Would you still be a member of the Valley of the Sun-JCC, if the inscription on the wall under the name Ina Levine Jewish Community Campus was engraved with the following words:

“This Health Club is Supported Financially by the Broken Committments to Fund the Vulnerable, Elderly and Marginalized Members of our Community, who have Graciously Not Complained about Doing Without Meals, Rabbinical Support and Visitation, Adequate Resources and Medical Care, so that You Can Enjoy Your Visit to this Luxurious Health Club.”

I have wondered how our Federation’s Board ended up determining that the perpetual financial support of an unsustainable health club (the VOS-JCC, by any objective standard is a luxury health club with some office space attached), is more important than providing food and care for the elderly. Another way to ask that question is: What type of people prey on the most vulnerable, marginalized, and disenfranchised members of society for material gain? Keep this question in mind as you make your way through this post and more importantly, when you next visit the Federation’s Valley of the Sun Jewish Community Center Health and Fitness Club.

OVERVIEW: We have a very small selection of very philanthropic donors in the Jewish Community of Phoenix. The major gifts that have been made to the Federation have come from four or five families or family foundations. The names of the most prominent families are well known (The Jess and Sheila Schwartz Family Foundation, the William S. & Ina Levine Foundation, the Barness Family Foundation) as their names adorn many of the buildings that would not have been possible without their generosity.

The Board of the Federation has historically been populated by Directors who have business relationships with other directors on the Board, forming a very club-like, or inter-locking directorate. This makes proper governance very difficult.

Since 1986, the Federation of Phoenix has operated with a structural deficit (think of a huge rolling overdraft) where disbursements to the community have outpaced funds raised, but they have been able to cover this overdraft through timing of their payments to Israel and the raising of funds. This structural deficit came crashing down on the heads of the Federation when donations to the Federation dried up due to financial reversals that affected the small concentration of big donors, upon which the Federation relied (and to whom they were beholden). This has been coupled with the incessant funding outlays which have been necessary to operate the Ina Levine Jewish Community Campus. The ongoing and unquestioned funding of the Ina Levine Jewish Community Campus by the Federation is the result of their Board of Director’s unwillingness to address the benefit of deaccessioning the Campus for fear of alienating one of the two or three large donors who are left. It is axiomatic that when you have a concentration of big donors and a declining base of smaller ones, the charitable organization can not govern itself properly.

THE SICKENING DETAILS

The inter-locking relationships of the Board of Directors is best illustrated by this schedule from the 2007 tax return of the Federation.

So, in 2007, there were two directors who were related by business relationships to at least 7 other directors. I have no idea what the relationship was, but let’s say they were all limited partners in a real estate development. And let’s say that that there was a capital call for the investment and each member of the LLC (who is also a director of the Federation), has to come up with a $500,000 check to save the investment. So let’s say that all the other members of the LLC put in the additional $500,000 to save their LLC, and these same investors, acting in their capacity as Board Members of the Federation, were also opposed to authorizing more Federation funding for the Levine Campus. So the last investor to the LLC, who is wavering on whether to put in another $500,000 because he thinks the deal is bad, comes to his Monthly Federation Board Meetings and says, “you know, I have been thinking about the whole Levine Campus funding shortfalls, and I think that we should keep funding the Campus because it is good for the community.” So the other eight directors, not wanting to anger their business partner, and anxious for his check for their business investment, just decide to go along with his suggestion to appease him. When you have 9 out of 25 directors related to each other through outside business interests, you can be sure that they will vote as a block and that Board effectiveness will be reduced, and 36% of a board is generally enough to sway any company or foundation.

It is interesting to note that Steven Schwarz, who is still on the board, had the greatest number of disclosed relationships. Those relationships are either not required to be disclosed in future filings, or not disclosed, but many of the board members are still the same. Mr. Schwarz is supposed to be leading a think tank for the reform of the governance of our Federation, an organization that he has driven into a ditch in his capacity as a director. I would suggest that he step down from this position and also the board, immediately. He has been on the Board continually since 1998, he chaired the allocation committee in 2008 while being related in business to seven other directors This is a disgrace, an abuse of our trust, and should not be tolerated. Since Mr. Schwarz is now heading up the “governance task force” to determine how the Federation should be governed, it begs the question if it might not also be possible to enlist Bernard Madoff to serve as the Federation’s CFO?

