Portland’s 50 Non-Profits with the Highest Amount of Liabilities

Wednesday, September 23, 2015

Brendan Murray, GoLocalPDX Contributor

Portland's 50 richest non-profits currently hold more than $3 billion in debt. Legacy Health, which has liabilities in excess of $815 million, sits at the top of the list.

GoLocal reviewed data released by ProPublica, based on financial filings from 2013, to compile the list of the charities with the largest liabilities in Portland.

SEE SLIDES BELOW: #50 to #1: Non-Profits in Portland with the Highest Amount of Liabilities

As with GoLocal’s list of the wealthiest non-profits in the country, the list of the foundations that carry the most debt is dominated by universities and medical centers.

In addition to Legacy Health, which holds the first spot on the list, there are 13 other medical centers or organizations on the list, including two more in the top ten.

Lewis and Clark College finished third, the highest of any college or university on the list. There are eight colleges in the top 50, and three in the top ten, including Lewis and Clark.

Ann Skeet, a professor at Santa Clara University and the former CEO of the American Leadership Forum Silicon Valley, told GoLocal the prevalence of schools and medical organizations on the list is to be expected.

“It does not surprise me,” Skeet said. “In both of those cases, many dollars are tied to building projects, which often are agreed upon before the fundraising process is complete, meaning they have to carry some debt.”

Schools, Hospitals, and Construction

Chris Krenk, CEO of Albertina Kerr, a Portland non-profit, and President of the Board of Directors of the Non-Profit Association of Oregon, agreed with Skeet’s take. He told GoLocal that schools and hospitals have been building faster and larger recently, forcing them to carry more debt.

“Colleges and medical centers tend to have relatively high debt/liability due to their facility costs,” Krenk said. “A lot of construction has gone on over the past few decades modernizing aging buildings and constructing new cancer and children’s centers to name a couple that come to mind immediately.”

Skeet said that often, schools and hospitals incur debt from their many ongoing construction projects. Typically, a school will begin the construction process before reaching their funding goals, in order to entice donors.

“It can be much easier to get people to donate if you can show them progress on the project they’re contributing to,” Skeet said. “Larger donors will give based on drawings and conceptions of what the project will look like upon completion, but most donors want to see what they’ll be giving to.”

Ann Skeet; courtesy Santa Clara University

A Business Strategy

Skeet, with Santa Clara University, said that debt can also often be a strategy for non-profits, as a method to raise future capital or achieve their goals.

“Sometimes, it can be a business strategy for the non-profit to take on debt, just like it can be for a person or a household,” she said. “If interests rates are low, some members of a foundation’s board of directors might advocate taking on some debt in the form of riskier investments or something else like that.”

Skeet referenced the Cystic Fibrosis Foundation, which invested $150 million in Kalydeco, a drug manufactured by Boston-based Vertex Pharmaceuticals, Inc., that hoped to help cure the disease. While it was a risk that meant the organization would have to carry debt for a long time, it eventually paid off.

The drug was approved by the Food and Drug Administration, and, in addition to helping develop a product that could achieve CFC’s mission, the foundation reaped more than $3.3 billion in payout after selling royalty rights earlier this year.

Skeet did note, however, that such investments carry large amounts of risk and should only be undertaken after careful research and consideration.

“In general, it’s better to have lower debt, and you have to be careful about how much you have,” Skeet said, “but, some people push to add debt as part of a business strategy.”

Portland’s 50 Non-Profits with the Highest Amount of Liabilities

SEE SLIDES BELOW: #50 to #1: Non-Profits in Portland with the Highest Amount of Liabilities

Schools, Hospitals, and Construction

Ann Skeet; courtesy Santa Clara University A Business Strategy

Related Slideshow: 50 Non-Profits in Portland with Highest Amount of Liabilities

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Ann Skeet; courtesy Santa Clara University

A Business Strategy