Community Endowment Fund awards $100,000 in local grants

Ukiah Daily Journal Staff
Updated:   05/15/2013 12:00:32 AM PDT
Article from http://www.ukiahdailyjournal.com/news/

Ukiah Daily Journal

One hundred thousand dollars in local grants were awarded at the March 5 meeting of the Community Foundation. These grants were made possible through the Community Foundation's "Community Endowment Fund."

"The Community Endowment has been built by contributions that vary from a check for twenty-five dollars to an estate gift valued at several hundred thousand dollars," says Board President Jim Mayfield. "By giving to the Community Endowment, our donors know their gifts will be used here in Mendocino County, doing good, for the long term."

Megan Barber Allende, the Community Foundation Director of Grants and Programs, notes that the Community Endowment Fund has been built by donors with various interests, and all of these are reflected in the grants. "We awarded grants for youth, to help the poor, for the arts, to preserve the natural beauty of this place, and for many other areas of interest. We do it all through the big umbrella of the Endowment Fund."

The grants funded through the Community Endowment Fund are reviewed by regional volunteers, as well as a Board Committee. Grants are made in all regions of the county, and fund grassroots as well as more established non-profit organizations.

Countywide

Cancer Resource Centers of Mendocino County­$4,800: To develop and implement program management modules aligned with CRCMC's Salesforce platform, convert CRCMC's website toa non-HTML platform, and train CRCMC staff to use and maintain both of these systems.

Mendocino County Public Broadcasting­$5,000: For a new digital, remote-controllable console at the KZYX studio in Philo, ensuring continuous radio service for all of Mendocino County.

Ukiah

Alex Rorabaugh Center­$2,000: To hire a community liaison/program developer for the "Open ARC Night" pilot program, opening the Alex Rorabaugh Center for use by neighborhood residents at no cost.

Ford Street Project, Inc.­$5,000: To implement NonProfit EASY to improve the website and develop communication and data management tools to integrate donor and volunteer databases, improve the Food Bank data collection process and enable workshop enrollment and on-line scheduling.

Mendocino County Youth Project­$5,000: To assist with rent and utilities for the 2bu Clothes Closet while MCYP integrates it into its program and funding structures, maintaining the current program while simultaneously expanding its services.

Redwood Valley Outdoor Education Project­$4,000: To develop a business plan, expand fundraising activities, and engage new donors--immediate and long term-- in order to sustain RVOEP's unique program and ensure that outdoor learning opportunities are available for generations to come.

School of Performing Arts and Cultural Education (SPACE)­$2,500: To purchase a new computer and two mini-servers to improve SPACE's administrative capacity.

TLC Child & Family Services­$1,500: To prepare the ground for an outdoor play area for neglected and abused children at TLC's short-term emergency shelter in Ukiah.

Ukiah Symphony Orchestra­$1,500: To purchase 42 music stands for use during Ukiah Symphony Orchestra rehearsals and concerts, enabling more flexibility for concerts and fundraising events and eliminating the organization's current dependence on Mendocino College.

For more information about the other 21 grants or how you can make a gift to the Community Endowment Fund, visit www.communityfound.org.

Anderson Valley

Anderson Valley Health Center­$4,000: To restore the Anderson Valley High School track to a multi-season fitness space useable to promote health and fitness among students and community members alike.

Anderson Valley Land Trust­$5,000: To conduct a series of educational workshops that will provide tools and strategies for farmers, ranchers, forestland owners, local resource organizations, and professionals to preserve working rural lands in Anderson Valley.

Laytonville/Leggett

Laytonville Unified School District­$5,000: To purchase supplies and additional instructional hours for the music teacher in order to expand, diversify and sustain the art and music program at Laytonville Elementary School.

North Coast

Community Center of Mendocino­$4,000: To outfit the dance studio with folding mats and exercise equipment in order to enhance the Community Center of Mendocino offerings of classes and activities for all ages, including Brain Gym, tumbling, Pilates, and step aerobics.

Gloriana Musical Theatre­$2,000: To reconstruct and redesign approximately 20 pages of the Gloriana Musical Theatre website with video clips and improved interfacing to support promotion of future productions, events, and educational programs.

Lighthouse Foursquare Church­$2,000: For a dishwasher and new countertop to enhance the meal program provided by Lighthouse Foursquare Church to poor and homeless coast residents.

