Through foundation, Arlington's gas revenues helping community
Interest revenue from gas-lease fund is a boon for the city
ARLINGTON -- Five days a week, Meals on Wheels volunteers bring Arlington residents Frank and Gracy breakfast, lunch and companionship.
The couple, married 79 years, rarely cook any more and say they appreciate the easy-to-prepare meals. But what Gracy, 96, said she most looks forward to is visiting time with the volunteers, who sometimes send her postcards while they are on vacation and bring her back little trinkets.
"I've got this one -- she is a doll," Gracy said about a friendly volunteer who recently gave her a white beaded necklace. The family asked that their last names not be used for privacy reasons. "She sure is a good one."
Meals on Wheels of Tarrant County, which serves 379 people in Arlington, is one of numerous local charitable organizations supported by the Arlington Tomorrow Foundation, an endowment city leaders created in 2007 to invest and manage a significant portion of the revenue from natural gas leases on public property.
The foundation, starting with a $25 million endowment that has grown to $80 million, has awarded 252 grants totaling $7.3 million from interest earnings on bonds over the past five years to city departments, nonprofit organizations and neighborhood groups for projects that help the public.
Now foundation leaders are looking to deepen the charity's community impact.
Its board of directors recently approved a new investment strategy designed to increase the endowment's annual return, which would allow it to support even more projects each year. They also are working to make it easier for interested groups to apply for funding. The changes, along with a new website, are expected to launch in September or October.
"After five years, we all recognize what a great gift this is to the city and how much potential it has to make an impact in the city," said Carolyn Mentesana, the Arlington Tomorrow Foundation's executive director. "At this milestone in our history, we are looking at ways to take it to the next level."
Relaxing the rules
Changes recently approved include switching to a year-round application process -- instead of accepting requests only twice a year -- removing caps on grant amounts that currently range from $15,000 to $100,000; and no longer requiring applicants to sit out for two years if they have already received two consecutive years of funding.
"Our goal is to make the foundation as accessible as possible and easier for people to understand," Mentesana said.
Those changes would benefit organizations such as Meals on Wheels, which received a $25,000 grant last year and a $30,000 grant this June. Under the current policy, the agency would have to wait two years before it could apply again. Carla Jutson, Meals on Wheels executive director, said this year's grant will pay for 6,000 meals for its Arlington clients.
"We are so grateful to them. Six thousand meals will be prepared and delivered. Six thousand times somebody will knock at the door and make sure the client is OK," Jutson said. "It is a major source of help for our clients.
When Arlington began signing natural gas leases on public land, the City Council discussed whether to invest the windfall to create a long-term revenue stream or spend the money on immediate needs, such as street repairs and park improvements. In 2007, the council decided to invest 90 percent of the one-time lease bonus money and 50 percent of royalties for the foundation and use the income earned on that money to issue grants. The rest of the bonus money and royalties has gone to the city's general fund.
"We knew there was going to be millions and millions of dollars coming in from natural gas activity on public lands. We didn't feel like it was fair for our generation to get that money to fix things in the city all at one time," Mayor Robert Cluck said. "We could have spent that money in eighteen months for sure but what would we leave behind? Nothing."
Mentesana, the only full-time staff member, oversees the foundation with a board of directors that includes three Arlington City Council members and two community leaders. The $80 million endowment is now the second-largest charitable endowment in the city, after United Way-Arlington, to invest in organizations that are based in the city or serve its community.
One of the foundation's first gifts was $1 million to help the River Legacy Foundation establish its own endowment. Over the past five years, at least $3.1 million has gone to city departments, primarily the Parks and Recreation Department, Mentesana said. City projects receiving funding have included enhancements at the Arlington Tennis Center, playground equipment.
Other projects have included the Levitt Pavilion, the Lake Arlington Branch Library, neighborhood sidewalks and free trees for residents.
