Wealthy Donors Look To Solve Financial Crisis In Kalamazoo, Mich.

Kalamazoo, Mich., is getting a little help from some wealthy friends to solve a growing financial crisis. Two local philanthropists have pledged $70 million to help the city end chronic budget deficits and cut property taxes. While private donors have rescued programs governments can no longer afford, such as public art and parks, rarely do people give millions directly to a city's general fund with no strings attached. But some question the donors' motivations and fear the arrangement could fundamentally change how government functions.

ROBERT SIEGEL, HOST:

Now to Kalamazoo, a mid-size city in southwest Michigan. It's far from rich, but it has rich friends. A decade ago, Kalamazoo was in the headlines because donors promised that they would pay the college tuition of any graduate of the city's public schools.

Now it appears Kalamazoo has struck philanthropic gold again. Two donors have pledged tens of millions of dollars to help the city cover budget shortfalls. People who follow philanthropy say they haven't seen another gift quite like it. As Erin Toner reports, the city is welcoming the cash over some skepticism.

ERIN TONER, BYLINE: At a Catholic church near downtown Kalamazoo, dozens of residents are piling into a gymnasium for a free dinner and to answer a big question. How can Kalamazoo be better ten years from now? For Brenda Moncrief, the answer is to help the tens of thousands here who live in poverty. She'd like to see more positive places for kids.

BRENDA MONCRIEF: This summer I literally watched a gang of boys going from house to house robbing us. So I don't want to see these boys ending up in prison, but they need something to do.

TONER: When this so-called Imagine Kalamazoo process started, there was no plan for how to pay for these ideas. But that changed quickly after two donors offered the city a whopping $70 million. While the astonishing gift is raising some eyebrows, it's giving Kalamazoo leaders some new hope.

BOBBY HOPEWELL: This has the potential of changing the day, bringing a new day to our city.

TONER: That's Kalamazoo's mayor, Bobby Hopewell, who says the city had run out of options to deal with growing deficits. Almost half its property, including colleges and hospitals, is off the tax rolls. Other properties have not fully recovered from the recession, so the mayor solicited money from a couple of Kalamazoo's wealthiest patrons - William Parfet, who is heir to the Upjohn pharmaceutical fortune, and William Johnston, who heads a wealth management firm. Parfet declined to be interviewed for this story, and Johnston did not return phone calls.

CHRIS SHOOK: I know both the gentleman through some business relationships but just know them.

TONER: Chris Shook heads a foundation in Kalamazoo and says he can vouch for the donors' motivations.

SHOOK: They want the community to prosper. They want the community to have good things for all its citizens. And I think that they've been fortunate in their lives, and they want to share that fortune.

TONER: Kalamazoo says it will use the $70 million to plug budget holes and cut property taxes by a third, hoping to lure new development. The money will also seed an endowment to help provide ongoing tax relief and pay for new government programs. Aaron Dorfman heads a watchdog group called the National Center for Responsive Philanthropy.

AARON DORFMAN: Seen a lot of interesting philanthropic gifts but none quite like this.

TONER: Dorfman says there are plenty of examples of private donors rescuing civic interests, much like the grand bargain in Detroit, which saved that city's art collection. But Dorfman says he's never heard of people handing over millions directly to a city's general fund with no strings attached. He's concerned the deal could fundamentally change government here.

DORFMAN: Are we going to tax ourselves at rates that we can pay for the goods and services that we want from government, or are we going to rely on wealthy individuals to pay for those public goods?

TONER: Matt Milcarek is the only Kalamazoo city commissioner who voted to turn away the cash. He says he prefers solving the problems that put the city in financial straits in the first place.

MATT MILCAREK: I don't think there's a single model in America where a city has a third of its general fund budget funded by private donors. It could be very exciting and great, or it could be something that we find out is really not a good model.

TONER: Meanwhile, Mayor Hopewell says he gets why some here are skeptical, but he promises the donors won't enjoy any political influence because of their gift. At that recent Imagine Kalamazoo meeting, a number of residents said if their property taxes go down hundreds of dollars as promised, they're pretty all right with the deal. For NPR News, I'm Erin Toner.

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