January 23, 2003 | Read Time: 12 minutes
Foundation uses mining fortune to spur economic development
Look at the signature building projects here, and one is likely to see the imprint of Spencer Penrose.
The Broadmoor Hotel, the Pikes Peak Highway, the Will Rogers Shrine of the Sun, the Cheyenne Mountain Zoo — Mr. Penrose built all of them early in the last century, using a fortune made in gold and copper mining to turn this city into a tourist destination.
Today, another of Mr. Penrose’s creations — the El Pomar Foundation — carries on the strong focus on economic development. The $435-million foundation, founded in 1937, has spent $32-million to help the city build a concert and hockey arena, and it has helped make Colorado Springs a hub for national nonprofit organizations by providing multimillion-dollar grants to entice groups such as Focus on the Family, Junior Achievement, and the United States Olympic Committee to move here. This month, the International World Games Association, which holds a championship competition in multiple sports every four years, will move here also with the help of financial subsidies from El Pomar.
“We’re continuing the Penrose legacy,” says William J. Hybl, El Pomar’s chief executive officer. “He was interested in helping the community and in expanding the economic base, and so are we.”
‘Foreclosure Capital’
Most charities in the state welcome such a role for the foundation, particularly at a time when the local economy is flagging. In Colorado Springs, 8,300 people have been laid off in the past two years. Seventy percent of the layoffs have come at technology companies, including big employers like WorldCom and Hewlett-Packard. Many observers say the foundation’s grant making has helped the city weather the current downturn, as well as aided in the revitalization since the late 1980s, when Colorado Springs was dubbed “the foreclosure capital of the country” by CBS’s 60 Minutes.
Even with the recent economic trouble, the unemployment rate today stands at 5.8 percent, slightly lower than the national average of 6 percent.
The foundation’s grant strategies, however, have also drawn complaints. Some question whether grants like the one for the new arena are the best way to help city residents. A small number of charity officials worry that El Pomar wields too much influence, building its own empire in the Spencer Penrose tradition. No charity critics were willing to be quoted by name for this article, however, citing fears that such comments would hurt their ability to raise money in the state.
Even big fans of El Pomar say little gets done here, in the second largest city in Colorado, without the approval of the foundation. “If you’re trying to do something big in Colorado Springs, and it’s broader than just a neighborhood thing, you’ve got to get El Pomar involved or it won’t go,” says Jerome W. Page, former chief executive officer of the Urban League of the Pikes Peak Region, who retired in 2001. “It’s big money.”
Focus on Colorado
El Pomar’s offices sit in the shadows of the luxurious Broadmoor Hotel, which Spencer Penrose left to the foundation at his death in 1939, along with the surrounding 3,000 acres, valued then at roughly $15-million. Mr. Penrose named the foundation El Pomar (“the orchard” in Spanish) after his Spanish Mission Revival-style villa, which is nestled in the hills behind the Broadmoor, on the site of a former apple orchard. In keeping with its mission to promote “the general well-being of the inhabitants of the State of Colorado,” the foundation makes grants only to nonprofit groups in the state.
It took 36 years before the foundation board hired its first full-time employee. Currently, El Pomar has a full-time staff of 56, including 23 “fellows” who work on 13 programs run by the foundation, all of which were started after Mr. Hybl became CEO in 1990.
El Pomar’s current financial strength is due in large part to its forced sale of the hotel in 1988. The foundation held on to the Broadmoor as long as it could after the federal Tax Reform Act of 1969 barred nonprofit groups from owning a majority interest in a business. It finally sold the hotel just before the 20-year transition period permitted by the act was over.
After the sale, which coincided with the early years of a bull market on Wall Street, El Pomar’s endowment stood at $117-million. The foundation’s assets peaked at $490-million in 2000 before drifting down to the current $435-million.
Throughout much of the 1990s, El Pomar was the largest grant maker in the Rocky Mountain region. It was displaced in 2000 by the Daniels Fund, in Denver, which makes two-thirds of its grants in Colorado with the money it inherited from cable entrepreneur Bill Daniels.
Today, roughly 15 percent of El Pomar’s assets are in the Broadmoor (it retains a 20-percent interest) and other land holdings. The remainder, some $370-million, is invested in stocks (65 percent) and bonds (35 percent).
