When I moved to Seattle 20 years ago, I gave up access to the New York edition of The New York Times. My Saturday and Sunday mornings are punctuated by the delivery of the national edition but…it’s just not the same. I read the online edition regularly, especially for stories that didn’t make the national cut.
In late September, an article by Stephanie Strom took my breath away. “Nonprofits Paying Price for Gamble on Finances” sounds the alarm about the mountain of debt nonprofits have taken on in recent years to fund capital projects and other initiatives that could not be supported by philanthropy alone. There is a chart that illustrates how serious of a problem this has become, especially in light of the economic crisis: charities’ debt from tax-exempt bonds quadrupled between 1993 and 2006. Some organizations took on this debt expecting to pay it off with donations and interest earned from other sources. In many cases, their planning and projections have not paid off, quite literally.
Looking ahead, how will nonprofits retire their debt? How will they finance the new projects their clients need or their patrons demand if credit is hard to come by or their financial projections indicate that taking on debt will bury the organization? About a decade ago, I read about an “expert” who opined that capital campaigns weren’t necessary to fund projects – debt was the answer. I wonder if he’s changed his tune.
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About the Author
Kate Roosevelt CFRE
Kate’s clients love her non-nonsense, yet flexible manner. She’ll tell it like it is, but will always go the extra mile to ensure her clients realize their goals.