Mendocino Film Festival­$4,000: To retain a graphic arts consultant to create templates for annual print publications, assemble templates into a user-friendly "cookbook", prepare volunteers to use these new tools, and aid MFF in sharing approach with other non-profits.

Mendocino Woodlands Camp Association­$3,000: For marketing materials and local outreach activities to elementary schools, home school programs, and colleges to encourage participation in Mendocino Woodlands environmental education program.

Pacific Textile Arts­$4,000: To assist with the installation of a translucent roof over a courtyard on the Pacific Textile Arts campus, providing a protected space for outside classes, a raised bed garden of dye plants and a rain water collection system.

Renewable Energy Development Institute­$4,000: To expand the existing Home Energy Link Program (HELP) to low income families on the Mendocino Coast, providing access to a wide variety of free energy and money saving programs.

Round Valley

KYBU: Round Valley Community Radio­$3,500: To purchase remote broadcasting equipment for KYBU Round Valley Community Radio and provide training for youth and adult community volunteers to broadcast live from local events and meetings.

Round Valley Indian Health Center/Family Resource Center­$1,000: To purchase computers to assist with the establishment of a Community Computer Center in the new Round Valley Family Resource Center.

South Coast

Acorn Independent Learning Center­$2,500: To deliver three 4-6 week sessions of garden-based education programs to approximately 60 children from local South Coast elementary schools, fostering an appreciation and understanding of our local environment and food systems.

GED Program of Point Arena­$1,000: To purchase computers to better prepare students for the upcoming online GED testing requirement.

Point Arena High School­$5,000: To enhance the newly built track with the purchase of 80 hurdles, 8 starting blocks, sand for long jump, and fencing for shot put allowing the PAHS track & field team to train for and host meets for their parents and the broader community to enjoy.

South Coast Seniors­$3,300: To purchase and install an ice maker which will be used to maintain the freshness of food served during senior congregate dining, fundraisers, and in the Meals-on-Wheels program, creating substantial organizational savings over the long-term.

Willits

Charter School Association of Willits­$3,000: To purchase a two-door commercial refrigerator for Willits Elementary Charter School, enhancing food safety at the site.

Nuestra Alianza de Willits­$4,000: To assist with office rent and utilities during the organization's transition from Mendocino College to self-sufficiency, enabling it to develop a business plan and the Board leadership skills necessary to cover these costs well into the future.

Willits Daily Bread­$3,400: To purchase a new commercial refrigerator in order to improve food safety and reduce energy costs.

Willits Community Theatre­$1,000: For the costs associated with initiating and recording a series of workshops designed to inspire interest in theater from community members traditionally outside the scope of committed theater "regulars", thereby expanding WCT's volunteer base.

Willits Kids Club­$4,000: For tree protection and staking for over 70 new trees in the Willits Kids Club Discovery Park and Playground, providing children and adults with a safe place to play, learn, and grow.

Ukiah Daily Journal Staff
Updated:   05/15/2013 12:00:32 AM PDT
Article from http://www.ukiahdailyjournal.com/news/

KAHLER: Good, bad and ugly of whole life insurance

by Rick Kahler
Article from http://rapidcityjournal.com/business/

It's impossible for a financial columnist to please all of the readers all of the time. My recent column criticizing the Be Your Own Banker scheme drew the ire of several fans of whole life insurance. Two of them in particular, whose responses were published in the Rapid City Journal, disparaged my integrity, my professional qualifications, and my math skills.

Part of the problem is that these readers interpreted my warning about BYOB, which I called "one step from being a scam," as an attack on whole life insurance in general. That was not the case.

Admittedly, I'm not a fan of whole life as an investment. The purpose of life insurance, in my view, is not to provide retirement income or cash value, but to replace income when someone dies. For most people, the best and cheapest way to do this is through term life insurance. Obviously, someone who sells insurance will have a different opinion.

The insurance agent who tried to show that my math didn't add up accused me of misrepresenting a Modified Endowment Contract (MEC). He wrote that no insurance professional using what he called the "banking concept" would ever sell an MEC. He's right about that.

An MEC is a classification under 1988 federal tax law that is intended to limit the use of life insurance policies as tax-advantaged investments. If the cumulative premium payments exceed certain amounts, the IRS defines a policy as an MEC. This means withdrawals from the cash value are taxed as ordinary income and subject to a penalty.

