The Birth of Pre-D – from the Perspective of a Founder

The original Pre-Development Fund (Pre-D), founded in 2006, was a collaboration between Rasmuson Foundation, Denali Commission, Alaska Mental Health Trust Authority, and Mat-Su Health Foundation.

The seed was planted when Bill Allen (USDA’s representative in Alaska) had a conversation with Ed Rasmuson about getting the financial community to work with funders to collaborate on big capital projects across the state.

According to Diane Kaplan, then Rasmuson Foundation President and CEO, that conversation led to meetings with experienced architects, accountants, construction executives and engineers, affectionately called “the grey hairs.”

Those meetings touched on the concerns that both funders and nonprofits had when considering a capital project, such as cost, materials, and the best approach. They wanted to be sure that organizations had a full understanding of the costs of both construction and operations and could realistically assess their ability to raise funds to fill financial gaps. The founders wanted to develop a service that would conduct vetting of projects that funders could rely on. Hence, the Pre-Development Fund was established. Rasmuson took the lead and invited The Foraker Group to manage the program.

It was clear from the beginning that Pre-D needed more than just architects and engineers to advise nonprofits, according to Kaplan. Those nonprofits also required financial help. Nonprofits needed the expertise to fund not only the capital phase of a project but also the ongoing operational expenses, Kaplan said. The funders believed it was critical that nonprofits had some unrestricted funds to cover unexpected costs to ensure the success of their project.

Early on, funders realized that when a nonprofit went through Pre-D, funder boards were much more likely to finance the project. Kaplan said that Pre-D was the “Good Housekeeping Seal of Approval” when it came to getting support from their boards. Pre-D gave funders the reassurance that a nonprofit could manage a capital project.

Most of the programs that went through Pre-D were built, according to Kaplan. It was a real testament to the program’s success. The goal was to help nonprofits secure funding before the project got off the ground and to be sure the project was right-sized with a reasonable, supportable budget. Pre-D was instrumental in leveraging money from a variety of sources including local, state, and federal funding as well as private money. Pre-D got the attention of national funders, which helped put the program on their radar.

In 2013, Pre-D won The Secretary’s Award for Public-Philanthropic Partnerships – Housing and Community Development in Action. This award recognizes excellence in public-philanthropic partnerships that have both transformed the relationship between the sectors and led to measurable benefits in terms of increased economic employment, health, safety, education, sustainability, inclusivity, and cultural opportunities.

At the height of the program, many factors converged that propelled Pre-D forward. The late Senator Ted Stevens (R-AK) was the Senate Appropriations Chair. The state had money for capital projects and each legislator had capital money to spend in their district. Rasmuson had just received a $450 million dollar addition to its endowment from Elmer Rasmuson. Oil companies ConocoPhillips and BP were each giving $12 million a year to communities as part of a compact with the State of Alaska. Senator Stevens was directing over $100 million a year for infrastructure through the Denali Commission, and USDA Rural Development had a robust grantmaking budget. At the time, if you could think it up, you could probably find the money to build it. And nonprofit boards felt more confident fundraising because Pre-D ensured that the project was viable and thoroughly vetted by experts. During that time many communities, especially in rural Alaska, built health centers, housing, community centers and cultural facilities.

Today, most of that money is gone, according to Kaplan. Federal and state dollars have shrunk, so it’s a struggle to put together the money to fund a construction project. For those organizations looking to engage in a capital project, Kaplan has the following advice:

Make sure you understand all the financial implications of a capital project. For instance, funders who typically give you an operating grant may not continue to do so if they’ve just made a substantial capital grant.
Always understand where the money is coming from to both build and operate the facility. Don’t forget to include services that you may need to fund with a new building that you haven’t had to fund in your current location. For instance, you can’t operate a facility four times as big with the same staff. Also, build a realistic contingency plan.
Reach out to other organizations who have built a similar facility. Ask them what they have learned, both the good and the bad.
Figure out who is going to manage the project. Who will be the go between with contractors and your organization? Do you hire that out? Do you assign it to a staff person? Does the CEO manage the project? Be sure to consider that if a staff person is managing the project, what else is that staff person not doing? Is it worth it for a nonprofit executive to develop expertise in facility development if they will never use those skills again?
Importantly, make sure your financial statements are in a format that allows you and the board to understand your true financial position, including how much unrestricted cash you have available. If you have none, you are not a good candidate for a facility project. Stuff happens and you need unrestricted funds to carry the work through.

Kaplan believes that Pre-D came about at the perfect time for Alaska’s nonprofits. It provided a much-needed service to assist nonprofits in planning and executing their capital projects. Kaplan hopes that by putting the Pre-D process online, nonprofits will continue to benefit from the wisdom of those who successfully developed and managed a capital project.