Sal Army Completing Kroc Heiress’ Dream For Centers

June 1, 2012       Mark Hrywna      

Ten years after the first Ray and Joan Kroc Community Center was unveiled in San Diego, Calif., the largest Kroc Center is set to open this month in Chicago, Ill., leaving only a few more facilities to complete the late heiress Joan Kroc’s vision.

The San Diego center was the impetus behind what would be the single largest gift to a non-foundation American charity. When Joan Kroc died in 2004, she initially left $1.6 billion to The Salvation Army (SA) for the express purpose of building and endowing more centers around the nation. The wife of the late McDonald’s founder Ray Kroc, Joan envisioned Kroc community centers being built in underserved neighborhoods with the San Diego facility serving as the prototype.

Of the 99 letters of interest from local affiliates, 30 were selected for Kroc Centers. The first wave of facilities opened four years ago in San Francisco and Atlanta and each year since has seen a few more completed, with four opening in 2009 and 2010, respectively. Some were canceled along the way, victims of the recession or lack of local support, among other factors.

Five centers will open this year. In addition to Chicago, centers opened in Phoenix and Suisun City, Calif., during May. Two debuted during January in Honolulu, Hawaii and South Bend, Ind. Two others in the midst of construction are likely to open in 2013 in Memphis, Tenn., and Guayama, P.R. The only remaining Kroc Centers still actively fundraising are those planned for Camden, N.J. and Staten Island, N.Y., along with Norfolk, Va., which recently acquired property and should break ground later this year.

For a geographic overview of the Kroc Center initiative, click here.

The original San Diego center was funded by a $92-million donation from Kroc in 1998, to which she later added another $5 million for endowment purposes. The endowment was a critical part of the billion-dollar estate gift, which was split among The Salvation Army’s four territories, with each share reaching almost $450 million. Each territory administered the gift and set requirements on how much the local affiliate would have to raise to match the Kroc money, which would fund construction and part of the center’s endowment.

The Kroc gift totaled more than $1.8 billion after the estate was settled. It was distributed to the four territories between 2005 and 2010, according to the most recent audited financial statements for The Salvation Army:

  • 2005, $980 million
  • 2006, $312 million
  • 2007, $290 million
  • 2008, $138 million
  • 2009, $78 million
  • 2010, $3 million

Kroc centers have had struggles over the years. The Salvation Army canceled several planned facilities when it became clear that local officials would not be able to raise enough money, to some extent victims of the economic downturn. Among them were Long Beach, Calif., Louisville, Ky., Detroit, Mich., and Mas­sena, N.Y. In some cases, the local SA chapter planned to pursue a scaled-down version of a facility separate from the Kroc gift.

An issue that has come up over the years has been how closely the centers connect with The Salvation Army’s mission. With some local exceptions, most Kroc Centers are elaborate facilities, featuring performing arts centers, swimming pools and other recreational facilities and programming for adults and children, what some have described as not within the organization’s mission of helping the poor. The basic elements of each Kroc Center were required to include arts, athletics and educational elements, with some variations among facilities. “Mrs. Kroc wanted it to be very holistic in nature,” said Steve Bireley, Kroc Community Coordinator for the Western Territory.

“What we didn’t want was a cookie cutter operation to dictate to the community how it’s to be built,” said Maj. Jorge Diaz, property and mission expansion secretary for the Eastern Territory, adding that programs operating in each area are specifically designed for that particular community.

“This has been a little bit of a stretch for the Army but it’s one that’s totally compatible with our mission,” said Maj. Bob Rudd, community relations and development secretary for the Western Territory. “The philosophical question is should The Salvation Army stay responsive to changing demographic needs in the community. We were called to serve those who are in need. If the need changes and the needy is inclusive of a broader range of personalities than just people who are dirt poor, well then that’s part of our mission too,” he said.

Part of the fundraising effort was educating the public about a new way of Salvation Army service, according to Commissioner Carol Seiler, territorial coordinator for strategic mission planning. “There were many people who felt that the efforts we were doing with the basic survival, subsistence, emergency assistance, housing for the homeless, that those were closer to the heart of us. So some of the education that we were doing on the impact this could do in underserved communities, with giving youth and families opportunities, and a safe environment for seniors…that education piece was part of the fundraising challenge as well.” She described it as a “change in the envelope, a fancier building, but not a change in mission.”