What the BYOB salespeople promote are "blended whole life" policies. These combine term and whole life in order to keep the policies from qualifying as MECs. The calculations presented in my article were actual numbers taken from a blended whole life policy sold by a BYOB promoter, so of course they didn't add up when viewed through the lens of an MEC.

Is a blended whole life policy ever a worthwhile option? Like any insurance products, there are certain situations where they make perfect sense when they are represented honestly and transparently.

However, anyone considering such a policy needs to know two things. First, insurance agents are compensated by commissions on the products they sell. They have no fiduciary responsibility to act in the best interests of their customers.

Second, whole life insurance pays some of the highest commissions of any financial product on the planet. The typical commission ranges from 50 percent to 70 percent of the first year's premium.

With commissions like this, it's easy to see how insurance agents might feel challenged by any criticism of whole life insurance. As a fee-only financial planner, if I discover that a particular type of whole life insurance isn't good for consumers, that's simply useful information to pass on to my clients. The same discovery for a commissioned insurance agent, however, is a potential threat to that agent's livelihood.

Even with these tempting commission rates, there are many legitimate life insurance professionals whose intent is to serve customers rather than exploit them. These honest agents do their best to sell products they believe will promote consumers' financial well-being. Comparing whole life insurance sold by reputable agents to the schemes pushed by BYOB sellers is like comparing apples and rotten apples.

It's too bad that more insurance professionals are not stepping up to protect their industry from the rotten applies engaged in this type of shady marketing. Numerous honest life insurance salespeople would agree that the BYOB spin is not only harmful to consumers, it is also hurting the life insurance industry as a whole.

Rick Kahler, CFP, is a fee-only financial planner and author. Find more information at www.KahlerFinancial.com. Contact him at Rick@KahlerFinancial.com or 343-1400, ext. 111.

Rick Kahler
Article from http://rapidcityjournal.com/business/

How Cooper Union’s Endowment Failed in Its Mission

By Marcus Mabry and James B. Stewart

Common Sense: The Fight for Cooper Union: Cooper Union, once a premier institution of higher learning with free tuition, will begin charging students. The Times’s James B. Stewart and Marcus Mabry discuss how it mishandled its endowment.

By JAMES B. STEWART

Published: May 10, 2013

Article from http://www.nytimes.com/2013/05/11/business/how-cooper-unions-endowment-failed-in-its-mission.html?pagewanted=all&_r=0

Since Peter Cooper’s heirs gave the Cooper Union for the Advancement of Science and Art the land under the Chrysler Building in 1902, the school’s endowment has enabled it to offer students a high-quality, tuition-free education through two world wars, the Great Depression and multiple stock market crashes and financial crises.

So why does Cooper Union now find itself forced to charge tuition of an estimated $20,000 a year, abandoning what many consider its most important legacy?

This week, angry students were occupying the president’s office in protest. They might be even angrier to learn that some of their future tuition dollars could be going to support wealthy hedge fund managers who oversee some of the school’s $666.7 million endowment.

Cooper Union may be an extreme example, but it’s hardly the only college suffering from a combination of decades of bad decisions and recent treacherous markets. Its endowment was typical of the many endowments and pension funds that took the plunge into so-called alternative investments like hedge funds, which have lured investors with the promise of generous and steady returns in both good times and bad. And compared with many universities, Cooper Union did a good job managing its endowment through the recent financial crisis. As recently as 2009, the school maintains, it ranked first among all American universities for endowment performance.

Even so, hedge funds couldn’t solve the college’s dire financial problems, and many hedge funds have been far more successful at lining the pockets of their managers than beating market averages. (The typical hedge fund manager charges a fee of 2 percent of assets plus 20 percent of any gains.) In fiscal year 2009, which ended June 30, 2009, Cooper Union’s hedge funds and other managed assets lost 14 percent, and the returns since then have lagged the stock market’s recovery. Today, Cooper Union’s endowment is lower than it was at the end of fiscal year 2008, even as the Standard & Poor’s 500-stock index has hit new highs. From 2009 to 2012, a simple, low-fee mix of 60 percent stocks and 40 percent bonds far outperformed hedge fund indexes.

