Council should examine policy on donations to nonprofits

By Chelsea Maude Avirett | Jul 14, 2016

In this year’s budget, City Council will donate $60K to four local nonprofit organizations. Two of these donations are recurring: Rockland Main Street has received a donation since its inception (local government funding is a requirement to be certified by the National Historic Trust), while the Rockland District Nursing Association donation is a longstanding one: the organization has received city funds for more than 85 years. This year Councilor Valli Geiger recommended that two organizations, the St. Bernard Soup Kitchen and the AIO Food Pantry, also receive city donations.

Government donations to nonprofits reflect the valuable work these organizations do in our community and recognize that many nonprofits meet needs in the community that the government cannot currently provide. No one, however, has raised the obvious question: should the tax levy be used to fund nonprofits in the first place?

This is not an easy question to answer. Everyone is aware that raising taxes (or even spending the tax dollars currently allocated) places a burden on many residents, especially those on fixed incomes, and that our current tax rate is high compared to surrounding towns, which makes it difficult to attract new residents or businesses. Furthermore, services are continually cut or reduced to avoid increasing the tax levy. On the other hand, the tax levy spreads costs across the entire community, which limits the burden.

Regardless of whether the tax levy should be used to fund nonprofits, the current practice for giving out donations is haphazard and benefits select nonprofits in the community while missing others that also do important economic development work or meet essential community needs.

Before next year’s budget cycle, City Council should proactively consider the question of how the city provides donations to nonprofits, evaluating both the general rationale for such donations as well as determining an equitable way of distributing them. To have the discussion during budget season means that the focus is on particular organizations, rather than on the larger policy question. After this discussion, council should develop a clear policy that considers three key issues. First, are city donations the best use of the tax levy? Second, what specific tangible value does the community receive from each donation? Finally, how should the city determine which organizations to support?

If the city decides that the tax levy should fund some nonprofits, the exact parameters and limits of that funding have to be evaluated in advance of specific requests. Currently, donations are unrestricted, which means that they can be used for anything from specific projects to funding operating costs.

When we fund organizations rather than projects, the efficacy of the donations cannot be evaluated. It’s not enough to say that an organization provides important economic development work in the city or meets essential and otherwise unmet community needs — most nonprofits in the city do that already, regardless of whether they receive tax dollars. Instead, the city should identify exceptional value in order to justify spending tax dollars.

One way the city can do this is to require recipient organizations to provide matching grants (with new donations) to receive funds from the city. This is the model the city offered to the library, a city department, last year in order to avoid a $50,000 cut in services. Other ways include providing a donation to launch a new program, to expand the existing services the organization provides, or to purchase equipment that will improve efficiencies.

For any donation, the value of the project should exceed the dollar value of the donation. Currently the city uses such a model when it donates a lien-acquired property to Habitat for Humanity. When the city donates the property, there’s a small cost incurred (the loss of revenue from sewer fees and the cost to process the lien), but the return on investment is significant: instead of benefiting a private investor, the entire community benefits when affordable housing exists.

While such changes would ensure the city receives a measurable result for donations, it would not address the issue of fairness: how do you determine which organizations should receive city donations? One way to make the process more transparent and equitable would be to replace donations with a series of grants that any local nonprofit can apply for. This would require organizations to identify specific projects or new value that a city donation would provide and ensure that the money is enhancing current services. Making this a competitive process would also help avoid the danger of picking and choosing local winners.

Comments (2)
Posted by: Dale Hayward | Jul 22, 2016 00:45

We  give donations to non profits when the not-for-profit like the Goodwill pay no taxes but take retail dollars from hardworking local businesses? Because this is so volatile  no one dares to take the issue to task and start taxing not-for-profits with millions and millions like the Farnsworth and The Island Insitutute?



Posted by: deborah o atwell | Jul 19, 2016 07:37

I really appreciated that Chelsea 's article is so wonderful to read. I liked the three questions judging merit and the idea of matching funds, like the library did.This would be easy to implement and would reduce the feelings that arise when the council appears to show a  bias. Funding a project rather than an organization is probably a good idea as well. I personally prefer that the RDN be funded as an organization but I have to admit , any non profit getting our tax money needs to really be aware of the gift being given on top of their tax free status.



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