In August 1986, when Tom Renier launched the Northland Foundation, the organization was little more than an idea.
He had rented space in the Ordean Building formerly occupied by the Boy Scouts.
“It had a black rotary phone in the middle of the floor, and that was it,” Renier said. “I walked in and said, ‘I suppose I ought to get some furniture.’ So I went down to Damaged Freight and outfitted the office, and then I started building my staff one person at a time.”
Today, as Renier prepares to leave the foundation, the organization employs 15 people in its offices on the sixth floor of the Sellwood Building in downtown Duluth, as well as 60-70 people working at the assisted living facilities it operates in Aitkin, McGregor, Buhl and Hoyt Lakes.
Starting with seed money from the McKnight Foundation and under Renier’s leadership, the Northland Foundation has amassed an unrestricted endowment of more than $60 million.
“That allows us to try things, to experiment, to take risks,” Renier said.
“Between that and the 20-some million (dollars) under management in our loan program, we’ve got about
$80 million in assets,” he said. “If you’d have told me 25 years ago we could do that, I would have said, ‘I can’t imagine that happening.’ ”
Hardscrabble origins
The McKnight Foundation gave birth to the Northland Foundation as one of six regional initiative funds created to serve different portions of rural Minnesota during difficult times. Renier recalls that the organization got its start “in the wake of a farm crisis all over Minnesota and a major downturn in the mining industry.”
The Northland Foundation and its five sisters focused from the beginning on turning the economic tide.
“We said that the financial viability of small communities really dictates a whole lot of what are human and social issues,” Renier said. “In other words, high unemployment, high poverty and the lack of a vibrant business community adversely affect all kinds of other issues, whether they be abuse, suicide or you name it.”
He said the thrust of the fledgling regional foundations was unorthodox, to say the least.
“Back then, pre-mid-1980s, economic development was really not on any foundation’s radar,” Renier said. “They were human service funders. They were arts funders. And the thing we told McKnight was that at a minimum, we want to increase the availability of capital. At the time, capital for small businesses and entrepreneurs was really difficult to find in rural places.”
Renier said he and other new initiative fund presidents who were hired with the help of McKnight funding had to make their case.
“To McKnight’s credit, they said, ‘We don’t really think we belong there. We don’t really think that’s going to work well for a foundation to be making loans to private-sector businesses. But if that’s really what you want to do, we’ll use our law firm to initiate an IRS ruling that says in areas of high unemployment and economic instability, creating jobs through financing small businesses and entrepreneurs is certainly in the interest of the general welfare of the community,’ ” Renier said.
He praised the McKnight Foundation for supporting an innovative idea.
“The initiative funds are unique in a lot of ways, but the thing that makes us absolutely the most unique is, I think we’re the only six quote-unquote philanthropic organizations that actually are allowed by law to make loans to for-profit businesses,” he said. “And it has been a pretty major part of what we do.”
Filling a gap
Renier said the Northland Foundation works in tandem with area banks and estimated that about 98 percent of the more than $60 million the Northland Foundation has lent to date has been in partnership with area banks.
“They don’t see us as competition. They view us as partners,” he said.
“They don’t compete with area banks, they augment them,” said Brian Hanson, president and CEO of APEX, a regional economic development agency.
Northland has stepped in to help small businesses and entrepreneurs who might not otherwise have access to the money they need to grow a business, often filling a critical financial gap. The organization intervenes when area banks aren’t quite able to underwrite a loan alone.
“We come in in a subordinated position behind the bank and make the deal work, and we structure it so that the borrower has the best terms possible to be successful,” Renier said.
Northland has leveraged more than $300 million of capital from the private sector to date by Renier’s estimate.
He said the foundation always exercises discretion but still has sustained some losses, which is no surprise for a development lender.
“I’m guessing that over the past 25 or so years that we’ve been doing this I think our loan loss rate is probably sub-5 percent, which is just about where you want to be if you want to do this legitimately but still fill a capital gap.”
At times, the Northland Foundation has been willing to restructure loan agreements to help clients in a pinch.
“If we feel that a business has the potential for profitability but really needs to get through a certain stage, we’ll do everything we can to hang with that business,” Renier said. “So we are clearly not risk-free. We have definitely written off some loans and some reasonably large ones. But we’ve also been very good at raising capital. Right now, we probably have about $20 million under management, with about two-thirds to three-fourths of that in active loans. The rest is available for lending. You never want to be completely out of capital, because then you can’t consider the next deal that walks in the door.”