Weak hedge fund performance is hardly Cooper Union’s only financial problem. Today’s crisis has been brewing for decades if not longer, and comes after years of what looks like bad management decisions with little accountability or supervision by New York’s attorney general, who oversees nonprofit institutions. Over the decades, Cooper Union has sold off assets piecemeal, failed to diversify its endowment, taken on debt and built a lavish new building. After the 2000-1 stock market plunge, the managed endowment, excluding the Chrysler Building, lost half its value. The school never cultivated its potential donor base, leaving most graduates with the impression that it was wealthy and didn’t need alumni contributions.

In some ways, it’s surprising that the school’s trustees managed to stave off charging tuition as long as they did. “We’ve only been one step ahead of the bailiff for decades,” said John C. Michaelson, a trustee who runs an investment firm and has been chairman of the investment committee since 2012, as well as from 2005 to 2008. “We were pulling rabbits out of hats.”

The simplest rule of asset management, one familiar to even novice investors, is diversification. Yet Cooper Union’s endowment is highly unusual in that it’s concentrated in a single asset — the land under the Chrysler Building — which accounts for nearly 84 percent of its assets, according to its most recent financial statement.

By contrast, Emory University in Atlanta, which as recently as 2001 had 60 percent of its main endowment in Coca-Cola stock, has since sold all of it and diversified into other assets.

Having so much of the endowment in a single asset “is against everything I stand for,” Mr. Michaelson said. He and other trustees said they considered selling it in 2006, when the college was facing mounting financial deficits, but concluded that would be impractical. Cooper Union receives annual lease payments of $9 million from the owner of the Chrysler Building, Tishman Speyer Properties, and $18.2 million in so-called tax equivalency payments that would otherwise go to New York City. The right to the tax revenue couldn’t be transferred to a buyer.

But assuming a 5 percent return, a $27.2 million annual revenue stream would be generated by selling the Chrysler Building land for $544 million, which doesn’t seem so far-fetched a price. Tishman Speyer sold 666 Fifth Avenue, which hardly compares to the landmark Chrysler Building, for $1.8 billion in 2006, and bought the MetLife building in 2005 for $1.72 billion. And the Chrysler site might have been highly appealing to a sovereign wealth fund or other major real estate investor looking for a trophy asset. (A Cooper Union spokesman said the trustees needed to generate annual revenue of $55 million, which the lease is expected to produce beginning in 2018. The amount necessary to generate that revenue at a 5 percent return would be $1.1 billion.)

Still, it doesn’t seem the trustees made any serious attempt to even determine its market price, and the college seems to have had a nostalgic attachment to it as a part of its heritage. In 2006, Cooper Union defended the decision not to sell the land by describing it as “a gift from the children of Peter Cooper,” that is “the heart of the Cooper Union.”

Instead, Cooper Union renegotiated the lease with Tishman Speyer, which was not due to expire until 2047. The college negotiated an increase to $32.5 million in 2018, which rises every 10 years thereafter. But it still had to make it to 2018, five years into the future.

At the same time that Cooper Union decided not to try to sell the site, it borrowed $175 million, using the Chrysler site as collateral, to build a new engineering and art building and “to meet future operating deficits,” as the school acknowledged in court papers seeking permission for the loan. The term of the loan was 30 years, at an interest rate of 5.875 percent, which amounts to more than $10 million in interest payments a year. By today’s standards, 5.875 percent is exorbitant, but the college said it couldn’t refinance the loan at a lower rate.

Hardly anyone disputes Cooper Union’s need for new engineering facilities. Whether it needed that particular building, at such high cost — about $166 million — remains a matter of dispute. Trustees told me that the college’s development consultants told them that a signature building with a marquee architect — in this case, Thom Mayne of Morphosis Architects — would attract a large donor eager to have his or her name on a trophy building.

But no such donor materialized, and experts I consulted said Cooper Union had it backward — the first step is to attract the donor, who then is involved in choosing the architect and designing the building. “I’ve never heard of a case where you build the building first and hope a donor comes along,” said Kenneth E. Redd, director of research and policy analysis for the National Association of College and University Business Officers. Trustees I spoke to agreed that the assurances they got that donors would materialize proved to be wrong. “We were supposed to raise another $125 million,” a trustee told me. “We didn’t. Maybe we were over-optimistic, but we had these professional development people who told us someone would want to put their name on the building.”

