In tough economic times with an ebb in charitable giving, the Rochester region is about to reap the benefit of an unusual burst of generosity.
Three Rochester-based private foundations—one already in possession of a very large endowment, a second about to take possession of an even larger pot of money and a third waiting in the wings—could generate annual grants of $25 million or more.
The private foundations, all very different from one another, would be the three largest in the region, and they could give away as much each year as the long-established United Way.
“I think it’s wonderful news for the community. To the extent that all of these foundations collaborate with each other and with other funders, we can have remarkable opportunities to move this community forward,” said Jennifer Leonard, president and executive director of the Rochester Area Community Foundation, the only other local organization that rivals the United Way in scope of annual charitable giving.
Two of the foundations are the legacies of two titans of local business, Robert B. Wegman and Max M. Farash. The third resulted from the merger of two health insurers.
The biggest of the three, perhaps by a wide margin, will be the Max and Marian Farash Charitable Foundation. Real estate tycoon Max Farash, who died on Feb. 28 at age 95, left holdings that have been valued well in excess of $200 million—and nearly all of that money will go to his family foundation.
Substantial property and other assets should be turned over to the foundation in coming months. The body’s seven board members are to meet next week to learn more about those assets.
The Farash foundation almost surely will be the biggest private foundation in the area, and one of the largest in upstate New York.
“Rochester, strangely enough for a community that has a very strong philanthropic tradition, has not had a lot of large private foundations,” said Liz Wilder, executive director of the locally based Grantmakers Forum of New York. “I think it’s great that the transfer of wealth ... is resulting in some significant charitable entities where we haven’t had them in the past.”
In accord with the wishes of Max Farash, who immigrated to Rochester as a child from a Jewish enclave in what now is Macedonia, 50 percent of the foundation’s annual gifts will go to Jewish interests or groups. Fifty percent also will go to recipients in Monroe or Ontario counties. The two categories can overlap.
“It can be transformational, both for the Jewish community and for specific areas in the Monroe and Ontario communities as well,” said Lawrence Fine, executive director of the Jewish Community Federation.
He said there is “substantial" need for financial support of institutions such as Hillel Community Day School and Jewish Senior Life that work with the local Jewish community, which Fine numbered at 18,000 to 22,000. “The impact of the Farash foundation’s contributions alone could be huge,” Fine said.
Farash foundation Chairman Nathan Robfogel said the precise value of the assets that will be given to the foundation is not clear, though his operating assumption is the figure will be between $200 million and $300 million. Some court documents have put the estate’s value at $400 million.
Private foundations must give away an amount equal to 5 percent of their assets each year or face federal tax penalties. That could lead to annual Farash grants of $10 million to $20 million.
“This is going to be a significant addition to philanthropy in the region,” said Robfogel, a prominent local lawyer long active in nonprofit circles.
The Wegman legacy
Robert Wegman, who was chairman of the family grocery company when he died on April 20, 2006, also left the bulk of his estate to the foundation he started in 1993. Wegman directed in his will that the Wegman Family Charitable Foundation would, at a minimum, receive his shares in the privately held company. An asset inventory filed in Monroe County Surrogate’s Court in 2007 valued those shares at $86.5 million.
Paul Speranza, vice chairman and general counsel of Wegmans Food Markets Inc. and a member of the foundation board, said the value placed on the shares in 2007 is a “decent approximation" of the amount that will be transferred to the foundation.
There is no timetable for that to happen. “With larger, complex estates, things tend to take longer than they do otherwise,” Speranza said.
The foundation used infusions of cash from Wegman’s estate to give away nearly $11 million in the first three years after his death, far more than it had donated in previous years. The largest recipients in 2008 were the Roman Catholic diocese’s Wegmans scholarship program and Hillside Children’s Foundation.
Speranza said Robert Wegman left the decision on grants to board members, who currently are his widow Margaret, his son Daniel and Speranza. He noted that the foundation, during Robert Wegman’s lifetime and afterward, has been particularly generous with gifts that supported economically disadvantaged children and education.
Unlike the Farash and some other foundations, the Wegmans foundation does not accept applications from nonprofit groups seeking funding. “What it means is that the three trustees will tend to make grants to those organizations they’re most familiar with,” observed Wilder.
The health foundation
The third of the large new entities, the Greater Rochester Health Foundation, is a hybrid. It has accepted applications for grants from many groups, but it also has set its own agenda and focused giving and staff work in particular areas.
The foundation came into being in January 2006 with a $200 million endowment from MVP Health when that firm merged with local nonprofit insurer Preferred Care.
The group’s name reflects its philanthropic focus. It has helped underwrite work to reduce lead poisoning and made a special cause of combating childhood obesity in the Rochester area, pledging $50 million over 10 years to the latter cause. Foundation president John Urban, who headed Preferred Care before the merger, has said directing significant resources to selected issues is important. “Otherwise, you just won’t move the needle,” he once said.
In 2008 the health foundation made grants of $7.2 million and also provided some program services itself.
Like many institutions, the health foundation and other large philanthropic groups suffered losses to their endowments in 2008 and 2009 when the financial markets tumbled.
Officials at the health foundation, the community foundation and the United Way say their investments have rebounded as the economy has improved, though none of them has yet recouped everything they lost.
“I can safely say that we had a substantial rebound, which has thus far continued into this year, but we are still materially below where we were,” Urban said.
Just as the rocky economy drained endowments, it also eroded fundraising and charitable giving, the community foundation’s Leonard said.
“You can safely say this has been a tough time for nonprofits,” she added.
She noted that the combined annual giving power of the Big Three foundations will be roughly equal to the decline in annual contributions to her foundation and the United Way in recent years. Some of that decline is due to economic woes, she said, while some is due to long-term population and employment trends.
Private foundations sometimes have favored nonprofit programs that they support year after year, but Leonard said they also can play an entrepreneurial role—directing large sums of money to a new or special cause.
Historically, Leonard said, most Rochester private foundations have been small and lacked the “venture capital" to engage in that sort of activity. She said Rochester grantmakers were discouraged recently when they couldn’t find local matching funds for an innovative federal program. And a recent study identified the need for at least $15 million in new funding for five proven children’s programs.
“The availability of the (three) private foundations could change that calculation, and provide money to invest in and leverage new opportunities for the community to advance,” she said.
How the Farash foundation approaches giving will be determined by the board, which added two members last week—Dr. Alvin L. Urles and Howard Konar—and probably will add two more.
Robfogel said the board had expected that Max Farash’s real estate—he owned 5,000 apartment and townhouse units in the Rochester area and Florida, plus other commercial property—would be sold, with the foundation getting the proceeds.
But for tax- and market-related reasons, he said it was decided to give the real property to the foundation. Some properties have already been turned over, and Robfogel said it appeared the vast residential holdings will be passed on this year.
How long the foundation would keep such properties hasn’t been determined. Robfogel noted that foundations prefer diversified investments, but he said it may make sense to hold the properties for a while, in part to give the real estate market time to improve.
He noted the properties are “very well-managed . . . and are profitable,” and said the foundation could rely on rental income from the apartments and townhouses to fund its grants if it came to that.
Robfogel, a retired partner at the Harter Secrest & Emery law firm who has served on numerous nonprofit and foundation boards, said the Farash charitable organization likely will need to hire full-time staff. The board also will discuss whether, while keeping with Farash’s wishes, to sharpen the focus of its giving.
“My experience, as a lawyer and as a member of other foundation boards, is that most foundations like to come up with specific thrusts in order to make a statement or in order to support the wishes of the founders of the philanthropy,” he said.
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