Donald W. Reynolds Foundation winding up years of giving

MOUNTAIN HOME, Ark. (AP) — A $10 million grant from the Donald W. Reynolds Foundation transformed this city's public library into a showplace and destination.

"We have more than 600 people a day come through those doors," said Gwen Khayat, director of the Donald W. Reynolds Library, which serves Baxter County. "Except for Wal-Mart and the grocery store, I bet we have more traffic than anybody."

Mountain Home voters soundly rejected a property tax increase in 2003 to raise $2 million so the library could move from its 39-year-old building into a vacant Harvest Foods supermarket.

"It was humiliating," Khayat said.

The next year, library officials began talking to people at the Reynolds Foundation about grant possibilities. They got small grants to study feasibility. Then, in 2008, they were awarded a $10 million grant for construction. The new library opened in 2010 along the U.S.62/412 bypass.

A bust of philanthropist Donald W. Reynolds is in the entryway of the library. On Sept. 23 each year, library staff members gather around it to celebrate Reynolds' birthday. At Christmastime, the bust is decorated with a Santa Claus hat.

"That's our way of including him and recognizing how grateful we are," Khayat said.

For more than 60 years, Arkansas has benefited from Reynolds' philanthropy. It's one of three states -- along with Nevada and Oklahoma -- where he owned businesses and focused his charitable efforts.

But by the end of 2017, the foundation that Reynolds established in 1954 will cease to exist.

The decision to end the foundation was made in 1994, shortly after Reynolds' death the previous year, said Steve Anderson, president of the foundation.

"It was never meant to go on in perpetuity," he said.

Since 1994, the Reynolds Foundation has given $1.8 billion in grants, including more than $460 million in Arkansas, said Anderson.

Most colleges in the state have a building bearing the Reynolds name. It's on everything from Razorback Stadium in Fayetteville to the Institute on Aging at the University of Arkansas for Medical Sciences in Little Rock.

Born in 1906, Reynolds spent his childhood in Oklahoma City, where he hawked copies of the Oklahoma News at the railroad depot, according to the foundation's website, dwreynolds.org. Reynolds worked in a meatpacking plant to pay for his studies at the University of Missouri School of Journalism, where he graduated in 1927.

Reynolds started the Donrey Media chain in 1940 when he bought two Fort Smith newspapers -- the Southwest American and Fort Smith Times Record. He already owned the Okmulgee Daily Times in Oklahoma. The three newspapers were the basis for the Donrey chain.

By the early 1990s, Donrey had grown to include 53 daily newspapers, 11 outdoor advertising companies, five cable television companies and one television station. Reynolds was a billionaire -- the richest man in Nevada, according to the Las Vegas Review-Journal, which he also owned.

In April 1993, after a brief illness, the 86-year-old Reynolds died at sea -- on a vessel off the northwest coast of Italy, bound for Spain.

Later that year, Donrey Media was sold to Stephens Group Inc. of Little Rock. At the time, Forbes magazine estimated Donrey Media's worth at $950 million.

Reynolds' will instructed that most of the proceeds from Donrey Media's sale go to the foundation, according to an article in Editor & Publisher.

On Feb. 19 of this year, most of Stephens Media's properties were sold to New Media Investment Group of New York City for $102.5 million.

It's with a twinge of sadness that the Reynolds Foundation will shut down, said Anderson, a Fort Smith native who lives in Las Vegas, where the foundation is based and its headquarters building is listed for sale. The asking price is $9.5 million.

Anderson joined the foundation in 1994 and has been president for the past 17 years.

In 1994, the foundation board established guidelines for grant-making and developed a list of programs it wanted to investigate, Anderson said. This was done with the founder's original vision in mind, he said.

"We've stayed pretty consistent to our original intent and our original plan," Anderson said.

The foundation started its "current operations" in 1994 with between $800 million and $850 million, he said.

About eight years ago, the foundation board began the closure process, Anderson said. Basically, that meant giving out more grants than it had in the past and "spending down" assets.

"In the last five years, we've made significantly more grants than most foundations our size," Anderson said.

Part of the plan, from an investment standpoint, has been to limit the risk like one would when approaching retirement, Anderson said.

The 2017 date for terminating the foundation is tied to completing programs and initiatives that are already in the works, he said.

The date for terminating the foundation has changed a couple of times, Anderson said.

"In accordance with its articles of incorporation, the foundation is designated to terminate rather than continue in perpetuity," according to the mission statement on its website. "The Board of Trustees has determined that the foundation will cease to make grants on or before 2022."