Nowhere was that more evident than in Detroit, Mich., one of several cities that initially was awarded a center only to cancel the plans. One of the challenges there was the local desire to continue basic services, such as emergency assistance, addiction and recovery, and other extensive work for which The Salvation Army is known, Seiler said. People wanted to put funding into those programs.

The Salvation Army ultimately decided to abandon plans in 2009 after almost two years of trying to reach the second phase. Approximately $2.3 million was spent and an estimated $2.1 million was raised for the proposed Detroit Kroc Center. Seiler said development consultant firms were changed two or three times, thinking that might have been the problem with fundraising, and internal staffing had to put work together before construction bids. After the Kroc Center was canceled, the decision was made locally to pursue some type of facility on a smaller scale.

Other canceled centers faced challenges, such as fundraising and property acquisition. “The economy changed just enough that Louisville just couldn’t do the local fundraising,” said Maj. Bert Tanner of the Southern Territory, and another Kroc Center planned in Charlotte, N.C., was canceled because fundraising would not be able to support it. “It came in that period of time after the downturn, at the end of 2008 and 2009,” he said.

In other cases, the economy wasn’t a death knell for a Kroc Center but it might have modified the original plans. The early projections were based on a 2004 economy, said Tanner, so the cost of construction changed considerably as they started going into the project’s development stages. The recession increased the cost of some materials but reduced some labor costs from those early projections, he said.

Long Beach, Calif., was the very first Kroc Center announced as an award recipient, but after four years and $4.6 million spent, it could not raise the $15 million required. There was also difficulty in the site that had been identified — a flood control plain owned by the city, county and state, which required approvals to give control of the site to The Salvation Army. Sustainability also became an issue in Massena, N.Y., and when the center was canceled, the Kroc dollars were disbursed to other Eastern centers identified as possibly needing a boost for construction or endowment, according to Diaz.

“Sustainability is a critical issue. You can build a building possibly but can you sustain it, and the answer is no. You’ve got to demonstrate that these are sustainable. It was an objective kind of thing,” Rudd said.

Community buy-in

“Part of the ‘challenge’ is that Mrs. Kroc was adamant about several important things. It had to be a world-class center providing opportunity for people who would not normally have an opportunity, including young people and older folks,” said Rudd. “To make projects healthy, she would give part of her money toward endowment, the idea being she wanted the community to demonstrate in a practical sense that they were supportive of this notion. She didn’t want to force these projects on anyone. She wanted it to be a real community center, a synergistic kind of effort,” he said.

“It’s important to have the community with you on it,” Seiler said, “then they have the sense of ownership.”

The South Bend, Ind., Kroc Center had at least 7,000 members within the first couple months of opening. In anticipation of the Chicago opening this month, The Salvation Army has been conducting Kroc Center-related youth and school programs for two years, Seiler said, generating excitement in the community and creating partnerships. In Green Bay, the community raised the required funds before plans for a community center were even approved, according to Seiler.

The team behind the Kroc Center in Augusta, Ga., made almost 200 public presentations regarding the proposal. They visited civic meetings, schools, homes and businesses. “We felt that if we want people to invest, we wanted them to be as informed as possible. I think that helped tremendously,” said Capt. Todd Mason, administrator of the Augusta center.

Augusta also extended the pledge period to five years instead of the traditional three years, allowing donors – most of who started in 2008 – to conclude their pledges in 2013. “It gave them that little additional window of opportunity, a chance to spread that out a little more and feel more secure in their gift,” Mason said.

Norfolk, Va., is in the final phase, recently confirming a land purchase from the city and completing the necessary fundraising, which on average is about 75 percent of the required total. Kroc Centers in the Southern Territory, Tanner noted, have not received any government support in terms of fundraising and avoided any tax-based revenue.

Timing is everything

“The overall fundraising climate is definitely improving,” said Seiler. “Most of ours in Central Territory were already committed, had done their fundraising to move forward and are moving into the model of how their business model is to operate and what the endowments are to do with that. So, there are fewer (Kroc Centers) out there left to do the aggressive fundraising.”

