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Square Roots grant application to expand Creamery risks siphoning funding off from new school, food bank

Updated: May 3

Efforts to expand restaurant could deprive families in need of critical food / housing support and raise school taxes - let our state representatives know what YOUR priorities are!

We first raised concerns about a grant proposal advanced by Square Roots Community Initiative (SRCI) for a Redevelopment Assistance Capital Program (RACP) grant when first presented to Kennett Square Borough Council in February 2023. We were especially skeptical that a centerpiece of the proposal - an Underground Railroad themed craft-cocktail bar - justified a $2M investment in structural repairs that Square Roots failed to catch when it first acquired the building. Nonetheless, Council officials voted to support the proposal, claiming no downside. We have since discovered a major downside: SRCI's application is now competing with others that, in our view, offer a clear public benefit: a $4M proposal by the Kennett Consolidated School District (KCSD) to support the construction of New Garden Elementary School, and a $7M proposal by Kennett Area Community Services (KACS) for new headquarters allowing them to expanding their operations.

It all comes down to pie... political pie - because the fate of all three applications largely rests with our representatives, the Governor, and the Governor's Budget Office. How much of the overall RACP funding can Representative Christina Sappey and Senator John Kane tap? And if it is less than the $13M these three Kennett agencies have together requested, how is it to be divided up? And more importantly, what are the priorities of their constituents? To answer these questions, we need a deeper dive into the RACP process, and the merits of each proposal. The biggest problem: the strength of the SRCI application appear to rest on claims that are tenuous or flat out false, based on the evidence we have gathered to date and summarized here.

What is RACP?

RACP is a competition intended to support the "design, acquisition, and construction of a regional economic, cultural, civic, recreational, and historical improvement projects." There have been more than 1700 applications submitted in the past 2 years, and more than 37 in Chester County alone. In most cases, the public benefit is clear cut - all but a handful support the construction of facilities supporting health, education, emergency services, or waste management. While a clear public benefit is not required (RACP is also intended to support job creation, and especially well-paying jobs), a documented public benefit is an important consideration. Let's look at some of the criteria to be considered by RACP

50% match: A RACP applicant is required to match 50% of total project costs with non-public funding.

  • KACS meets the required match: RACP funds cover almost 50% of the total construction costs - they will match the $7M requested with over $4M match for construction and almost $3M in related costs, all through donations.

  • KCSD meets the required match: RACP funds cover less than 10% of total construction costs - they will match the $4M requested with over $49M match for construction.

  • SRCI claims in its application that it lacks the funds to match construction costs. Instead, it only meets the match through a loophole that allows the value of the building to be counted. SRCI's RACP application asks the public to cover more than 80% of total construction costs, with SRCI fronting the absolute minimum required.

We dispute SRCI's claim that it lacks the necessary funding (see above). It appears much more likely that SRCI's strategy is to simply tap into as much free public funding as possible without impinging onto other initiatives preferred by its wealthy patrons

  • SRCI has other assets it can tap into - It reported $12M in assets in 2022

  • SRCI has other wealthy funders it can draw from

    • White Horse Group Foundation (WHGF), a related family foundation, had $20M in assets in 2022, and contributed over $1M to other SRCI initiatives in 2021 and 2022

    • Could SRCI tap into the anonymous funder who seeded SRCI with $10M in 2021?

  • SRCI directed significant funds to initiate other projects in 2022 and 2023 using funds that could have been used to create a match. This includes assembling more than $800K for the "Red Clay Park", and appears ready to dedicate still more funds to paving projects to begin soon.

  • Other sources were tapped to undertake significant renovations to a cinderblock building to create the Creamery restaurant in 2016 and subsequent enhancements (including the installation of a "Glice" rink).

Public benefit: RACP favors applications that will deliver a public benefit.

  • KACS clearly offers a public benefit as a provider of food and housing support to families in need.

  • KCSD clearly offers a public benefit as a public school

  • We believe that SRCI's claims that it will deliver public benefits are largely false, claims resting on three elements in its application.

SRCI claims in its application to be a social services provider (see right). Except for vague references on the Square Roots website to its involvement in Bridges Out of Poverty (which we understand are years out of date), we can find no actual activity or events that appear to involve providing social services. And none of SRCI's board appears to have any training or experience as social service providers.

SRCI claims on its application that it will create "a sustainable revenue source that can be deployed for charitable uses" (see right). There are two problems with this claim.

  • SRCI claims that it includes a for-profit business, and that profits from which are given to charitable purposes. Such an arrangement, however, makes it possible for SRCI to circumvent protections in place for traditional non-profits to ensure that funds are well-deployed. For example, the total salary paid in 2022 to Square Roots staff listed as officers of SRCI totaled more than $716K.

  • We can find no record indicating that any profits from the Creamery were diverted to SRCI in 2021 or 2022. 

  • SRCI's record of donations to independent non-profits in 2021 and 2022 totaled less than $50K (e.g., BRC, Lincoln United Way). This is negligible considering that the total revenue from investment income reported in 2021 and 2022 exceeded $2M.

  • SRCI noted specifically that "a cocktail bar and lounge, commercial kitchen and event space,,, will all be designed to pay homage to the stories of the Underground Railroad." We will conduct a separate review of SRCI's Voices Underground initiative, but it is worth noting that, according to its 2022 filing compensation paid to its executive officer exceeded $210K, more than 20% of total expenses. In contrast, KACS' 2023 filing reveals that the $115K paid to its executive officer represented less than 3% of total expenses

What can you do?

At least this is simple! We believe that every effort be made to fully fund the RACP requests submitted by KACS and KCSD before any funds are recommended for SRCI. We suggest you call the district office of Representative Christina Sappey (484) 200-8264) and Senator Jon Kane (610-510-8252), and the Office of Governor Shapiro (717-787-2500) and let them know what you think!

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