Elkhart, Indiana, which bills itself as the RV capital of the world, got hit harder by the recession than any other American city. Now it has hit the jackpot. Literally.
An Elkhart native named David Gundlach left town, got rich, came back to town and dropped dead. In his will, he left his entire estate – about $150 million -- to Elkhart or, more precisely, to the Elkhart County Community Foundation, with no strings attached.
Apart from some oil-fueled gifts to the Tulsa Community Foundation, Gundlach’s benefaction may be the single biggest bonanza ever received by a city or county foundation.
Now Elkhart has to decide how to spend this money. One economic development official in town told me that “it’s like winning the lottery.” We’ve all read stories about lottery winners who blew their windfall and ended up in the gutter, wiser and much sadder. Elkhart knows these stories and has spent the past year in an intense community discussion to avoid its own civic hangover.
The results of that year’s study are out now. The Foundation has set guidelines for spending its money. In many ways, those guidelines pose more questions than they answer.
The Gundlach-Elkhart story has received surprisingly sparse national attention. But now the spending is beginning. Gundlach’s gift could be transformative. Or it could change nothing. More likely, it will have some impact but less than it could.
Elkhart County is in northern Indiana, on the Michigan state line, just east of South Bend. The County has 200,000 people. Goshen (32,000) is the county seat but Elkhart (51,000) is the biggest town.
It’s an odd place, in ways that complicate its use of Gundlach’s gift. Its economy rests largely on the recreational vehicle industry. Manufacturing employs only 7 percent of American workers today; in Elkhart, manufacturing accounts for 43 percent of all jobs, mostly in RVS and auto parts. It’s the most manufacturing-dependent county in the country.
People buy RVs when they have spare cash, so the recession clobbered the RV industry and Elkhart. The industry turned out 390,000 RVS in 2006 and only 160,000 in 2009: 60 percent of all RVS are made in Elkhart County.
When the industry collapsed, so did Elkhart. For a while in 2009, it had 20.3 percent unemployment, the nation’s highest. President Obama’s first post-election trip in 2009 was to Elkhart. The city eventually got $41 million in stimulus money, enough to make some needed infrastructure improvements.
A Norwegian-owned electric car company called Think Global also got $17 million in federal tax credits to build a factory in Elkhart. It promised 400 jobs but created only 25 before Think Global went bankrupt and was bought by a Russian. At last report, the plant was moribund.
But then two good things happened. First, the RV industry rebounded. Thousands of workers are being recalled. The unemployment rate is about 8.5 percent, still above the national average and well above its pre-recession rate of 4.7 percent, but a whole lot better than 20 percent.
Everybody in Elkhart knows that RVs are a feast-or-famine industry. Right now, after a four-year famine, the feast is back.
The second good thing, of course, is the Gundlach gift. Elkhart’s future may depend on how the latest RV boom affects this windfall.
Elkhart is different in several ways. First, it has all its economic eggs in the manufacturing and RV baskets. Unlike most industrial counties, it’s hotly anti-union and Republican. It’s an isolated place, disdainful of neighbors like South Bend, only 15 miles away, and hostile to regional cooperation.
And it suffers from a complacency born of that feast-and-famine RV cycle. When RVs nosedived in 2009, Elkhart didn’t get the message that it should diversify. Instead, it remained sure the industry would come back. It always has. And it did -- but each recovery is always a little weaker than the one before, and the next dip, when it comes, will be even lower.
Which is where the Gundlach gift comes in.
Gundlach was a loner but a brilliant businessman who got rich when he sold his British-based Hastings Direct insurance company to an Australian group. He lived high. He owned a $20 million Malibu mansion, palled with movie stars and even financed a charming low-budget movie, “Get Low,” starring Robert Duvall, Bill Murray and Sissy Spacek.
But he missed Elkhart, where his mother still lived, so he came home, buying a huge house with a Rolls-Royce in the driveway. He reconnected with some old friends and met Pete McCown, who had just become president of the Elkhart County Community Foundation. He told McCown that he had included the Foundation in his will.
Then he died of a heart attack in 2011. He was only 56 years old.
“We guessed it (the bequest) would be about $25 million,” McCown told me. Instead, there was a $113 million Swiss bank account, plus that Malibu mansion, plus that Rolls and 14 other cars, plus other holdings – about $150 million altogether.
Unlike the electric car company, the bequest is real. So how to spend it?
Under the law, the Foundation must give away at least 5 percent of its endowment every year. Before, this amounted to $500,000 per year. Now it’s $8 million.
Community foundations usually act as repositories of small local family foundations, spending the money as the donors wish, usually with a focus on social improvement. But Gundlach left a lot of money but no instructions on how to spend it. Whether he did Elkhart a favor depends on what happens next.
McCown moved carefully. He says he talked to other community foundations, such as the Chicago Community Trust. He organized site visits to other counties. Especially, he launched a year-long “community listening tour,” asking local groups how to spend the money. The tour took him into homes, dinners, businesses, even a homeless shelter, he said. He tried to talk with everyone, including the county’s sizable Amish population.
Two big themes emerged:
- Young people. McCown says everyone felt that “kids should be a priority,” creating better opportunities for the next generation, stressing education, better parenting, possibly college scholarships.
- Making Elkhart county a great place to live, a “vibrant community.” This seems to include civic improvement, festivals, bicycle trains, parks.
McCown agrees that “the devil is in the details,” and those details remain murky. A mega-project such as the Kalamazoo Promise, using all the money for scholarships, seems out. So does focused community development, such as the philanthropy-based medical research project in Grand Rapids: diversifying Elkhart’s economy “is not part of our mandate,” he said.
The Foundation is setting up committees to judge any request for more than $10,000, with any request for more than $1 million going to the Foundation board. McCown says the Foundation isn’t about to “become an ATM for non-profits,” but he wants to upgrade the quality of non-profit leadership in Elkhart.
Given the size of Gundlach’s gift, these goals seem modest. But the Foundation seems to feel that a more attractive Elkhart will draw new businesses and jobs. McCown told the local newspaper that he wants “transformative” projects that can continue after Foundation funding ends.
Good luck to McCown, the Foundation and Elkhart County. It seems from here that Gundlach has given his old home town a once-in-a-lifetime weapon to make permanent change in a parochial and conservative place too dependent on one industry and too isolated from the outside world.
That world and the economy that drives it are going through epochal changes. Elkhart has indeed won the lottery, but unless it uses Gundlach’s gift to meet the global challenges of the 21st century, it may be sorry in the morning.