MuskogeePhoenix.com, Muskogee, OK

Local News

August 25, 2013

Foundation committed more than $10M to city

Official: Many projects would not exist without Foundation

City officials are in the early stages of putting together a capital improvements package they hope residents will approve next year by extending a temporary sales tax for another five years.

Some taxpayers, however, wonder why they should tax themselves and others who shop here when the City of Muskogee Foundation can be tapped for funding. During its first five years in existence, the foundation has given the city nearly $9.53 million in grants and pledged another million dollars.

The city has used the money to fund extensive parks improvements and street repairs, its housing rehabilitation program and real estate acquisitions. Other city programs funded by foundation grants include teen programs, a wellness initiative and a mobile communications system for the police department.

Foundation grants awarded during the past five years outpaces the projected $5.21 million in revenue that will be generated by the five-year 0.18 percent sales tax dedicated for capital improvements projects. That tax, which will expire Sept. 30, 2014, has been used to fund water and sewer line replacement and repairs, recreational trails, the purchase of a new firetruck and station expansions, road projects, storm siren replacements and other projects.

City officials contend they never have used the foundation to prop up the annual budget, which has remained relatively flat since the economic collapse in 2008. A review of foundation records and city budgets dating back to 2008 supports that contention.

Interim City Manager Roy Tucker said without foundation funding, “many of those projects simply would not have happened.” Tucker, a city attorney who was appointed to serve as interim city manager after Greg Buckley’s departure, said he believes it would be imprudent to rely on the foundation to fund core services.

“The point of establishing the foundation was not to spend off the principal but rather grant and utilize the interest so it becomes a resource for the community for many, many years,” Tucker said, noting there has been no policy for department heads to seek foundation grants before requesting general revenue funds. “To do otherwise, we would end up four or five and maybe 10 years later with none of that money left.”

The foundation is funded with proceeds from the 40-year lease of the city’s hospital — now known as EASTAR Health System — to Capella Healthcare. A portion of its returns on the investment of that money is used to fund grants designed to improve the quality of life in Muskogee.

Tucker said many “wonderful projects have been funded” by grants awarded by the City of Muskogee Foundation. While those projects have included infrastructural improvements — $5 million for street repairs and park improvement projects alone — Tucker said voters shouldn’t confuse those projects with the long-term projects voters will be asked to approve next year.

“I would say the purpose of the foundation as it relates to grants to the city are more for short-term and immediate needs,” Tucker said. “For capital improvement projects, that relates more to long-term projects guided by what we think the city should look like.”

Dean Swan, a Muskogee voter, said it is hard to support a sales tax that has a greater impact on those with lower incomes when alternative funding is available. He said higher costs for basic necessities coupled with stagnant wages makes it tough to support a sales tax extension.

“From my perception, sales taxes tremendously hurt the buying power when you consider the average income level in this city is so low,” Swan said. “When you look at the percentage of lower income people and the share of their wages that go to pay for basic necessities, it looks like the little people are being sucked dry.”

Swan suggested that funding for things like street improvements and other infrastructural needs should come from those whose use puts the most stress on those systems. For example, the companies that carry heavy loads that cause more wear and tear on the streets should shoulder most of the burden or maintaining those streets — the same would go with wastewater treatment and water supplies.

“There are so many ways to work out this issue without hurting the people who are living in poverty,” Swan said about funding capital improvement projects. “The cost of groceries keeps going up, fuel has gone up, and utilities have gone up, but income is not going up.”

D.J. Thompson, the foundation’s grants administrator, said grants that have been awarded for city programs and projects often are supplemented by other funding sources. The grants, she said, allow the city to complete projects faster than they might be otherwise.

“Grants like these leverage the city’s budget from sales tax dollars and other funding sources, resulting in faster results that we’ll all benefit from sooner,” Thompson said. “Just like with any grant we make, part of the appeal is that the city departments are usually able to come to the table with matching funds from other sources like capital improvement tax and budget dollars, and other grants.”

Thompson said foundation grants awarded to the city meet the nonprofit’s goal of making “making Muskogee better for as many citizens ... as possible.” Funding for parks improvements and street repairs, Thompson said, has the potential to benefit “everyone in Muskogee” who uses “the collector and arterial streets” where work is planned and the parks that “are in almost every neighborhood.”

John Barton, who served as chairman of the foundation’s directing board during its first five years of existence distinguished the purposes of sales tax revenue and foundation grants. He expounded the foundation’s financial philosophy, which from the beginning discouraged the use of its resources to prop up the city.

“I look to the foundation more for that special project that is a little more difficult to do,” Barton said. “The vision never was to use the foundation to fund everyday city operations, and we haven’t — the city continues to buy police cars, work on water lines and do the things cities are supposed to do without foundation funds.”

The foundation’s granting policy authorizes the board to award a limited amount of money each year. That amount is typically is set in December.   

Barton said during the foundation’s first five years, it earned $50 million on its investment of the more than $100 million received by the city from its 40-year lease of the hospital to Capella Healthcare. The foundation’s financial statements show it had assets totaling more than $129.38 million in July — that’s after awarding grants worth more than $27.44 million.

Parks and Recreation Director Mark Wilkerson, whose departments have benefited from foundation grants totaling $2.28 million, said projects made possible by the city’s charitable nonprofit can be seen almost anywhere. With another million dollars pledged for park improvements during the next two years, Wilkerson said more work remains.

Wilkerson acknowledged it has been difficult at times to spend the $500,000 the foundation pledged annually for five years. Most of that is because of time constraints, but Wilkerson assured every cent will be spent.

“The other reason is we are trying to leverage that money with other grant opportunities out there,” Wilkerson said, citing trails grants and others secured by leveraging foundation grants. “We spend about six months out of the year sitting around waiting to find out if those grant requests are approved. I am about ready to punt and spend it.”

Public Works Director Mike Stewart said a $2.5 million grant awarded this year for street repairs was the foundation’s first real investment in the city’s infrastructure. Stewart said he applied for the economic development grant after hearing all the buzz in Muskogee about all the great things the parks department has been able to accomplish as a result of a five-year grant worth $2.5 million.

“My comments to the mayor was we could get that same kind of excitement if we could get a grant like that to undertake these street projects,” Stewart said. “There will be a lot of angry people when we start tearing up those streets, but they will see a big difference once those projects are completed.”

Tucker said Muskogee voters, who likely will be asked next June to extend the 0.18 percent capital improvements sales tax for another five years, shouldn’t confuse that package with a new tax. It’s an extension of a sales tax voters already have approved.

“There is a buzz in the city that things are changing, things are improving and things are happening,” Tucker said. “We want to keep that buzz alive so other things keep happening. We need those (sales tax) funds to continue this momentum.”

Reach D.E. Smoot at (918) 684-2901 or dsmoot@muskogeephoenix.com.

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