Facing immediate financial crisis, can The Contributor survive its own success? 

Final Issue?

Final Issue?
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The relative success of The Contributor in a short period of time says a lot about who we are as Nashvillians.

Stationed at street corners, off-ramps and sidewalks, the men and women who peddle the paper represent a transaction people understand. It doesn't matter whether the buyer reads the "street newspaper," or stores it on the floorboard with other issues: The vendor has earned the dollar cover price. These aren't people begging for money. They're selling a product.

Nashvillians have grown so comfortable with that simple proposition — you sell something, I buy it — that The Contributor has become one of the largest papers of its kind in North America. It's successful enough that Tom Wills, The Contributor's director of vending, stopped telling vendors they'd have to find added work if they wanted to get off the streets. Last year it funneled more than $2 million to hundreds of homeless men and women.

And if any of that money came back to the parent organization, the paper might not be in its current state.

Right now, The Contributor has about six weeks to live.

Sitting in an anteroom at McKendree United Methodist Church, on a couch that dwarfs her small frame, The Contributor's founder and executive director Tasha French Lemley is quite composed for someone whose organization is in crisis mode. Asked how tall she is, Lemley responds, "Five feet, but that's if I had a good night's sleep and I stand up straight."

Even when she's kidding, though, her voice carries an edge of determination.

Ask her what led to the paper's founding, and she will lay out the details. How Lemley, as a new Abilene Christian University graduate, ended up in Nashville in 2000 working at Kinko's, the only place in town that would hire a graphic artist with no experience. How she met a homeless man, Don, who slept near her workplace. How he put a human face on the city's street people, instead of remaining something she hurried past on the way to her car.

Their meeting became a friendship, and an entry to a different world. A half-decade of advocacy later, she started The Contributor in 2007 with a handful of other committed individuals. First every other month, then every month, an all-volunteer group led by Lemley and Wills produced the newspaper and began to slowly grow its circulation and the number of vendors that sold it.

The model they followed was well-tested in other cities. The Contributor sold copies for a quarter to vendors — homeless men and women who received a short training course and signed a contract to abide by a code of conduct. The vendors in turn sold the paper on the streets for a dollar. The strength of the model was that it put money directly into the pockets of the people who needed it the most.

By January 2010 they had grown to 12,000 papers a month, a number that tested the limits of Lemley's part-time jobs and freelance gigs. Looking at what peer papers in other cities were doing, she saw the Denver Voice's circulation of 30,000 copies a month as a worthwhile goal. "Someday, maybe we will be what Denver is," she thought.

What The Contributor's founders didn't realize was just how much the three-year-old enterprise was about to take off. Demand pushed circulation to 26,000 by March, then 66,000 in September. By December, the circulation had grown tenfold. Where Lemley had once dreamed of reaching 30,000 copies, The Contributor was now moving 120,000 a month.

To give an idea of just how explosive the organization's growth was, tax records for 2009 show $28,338 in revenue followed by $213,735 in 2010 and $453,258 in 2011. In three years, it had grown 16 times in size. The Contributor was now one of the biggest papers of its kind on the continent. 

What's more, with the rise in revenue, The Contributor was able to professionalize its volunteer operation. Lemley quit all her jobs and signed on as the organization's full-time executive director. For this, she was paid an annual salary of $40,000. In fall 2010, the paper added a part-time cashier, and by January the organization was able to pay Wills for his bookkeeping and his work with vendors. After that, a part-time development coordinator and event planners were hired to handle the ever-increasing demands of fundraising — an issue that would come to cloud The Contributor's booming success.  

Why raise funds? The growth in revenue brought in enough to build up a sizable savings warchest — more than $100,000 at one point, according to both Lemley and Wills. But as the paper grew, so did costs. Virtually every street newspaper has a donation component, because as nonprofit experts will tell you, very few social enterprise organizations outside of Goodwill cover their budgets with earned revenue.

One of the most successful street papers, Seattle's Real Change, serves as an example. It has an annual budget of close to $1 million, with about 33 percent of the budget coming from earned income. That means roughly two-thirds of their funds come from donations, pledges and grants to the paper itself. In comparison, 50 percent of The Contributor's budget is covered by revenue from vendors buying the paper to sell.

