapson cited “major building campaigns, the library, YMCA, Detroit Riverwalk, and lots of other ways in which Kresge has invested in the city’s bricks and mortar to make it a more vital place.”
About ten years ago, Kresge began to expand its lens and programs in Detroit to focus not only on bricks and mortar, but also on other elements of community life to help Detroit regain its position as a great American city – including land use, transportation, human services delivery, and arts and culture. According to Rapson, “Our programs touch an array of the most significant components of community health and vitality. We dedicate about 20 percent of our budget at Kresge each year to investing in Detroit in one way or another.”
In 2010, Kresge launched a multi-year effort to help the city of Detroit develop a framework for making decisions about how land in the city, much of it blighted, could be put to better use. Development of the framework involved highly technical analysis from teams across the country, along with a robust community engagement process involving more than 50,000 Detroit residents. The result is known as the Detroit Future City Strategic Framework Plan – which has become the blueprint for Mayor Mike Duggan’s administration and for Kresge as the foundation considers how to invest in the city.
Looking back on how it was possible to bring together so many partners for the successful collaboration that resulted in the “Grand Bargain,” Rapson says one word comes to mind. Practice. “The philanthropic community in Detroit has been practicing cooperative work and collaborating for the better part of about ten years,” Rapson said. “Over those years we constructed a fund called the New Economy Initiative that assembled almost $130 million among 10 foundations to promote small business development and entrepreneurship. We came together over that same period to help jump start a regional rail system, with Kresge making the lead donation of $50 million into a new light rail system. The Ford Foundation, the [W.K.] Kellogg Foundation, and many of the local foundations contributed, as well, everyone finding a role to play.”
Rapson cited many other examples of collaboration among the philanthropic community, saying, “By the time the Grand Bargain opportunity was presented by Judge Rosen, we were quite well equipped to move quickly because we were used to working together, there was deep trust among the partners, and we understood that often the only way to make real progress in our community is through exactly the kind of collaboration the Grand Bargain called for.”
What lessons can other cities facing financial struggles learn from the Grand Bargain? Two come immediately to Rapson’s mind. “First, the philanthropic community has a significant role to play in the civic vitality of almost any community,” noting that while every community may not have a Kresge Foundation or Ford Foundation, almost all have philanthropic presences of one kind or another. “Those assets within a community can be enormously helpful to thinking creatively, to solving problems in unexpected ways, and to promoting a form of civic collaboration that can help change the dynamic of community problem solving.”
Rapson says it’s also important to be prepared for the unexpected. “If the foundation community in Detroit had never worked together, had never come to understand the benefits of this kind of tight and enduring collaboration, putting the Grand Bargain together would have been quite difficult.” He suggested that other cities work on developing that “collaborative muscle” so that they’re prepared to take on collaboration in a form that no one expected. “Because we had that tradition of collaboration, it enabled us to take something that was outside of everyone’s comfort zone and expectations and move quickly and decisively to make decisions that were in the long-term interest of the community.”