Southeastern San Diego Charity Prepares For Major Funding Shift
The Jacobs Center will lose its main source of money by 2030 and is looking for new donors
Thursday, July 28, 2016
The main financial support for the charity comes from the Jacobs Family Foundation. By 2030, the foundation will sunset its contributions.
Southeastern San Diego Charity Prepares For Major Funding Shift
Claire Trageser, reporter, KPBS
The Jacobs Center for Neighborhood Innovation has been part of southeastern San Diego since 1995, funding the Market Creek Plaza shopping center, helping locals start businesses and working to redevelop the area.
The main financial support for the charity comes from the Jacobs Family Foundation, started by entrepreneur Joe Jacobs and his wife, Violet, but that support is ending. By 2030, the family foundation will sunset completely. That means a major shift for the Jacobs Center — and could mean it will struggle to survive.
At the start of this year, the Jacobs Center changed its tax status to become a 501(c)3 public charity, which will help attract new donors, said CEO Reginald Jones. It had previously been a private foundation.
“As a foundation, it's more challenging to raise money,” Jones said. “Now, as an independent 501(c)3 public charity, we are able to really leverage the Jacobs Family Foundation's resources to bring in more investment partners with us to do this work.”
The center will need new donors to continue operating in the neighborhood, he said.
“There are challenges ahead, but with any undertaking like this, there are challenges, and it’s important to not get bogged down in those challenges,” Jones said.
‘Give people a hand up’
Born to Lebanese immigrant parents in Brooklyn, New York, Joe Jacobs went on to earn a doctorate in chemical engineering and founded the Jacobs Engineering Group in 1947 in Pasadena. The company made $12 billion last year.
One of his three daughters, Valerie Jacobs, said when the company went public in the 1970s, the family received a significant influx of cash.
“We were all very surprised about that,” she said. “He and my mom almost immediately went home and decided they were going to give most of it away.”
“We had a big argument the first time we decided to give away money,” she said. “My dad wanted to give it to a conservative think tank, and the daughters said, ‘No way, Dad.’ And he said, ‘Well, it's my money.’ And we said, ‘You said we were all going to do this together.’
“So he, to his credit, came back and said, ‘OK, if I want to do that, I'll do it outside the foundation and we'll decide together where it should go.’”
The family then committed to improve southeastern San Diego because it was one of the few causes they could agree on, she said.
“Our family is very divided politically,” she said. “But we did find common ground in trying to give people a hand up, not a hand out. We could all get behind that, and that's where we started.”
Sunsetting family’s funding
On a recent hot and sunny day, Sergio Gonzalez wandered among aisles of plywood boards set up next to Chollas Creek. Each was covered top to bottom with radiant designs in spray paint.
“So they let us build two walls. We were supposed to be temporary. We ran out of space the next day, so we built two more walls, and two more walls, and eventually we had this art park,” Gonzalez said.
He’s the finance manager of Writerz Blok, an urban art program run by the Jacobs Center that has created a space for teenagers and artists to make graffiti murals.
Gonzalez grew up in the neighborhood, and was a teenager when Joe and Vi Jacobs began their family’s work there in the 1990s.
“A big problem in this community has always been gangs, violence, illegal graffiti,” he said. “So when the Jacobs Center moved into this community, they came in with big construction trucks and trailers and started the redevelopment. Those were blank canvases to us. We’d paint on those trucks and trailers, and the next day they’d be erased. And we’d come back and do it again. To us, it was a threat because we didn’t know who these people were and what was going on, so we would go out and deface their property to keep them away.”
Instead of fighting the graffiti, the Jacobs family set aside a space for them to do it, which eventually became Writerz Blok. Now, the program also provides education and job training, including classes in graphic design, screen printing and graffiti art history.
“What started as a nomadic program as a way to minimize vandalism in this community has now turned into one of the most unique art parks,” Gonzalez said. “It helps at-risk youth, youth that are disconnected from the schools, and brings them the idea of having careers through art.”
