TO: LINDA REICH, CITY MANAGER
FROM: FRED GALANTE, CITY ATTORNEY
SUBJECT
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Establishment of a Nonprofit Community Foundation.
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RECOMMENDATION
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Approve (1) adoption of Resolution No. 2026-018 approving the establishment of a nonprofit Community Foundation for the purpose of accepting and using funds donated to the City for community purposes; (2) authorize the City Manager to work with the City Attorney's Office to prepare articles of incorporation and all necessary documents to establish the nonprofit; (3) authorize the City Manager to designate the members to serve on the Board of the Foundation; (4) approve the recommended name of the nonprofit; and (5) require annual reports to be presented to the City Council on the Foundation’s activities.
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FISCAL IMPACT
Sufficient funds have been included in the adopted Fiscal Year 2025-26 Administration Operating Budget. The total estimated fiscal impact of the recommended action is $4,000.
CITY OF CHINO MISSION / VISION / VALUES / STRATEGIC ISSUES
The recommendation detailed above further the City’s values and strategic issues that serve as key pillars on which identified priorities, goals, and action plans are built, by fostering:
• Positive City Image
• Financial Stability
• Responsible Long-Range Planning
• Exemplary Leadership
• Public Service Excellence through Internal and External Partnerships
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Expenditure: 1002020-43050 |
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BACKGROUND
Throughout the year, the City of Chino works with businesses, organizations, and individuals to raise funds to support community programs and charitable activities. As the City Team expands its outreach efforts, donor relations, grant funding, and sponsorship activities, more dynamic tools are needed to track and allocate potential funds. Staff has explored opportunities to secure additional means of funding, other than the general fund, and has identified the creation of a tax-exempt, California nonprofit public benefit corporation (aka community foundation) as a viable model.
In general, cities may create a Foundation and use it to expand and enhance public services and community programs allowing staff to access more diverse funding options. The Foundation's purpose would be to promote, sponsor, and fund the advancement of programs such as, but not limited to, Chino parks and recreation facilities and programs, public safety programs, public art activities, economic development programs, special events, and community service opportunities to strengthen and enhance the quality of life for the Chino community, as allowed by applicable state and federal laws. A Foundation can also provide access to alternative funding sources and grant opportunities, that the City, while a tax-exempt entity, may not otherwise be eligible to receive. The Foundation may also receive funds and regrant them to other nonprofit or community-based organizations allowing more funds to circulate within the Chino ecosystem.
ISSUES/ANALYSIS
The California Nonprofit Public Benefit Corporation Law requires filing of articles of incorporation with the CA Secretary of State to establish a 501(c)(3) nonprofit. Additional filings are required with the Internal Revenue Service (IRS) to receive tax exemption. Currently, the process is estimated to take nine months from the time of filing to receive approval. Additional requirements such as the filing of bylaws and the establishment of a governing Board are also needed. Staff recommends the following:
1. Name:
The “Chino Community Foundation” is the recommended name of the nonprofit organization.
2. Board Composition:
Several options exist for how such a Foundation could be structured. Perhaps the single most important issue is who will be on the Board of the nonprofit, as this has implications for the control of the board, the resources available to the board, and whether the Board is subject to the Brown Act. Staff has explored several alternatives for Board formation and recommends Option 3 below.
The benefits and drawbacks of three different options for structuring the Board and furthering the City's objectives without forming a nonprofit are as follows:
Option 1: City Council Serves as Board:
Under this option, the City Council would control the activities of the Foundation and the Foundation would operate as an arm of the City. Although the Board could reach out to the private sector for support and donations, the private sector would not be represented on the Board. A benefit of this structure would be that Foundation meetings could be held at the same time as City Council meetings and could also be noticed simultaneously with the notice for Council meetings. A drawback of this approach is that private entities may be hesitant to donate to an organization that is perceived as political, and the willingness of donors to donate to such a nonprofit might be influenced by whether the donor agrees or disagrees with the politics of specific Council members at any given time.
A Foundation with this Board structure will be subject to the Brown Act.
Option 2: Two Council Members Serve on The Board:
A Board with this structure would include both City Council members and non-City Council members. The City's control over the Board would depend on the size of the Board, the number of City Council members on the Board, the number of City representatives on the Board (other than City Council members), and the number of Board members appointed by the City Council. A Board with both public and private members would likely be perceived as a public-private partnership. A Board with only City Council members and City representatives would be perceived as an arm of the City. Including members of the private sector could increase the monetary, experiential, and networking resources available to the Foundation.
Under Government Code 54952(c)(1)(B), legislative bodies subject to the Brown Act include a private corporation that "Receives funds from a local agency and the membership of whose governing body includes a member of the legislative body of the local agency appointed to that governing body as a full voting member by the legislative body of the local agency.”
A Foundation with this Board structure will be subject to the Brown Act.
Option 3: City Staff Members Serve on Board (Recommended Option):
A Board with this structure would be made up solely of non-City Council members. The City's control over the Board would depend on the size of the Board, the number of City representatives on the Board (other than City Council members), and the number of Board members, which may include City Executive leadership. A Foundation of this type would more likely be viewed as non-political, which could encourage more donations.
A suggested Board composition under this option may consist of five members appointed by the City Manager. The board may include the following members of the City’s Executive Management Team:
a. Board Chair - City Manager
b. Board Secretary - Assistant City Manager
c. Board Treasurer - Finance Director
d. At-Large Board Member - Community Services Parks and Recreation Director
e. At-Large Board Member - Chief of Police
If a vacancy occurs on the City’s Executive Management Team resulting in a vacancy on the nonprofit board, the City Manager (or his/her designee) will appoint a temporary member until the vacancy on the Executive Team is filled.
A nonprofit with this Board structure is not subject to the Brown Act
Under this option, it is suggested that the City Council receive annual reports of the activities of, funding received, and expenditures made by the Foundation.
Option 4: No Nonprofit:
If the Council decides not to create a nonprofit, the City could still pursue the same objectives by encouraging potential donors to donate funds directly to the City, rather than to a Foundation. This option would avoid the start-up and maintenance costs and staff time which would result from creating a Foundation (unless the Foundation had a private Board and was able to operate without City support).
The estimated start-up cost to file the necessary documents for establishing this nonprofit community foundation is $880, plus any legal fees to prepare the required documents and Staff time to determine the structure of the nonprofit entity.
Attachment: Resolution 2026-018