The foundation has been hurt less than many other foundations in the downturn thanks to its “defensive growth” strategy, which kept it away from technology stocks as they surged in the late 1990s. About half of the foundation’s assets are managed in-house by R. Thayer Tutt Jr., El Pomar’s president and chief investment officer. “We looked stupid then, but we’re looking less stupid now,” says Mr. Tutt, whose great-grandfather was in a mining partnership with Spencer Penrose. As of November 2002, the foundation’s stock-and-bond portfolio had dropped about 9 percent from the previous year.
The surge in assets over the past two decades has boosted El Pomar’s annual spending to about $21-million per year, and has allowed it to add 13 specialized program areas while also increasing its general grant-making budget. Given the recent weak stock market, El Pomar is in a holding pattern — it’s not adding any new programs, but it’s not cutting any, either.
“Until the last two years, we’ve been able to do it all,” Mr. Tutt says.
Array of Approaches
El Pomar’s strategies for improving Colorado Springs and the state take a variety of forms.
Through its El Pomar Youth in Community Service program, the foundation gives $10,000 each to student groups at 121 high schools and lets the students decide how to distribute the funds to nonprofit groups of their choice. The program is designed to instill an appreciation for philanthropy among young people.
To help run this program and others, El Pomar created a two-year fellowship program. The 23 fellows currently in the group, many of them fresh out of college, are paid $25,000 or more, depending on their work experience. Besides working on the programs’ day-to-day operations, the fellows volunteer one day a week at a nonprofit group, and take classes related to nonprofit leadership. The foundation also has a separate program to provide leadership training and scholarships to students at six Colorado universities.
And El Pomar allows any nonprofit group in the state to hold meetings at the elegant Penrose House, the former home of Spencer Penrose and his wife, Julie, for no charge.
It also sponsors the annual Awards for Excellence banquet, a splashy affair held at the Broadmoor that honors the state’s top nonprofit groups in 14 categories, such as education, environmental issues, and health care, with cash awards of up to $15,000. Before revealing the winners, El Pomar highlights the mission and accomplishments of each nominated group by showing a 30-second video, paid for by El Pomar, which the nonprofit organizations can then use in future fund-raising efforts.
In June, the foundation showed it can move quickly to meet emerging state needs, by creating a $5-million Wild Lands Fire Fund just weeks into what would become the worst fire year in Colorado history. El Pomar set up an operations center at the Penrose House and dispatched its team of 23 fellows to the scene of existing fires to assess the needs of firefighters.
The foundation has made small grants to 179 rural fire agencies, which are typically first on the scene at wildfires, to help them buy equipment and other necessities.
El Pomar officials contend that their own programs are as effective as those of the groups to which they award grants, but some nonprofit leaders believe that the foundation has become too much of a bureaucracy and is consuming money that should go directly to charities. “Grantees in the community would absolutely like to see more of the money,” says a former official at a Denver nonprofit organization, who recently moved out of state.
El Pomar counters that much of the money spent on its own offerings, such as the state-awards programs, ultimately does end up in the hands of charities.
Creating Jobs
Many of the foundation’s largest grants have sought to bring new money, jobs, and opportunities to Colorado Springs.
One of the fund’s most controversial grants was the $4-million it awarded Focus on the Family in 1988 to entice the nonprofit Christian media conglomerate to move its headquarters, and 1,200 jobs, from Pomona, Calif., to Colorado Springs. El Pomar officials say they made the grant to help the city persevere amid deep defense-industry cutbacks that nearly crippled the city’s economy in the late 1980s. But some people here grumble that the arrival of Focus on the Family helped cement the city’s reputation as a haven for conservative Christian groups. The city now has 107 evangelical Christian organizations, according to the International Bible Society, in Colorado Springs.
Some believe the foundation’s GOP links — Mr. Hybl served briefly as special counsel to President Reagan — may have influenced the Focus grant. “The people who resent their influence believe they have a conservative agenda,” says Cathy O. Robbins, executive director of the Chamber Nonprofit Partnership, a group based at the Chamber of Commerce that helps link Colorado Springs nonprofit groups with businesses and foundations.