Renier notes proudly that the Northland Foundation’s loan program is 100 percent self-funded. It pays for staff and other expenses, and it covers the loan losses incurred. Some years the loan program has made money, and some years it has come out behind.
“But overall, I think we’re as close to break-even as this kind of thing could get,” Renier said. “We wanted to run it like a business or a bank. We didn’t want to subsidize it with other people’s money, and I think we’ve been really successful.
Youth focus
Of course, the Northland Foundation isn’t just in the business of cutting loans.
Its philanthropic activities have a strong thrust toward helping young people, whether that’s through supporting Life House programming for homeless teenagers or funding for its Kids Plus initiative, which includes early childhood education, youth leadership programs and efforts to develop the philanthropic values of future generations.
Renier estimates that the foundation directs 50-65 percent of giving toward youth programs with a focus on “connecting kids to community.”
Northland has been able to tap small businesses, corporations and foundations for support. Renier notes that many of the foundation’s economic development partners also sign on to bolster its other philanthropic efforts.
In addition to youth programming, the foundation has supported families by working to address housing needs, help people with disabilities, fighting abuse, fostering self-sufficiency and developing workforce skills.
Aging with dignity
In recent years, the Northland Foundation has taken aggressive steps to help seniors stay as independent as possible and remain actively engaged in their communities.
“About eight or nine years ago, we concluded that one of the biggest challenges is keeping seniors in their small communities, because nobody was building any assisted living facilities or any kind of elder care in very small rural communities,” Renier said. “As much as we knew that would be a financial challenge, because there’s no wealth there, we said, ‘Let’s wade into this and see how it works.’ ”
The foundation now operates facilities in Aitkin, McGregor, Buhl and Hoyt Lakes, each with a capacity of 20 residents or less.
Renier said the senior facilities have required ongoing financial support from the foundation, but the organization’s commitment has not wavered.
“Fortunately, my board says, ‘This has been a long-term priority for us and, we’re going to stick with this, at least in the short run. We’re going to learn some lessons. We’re going to get really good at this. And if we don’t turn a profit, we don’t,’ ” he said.
Last year, Northland received a major grant from the Margaret A. Cargill Foundation, providing $2.5 million in a three-year period, during which it will work to develop a set of best practices for operating assisted-living facilities in small, rural communities with an aim toward making them more viable in small towns.
“Someone has got to figure this out. It’s probably going to be a major public policy issue as more and more people hit 55, 60, 65 and older, because in rural places, there isn’t the wealth to sustain quality care, and we’re all about quality care,” Renier said. “If you can’t do it and create aging in place with a strong, safe social environment, you’re not doing your job.”
“We as a society have to figure that out. We just do,” he said. “We owe it to our elders to make sure that they age with dignity and as much independence and socialization as possible. And if we can do it in their community, where they’ve invested their lives and their work and raised their families, we ought to try.”
Renier’s legacy
When Renier steps down from his post as president of the Northland Foundation at the end of this year, he will be 67 years old, but he said he’s far from tired of his job.
“People ask, ‘How could you do the same job for 28 years?’ And I say it has never been the same. It’s a different job every day, because we’ve been able to grow and try things and expand and experiment. That’s the fun of the job,” he said.
“But there’s always a time when you think, ‘I’m going hand this to somebody in really good shape with tons of potential and let another individual bring the new thinking and new excitement needed to take it to the next level,’ ” Renier said.
“I don’t want to get to the point where it’s not fun and challenging, because if you’re not moving forward, you’re moving backwards, and I want this organization to continue to move forward under new leadership.”
Saying goodbye won’t be easy for Renier.
“In one sense, it’s excruciating, but in another sense it’s really exciting to me,” he said.
Renier expects he will greatly miss many of the staff members he brought aboard through the years.
The average tenure of foundation employees is at least 15 years by Renier’s estimate.
Reflecting on his staff’s collective longevity, he said: “I’d like to say it’s because I pay them so much or I’m such a wonderful boss, but it’s because they’re so damn committed to what they’re doing.”
Renier knows he will leave behind a talented team to carry on.
“It’s the culture we’ve created here. It’s hard to describe, but we have sort of an ‘all hands on deck’ culture up and down this hall. Aside from the fact that I’ve got the nicest view, there’s no visible hierarchy,” he said from his corner office overlooking Duluth’s harbor. “If something needs to be done, everyone pitches in.”
And then, there’s the work and the programs that will continue. He said he’s proud of those, too.
“Not just that we created those programs but the way we did it, the way we determined what we were about early on, and we really stuck with that,” Renier said. “And all we kept doing was getting better at it.”