But the date to end the foundation was moved up by five years.

"Everything will be paid out before we close the doors on Dec. 31, 2017," Anderson said.

There's nothing special about that end date, he said.

"There's not anything historically significant about that," Anderson said. "It's just a target date we finally set on and decided to work toward."

In the world of foundations, coming to an end is called "sunsetting." Basically, it entails giving away a larger percentage of assets than the 5 percent required for private, nonprofit foundations to keep 501(c)(3) tax-exempt status.

Anderson said that since 1994 the Reynolds Foundation has given more in grants than 5 percent of its assets.

Based on income tax returns, the Reynolds Foundation distribution ratio -- also known as payout ratio -- grew from 9 percent in 2006 to 49 percent in 2012. The percentage dropped to 31.6 the next year, as total assets dropped below $200 million.

In 2005, the foundation had $1.2 billion in total assets, according to its financial reports. By the end of 2013, total assets were $175.6 million.

As part of the sunsetting process, the foundation stopped accepting capital and planning grants in 2009. That capital-grants program had provided $393 million in grants during its 15-year history, according to the foundation's website. Those grants were only available to entities in Arkansas, Oklahoma and Nevada.

With the closure of its capital-grants program, the foundation focused more on its other initiatives.

"We have a number of multiyear grants that we are processing, commitments that we made in previous years that we are paying out over time," Anderson said.

At the end of 2013, the foundation still had $72.4 million in grant commitments to be paid out, according to that year's financial report. Numbers for 2014 aren't available yet.

Anderson said it's becoming more common for foundations to come to an end. Other spend-down foundations include the Bill & Melinda Gates Foundation, The Atlantic Philanthropies and the United Nations Foundation.

According to a 2009 study by the Foundation Center, 63 percent of foundations intended to go on in perpetuity, 12 percent planned to limit their lifespan and 25 percent were undecided. The average number of years between a foundation's creation and the decision to spend down was 19, according to the study.

A 2013 survey of CEOs of 211 large foundations indicated that 13 percent planned to limit the lifespan of their foundations, said Ellie Buteau, vice president for research at The Center for Effective Philanthropy, which provides data to help foundations become more effective.

She said foundations need to consider these options in light of their goals and strategies.

Steven Lawrence, director of research at the Foundation Center, said he doesn't believe more foundations are switching from perpetuity to spend down, but more foundation directors are aware of the option.

"Relatively younger foundations have thought through the issues of perpetuity more," said Lawrence, who described the Foundation Center as the leading resource for information on philanthropy worldwide.

Lawrence said foundations might choose to spend down if they want to have a larger impact in the short term.

More foundations are looking shorter term, Anderson said.

"It's not the norm, but there are more and more foundations starting to establish an end date, for a lot of different reasons," said Anderson. "Foundations don't want to get too far away from their original donor's intent. The farther you get away from it, the fewer people there are around who knew the founder."

Albert Ruesga, president and CEO of the Greater New Orleans Foundation, said there's a debate about whether certain foundations can do more good in the near future rather than the distant future.

"There's debate about whether more foundations should be spend-down foundations," he said.

"Keeping the large amount of money you find in an endowment tied up for perpetuity really reduces the impact of the foundation over time. There are some that say every foundation should consider being a spend-down foundation. ... The general consensus is that one size doesn't fit all."

From the time the Reynolds Foundation started in 1954 until Reynolds' death in 1993, the founder actively made grant decisions with his board, Anderson said. Most of those grants went to entities in communities where Reynolds had newspapers and other business interests.

Nationally, the Reynolds Foundation's priorities fall under three categories: cardiovascular clinical research, journalism, and aging and quality of life. Outside those parameters, some of the foundation's larger national grant recipients include the Smithsonian Institution in Washington, D.C., and George Washington's Mount Vernon plantation home in Virginia.

Much of the foundation's work has been regionally -- benefiting Arkansas, Oklahoma and Nevada.

"Because of our capital-grants program, we have focused a lot of our attention on Arkansas, Oklahoma and Nevada," said Anderson. "All of our trustees have come from those states. Mr. Reynolds was active in one way or another in all three states during his lifetime. There were a lot of Donrey properties in those three states as well."

Besides the capital-grants program, regional initiatives have included women's shelters, food distribution programs and museums for children.

Reynolds Foundation grants have built food banks in Little Rock and Jonesboro, as well as women's shelters in Fayetteville, Fort Smith and Pine Bluff. The foundation also funded children's museums in Little Rock and Hot Springs.

