Capturing Philanthropic Wealth in Rural Communities

August 23, 2018

Several months ago, I was pleased to see my hometown of Kiester join forces with five nearby towns to create a new community foundation called Our Town USA. At Southern Minnesota Initiative Foundation (SMIF), we support communities in capturing and retaining philanthropic wealth through community foundations like this. This has become increasingly important as $7 billion is expected to transfer between generations by the year 2030 in SMIF’s 20 counties .

In southern Minnesota, 30% of our 176 communities are home to a community foundation. More than half of these are administered by SMIF. SMIF currently assists in managing 28 small town community funds . These local foundations provide direct support for projects and programming important to their community, ranging from early childhood, tourism amenities and marketing, community events and much more.

SMIF acts as more than just the fiscal agent for these community foundations. We provide board facilitation and training, marketing and planned giving support; fiscal oversight and investment of the funds; and all necessary financial filings. SMIF has also provided a total of $514,000 in grant and endowment matching dollars so far to our 28 community funds to further their local efforts. In addition to community foundations, SMIF offers a wide range of other affiliate funds to help communities retain philanthropic wealth, including Donor Advised Funds, Scholarship Funds and Disaster Relief Funds.

SMIF's community foundations are also a great mechanism for supporting our retiring farmers while keeping rural Minnesota’s agricultural assets in production. The average age of farmers in southern Minnesota is 55 years and climbing. Farmland will account for a large portion of the transfer of wealth, yet it remains unclear to whom this wealth will be transferred. For every six farmers 65 or older, there is only one under the age of 35 standing in line to replace them, according to the 2012 USDA Ag Census.

However, there is a model that allows retiring farmers the peace of mind that their land will continue to be farmed by a new generation. In 2014 SMIF launched a farmland retention program called Preserving our Heritage . What makes this model unique is that rather than liquidate the asset as most charities do, we keep the land, continue it as productive farmland and use the income stream to support impactful community work.

Choosing to donate one’s land is an enormous benefit on all fronts: The landowner will receive a tax deduction and bypass capital gains while still being able to maintain a stable revenue source. The tenant can continue to rent and farm the land. The county maintains its tax base. The foundation retains ownership and acts as a steward of this resource to ensure the community benefits long-term from the income generated. Most importantly, the farmer leaves a legacy for their community.

Through this program, retiring farmers can give some or all of their land directly to one of the many community foundations that exist under SMIF’s umbrella, allowing farmers to support their individual communities. When a farmer is thinking about estate planning, it can be a comfort to know there is a way their land can remain active farmland and provide them with a steady revenue stream, while in the long-term also benefitting the communities and causes they care about most.

Our community foundations and other affiliate funds are doing amazing work and have to date invested $4.6 million through grantmaking to their communities. They are keeping our rural communities vibrant, providing funding for today and into the future. We are proud to be in a position to support their efforts.

SMIF’s 28 community foundations include Alden, Blue Earth, Byron, Eagle Lake, Ellendale, Elysian, Goodhue, Harmony, Henderson, Lanesboro, Le Sueur, Mabel, Madison Lake, Mapleton, Montgomery, New Prague, Our Town USA-United South-Central School District, Plainview, Preston, Rushford, Sleepy Eye, St. Charles, St. James, Spring Valley, Wabasha-Kellogg, Wanamingo, Winthrop, and Zumbro Valley. Many serve multiple area communities.

For questions about starting a community foundation contact Alissa Oeltjenbruns, Community Philanthropy Director, at alissao@smifoundation.org or 507-214-7023. For questions about the farmland retention program please contact Jennifer Nelson, VP of Development at jennifern@smifoundation.org or 507-214-7025.

Tim Penny is the President & CEO of Southern Minnesota Initiative Foundation. Tim represented Minnesota’s First Congressional District in the U.S. House of Representatives from 1982 – 1994.

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