The family has given more than $100 million to the Jacobs Center, which is on Euclid Avenue near Market Street. The center bought 60 acres of property to redevelop, including Market Creek Plaza in Chollas View. It also runs other job training and education programs.
The Jacobs Center had $125 million in assets in 2014, much of it in property, according to an audited financial report. It received just under $16 million in contributions, with $15 million coming from the Jacobs family — a big jump from prior years. From 2011 through 2013, the center averaged just under $9 million in contributions annually, with an average of $7 million coming from the Jacobs family.
In 2014, the center brought in another $2.6 million in rents from the property it owns. It spent between $9 million and $23 million a year from 2008 to 2014, so it will need to spend less or raise more money in the future to offset the loss in the Jacobs family’s contributions.
Valerie Jacobs said the plan was always to phase out their funding.
“We’re going to go out of business, so the community will be inheriting the assets we built,” she said.
The goal is to see if the family’s efforts can create lasting impact after the money is gone, she said.
“This is a grand experiment,” she said. “Nobody's ever done this before, and one of our values in the Jacobs family has always been risk-taking. And we might fail.”
Becoming a public charity
When the Jacobs Center became a public charity this year, some technical changes occurred with the switch. For example, a federal law that requires a private foundation spend 5 percent of its assets each year no longer applies. It also means that people who give to it can get larger tax deductions — 50 percent of the donor’s adjusted gross income instead of 30 percent for a private foundation.
There are also new restrictions. A public charity must get money from a range of sources — no more than two-thirds of its funding can come from one person or entity.
A public charity isn’t required to spend 5 percent of its assets each year, but it should spend that amount and more if it wants to attract donors, said Jim Lauth, a San Diego lawyer who works with charities.
“No one would want to contribute to the charity if it’s only spending 5 cents on a dollar for its charitable programs,” Lauth said. “They want to see 85 to 90 percent.”
He said switching to public charity status means more people are likely to donate, because they think a private foundation doesn’t need their money.
“Why would I donate to the Rockefeller Foundation?” he said.
The Jacobs Center is doing what’s called place-based philanthropy, which means its work is rooted in a specific area, said Nancy Jamison, president of San Diego Grantmakers, a nonprofit membership association.
That type of work comes with added challenges, she said.
“You can’t be a philanthropist who comes in and makes a few grants and leaves,” Jamison said. “You have to truly listen to what the community members need instead of flying in and saying, ‘OK, we’re going to do this for you.’ It’s about what the community identifies as the issues.”
That also means finding funders who want to pay for what the community wants to do.
Jamison said it won't be easy for the Jacobs Center to raise enough to make up for the foundation’s support, but she’s optimistic it can succeed.
Plans for the future
Jones, the Jacobs Center’s CEO, shares that optimism. His task now is to find a way for the organization to transition the work to the community so it continues after 2030.
“What we hope to do is leverage the family's investment with other funders, both locally, regionally and on a national level to really create a strong, stable, sustainable organization that will carry out the work that we've set out to do,” he said.
The Jacobs Center has not yet developed 37 acres of its property and is working on a new master plan for that space. It’s also currently collecting comments from the community about future development.
Southeastern San Diego was among several underserved communities in the country recently named a “Promise Zone,” a federal distinction that makes it easier to get grants. The Jacobs Center will get some of those funds to use in the community.
Jones said government money will be necessary.
“Philanthropy can't do what government should do in really uplifting historically underinvested communities like southeastern San Diego,” he said. “So for that reason, while we're seeking private funding partners to come into this work with us, we're also really engaging very heavily with the city and state as well as federal sources.”
As for the graffiti mural space Writerz Blok, Sergio Gonzalez said he’s working to make his program a nonprofit separate from the Jacobs Center. He’s building classroom space and looking for a new location so he can expand its career training programs and serve more students.
“We’re building our capacity as residents, as business owners, to learn about everything we need to know,” he said. “So once they’re gone we’re not left here with nothing.”
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