Of the loan proceeds, $34 million was turned over to the school’s endowment. According to Mr. Michaelson, all of that was held in cash and used over the next few years to cover the school’s mounting operating deficits. “I never would have borrowed money to invest in the market,” Mr. Michaelson said. “It’s against everything I believe in; I don’t believe in leverage. Leverage is great on the upside. It destroys you on the downside. We couldn’t afford to lose money.”

But the endowment aside, the large loan did have the effect of adding a large amount of leverage to Cooper Union’s balance sheet at what turned out to be an especially bad moment. And the cash freed up other money for alternative assets at what turned out to be the top of the market. In 2006, the school had $19.4 million in hedge funds. In 2007, that had ballooned to $75.6 million, which amounted to more than 60 percent of the managed portfolio, excluding the Chrysler site and cash. By 2008, the hedge fund investments amounted to almost $103 million. That’s a very high concentration of the non-real estate assets in a single asset class.

Cooper Union’s heavy reliance on hedge funds “strikes me as irresponsible,” said Simon Lack, an investment adviser and author of “The Hedge Fund Mirage,” which questions many of the premises of hedge funds. “Of course, it was forced upon them by a long series of what look like bad decisions. But there’s no way that hedge funds could deliver the returns they wanted after their high fee structure.”

Mr. Michaelson said he anticipated there might be a market downturn, and that the hedge funds included so-called long-short funds and absolute return strategies intended to protect against declining markets. But by the end of fiscal year 2009, Cooper Union’s hedge funds amounted to just $18.8 million, in part because of market declines and in part through liquidation.

Mr. Michaelson said he was aiming for a 10 percent annual return, which may have been attainable in the early days of hedge funds, when they had much less capital to invest. Today, “such returns are simply unrealistic,” Mr. Lack said.

Hedge funds did help cushion the market decline in fiscal year 2009, when the S.& P. 500 dropped about 26 percent. But they have hurt the endowment’s performance since then. Mr. Michaelson said Cooper Union’s returns for the managed endowment, excluding the Chrysler asset and cash, were negative 14 percent in fiscal year 2009, 10 percent in 2010 and 17 percent in 2011. Cooper Union’s portfolio lost 5 percent in fiscal year 2012. That portion of the endowment fell to about $85.9 million at the end of fiscal year 2012, from about $169 million in 2008, and the total endowment dropped to $666.7 million from $710 million in 2008.

By comparison, a simple mix of 60 percent stocks, as measured by the S.& P. 500, and 40 percent bonds, using the Dow Jones corporate bond index, performed far better: down 11.7 percent in 2009, and up 14.5 percent in 2010, 20.8 percent in 2011 and 7.9 percent in 2012. Yet investors keep pouring money into hedge funds — a record $15.2 billion in this year’s first quarter. Hedge funds now have $122 billion under management, a new high, according to Hedgeweek, a trade publication.

Cooper Union’s costs, especially health care costs, kept mounting inexorably. In 2008, the college was $4.6 million short in cash. Last fiscal year, the cash-flow deficit was $13.2 million.

Aside from endowment income, universities have only limited options for increasing revenue: donations, tuition and, for research universities, government grants. Alumni contributions have long been a weak spot at Cooper Union. Thomas R. Driscoll, a trustee and member of the alumni council, said: “There was never any sense of giving back. Cooper never asked. We always thought Cooper didn’t need the money because it had the Chrysler Building. Forty years ago, I would have stressed to students that someone had to make it possible for you to come here for free.”

With few donations, that left Cooper Union only one option: charging tuition. On April 23, the college announced that it would cut the full-tuition scholarship in half beginning with the entering class in 2014, and would continue to offer full-tuition scholarships to students with demonstrated need. “Our priorities have been and will continue to be quality and access, so that we will remain a true meritocracy of outstanding students from all socio-economic backgrounds,” the college’s trustees said in a statement.

Mr. Michaelson conceded that the school could have continued to use the endowment to cover deficits and would have survived until 2018, when the higher payments from the Chrysler lease start. “But what kind of school would you have had by then?”

A version of this article appeared in print on May 11, 2013, on page B1 of the New York edition with the headline: How Errors In Investing Cost a College Its Legacy.

By JAMES B. STEWART
Published: May 10, 2013
Article from http://www.nytimes.com/2013/05/11/business/how-cooper-unions-endowment-failed-in-its-mission.html?pagewanted=all&_r=0