TOWER- After more than a year of research, the Gunderson Trust Board unanimously approved a plan to shift the trust’s assets to the Duluth-Superior Area Community Foundation (DSACF) to manage. …
TOWER- After more than a year of research, the Gunderson Trust Board unanimously approved a plan to shift the trust’s assets to the Duluth-Superior Area Community Foundation (DSACF) to manage.
The decision, made at the board’s Feb. 23 meeting, could essentially put the board out of business, although the final details of that will need to be worked out by the city council and the court that oversees the trust.
The board has struggled for years to effectively manage a trust that holds about a million dollars in assets but generates almost no proceeds for the city or the recreational opportunities the trust was originally designed to fund.
The trust board has spent over a year researching options that would allow a better financial return from the trust’s balance. After reviewing proposals from three Minnesota-based community foundations, along with Frandsen Bank and Trust, the board opted to recommend the DSACF.
“It was a unanimous recommend to the Tower Council,” said board treasurer Steve Wilson, who spearheaded the board’s research effort. “Their fees are 0.65 percent, the lowest of the three we looked at, and there is some flexibility that the other funds didn’t offer.”
The DSACF would provide an annual payout of 4.75-percent of the funds balance each year, with the real possibility the fund’s balance would still be able to grow. The trust board will seek to keep the parameters of the income distribution basically the same, with 75 percent going to the city’s general fund, while providing more flexibility to fund a wider range of nonprofits. Current guidelines specify that the 25-percent remainder each year go to fund recreation on city forest lands and community education.
The process to change the trust will involve several steps. First, the city council needs to approve the plan, and then a final agreement needs to be negotiated with the DSACF. Then the city needs to go to court to have the Gundersen Trust dissolved and the funds transferred to the community foundation, which will then manage the funds as a permanent endowment for the city.
The DSACF was formed in 1983, and now manages over 440 charitable funds with assets of $100 million in their investment portfolio.
The move would eliminate the need for the city to incur ongoing legal and audit fees for the trust. The trust board has been trying to unravel a host of complicating factors due to inconsistent legal and audit oversight, and lingering questions about the trust’s legal status as a nonprofit. In addition, members of the trust board have realized they do not have the financial knowledge or expertise to oversee the investment of that amount of public money.
Wilson said he hopes the council will act on the trust board’s recommendation at their next meeting in March.
Left unanswered, for now, is how the potentially significant new revenue stream will be distributed. The switch to the DSACF, if ultimately approved, is expected to generate at least $40,000 annually to start, and possibly grow from there. Whether city council members would review funding requests themselves, or leave recommendations to a reconstituted trust board, is an issue that city officials will still need to determine.
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