That number in itself is healthy, says Lewis Lavine, president of the Center for Nonprofit Management. Still, as the paper evolved, a significant portion of its operating money had to come from the outside to ensure it wouldn't burn through its savings.

By late 2012, Lemley had taken an important step: starting to recruit an independent board. In the early years, before The Contributor received its charitable status and 501(c)(3) designation, it had worked to have the same group of people running the organization to also be responsible for its strategy and oversight. But 2012 brought the addition of a second edition each month. The paper also crossed the $500,000 threshold for revenue, which brought the necessity of having tax statements audited before they could be submitted to the IRS.

The organization now needed people with nonprofit experience who could provide guidance for the organization, More critically, it needed help raising funds. A yearlong giving campaign, launched in October 2011, had fallen short of its $200,000 goal. With earned income stabilized instead of growing, and fundraising falling short, the organization had to lean on money it should never have had to touch: its accumulated savings.

Looking back, Lemley and Wills say, this is where the seeds of The Contributor's current crisis were sown.

"I knew that we were dwindling, but I also knew that in January of 2013 we looked similar to 2012," Lemley says. "Not being a financial person, that looked good enough to me. I did know enough to know that a part-time development coordinator was not going to cut it for us long-term. So we had lots of discussions with our board. We were dipping into savings more than we wanted."

Wills puts the situation more bluntly.

"Growth can kill you," he says.

Both Wills and Lemley had a vague idea of the scope of The Contributor's problems. But neither saw what they both call a "perfect storm" coming their way in 2013.

"When we started the paper, our mission was only two parts," Lemley says. "One was to create a quality publication well worth a dollar that focused on issues surrounding homelessness and poverty. The second was to use that paper as an income source for homeless and formerly homeless people."

The last piece revealed itself only after years, Lemley says. That's when she realized her own first days in Nashville were playing out on streets and intersections all over the city.

"A need was being met that we didn't know was part of our mission, and that's face-to-face interaction between someone who has experienced homelessness and someone who has not," she says. "And that, by far, is the thing that has sustained us the most. It's why we've been as successful as we are. Nashville was really hungering to dialogue with the person in front of them. They didn't know how to get to panhandlers, they didn't know how to help the homeless. They didn't know what to do. This created a means for them to have an actual relationship."

However much those relationships may feed or house an individual, unfortunately, they don't sustain the organization. With every dollar per paper going to a vendor — or in most cases, experts say, two or three dollars — many assume that something goes back to The Contributor itself. It doesn't, though — and that disconnect is at the heart of The Contributor's problems.

In February, Lemley laid off the paper's part-time development coordinator in order to hire a development director who could build deeper relationships with bigger donors and help the organization reach a sustainable level of fundraising. But that director didn't come on board until April. With a larger plan not in place until summer, donations ground to a halt. Combined with a 13 percent dip in circulation, the paper's reserves burned at a higher rate. On Jan. 1, 2013, the organization showed a bank balance of $109,771. As of this week, it was down to less than $30,000. Monthly expenses, meanwhile, run at roughly $53,000.

The new board, which Lemley and new chair David Miller Walley spent months recruiting, finally came together in June. Just hours before their second meeting three weeks ago, however, Lemley learned that the organization was rapidly going broke.

"The June meeting went well," she says. "And we knew things were tight. We worked diligently. The next board meeting was going to be about finances, and that was two-and-a-half weeks ago. Suzanna [Shumate], our development director, has been working on a fundraising plan. She was presenting that to the board two-and-a-half weeks ago.

"Tom got all of the receipts and the deposits from our bookkeeper, so our numbers got up to date through the end of June, and at the board meeting we looked at the development plan that was proposed, looked at where our budget was and went, 'Holy shit.' We knew things were tight, but we did not know they were this tight."

In short order, the Contributor board divided the responsibility for raising $75,000 among its seven members plus Lemley, Wills and Shumate. Each is now responsible for $7,500 individually. If they raise the money, it will tide the paper over until November and the holiday season, when charitable funds flow more freely.

The hope, said Walley, is that this buys the paper enough time for the development plan to kick in and put The Contributor back on firm footing. Some pledges have begun to come in from local foundations, but there's still a big gap.