Bob Silver should also step down at once. He has served on the Board since 2002, and if he is just now, in January of 2011, discovering that the Federation has a structural deficit, then I question what he has been doing as a member of the Board for the last 9 years. See article from Jewish News. Additionally, Mr. Silver was quoted as saying that they have done a very poor job in engaging the community. So, the next question that begs to be asked is why is Mr. Silver, a Board member for the last nine years during which this disaster was unfolding, now tasked with solving the problem? What specific skill does he now possess that has been dormant for the last decade? For that matter, the following board members, who have also served for the last nine years, should also step down:

Ann Zinman, Lanny Lahr, Joel Bernick, David Weiner, Sandra Scheinbein, and Barry Zemel (Zemel served since 2005)

WHY FEDERATION SUPPORT OF THE INA LEVINE CAMPUS IS MUCH MORE OF A BURDEN THAN IS ACTUALLY REPORTED – YOU MIGHT CALL IT A FINANCIAL DECEPTION OR FEDERATION THREE CARD MONTY.

Here is how this scheme operates:

Step one: Federation raises money.

Step two: Federation figures out how much money it costs to operate the Ina Levine Campus.

Step three: Federation grants money to agencies and schools located on the Ina Levine Campus. In turn, these organizations pay “rent” to the Ina Levine Campus. In this way, the true cost of what the Federation actually pays to the Ina Levine Campus is hidden within these grants. This shields the Federation from further complaints that the Federation is supporting the Ina Levine Campus to the detriment of other causes.

THEREFORE, THE AMOUNT OF MONEY PAID BY THE FEDERATION TO SUPPORT THE CAMPUS IS MUCH HIGHER THAN THE GRANTS GIVEN DIRECTLY TO THE CAMPUS AND TO THE VOS-JCC.

I will illustrate this from the 2009 IRS 990 filed by the Federation:

The 2009 Federation donation to the VOS-JCC was $680,000.00.

The 2009 Federation donation to the Council for Jews with Special Needs was $60,000. The Council for Jews with Special Needs is housed on the Ina Levine Campus. Their rent, for their office was $10,000 for the year, which is paid back to the VOS-JCC, which is of course, part of the Ina Levine Campus.

And of course, the Bureau of Jewish Education, which paid $93,581 in rent to the VOS-JCC (back to the Federation), after receiving $129,000 from the Federation in a grant.

Let’s look at $102,333 the Federation paid in rent that year to the VOS-JCC, which is of course, money just paid to prop up the facility, money paid to itself.

This seems like a lot of office rent for the amount of full time staff at the Federation. But more importantly, when the rent is added in from the Bureau of Jewish Education and Jews With Special Needs, then the contribution to the VOS-JCC is actually $103,000 greater than what was officially given.

Now let’s look at what happened when the Federation was forced to renege on their promised allocations in 2010 and 2011 and see who took the biggest beating. You can download the allocations here.

I have removed the $300,000 target for Jewish Day Schools and the $150,000 target in what will, supposedly be given out. So, that means that when it came time to hand out the bad news, if you were housed on the Ina Levine Campus, your percentage of what was allocated by the Federation originally, as a percentage of the amount of money raised by the Federation, versus what will actually be distributed, miraculously increased from 55% of the total income to 60% of the total income raised by the Federation. How did that happen?

This is very simple. In order for the Federation to no longer agree to subsidize the Ina Levine Campus, the Board would have to say to the Levine Foundation, something like, “sorry, you were stupid to donate your money to a health club that is unsustainable, and we are very sorry now that this monument that we erected to you needs to be sold.” Of course the reason they would not do that is that without the Levine Foundation, there is very little possibility that the Federation could exist in the future, especially in view of their chronic mismanagement, poor governance, and lack of transparency. So you can now understand why cutting funds to Kivel, reducing food expenditures and Rabbinical visitation to the elderly looks like a good decision if you are on the Federation Board.

