Anchor Institutions

OVERVIEW

Emerging trends related to globalization—such as the decline of manufacturing, the rise of the service sector, and a mounting government fiscal crisis—suggest the growing importance to local economies of anchor institutions—nonprofit institutions that once established tend not to move location. Indeed, in many places, these anchor institutions have surpassed traditional manufacturing corporations to become their region’s leading employers. If the economic power of these anchor institutions were more effectively harnessed, they could contribute greatly to community wealth building. The largest and most numerous such nonprofit anchors are universities and non-profit hospitals (often called “eds and meds”). Over the past two decades, useful lessons have been learned about how to leverage the economic power of universities, in particular, to produce targeted community benefits. Prominent examples from the university sector include:

• Trinity College in Hartford, which since 1996 has invested more than $7 million of its endowment in neighborhood revitalization within a 15-square-block area of the campus; the effort is projected to generate more than $100 million in new construction.
• The University of Pennsylvania, which has shifted over 10 percent of its annual purchasing to purchasing locally, thereby injecting an estimated $80 million into the West Philadelphia economy in 2006-2007. Penn aims to increase this amount to $120 million by 2010.
• Howard University, which collaborated with local civic and neighborhood groups and the Fannie Mae Foundation, to create 307 new housing units in its surrounding neighborhood. This in turn helped spawn commercial development and improvements of nearby vacant and boarded up properties.
• The Duke-Durham Neighborhood Partnership Initiative, which has invested more than $2 million in an affordable housing loan fund to promote home ownership and community stabilization.
• The University of Southern California, which has instituted a program to increase employment from neighborhoods immediately surrounding its campus. In one recent period, one out of every seven applicants for staff positions was hired from the seven zip codes nearest the campus.

These best practices can be extended and adopted to other types of nonprofit anchor institutions such as cultural institutions (e.g., museums and community arts centers), libraries, hospitals, community foundations and other locally-focused philanthropies, faith-based institutions (such as churches, mosques, and synagogues) and community colleges. Indeed, never has the economic role of these institutions been more important. Universities alone now spend $350 billion annually and have a total endowment of over $300 billion. Nonprofit hospitals own assets in excess of $600 billion and enjoy annual revenues greater than $500 billion. Nationwide, foundation assets exceed $650 billion.

Such funds, if more clearly focused on local community wealth building, could have a considerable economic multiplier impact, particularly since an ironic effect of globalization has been to make local economies more important — a phenomenon that often goes by the name of localization. As New York Times columnist Paul Krugman has noted, “Although we talk a lot these days about globalization, about a world grown small, when you look at the economies of modern cities what you see is a process of localization: A steadily rising share of the work force produces services that are sold only within that same metropolitan area.”

Anchor institutions – with the proper incentives and motivation– have the economic potential to leverage their assets and revenues to promote local private sector development, through such means as:

• Directing a greater percentage of their purchasing power toward local vendors based in the community.
• Hiring a greater percentage of their workforce locally.
• Providing workforce training for people needing assistance in the community.
• Incubating the development of new businesses, including social enterprise among nonprofits.
• Serving as an advisor or network builder.
• Leveraging real estate development to promote local retail, employer-assisted housing, and community land trusts.
• Using pension and endowment funds to invest in local job creation strategies and to provide community venture capital for nonprofits, entrepreneurs, and employee-owned firms.

This link between anchor institutions and community wealth building is not merely theoretical. Many churches, for instance, have long sponsored and raised funds for community development corporations (CDCs). Indeed, according to the 2006 census conducted by the National Congress for Community Economic Development, 24 percent of all CDCs—roughly 1,100 total, nationwide —are faith-based.

Anchor institutions can also provide capital or low-interest loan financing to community development financial institutions (CDFIs). Harvard, for instance, in 1999 provided $20 million in low-interest loans to Boston-area CDFIs. Indeed, a large section of the CDFI industry was started with faith-based capital. CDFIs have also received substantial foundation PRI (Program Related Investment) loan support.

To date, however, only limited attempts to fully incorporate anchor institutions in community wealth building have taken place. One effort now underway is in Cleveland, Ohio, where the Cleveland Foundation has initiated an anchor institution strategy involving universities, hospitals, and cultural institutions in the city’s University Circle area. The program will lead to anchor-funded initiatives aimed at employer-assisted housing, improvement of local public schools, and a range of community wealth building efforts. The Ford and Casey Foundations are now working to catalyze an anchor institution program involving “eds and meds” in Camden, New Jersey. Important foundation-initiated, city-focused networks, such as Living Cities and CEOs for Cities, are taking the first, tentative steps to explore anchor institution strategies. The time, in other words, would seem to be opportune for the development of new across-the-board approaches.