“Community foundations are really having a moment,” says Susie Brown, president of the Minnesota Council on Foundations, the state’s membership association for grantmakers. “They are the brightest lights in the philanthropic spectrum.”

Why? Because community foundations are structured to raise and steward funds from a wide range of community donors and to convene their communities’ residents to develop and respond to shared goals and priorities. By definition, community foundations, which have a specific legal structure, exist to help people collaborate and respond. During a time of political polarization, community foundations are a vehicle for developing broad-based community solutions.

“These entities have unique aspects that make them special, that put them in a place of relevance right now. They are truly, deeply built around bringing people together to do the work,” Brown says.

It’s helpful to examine that role in the context of geography and identity populations.

There are more than 800 community foundations in the United States and more than 25 across Minnesota. The majority of Minnesota’s community foundations are focused on specific areas. These can be large population centers such as Duluth-Superior, Fargo-Moorhead, and Mankato or smaller towns including Northfield, Paynesville, and New London-Spicer. Community foundations also are formed around communities of interest, such as the Minnesota Women’s Foundation and PFund, founded by and for the LGBTQ+ community.

These entities share a legal structure that allows them to pool donations from many sources to address community needs and to make grants that support nonprofits so they can respond effectively. To earn their designation as “public charities,” community foundations must continuously demonstrate that they are accepting donations from the public at large.

Deep Community Roots

Community foundations accept contributions in many forms and for many purposes. Donors can give appreciated stock, mutual funds, or cash directly to the foundation; establish donor-advised funds (DAFs), which they can direct to their preferred charities and causes; and establish endowments, combined with or separate from a pooled endowment. Many community foundations accept gifts of other assets, including property, that typically are then sold by the foundation to build its financial resources.

Beyond seeking and accepting donations from the public at large, a second defining element of community foundations is the requirement for governance by a “diverse and representative” board of directors. Family and independent foundations don’t have such a requirement. A local community foundation is likely to have deep roots in the community through the involvement of representatives of business, government, and the nonprofit sector.

Here’s an example of how these structural factors play out in a real-world situation.

Paynesville, population 2,400, is a town between Willmar and St. Cloud in central Minnesota. Its community foundation’s origins lie in city government. Since 2008, the Paynesville Area Community Foundation has been a separate, independent entity with a 13-member community board representing business, nonprofits, schools, and government.

Randy Schaefer, the foundation’s first executive director, was originally from the area and spent 37 years in business before returning to his hometown for what he imagined as retirement. Instead, he became the spark plug that propelled the foundation toward ever greater goals, though he only worked part time.

Recently, residents realized that seniors and those who can’t drive were overbooking the sole transport van operated by the local senior center. The existing van could hold only one person using a wheelchair per trip, which meant that other seniors needing transport to a doctor’s office or the VA, or for other urgent needs, were often thwarted when trying to book such a trip. A second van could solve the problem.

The community foundation took on the challenge of raising the $85,000 needed for the van purchase, and it met the goal in only 45 days. Realizing that the van would need a garage, the foundation then led the charge to raise an additional $100,000, achieved in another 60 days. Both fundraising campaigns were completed more quickly than the senior center had considered doable if it had set out alone to raise the funds. Now, hundreds of seniors with transportation needs have more and better options. Paynesville’s next project is a playground for local youth.

“When founded, the hope was to raise $10,000 toward community needs,” Schaefer said. “Today, we have $7.3 million in endowment, an active board, and a strong mechanism to encourage people to leave some of their assets to the foundation and keep their dollars local.” In a town where Schaefer said many residents have trouble meeting their daily financial needs and obligations, the Paynesville Area Community Foundation is finding ways not only to address needs but also to build on community assets that attract new residents and help make Paynesville a great place to live. Schaefer, 58, died unexpectedly Sept. 13, just days after the TCB interview was conducted.

Transfer of Wealth

The generational transfer of wealth is a key factor in the expansion of community foundations across the state. Benjamin Winchester, a St. Cloud resident who is a rural sociologist with University of Minnesota Extension, studies intergenerational transfer. He looks not only at community capacity for charitable giving but also documents places across the U.S. where such local giving has been encouraged.

For example, Five to Thrive is a program of the Nebraska Community Foundation that asks residents and expats to designate 5% of their assets to the foundation in their will. “Invest in the community that has invested in you,” the materials read. The foundation’s website includes video promotions and a Five to Thrive toolkit that local communities can use to increase participation.

Read more from this issue

Private Dining Guide 2024

A Minneapolis Teen's Business Club Goes Global

The Road Diet

Can the Roy App Fix the Gophers?

Winchester says that Minnesota’s transfer of wealth (TOW) is well underway. His research team has made Minnesota TOW data freely available, by county. (A University of Minnesota website details this information for anyone interested.) In March 2024, Winchester and his team released an aggregated report for the state of Minnesota. It showed that Minnesota’s collective household net worth of $2.19 trillion could represent as much as $3.6 billion in an endowment if 5% of the 10-year wealth transfer was captured for local community giving.

The generational transfer of wealth is a key factor in the expansion of community foundations across the state.

“These reports help stimulate conversations about needed investments in strengthening local communities. Because of their role, community foundations are at the center of these conversations, they’re proactive,” Winchester says. “We like to tell people that they are living in abundance. There is tremendous wealth in our communities, and we can capitalize on visionary activities. We have the means.”

The Mankato Area Foundation is another example of creative local leadership. Nancy Zallek, president and CEO, says that the foundation has assets of $34 million, with 130 donor-advised funds. The foundation also has adopted a new program to expand giving by area businesses. Called the Corporate Advised Fund, this effort encourages businesses to use the community foundation as a vehicle to organize and administer local grants, thus saving the costs of operating philanthropic giving within their business. Companies like the local office of Eide Bailly and more than a dozen others are taking advantage of this service.

Now celebrating its 50th anniversary, the Mankato Area Foundation shows what taking the long view can produce. “We asked ourselves, ‘What tools would it take in this region to make giving easy, fun, and rewarding?’ Then we built our strategy with a big focus on donor-advised funds,” Zallek says. She pays special attention to relationship building and donor cultivation to ensure she and her staff know what interests each donor and where there’s a possible match with community needs.

This approach has allowed the foundation to fund everything from bike trails to programs combatting food insecurity to commissioning a large-scale mural on some of Mankato’s prominent silos. “Artists came to us and needed significant support to pull this project off,” Zallek recounts. “It took a few months, but we did it.” The mural stands today as a distinctive regional landmark.

TCB readers likely have heard of the Saint Paul & Minnesota Foundation and The Minneapolis Foundation, two of the largest community foundations in the U.S. But look farther and find the dozens that are working at the local level on community development and engagement and on enriching and strengthening cities and towns across Minnesota. Zallek says, “It’s important, and it’s a lot of fun, too.”

To see the full 2024 Giving Guide, follow this link.