NO MATTER HOW MUCH DISCOVERY CHANNEL BOB SILVER WATCHES TO GET MORE IDEAS LIKE SOLAR POWER SALVATION, THE FEDERATION WILL FAIL BECAUSE THE VOS-JCC IS A FAILING INSTITUTION.

Please keep this chart in mind as I will reference it in the following paragraphs.

	2009	2008	2007
Members	2,500.00	3,000.00	3,600.00
% Decline From Previous Year	-17%	-17%	No Data
Dues Collected, Millions	1.624	1.783	1.904
% Decline From Previous Year	9%	6%	No Data
Program Fees Millions	3.457	3.657	3.472
Change from Prior Year	-5%	5%	No Data
Percentage of Revenue from Contributions and Grants- JCC	14%	17%	17%
Percentage of Revenue from Contributions and Grants VOS – YMCA	28%	31%	29%
Percentage of Revenue from Contributions and Grants Silicon Valley	62%	60%	40%
Summer Camp Participants VOS JCC	446	617	780
% Decline From Previous Year	-28%	-21%	No Data
VOS JCC PROFITS	$(5,336.00)	$53,000.00	$(292,941.00)

According to their tax filings, when the VOS-JCC was a separate entity, their membership has been declining 17% per year, but their dues have only been declining a fraction of the amount, which means they have been raising prices on their memberships to existing or new members. The VOS-JCC was losing membership before the financial crisis occurred, and that is important to remember.

The next issue to consider is that their summer camp has had fewer and fewer participants, and that flies in the face of their strategy, which, taken from their tax returns states that the summer camp is very important because it is the first point of contact their members have with the JCC, it is their reason for joining the JCC:

Therefore, if this tax return is correct, and the reason that people join the VOS-JCC initially is through their contact with the JCC as parents of campers, then losing 28% of your enrollment, or even 20% would correlate directly with their loss in membership. The figures in the chart that report the VOS-JCC’s surplus or deficits are completely meaningless: without Federation Support, the Ina Levine Campus can not be sustained.

Lastly, the percentage of grants to run the VOS-JCC as percentage of their total income is so abysmally low when compared to other similar institutions, that there is an an unnecessary burden placed on the collection and raising of membership fees.

That the Board would even continue to fund the VOS-JCC Health Club is impossible for me to understand. That they would reduce funding for Social Services and the Vulnerable to support this health club answers the question that I asked at the beginning of this post. The Board of our Federation and the people who make the allocations are the people who take money from the vulnerable, weak, and voiceless, so that JCC members get the material gain of having a luxury health club and the Federation keeps their unsustainable monument to a select group of donors to whom they have become beholden.

PS – As an aside, a few people have written to me, accusing me of being negative, suggesting I should write only from a positive point of view. Their thought is that if I was positive, upbeat, etc. it would be better, a help in healing our community. In order for the community to be healed there must be trust in our institutions. Trust is a function of having the qualities of openness and competency, and in the Federation, it is unfortunate that we have neither.

The only possibility out of this mess is something I mentioned before: The Ina Levine Campus must be deaccessioned, a receiver should be appointed to oversee the liquidation of the Federation, and their responsibilities should be overseen by the Jewish Community Foundation. We should never again allow our community to be led by individuals whose actions are self serving, repugnant, and a blemish on every Jew in the Greater Phoenix Area.

I would like to acknowledge the many people who helped piece this information together, but who are so scared of retribution from the Federation Board, that they have to remain anonymous. I have spent quite a bit of time speaking to current Federation employees, donors in the community, board members of Pardes Jewish Day School, my staff (who have done the bulk of the financial research), one retired Rabbi from the Reform Community, two currently employed Rabbis, and one President of an Orthodox Schul here in Phoenix. I have also had help with the storyline and editing from active members of the Jewish Community, who are as concerned as I am that everything in this blog is correct. We have over 5,000 hits, so thank you for being interested in making the Jewish Community function properly.