"We are not an uncommon story for startup nonprofits," Wills tells the Scene, something echoed by nonprofit experts. "Nashville has embraced The Contributor as much as any other city in the world."

That embrace will have to be a little more direct, though, if it is to continue.

"There's a gross misunderstanding of where that money goes," Lemley says. "I've sat down with the same people who say 'I buy 10 issues a month' and they say 'I donate to you every day,' but they never donate to The Contributor. They give our vendors $5 and $10 or even $100, and they assume that money comes back to us after all these years.

"Yesterday, I talked with a consultant who said, 'You do a crappy job telling people what you need.' "

At the moment, Lemley, Walley and Wills aren't just concerned for the nonprofit's future. They're concerned about any public perception that the money has been mishandled. All have been open to inquiries about the organization's finances, providing circulation figures, expenses and bank figures upon request. Lemley says they have nothing to hide.

"If any major donor wanted to talk with our accountant or bookkeeper, I'd have no problem with that," Lemley says. "We'll be doing our first major audit next month. That's another safeguard, that a donor can come and see our audited statements, and we'll be able to provide them. In the U.S., that's a way of showing your cleanliness."

Lavine believes that even though Nashville is missing a giant institutional donor — like Atlanta's Coca-Cola or Indianapolis' Eli Lilly — it can still support lots of charitable causes.

"What we have instead is a set of fairly large and very active smaller donors," he says. "They have been extremely successful in making a difference in the community. We have a number of individuals who are very, very generous. Nashville is a charitable community."

Pressed to say if she's considered whether The Contributor could fail, whether years of advocacy and hard work could be over, Lemley is candid. She confesses that she's not the most optimistic person in the room — but she thinks the organization can make it.

"I love this thing, and this is not the way I thought it would end," she says. "In so many ways, this organization is in its prime. So many of the changes that have happened in the last year have made us stronger. Stronger staff than we've ever had. A stronger board than we've ever had. A better living situation. Better vendors. More people getting off the streets. That's something that we never thought would happen with this paper.

"When Tom first started training vendors the first couple of years, he would tell them that this isn't going to get you off the streets, you need to find another source of income. It's going to help you with some of your basic needs, sure. And he's long since stopped saying that. A third of our vendors report getting housing since starting to sell."

For The Contributor's founders — and even more urgently, its vendors — there is more at stake than saving a business. It stems from Tasha French Lemley's first days in Nashville, and from the chance encounter that gave "the homeless" an identity, a face and a name.

"I'm not trying to be a Pollyanna, but there are actual relationships out there, lives being changed from customer-to-vendor interaction," Lemley says. "People are getting into housing. I just had an email forwarded to me from a lady from one Catholic group to another in a Nazarene group [who are] trying to help pay rent for a vendor whose utility bill is overdue. There's dental work being provided to vendors. There are people contributing the way Don contributed to my life."

But for them to contribute, The Contributor has six weeks left. And the clock is ticking.


CHARITY BEGINS

Lewis Lavine is president of Nashville's Center for Nonprofit Management. The Scene spoke with him about how donors should go about evaluating charitable causes.

If I'm a prospective donor, what criteria should I set? Is this an investment?
I would not assume invest is a bad word. It's interesting how the language is changing. A number of nonprofit executives, including myself, have been for-profit executives in the past. And individuals that provide dollars for philanthropic reasons are looking for a return on their investments. Now the return may be different — it should be a mission return, or a community good. But we believe that donors are making investments to see some evidence of a community return.

We believe at the center they should be looking for nonprofits that have a solid mission, that are practically run like a business, that have outcomes that are measurable and that are matched with their mission. 

By law, tax-exempt charitable organizations must file forms called 990s with the IRS. Is there anything I should be looking for?
I look for expenditures vs. revenues and how fiscally sound the organization is. And frankly, that's numbers 1, 2, 3, 4 and 5 that I would be looking for. Then I would read the 990 and supplement it with what else I know about the organization. Is there employment? Is it all-volunteer? How large is the paid staff? The modern 990s have 50 or 60 questions.

For me, an important question is, have the board members seen the 990s before it's gone to the IRS? That one is a critical question. It shows that the board is engaged and interested in what's going on.

Email editor@nashvillescene.com.

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