To generate bigger returns, the foundation hired an investment consultant last year to develop a more diverse portfolio. The endowment's principal had been largely invested in federal bonds, such as Fannie Mae and Freddie Mac, that were earning a little over 3 percent interest a year. Based on the consultant's recommendation, the board has now invested $70 million into two bond index funds and $10 million into an equity index fund.
By 2014, the endowment is expected to be invested 50-50 in bonds and stocks, which is more in line with other foundations and pension funds, City Treasurer Ethan Klos said. The diversified portfolio is projected to generate an annual return of 7 to 7.5 percent, which would allow the foundation to distribute even more grants each year. Mentesana said the board has taken a "very measured approach to the investment strategy."
"Our goal is to have a greater return so we can have a greater, deeper impact in Arlington," Mentesana said. "You make money so you can give money away."
The foundation also earned $5.3 million in capital gains after changing its investment strategy. That money has been placed in a new reserve fund that will allow the foundation to continue distributing the same amount of grants in case its earnings -- currently about $1.1 million a year -- decline.
Nancy Jones, president of the Community Foundation of North Texas, called the foundation's decision to diversify its assets "very savvy."
"It's a very smart move on their behalf to protect the continuity of the investment over a long time," Jones said. "If not, they run the risk of not being able to provide the sorts of returns that amount of wealth could provide."
Jones said her foundation has $157 million in invested assets. Of that, 60 percent is permanently endowed like the Arlington foundation and is invested similarly, she said.
The new investment strategy -- and the use of the foundation's money -- does have its critics.
Kimberly Frankland, a resident who regularly attends council and foundation board meetings, questioned whether its decision to invest 50 percent of its money to stocks over the next couple years is too risky.
Diversifying may be smart, but she questioned the speed of the transition.
"Theoretically it might be a good mix but theoretically stocks can go to zero," Frankland said. "Bonds are pretty darn secure but stocks are a whole different ballgame. This is public money."
"There is a lot of uncertainty in the world and I think it would be more prudent if they went to a 50-50 split over a longer timeframe."
While District 3 council member Robert Rivera supports the foundation's work, he argues that it would be more fiscally responsible for the city to spend the gas well windfall on immediate critical needs, such as the multi-million dollar backlog of road repairs, rather than issuing long-term debt and paying interest.
"These are public dollars and the citizens of Arlington who are here should benefit from the timely use of these resources. We have tremendous one-time needs in the city, including parks, fire and police equipment and street improvements," Rivera said. "The cost of these needed items are only going to become more expensive in the future."
Making those one-time investments would increase help improve the quality of life in neighborhoods and bolster the city's property tax base, Rivera said.
"The money isn't gone because you have invested it into our community. You have a brand new road, a brand new park and brand new fire truck," he said. "These are tangible items citizens can see and that benefit everyone."
A flood of requests
The foundation receives at least twice as much in grant requests each year as it can fund, Mentesana said.
In the fall of 2011, the board received 77 requests totaling $1.8 million but only had $720,000 available to award. This spring, it received 57 requests totaling $2.13 million but only had $642,000 available.
Recently, the foundation awarded a $70,000 grant to the River Legacy Foundation, which hopes to complete the first major interior renovation of the River Legacy Living Science Center since the building opened in 1996. River Legacy is required to raise $70,000 to match the funds before it will actually be awarded the grant, said executive director Jill Hill, adding that the nonprofit only has $15,000 at this point.
As part of a proposed $213,000 project, the center plans to install larger tanks that are designed to better mimic the fish, reptile and amphibians' natural habitats and allow for multiple species to be housed together. The project, which officials hope to complete this fall before the foundation's 25th anniversary, is set to be designed by Petraworks owner Greg George, who designed the Fort Worth Zoo's Museum of Living Art.
"It's better for the animals. It's better for the educational experience," Hill said. "We are looking to our community partners and the people who love what we do to help us in that venture. We can't do it without money."
Susan Schrock, 817-709-7578