The foundation has helped other entities, such as the Positive Atmosphere Reaches Kids (PARK) organization, a Little Rock after-school program that received a $2.5 million grant in 2013 to help it reach its $10 million endowment destination.

The Reynolds Foundation also gave PARK $5.2 million in 2001 for construction of its building on Geyer Springs Road in southwest Little Rock.

Melanie Jackson, community outreach coordinator for PARK, said the organization doesn't receive operating grants from the Reynolds Foundation.

Jackson said the Reynolds Foundation will "definitely" be missed.

"They were with us all along," she said. "We just received the last funding from them recently to reach our $10 million endowment. I think we should be OK. I think they are disbursing the last of their money now."

The largest cumulative recipient of Reynolds Foundation grants in Arkansas has been the University of Arkansas for Medical Sciences, where grants funded cardiovascular research and a geriatrics program, said Anderson. UAMS has received more than $89 million from the Reynolds Foundation since 1996.

Dr. Jeanne Wei, director of the Donald W. Reynolds Institute on Aging at UAMS, said the foundation's grants will help the institute continue in perpetuity.

"The Donald W. Reynolds Foundation has given UAMS sufficient funds, coupled with our own fundraising efforts, to establish a building endowment to maintain the Reynolds Institute on Aging facility in perpetuity," Wei said via email.

The University of Arkansas in Fayetteville has received more than $50 million from the Reynolds Foundation. Most of that came through the Razorback Foundation, which funds athletics at the university. The Reynolds Foundation gave $21 million toward the renovation of the UA football stadium, which was renamed Reynolds Razorback Stadium after the work was completed in 2001.

For some grant recipients, the sunsetting of the Reynolds Foundation will mean having to find donations elsewhere.

The Arkansas Economic Acceleration Foundation established and manages the Donald W. Reynolds Governor's Cup, a collegiate business plan competition for students in Arkansas, Nevada and Oklahoma. The program receives grants from the Reynolds Foundation.

Sam Walls III, president of the Arkansas Economic Acceleration Foundation, said that foundation will have sufficient grant money to get through 2016, but after that, it will be looking for donors to replace the Reynolds Foundation grants that will no longer be coming.

Walls said the Reynolds Foundation provides the prize money, which is $160,000 for each of the three states. The total cost for the program in each state is about $250,000 when the competitions and awards banquets are included, he said. Then there's another $90,000 in prize money for a tri-state competition, he said.

"For us, it's an issue," said Walls. "We're gonna miss them. There's no question about it. Next year, the funds run out. It's our swan song with the Reynolds Foundation. We hate to see them go. ... There's a universal agreement that we've got to keep this thing going. The challenge is, "who's going to step up?"

In some smaller cities, a gift from the Reynolds Foundation can have an exponential impact.

A decade ago in Mountain Home, population 12,448, a plan was in the works to renovate a former supermarket building to be the new Baxter County Public Library.

The library board wanted voters to pass a temporary millage increase to raise $2 million for the renovation. But an anti-tax group fought against it.

"We took our proposal to the voters, and it got soundly defeated," said Jackie Edmonds, who is president of the board of the Baxter County Public Library Foundation.

"It went down in major flames," said Deborah Knox, a trustee with the Baxter County Public Library Foundation. "I think 80 percent voted against it."

Instead, the pro-library faction applied for a grant from the Reynolds Foundation, which decided to grant $10 million for the library's construction.

"They said they'd build it if we came up with a plan to operate it and sustain it," Edmonds said.

And that's just what they did. The library board raised $2 million for an operating fund, which the Reynolds Foundation matched with another $2 million.

The new library was constructed in 2009 and was dedicated the next year.

"The whole thing came out of a major failure," said Khayat, the library director. "So it started with a sad thing."

Knox said she and Khayat put a lot of work into the effort to get the Reynolds Foundation grants. Knox also chaired the capital campaign to raise the $2 million.

The Reynolds Foundation grants allowed the library board to build a 36,000-square-foot library to replace the 12,000-square-foot public library that residents had used since 1964.

"It became everything we intended, everything we dreamed," Knox said of the new library. "It made a real difference in our community. I can't think of anyone anywhere that has benefited as much as we have."

The library has become a showplace in Mountain Home.

"People bring out-of-town guests over to see it," said Knox. "That is how pretty it is."

When Knox walks past the bust of Reynolds in the library's entryway, she sometimes stops to rub its head.

"Most of the time, I blow him a kiss," she said.

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Information from: Arkansas Democrat-Gazette, http://www.arkansasonline.com

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