Yet some who might be expected to criticize El Pomar instead talk about how it has evolved. “El Pomar has never been involved in the politics of the religious right,” says Frank Whitworth, an openly gay activist here. “Sure, they’re a conservative organization, but they’ve attempted to broaden their role to involve all of the citizens and be responsive to the needs of the entire community.”
More recently, El Pomar spent $32-million to help build the nonprofit World Arena, covering slightly more than half the arena’s total cost.
El Pomar officials made the grant after voters had declined at least three times to approve financing for the arena, says Mr. Hybl.
The foundation believed that having a venue for big events was crucial to the city’s development. Local residents had been taking their entertainment dollars to Denver, but the World Arena seems to be keeping many of them at home — according to Mr. Hybl, it’s one of the few arenas in the country that operates in the black.
Some charity leaders question whether the expense was a wise use of funds for an organization that vows to make grants only to groups and causes classified as nonprofit under Section 501(c)(3) of the Internal Revenue Code. “I would question whether that’s really a 501(c)(3) thing,” says a former official at another Colorado foundation. The arena, which opened in 1998, is classified as a charity by the IRS.
Mr. Hybl, who twice served as president of the U.S. Olympic Committee, says that in addition to its economic benefits, the World Arena fits with El Pomar’s longstanding commitment to amateur sports. In 1977, El Pomar provided $1-million to the U.S. Olympic Committee to move its headquarters here, and the foundation over the years has supported 15 national federations for fencing and other sports. The World Arena’s Ice Hall is used by Olympic contenders in figure skating, short-track speed skating, and hockey.
‘Quality of Life’
Even with El Pomar’s deep pockets, Robert K. Scott, president of the Greater Colorado Springs Economic Development Corporation, says a foundation cannot head off a recession. Nonprofit groups employ only about 3 percent of the city’s workers. “In my opinion, the largest impact of El Pomar in this community has been in contributing to the quality of life,” Mr. Scott says.
El Pomar’s powers to shape city plans, while substantial, have also run into limits.
In 1999, the foundation set aside $5-million to build a center in Colorado Springs to consolidate various services for the homeless, including a soup kitchen and a shelter to house 240 people. The plan was popular among community advocates and social-services groups, but it unraveled when landholders near the proposed site lobbied against it, fearing it would hurt property values. El Pomar says it will still spend the $5-million, but in a more piecemeal way, assisting various groups over time.
“It would have been more effective to do what we’d initially planned,” Mr. Hybl says.
Ms. Robbins of the Chamber Nonprofit Partnership says the homeless-center defeat illustrates that El Pomar isn’t as powerful as its critics sometimes claim. “They obviously don’t get everything they want,” she says.
Even so, she applauds foundation officials for pushing for city improvements, such as the World Arena, which she says has been a gathering place for people of all ethnicities and socioeconomic levels. Those who criticize the grant forget that the philanthropic dollar can go in different, but equally worthy, directions, she says.
“Do you build libraries so that everybody can read or give money to a beggar on the street?” she asks. “There isn’t a right or wrong answer — it lies in the intent of the donor and the trustees who interpret that vision.”
History: Established in 1937 by Spencer Penrose and his wife, Julie. Mr. Penrose, who made a fortune in gold and copper mining, also built the Broadmoor Hotel, in Colorado Springs.
Purpose and areas of support: The foundation makes grants only in Colorado, in the following program areas: civic and neighborhood efforts, human services, education, and arts and humanities.
Assets: $435-million as of December 2002.
Grants and operating programs: In 2002, the foundation made grants totaling roughly $15-million, and spent another $6-million on its 13 operating programs. The largest program, El Pomar Youth in Community Service, educates high-school classes about philanthropy and provides students with funds they can distribute as grants. In 2003, El Pomar’s total spending is expected to decline slightly.
Key officials: William J. Hybl, chief executive officer; R. Thayer Tutt Jr., chief investment officer.
Application procedures: Grant seekers must be based in Colorado and classified as tax-exempt under Section 501(c)(3) of the Internal Revenue Code. Additional information is available on the foundation’s Web site.
Address: 10 Lake Circle, Colorado Springs, Colo. 80906; (719) 633-7733 or (800) 544-7711.
Web site: http://www.elpomar.org
