Foundation Money Is Changing the Economic Course of Cities

Editor's Note: This article appears in Governing's Winter 2025 magazine. You can subscribe here.

Pittsburgh used to have brothel wars. Downtown was full of bawdy houses, more than needed to serve the local demand. Occasionally, one competitor would destroy another, at least temporarily, by setting off a pipe bomb. There weren’t just bordellos but street-level shops selling pornography, contributing to a general climate of decay. This was obviously not a healthy state of affairs, so about half a century ago some of the local civic leaders convinced Jack Heinz, heir to the ketchup fortune, to buy up properties downtown and give brothels the boot.

Heinz not only got his family’s foundation into this particular real estate game but convinced other local philanthropists to do the same. Over time, they bought up enough properties to turn the blighted area into a cultural district full of museums and performing arts centers. Over the decades, the foundations have continued to support these organizations, which collectively draw 2 million visitors a year to Pittsburgh’s downtown. As a result, in these post-COVID times, there’s often more street traffic downtown at night than during the working day. “Quite frankly, a lot of those assets — the opera, the symphony, the ballet, the Pittsburgh Playhouse — probably would have gone away had we not had that very rich philanthropic community,” says Rich Fitzgerald, executive director of the Southwestern Pennsylvania Commission.

Every city has foundations, but in some — including Tulsa, Okla.; Cleveland; Columbus, Ohio; Indianapolis; and Fort Worth, Texas — local foundations are playing an outsized role. They aren’t just contributing to the health of their cities, but are putting in place programs that are reshaping the local economy. Their money is old but they know for their communities to flourish it’s essential to generate new sources of income. “Economic activity is at the core of community thriving,” says Amir Pasic, dean of the Lilly Family School of Philanthropy at Indiana University. “Whatever your interest as a foundation, it’s hard not to care about the economic activity of your city.”

Over the past couple of decades, there’s been a shift in many corners of the philanthropic world. Some foundations view their role not as funding charities but rather acting as venture capitalists. They still write plenty of checks to the symphony, schools and social service agencies, but today’s foundations are also starting their own programs, designed not only to ameliorate societal needs but to change the way they’re addressed. “We work pretty directly and intensively on our own initiatives,” says Ken Levit, executive director of the George Kaiser Family Foundation in Tulsa. “We work with a lot of partners, but when we really want to do things that are more transformational in nature, we tend to find our best path is rolling up our sleeves and trying to get it done.”

Some mayors get frustrated that there are huge pots of money they can’t control and are being devoted to separate and occasionally different sets of priorities. But the reality is that any city that has major dollars being spent in productive ways is glad to have foundations available to lend a helping hand — and spending their dollars locally, rather than on national or global causes that could in fact gain them greater glory.

Few cities are as rich in foundation dollars as Pittsburgh, the happy hangover of enormous fortunes created at the peak of the domestic steel industry. There are plenty of people locally who say that if it weren’t for all that accumulated wealth going to good works, Pittsburgh would have gone the way of the rest of the Rust Belt, instead of being vibrant and beautiful (while also still having an enduring and substantial segment of the population living in poverty).

About three miles southeast of downtown Pittsburgh, a mammoth real estate investment from the local foundation community is changing the trajectory of another neighborhood. Four different foundations came together to buy 178 acres that had been home to a steel mill along the Monongahela River. Now it’s being turned into a massive multi-use complex. The area, known as Hazelwood Green, will eventually be home to more than 4 million square feet of office, retail and park space, with nearly as much room devoted to housing. The centerpieces will be buildings devoted to advanced manufacturing and life sciences, with operations run by Carnegie Mellon University and the University of Pittsburgh, as well as private companies working in those fields. “Given the patience that it took to get to this point, only foundations and only foundation leaders with a particular mindset could make an investment like that,” says Mark Nordenberg, a former Pitt chancellor.

Universities have been the key players in shifting Pittsburgh’s economy from its post-industrial depression to its emergence as a leader in AI, robotics and biotechnology. But the foundations have been indispensable partners. Foundations were able not only to offer money but a combination of attributes that may be even more rare than ready cash. Unlike government leaders, they don’t have to respond to political pressures. Unlike private companies, they don’t have to worry about their next quarterly earnings report. And, unlike the rest of the nonprofit sector, they don’t have to worry about fundraising. “Your money can be both patient and risk-tolerant,” says Chris DeCardy, president of the Heinz Endowments. “We can stay with an issue for the long term, even if progress is slow.”

Attracting talent is the name of the game in today’s economy. Foundation money has helped Pitt and Carnegie Mellon and the industries they’ve spawned attract talent, while also giving talented individuals reasons to stay, propping up the cultural district and spending fortunes turning the old industrial riverfronts into parks and trails. “At a time of economic devastation, the foundations are the only reason that our heads didn’t go under the water,” says former Pittsburgh Mayor William Peduto. “The new economy — the universities and the hospitals — were both the rudder and the engine, and that model was funded, created and sustained by those foundations.”
George Kaiser made his fortune in oil and banking but his money is helping to diversify the Tulsa economy. His foundation pays for the most successful remote worker relocation program in the nation. It has brought thousands of talented people to town, bringing with them their six-figure incomes, and it supports them with all manner of soft infrastructure by way of business incubators and networking support (to say nothing of the half-billion-dollar riverfront park the foundation built and runs, or its music museums devoted to Bob Dylan and Woody Guthrie).

