Billionaire rescues Michigan city with cash

Struggling Kalamazoo gets initial $70 million donation

NEW YORK — In Kalamazoo, Mich., a city besieged by poverty and state aid cuts, Mayor Bobby Hopewell had few options left. The city had thinned the ranks of the police force and halted work on aging infrastructure, only to keep spending millions more than it brings in.

Then, in July, he landed an unheard-of lifeline. William Johnston, the husband of billionaire Ronda Stryker, and William Parfet, whose great-grandfather founded Upjohn Co., agreed to give the city $70.3 million — a first step toward creating a $500 million endowment that Kalamazoo will use to put an end to chronic budget shortfalls and pay for a property tax cut aimed at drawing residents to the 76,000-person city.

“The state of Michigan has not helped us,” Hopewell said. “A philanthropic approach might make sense.”

More than seven years after the United States emerged from the worst recession since the Great Depression, cities are turning increasingly to charity, if only for modest relief from pressure caused by swelling pension debts, declining populations and limits on their ability to raise taxes.

After Detroit in 2013 became the biggest city ever to go bankrupt, private donors stepped in to help keep the city’s art collection from being auctioned off and shelter retired city workers from devastating cuts to their pension checks. Flint, Mich., reeling from a lead-tainted water supply, received philanthropic aid. Even relatively well-heeled cities, including Los Angeles, Jacksonville, Fla., and Boise, Idaho, have boosted staff devoted to raising money for parks, libraries and schools.

“Like all cities, there are definitely limited resources,” said Dawn Lockhart, who was named Jacksonville’s director of strategic partnerships this year. “There is unlimited demand placing an incredible amount of strain on both nonprofits and on the city.”

No city has pushed it quite as far as Kalamazoo, a city 140 miles west of Detroit where more than a third of the residents live in poverty.

Since 2009, the city has cut about $12 million from its general fund, which had operating revenue of almost $53 million in the 2016 budget year, city documents show. That has resulted in the elimination about 120 jobs over the past five years, which means it might take residents longer to pay a bill or receive approval for a new building, City Manager Jim Ritsema said.

The initial $70 million donation, to be used over three years, will be used to close Kalamazoo’s budget deficit and lower the general city property tax by about a third over that time. If the city succeeds in increasing the endowment to between $300 million and $500 million, officials plan to cut taxes even more.

“That’s the only strings that have been attached to this, to do greatness for everyone,” Ritsema said.

Parfet and Johnston did not respond to requests for comment.

The donations could help pay for city improvement projects that have been on the shelves without funding, such as lead pipe removal, roadwork, public art or entrepreneurial programs, Hopewell said.

Kalamazoo’s donation is “quite unusual” because it’s being used to solve a budget deficit instead of underwriting specific civic projects, said Robert Collier, chief executive officer of the Council of Michigan Foundations, which is made up of philanthropic organizations in the state.