Did philanthropy ruin democracy in Kalamazoo?

A case study in the power of the super rich

I don’t like to call stories “babies” because unlike actual babies, I am so sick of them by the time they are ready to meet the world that I often never want to see them again. But if any story is my baby, it’s this one, since it’s been marinating in my brain for so long. Now, my head birthed it and you can read it!

Two Rich Men Decided to Fund a Failing City. Some People Say They Made it Worse.

I covered philanthropy for a bit at The Atlantic, at the prompting of an editor who was interested in what effect increasing wealth in America would have on democracy. (Here’s a primer on the issue for the curious. David Callahan’s The Givers is an interesting look at how today’s super rich are giving their money to influence public policy.) It seemed that extreme wealth can pay for a lot of things that society arguably needs (COP26 has me thinking about Michael Bloomberg’s campaign to single handedly shut down coal-fired power plants.) But it also gives a lot of political influence to the people with that money.

Around the time I was thinking a lot about philanthropy, I read about an interesting experiment in the Michigan city of Kalamazoo. The city was faced with a looming budget deficit, and two local philanthropists had decided that they would give their own money—reportedly around $70 million—to fund the city’s budget. There were a few strings attached, but they didn’t seem too onerous. The city had to agree to lower property taxes, which seemed rather nice for homeowners, and close a structural budget deficit. I made a mental note to check back later.

Nearly five years later, I was surprised to find that no one had taken an in-depth look at this experiment and how it was going. There were some local stories about additional anonymous donations to the city—$86.6 million last year—but it was still very hard to understand from afar exactly what effect the donations had on the city, and what, if anything, had changed since the city decided to go down this road. 

I started talking to the city of Kalamazoo, which had essentially absorbed the foundation created by the philanthropists, known locally as “the Bills.” The biggest issue I could see at the time was that the philanthropists had pledged to raise $500 million from other people but it didn’t seem like they were anywhere close to that nearly five years later. The city was sending out notices on residents’ tax bills, saying they could donate to the foundation by giving some extra money on their taxes, which seemed like it would take a very very long time to get to $500 million (each resident would have to give around $6,700.)  

During that time, Kalamazoo alerted me to a special announcement, but they couldn’t tell me what it was about. In July, I watched on my computer as the mayor stood on the city steps and announced the city had gotten a $400 million anonymous donation in order to fund the foundation in perpetuity. That’s a lot of money. The mayor seemed really, really happy, but it didn’t seem like there was a whole lot of enthusiasm from the crowd, or if there even was a crowd.

After talking to the city, I knew I had to find out what locals were saying about the money. I noticed that there were two city commissioners who had voted against the foundation at the time, and reached out to one of them to set up a call. The other one had left city government to live on a homestead in the country. He gave me some other people to talk to, and the story snowballed from there. It turned out that there were a lot of people who were very upset about the foundation and its role in Kalamazoo, but who were afraid of talking to the media because, as one person said to me, “these are very dangerous people.” 

You can read the story to find out more, but a few things if you do. I’ve been criticized on Twitter by some Kalamazoo residents for “only” talking to people who have grudges about the city. I talked to dozens and dozens of Kalamazoo residents, of many different incomes and races, and while some of them were supportive of the foundation, many either had no idea it even existed or felt like it was creating problems for democracy and worsening inequality by giving money to people who already had it. 

I found that point very convincing. If a random billionaire gave your city $25 million every single year, but insisted that half of it be used to give property tax breaks to people who already own homes, there would be pushback. Philanthropists can put terms on their donations—maybe they only want to fund certain causes an organization supports—but that becomes problematic when their terms on a donation dictate public policy. This goes back to what I was talking about in the beginning of this email—you might be happy when billionaires give money to lower your property taxes, but would you be happy if they gave money with the condition that they do away with all taxes? 

Someone I interviewed referred to this experiment as a “libertarian’s wet dream,” and I found this an interesting way to explain it. Libertarians advocate for “voluntary exchange,” essentially abolishing taxes and allowing people to give money if they want. A few philanthropists convinced the city to lower taxes, and then decided that they wanted to give it money.  

Add on that the city of Kalamazoo has a huge homelessness problem, which the city has not addressed in the short-term with foundation money, and you see why people are so angry. I listened to the most recent City Commission meeting, in which dozens and dozens of callers complained about the city’s bulldozing of homeless encampments and its decision, on the same day, to spend $800,000 for golf carts for a city-run golf course. (These golf carts make the city money, but people were upset that the commission didn’t budget money to help Kalamazoo’s growing homelessness population.)

One last note about democracy: Kalamazoo had an election on Tuesday, and the mayor who announced the $400 million—who also received campaign donations from the families who gave the initial donation—won re-election. His opponent, a Black woman who was serving as vice-mayor, was taken off the ballot. The city clerk said this was because she signed an affidavit saying that she had no debts to the city, but that she actually owed $500 for a previous campaign debt. She says she had no idea that she owed any money, and indeed, the county clerk said in 2019 that it had waived fines because the software used to track campaign filings had failed to send notices. This is the type of thing that many people I talked to brought up in frustration as an example of democracy not working anymore in Kalamazoo.

Some more reading about philanthropy:

The Problem with Modern Philanthropy

The ‘Black Hole’ That Sucks Up Silicon Valley’s Money

How Silicon Valley Has Disrupted Philanthropy

Tech Billionaires’ Obligation to the Cities Around Them