The foundation learned both how to adjust its relocation program and scale it up in the face of unanticipated demand, Levit says. “Unlike a government, it’s not easy but a foundation can always pivot, or course correct,” he says. “We can reallocate from things that are working less well.”

Levit says he communicates with city, county and state officials on essentially a daily basis. With multiple billion-dollar foundations in the city, there’s a strong instinct to go to them constantly with hat in hand, says G.T. Bynum, who stepped down as Tulsa’s mayor last month. But what happens most often, he says, is that the city collaborates with the foundations when they can find common cause. Foundations are often able to act much more quickly than the city itself and in some cities it’s not at all unusual for a mayor to call and ask for a half-million dollars to kick-start a project. “It doesn’t have to be a politically popular thing for them to be focused on it,” Bynum says. “In government, if you don’t have public support, generally you’re not going to be doing it.”


No foundation is wealthy enough to tackle all issues. Most of them try to specialize in a few chosen areas. Sometimes, they run what amount to in-house think tanks that can lend real policy expertise when a local government gets serious about, say, mental health or homelessness, where Tulsa’s Zarrow Family Foundations had done some pioneering work. “Foundations can step outside of the grooves of the established way of doing things and give people an opportunity to think more creatively,” says Pasic, the Indiana University dean. “They’re the risk capital of society, able to complement or supplement where the local government or private sector is not able to do things.”

Above all, foundations have flexibility. Where a city or county might have almost no discretionary money to try something new, a foundation is literally made of money, with nothing but discretionary funds. The irony, however, is that even the richest foundation has far less money than any major city. They may be able to provide seed capital, but foundations aren’t going to want to fund programs ad infinitum the way a city does. No matter what kind of time horizon you have as a funder, nobody funds everything forever.
For that reason, foundations strive to be catalytic, putting up enough money to offer proof that a program is well worth funding — and then getting someone else to pay for it, or at least part of it. The state of Oklahoma, for example, now picks up some of the tab for Tulsa’s remote worker program. In Pittsburgh, when the city was going to build a new convention center, the Heinz Endowments was willing to fund a design contest among architects, provided the city agreed to make it a green building. “At the time, it was the largest certified green building in America,” says former Pittsburgh Mayor Tom Murphy. “We probably wouldn’t have had such a spectacular convention center if it weren’t for the foundations.”

It’s taken a quarter-century for the former steel mill site along the Monongahela River to be developed. Part of that was a desire on the part of the foundations to make the site green, powered entirely by renewable energy, as well as lots of planning to try to find ways for nearby residents to share in some of the wealth being created, rather than being gentrified out. The long gestation period left some at City Hall frustrated, having that riverfront land sitting there for years and failing to generate taxes. But the foundations weren’t interested in the kinds of proposals they were hearing to do something faster, such as using the land as a vast impoundment lot for law enforcement. “The foundations had to carry that land for well over a decade and change,” says Fitzgerald, of the Southwestern Pennsylvania Commission.
At their best, foundations try to be strategic and think long term. They support ongoing efforts of all types in their communities, but the ambitious ones are striving to make change, which they recognize will take considerable amounts of time almost regardless of the problem they’re trying to address. The Buhl Foundation was one of Pittsburgh’s first foundations, but with about $100 million in assets, its size is modest compared to some of the biggies in town. It decided to concentrate its money where it could make the most difference, rather than spreading it around too thin.

Buhl turned its attention to the North Shore, the hilly area north of the Allegheny River. Neighborhoods there were left behind in recent decades as the “golden triangle” between the rivers made a recovery. The very name North Shore is a rebranding effort, since crime and violence gave stigma to the former name North Side and kept people away. The Buhl Foundation held countless meetings with North Shore residents, learning that their top concerns were health, safety, education and jobs. No surprises there, but the specifics that they outlined informed Buhl’s plan of action.

One place the foundation decided to work was Perry High School, which was low performing and lacking leadership, burning through seven principals in eight years. Buhl was able to provide not only stability but money. There were lots of ideas about how that money could be spent, but Buhl ignored things that would be nice to have to take care of more pressing concerns such as safety. A program called Safe Passages dramatically decreased violence, which in turn helped drive enrollments up by 25 percent and bring suspensions down. The program is now a model for the district.
Similarly, Buhl has helped fund a partnership between the Housing Authority and police. Officers now work out of a public safety center, walking beats and building relationships with residents. It’s shown real results, bringing down crime in the area dramatically over the last three years. “The officers will say it’s not that community-oriented stuff, it’s real policing,” says Diana Bucco, president of the Buhl Foundation. “We’ve prevented crime, and we’ve arrested the bad guys.”

This program, too, has become a model for the city as a whole. None of this happened overnight. Bucco says she had to convince her board that the North Shore would require a 20-year commitment and could not achieve real results in just three to five years. But being able to be patient in that way has led to some real breakthroughs that now are being emulated elsewhere. “What foundations can do is provide the capital to incubate some really great ideas,” Bucco says. “But once they get off the ground, they should no longer require our investment.”