New Hanover Community Endowment leaders explain cancellation of food co-op grant
WILMINGTON, N.C. (WWAY-TV) — Nearly a year after the New Hanover Community Endowment withdrew more than $6 million in funding for the proposed Northside Food Co-op, the organization’s leadership says a shift in the co-op’s vision and rulings from the Internal Revenue Service played a key role in the decision.
The funding cancellation resurfaced as a major topic during the endowment’s semiannual public meeting this week, where community members questioned the organization’s decision to pull support from a project aimed at addressing food insecurity in Wilmington’s Northside neighborhood.
In an interview with WWAY, Board Chair Shannon Winslow and President and CEO Sophie Dagenais said the IRS determined that a grocery store did not qualify as a charitable project under the guidelines governing the endowment’s grantmaking.
Dagenais said the endowment remains committed to addressing food insecurity and pointed to more than $20 million in grants awarded to organizations such as the Food Bank of Southeastern North Carolina and NourishNC.
“We have made over 20 million in grants in the last couple of years, all of them are still working,” Dagenais said.
However, she said funding the development and operation of a grocery store presented a different challenge.
“For the benefit of Northside Food Co-Op and Growing Resilience to design and construct and operate a grocery store, that is a largely different matter,” Dagenais said.
Dagenais said the project’s direction changed after a private developer purchased land the co-op had initially planned to use.
“The business model was changing, it was very, very different than what had been imagined in our grant documents,” she said.
According to Dagenais, plans for the grocery store expanded beyond serving the Northside community, creating concerns about whether the project met the requirements for charitable funding.
“In order for it to be a charitable purpose it would have to sell foods at well below discounted rates or for free and that was not the model,” she said.
In a statement to WWAY, the endowment said:
With regard to a building grant, the proposed project specifically involves a building to be owned by a for-profit entity. This approach creates significant private benefit concerns. A more than incidental private benefit can render even overtly charitable activities non-charitable. In a situation where as here, the operation as proposed is a non-charitable activity, the private benefit associated with ownership of the building only adds to The Endowment’s belief that the project is not charitable as proposed.
The issue at hand is not the shared commitment to improving food security. We support that objective as evidenced by our grants. Rather, the concern lies in the proposed use of charitable grant funds for a project structured as a commercial grocery operation involving private ownership and benefit. This situation involves several complex considerations. Addressing the matter through media channels is not productive and does not advance the community’s interests. It risks spreading misinformation and eroding trust.
We have engaged in multiple conversations with Growing Resilience/Northside Food Coop and have offered alternative ways to support their goals. However, their continued request for grant funding to support a grocery store particularly one owned by and operated as a for-profit enterprise, or an agent of such enterprise, is untenable.”
Dagenais said she has worked to connect project leaders with alternative financing. She noted that while working for the Annie E. Casey Foundation, she connecting the parent company of the food co-op, Growing Resilience, with community development financial institutions that have financed grocery stores and food co-ops nationwide.
“I introduced our partner, Growing Resilience, to colleagues. I wanted to connect them to organizations — community development finance institutions — that have funded grocery stores, including co-ops nationwide,” she said.
Despite the endowment’s decision to withdraw the grant, Dagenais said the organization remains open to discussing alternative funding models that could align with charitable funding requirements.
“Because I’m very clear with legal counsel of our interpretation of charitable purpose, as counterintuitive as it may be, as sad as it may be, but if we are patient and if we are curious and if we are willing to explore more models, let’s do it,” she said.
