Occupancy expenses are the second highest cost in most nonprofit organizations’ budgets. Sharing space with other organizations means sharing costs, and as it turns out, there are also some great mission advantages. The nonprofit co-location movement has been helped along significantly by the Tides Foundation (more about them in a future posting) and by exciting co-location projects such as the Children and Family Services Center of Charlotte (CFSC) in North Carolina.
It’s hard to remember that just a couple of years ago nonprofit organizations paid a premium for space. Agencies were often the victim of rampant real estate development, pushing small nonprofits from one location to another. In Charlotte, a group of disgruntled executive directors who were sick of being pushed further and further out of the city finally decided to do something about it. The result was the creation of the Children and Family Services Center (CFSC), a building that houses nine nonprofit agencies in downtown Charlotte. I recently spoke to the executive director of CFSC, Peggy Eagan, to find out more about their co-location model.
“A group of us directors were meeting after work for ‘refreshments’ one night, grumbling about the space situation, when someone suggested, ‘They ought to build us a building,’ and it was a real aha moment for us.” From there, the nine executive directors went to work. Each nonprofit donated one volunteer to help raise the $7 million in capital, and proceeded to create CFSC, a 100,000-square-foot facility, housing nine nonprofit agencies, that opened in 2002 with Peggy as its first executive director.
Peggy told me that CFSC is structured as its own 501(c)(3) legal entity. Half of the board of directors is made up of member agency board representatives and half are at-large board representatives. Over time, CFSC has built out the shared services component of the collaboration, which is greater today than it was when the organizations moved in. “Agencies sign a ten-year lease that stipulates the requirement to collaborate—rent includes overhead costs, and access to the board room and other shared spaces. We provide technology for each agency—infrastructure, new desktops, on-site tech support—and we have added finance and human resource directors. All of that is part of the rent.”
From a program perspective, the nine agencies have done quite a bit of work together. Since 2007, the organizations have documented 62 separate program collaborations and one merger, all of which came about simply because of their proximity to each other.
It sounds almost too good to be true—does all of this really cost less than what the organizations were spending before the move? Peggy explained that every agency is different and that although each agency shares the costs of the finance and HR directors, the transactional work is charged out differently. “We have not tracked the efficiencies and revenue enhancements as well as we would have liked, but here is what we know: the organizations are saving about $1 million a year collectively on all of the expenses; there is a 35 percent savings on HR payroll processing; we have instituted a common retirement plan; and because we are located in the same facility, we can also offer group health insurance for the entire pool, which collectively costs $400 per person per year less than what agencies were paying.” Fully loaded, this package costs $15.15 per square foot versus the current market rate of $18-$22. per square foot.
When I asked Peggy what she would have done differently through the evolution of CFSC, she had a few comments, but nothing earth shattering: build one server, and better document efficiencies and enhancements. It seems like it’s a great example of what a group of disgruntled executive directors can accomplish when they really put their minds to it.