In the Central Territory, 90 percent of local funds had to be raised before construction could begin. That threshold wasn’t consistent across territories but it usually required a bulk of the money. The threshold was based more on how conservative the territory’s administration was in a sense, Seiler said. “In the Central Territory, we just wanted to make sure it was pretty stable before moving forward,” she said.

The second phase of the Kroc Center process included between 700 and 1,000 pages of documentation of community support, plans and site visits, according to Seiler. In cases where cities didn’t get past that first phase, she said there likely were issues related to the programming, planning, location or quality of the proposed site.

Guidelines for the Kroc gift were that Kroc Centers match 100 percent of the construction gift and 50 percent of the endowment to operate the center, but that could vary somewhat between territories. Some territories continued to raise money for either construction or endowment, above and beyond the match for the Kroc gift.

Chicago will be the largest Kroc Center, at 166,000 square feet and 30 acres, as well as the most expensive to construct at $110 million. The campaign had a $50 million goal, with $22.5 million for the endowment, and later made a decision to expand with a capital campaign to construct athletic fields and a five-hole putting course. In Philadelphia, an additional $10 million was raised to add to the endowment.

Across the Delaware River from Phila­delphia, in Camden, N.J., a 24-acre property is being remediated. The nearly $14-million clean-up cost will be covered by the city, after which The Salvation Army will purchase the site. Construction could begin by the end of this year. When people can see that there’s work being done on a site, it can help with fundraising, said Roger Severn, territorial field specialist for property and mission expansion for the Eastern Territory. Fundraising continues for the 125,000-square-foot facility, having reached $8 million of its $10-million goal.

“We are experiencing the same thing the nation is experiencing. Folks are being very cautious in how they invest their dollars in general,” said Diaz. “There have been roadblocks in some certain areas but by and large, where centers that have opened, folks have been very responsive,” he said.

While there is a media market overlap between Philadelphia and Camden, Diaz said New Jersey has a robust roster of foundations and companies that operate in the state. “It’s just a matter of accessing those companies and presenting the stories,” he said. “It’s a little bit of a challenge but New Jersey is an economy unto itself.”

Having another Kroc Center in close proximity is not without its benefits. Severn said they’re able to tour the Philadelphia center with potential funders and show off what a completed facility might look like, just a short drive across the Delaware River. “It’s been a benefit in a difficult market,” he said.

Across the Arthur Kill from New Jersey in Staten Island, N.Y., is probably what will be the last of the more than two-dozen Kroc Centers. It’s just a matter of when it’s completed. The Salvation Army in 2009 acquired a former hospital as the site for a Kroc Center. While the center meets criteria for a Kroc gift – to serve an underserved neighborhood – it remains to be seen whether the center will be able to generate enough financial support to sustain one. “The challenge is that there are not sufficient foundations or individuals to sustain the operation. We continue to pursue several avenues,” Diaz said, adding that fundraising really hasn’t kicked off as the organization is still seeking volunteers to chair the campaign.

The next step for Staten Island is to gather a campaign committee and determine how to raise the $37-million goal, which Diaz expects to report back on in several months.

In places where the Kroc Centers have been open for some time, such as San Diego, Seiler said the organization is working on coordinating how to consistently assess the impact of their facilities. “We’re already seeing things like property values increase,” she said, and will examine crime rates in the community and other research-based impact on young people, such as childhood obesity rates. “We think these things are worth recording, and make some difference on key public health issues. Cities have been very interested in that,” said Seiler.

The Kroc Centers are very personal to Bireley, the Kroc Community Coordinator for the Western Territory. He managed the original Kroc Center in San Diego and grew up not far from where it was built.

“I didn’t come from a poor family. We had a roof over our head and food on the table, but I wasn’t going to day camp. I wasn’t going swimming. I didn’t have anywhere to go other than places I probably shouldn’t have been and doing things I probably shouldn’t have been doing,” he said. “I think there’s a huge segment of the population in this country that falls into that category: no, they’re not under federal poverty guidelines but they aren’t able to afford the things that kids really need.” NPT