February 23, 2018
Re: Merger decision between FOTR and ARC
Dear Friends of the Rouge Members,
As many of you know, in 2015 the Friends of the Rouge (FOTR) and the Alliance for Rouge Communities (ARC) began exploring a possible merger of the two organizations. At the end of 2017 both organizations decided against the proposed merger. This letter details the background of that decision and how each organization plans to independently move forward.
The Erb Family Foundation and the Community Foundation of Southeast Michigan generously provided funds for the two organizations to explore the potential merger. During this exploration phase, characteristics of each organization were discussed including mission, structure, governance, budgets, and membership. Following this exploration, information was presented to each organization’s membership for a vote to continue with merger investigation.
While both organizations hold IRS tax status as 501(c)3 organizations, FOTR is a membership-based organization whereas ARC is a ‘watershed alliance,’ recognized by state law and comprised of 35 municipal governments, three counties, two public colleges, and four cooperating partners (including FOTR). The ARC’s membership unanimously approved to continue merger investigation at its March 2016 meeting, with a list of contingencies. FOTR’s membership approved to continue merger investigation at its annual meeting in April 2016 with a vote of 28-14.
Just before FOTR’s annual meeting, however, the executive director resigned. Though approved to proceed with the merger investigation, the lack of an executive director put a hold on the completion of the merger until a new executive director was hired, which occurred in winter 2017.
In June 2017, the ARC and FOTR began to proceed with the merger process, agreeing to a new name and a mission statement. The group also formed the basics of a board composed of five board members from FOTR and five from ARC. The question of how to formally organize the new group, as well as many other details, was still unanswered at this time.
FOTR retained Nick Leonard from the Great Lakes Environmental Law Clinic (GLELC) to provide legal counsel during this time period to help provide legal information to aid in progressing the potential merger. GLELC’s counsel indicated that the structure of a ‘watershed alliance’ would not support membership of citizens and corporate partners, which is the current membership make up of FOTR. The ‘watershed alliance’ structure would only support the ARC board structure composed of elected or appointed representatives from its municipal members. This understanding became a fundamental obstacle for progressing the merger. Both organizations valued their own board makeup and membership structure and each were unable to justify changing. FOTR values the input from citizens and corporate partners and ARC values its ‘watershed alliance’ status, which allows its member communities to be eligible for grant funding targeted for municipalities – including the SAW (Storm water, Asset Management, and Wastewater) program grants from the state, which has funded most of the ARC programs over the past decade.
Understanding this obstacle and working with GLELC, three options were discussed by FOTR and ARC:
- Dissolve both organizations and merge. Under this option FOTR would assume administrative duties of a combined organization. This was not in the interest of ARC as it would prevent the ARC from applying for state grants – including SAW grants – and put board voting power at a disadvantage for both parties. Also, both entities did not think FOTR had staff experienced to perform the permit activities for municipal storm water permit compliance and as a result would need to hire out the work. ARC felt this would not result in a cost savings.
- Consolidate FOTR into ARC. If organized as an “alliance,” individuals, businesses, foundations, and corporations that sat on FOTR’s board could no longer hold a seat on ARC’s board. FOTR felt this would not be representative of its membership.
- Contractual joint venture or entity joint venture. FOTR and ARC would enter into a contractual venture, which would allow some flexibility that the other two options do not. Both organizations would file for a shared assumed name. From that, both organizations could create an entity joint venture (third organization that manages the joint venture) requiring a separate board, bylaws, etc.
FOTR and ARC initially decided to move forward with a joint venture because it appeared that it would help consolidate and reduce costs of administration of both organizations and communications. After further discussion, ARC believed that no administrative savings to its organization would be realized. As a result, FOTR and ARC ended discussions to explore the joint venture for the time being.
Despite the decision to not merge, there were some positive takeaways from the exploration. Each organization gained much clearer understanding of the other’s organizational priorities. With the desire to expand its current relationship with FOTR in the wake of not merging, the ARC developed a 5-year budget and scope of work for services anticipated under its new storm water permit and collaborative plans, identifying FOTR as an important collaborating partner and as a viable partner to take over some aspects of the “Executive Director Services” beginning in 2019.
Overall, the process forced both organizations to refine policies, procedures, scope of services, and assess programmatic weaknesses, strengths, staff capacities, funding mechanisms, and watershed needs-assessment. The FOTR and ARC agreed to continue to work together as partners towards a cleaner Rouge River Watershed.
If you have any further questions, please feel free to contact me at firstname.lastname@example.org or (313) 792-9627.
Friends of the Rouge