Inside Alabama’s Largest Foundation
The Alabama Power Foundation has invested more than $150 million in grants and scholarships since shareholders set it up 25 years ago.
Alabama Power Foundation President John Hudson believes that the choice to support education and other nonprofits “will reap major returns for the state.”
The Alabama Power Foundation is the largest charitable foundation in the state and the 29th largest corporate foundation in the country, according to The Foundation Center. The private foundation has assisted Alabamians for the past 25 years, helping to strengthen educational programs and improve quality of life across the state.
Alabama Power shareholders voted in 1989 to create and provide an endowment to the foundation. A total of $15 million was donated from stockholders’ share of Alabama Power profits during the foundation’s first seven years.
“When Alabama Power shareholders decided to create the Alabama Power Foundation back in 1989, they started something that would greatly impact this state for years to come,” says Mark Crosswhite, CEO of Alabama Power. “The Foundation has been the source of a lot of good in Alabama. It was created with the same spirit of Alabama Power Company’s founder, William Patrick Lay, when he said of the company, ‘may it be developed for the service of Alabama.’ That is the same mission of the Foundation — to better the communities we serve.”
Through prudent money management, the initial endowments generated so much income that no further shareholder donations have been necessary for the past 18 years, says foundation President John Hudson, who also serves as vice president of public relations and charitable giving for Alabama Power.
“We have invested more than $150 million in grants and scholarships to benefit local communities throughout the state,” says Hudson. “Our view is that investing in nonprofits and community programs will reap major returns for the state, particularly in terms of educational achievement, workforce development and economic growth.”
Only a few years after its founding, the foundation’s endowment grew to $55 million in 1992, making the foundation the largest in Alabama, says Hallie Bradley, Alabama Power community initiatives manager, who spends about 60 percent of her time supporting foundation efforts. By 2000, the foundation was passing $50 million in giving and by 2007, passing $100 million in giving.
The foundation’s assets grew relatively quickly in 1992, thanks in part to a major payment from the federal government for Alabama Power property at Little River Canyon in northeast Alabama. The federal government gave the company more than $7.6 million for about 8,600 acres, with the understanding that the money would be put into the foundation. The land was used to create a national park. “It was a win-win opportunity,” Bradley says.
As might be expected, the successful foundation is often called upon for support. Currently the organization receives about 1,200 grant requests annually. Grants are submitted online for review, with foundation staff available to help grant requesters with the process.
Not every request can be fulfilled, of course, Bradley says. Both grant criteria and funding are limitations. “In 2014, for example, our requests for funding totaled close to $18 million,” she says. “But we are only able to fund around 700 requests per year, with funding close to $8 million in 2013.”
Choosing which worthy charities are funded is challenging. Foundation board members, who are also Alabama Power officers, make the final review and selection on at least a quarterly basis. Five full-time foundation staff members are completely dedicated to processing, reviewing and managing funding requests. “The grant reviews are set up on a continual basis, so there is always a steady stream of grants to process and review,” Bradley says.
Grants are given in three size divisions: requests for $50,000 and over; $10,000 to $50,000 and $10,000 and under. Five main categories are used by the foundation as judging criteria: arts and culture, environmental, health and human services, civic and community and education.
“The grant must fall into one of these five categories,” Bradley says. “We also look at the potential impact of the grant and community need. We like to make sure our grantees have support from other corporations and foundations, because we want our nonprofit partners to be sustainable and not solely supported by the foundation.”
Worthy organizations that make requests but don’t quite make the cut receive feedback and counseling from foundation members to enable them to garner grants in future years. And the foundation recently created a program, the Elevate Grant, to help new and struggling nonprofits develop their own capacities. “The Elevate initiative was launched at the first Elevate conference in August 2013,” Bradley says. “The goal of Elevate is for the foundation to improve communication with our grantees and provide support outside of funding. Many of our grantees do not have the resources for training. We listened to their feedback and have shaped our Elevate program to answer their needs.”
The foundation takes special interest in promoting better education in the state, Bradley says. Grants support all ages, from 4-year-olds in disadvantaged communities to college students attending the state’s major universities. “Education has always been a priority of the foundation and was one of the first areas we funded,” Bradley says. “The majority of our granting to date has been to fund education initiatives. We believe that education is the key to a successful workforce, economic development and the future of our state.”
Looking toward the future, the foundation is moving toward influencing the type of help that communities and nonprofits provide, in addition to supporting the excellent work already performed, Bradley says. The foundation’s competitive grant program has been expanded to help accomplish that. For example, its Power to Play program helps support the development of sports programs. The program was created because research has shown that students who participate in sports tend to have improved academic performance. “We’re trying to look at the big picture,” Bradley notes.
And she points out that the foundation isn’t the only way that Alabama Power gives back to the community. Numerous other charitable giving and employee volunteer projects are held each year.
“Alabama Power has had a long history of giving back to the communities we serve,” she says. “More than a century ago, Alabama Power Co. was created by our founders to be developed for the service of Alabama. Our founders’ basic values and philosophies guided future company leaders to create the Alabama Power Foundation decades later. This culture of service has spread through generations of employees who are committed to improving the quality of life in their hometowns.”
The foundation’s efforts have created a huge amount of good will, which is invaluable to Alabama Power. But there are direct fiscal benefits as well. Donated funds are tax deductible for the year they were donated, Hudson points out. “It allows a business to continue to contribute to the community in the future without impacting its bottom line,” he says.
While advantageous, private foundations are carefully scrutinized by the IRS and must be correctly set up and managed. Such foundations are required to donate at least 5 percent of their total asset base each year. They are also required to pay an annual excise tax. The tax may be 2 or 1 percent of the foundation’s net investment income, depending on financial criteria set up by the IRS.
“Private foundations are forbidden to use any assets to benefit the business that set it up, and there are many rules to follow regarding that relationship,” Bradley says. “We work diligently to maintain separation of the foundation and the company.”
Alabama Power leadership has carefully overseen the foundation’s investments over the years, Hudson says. “The foundation develops an allocation strategy with our treasury department that is implemented by selecting money managers that fit that strategy,” he says. “Money managers can change based on performance. We have a well-diversified portfolio that is heavy in equities in order to meet the return needed for our payout.”
Kathy Hagood is a freelance writer who lives in Homewood. Cary Norton is a freelance photographer who lives in Birmingham.