This rare charity tries to earn way as business

August 30, 2006|By Jay Hancock | Jay Hancock,Sun Columnist

Kathy Reese, recovering from depression, and seven or eight co-workers who between them know cocaine, alcohol and despair far better than they should, stand in a dingy office. Most hold hands in a circle.

"Forgive everyone," Reese reads from Heart Thoughts, a book by Louise L. Hay. "Forgive yourself. Forgive all past experiences. You are free."

The scene might come from any nonprofit organization trying to boost the odds for people at society's border, but this meditation came from Harbor City Services in Lansdowne, which employs dozens of recovering substance abusers and those who have fought mental illness to do jobs like shredding paper, organizing documents and doing commercial moving.

Harbor City is unusual. Although technically nonprofit, it stands outside the sanctuary of donations and set-asides that society has created for groups performing "charitable, religious, educational, scientific, literary" and other nonprofit missions, to quote the Internal Revenue Service.

It tries to earn its way in the marketplace jungle, with only its income-tax exemption as a shield.

"Social enterprises," these kinds of outfits are called. As needs and competition for donated and subsidized dollars have grown faster than the dollars, social enterprises are trying to take philanthropy into uncharted parts of the economy.

"Every dollar that a nonprofit earns for itself is a dollar that is available for distribution by local grant makers to another important charitable cause where earned income may not be feasible," Jim McClurg, president of the Social Enterprise Alliance in Shoreline, Wash., says via e-mail. "Social enterprise isn't about cutting the pie into smaller pieces; it's about expanding the pie."

You'll never be invited to the Harbor City Gala Benefit at the Meyerhoff. There isn't one. You'll never be called at dinnertime by a Harbor City fundraiser. Harbor City doesn't panhandle for donations. No United Way money, either.

Harbor City gets no government grants. It participates in zero government set-aside contracts for the disabled.

Besides its tax exemption, the company once received subsidized rent as part of Empower Baltimore and got the Abell Foundation to guarantee its bank loan. But otherwise it competes on price, quality and service and pays its way, like most businesses.

"I was dropped on my head as a kid" is Harbor City Chief Executive Officer John Herron's joking explanation for why his group has diverged from the nonprofit pack.

A licensed social worker, Herron, 56, has worked for years with the addicted and psychiatrically disabled. He taught at the University of Maryland medical school and earned a master's in business from Loyola College a few years ago.

He founded Harbor City as an added service for the psychiatrically challenged; it's hard to rise from addiction and confusion if you don't have a job.

About 60 people work there, mostly part time, shredding documents, running the small warehouse, driving trucks and humping desks and tables on moving jobs. They get $6.50 to $9 an hour.

Eight full-timers are on a medical and dental plan. Everybody has a past.

"If it wasn't for Harbor City Services, I'd probably still be in the hospital now," says Marietta Smith, 50, an office assistant who suffered from severe depression and headaches.

"I said I was going to smoke coke till the day I die," says Charles Hamilton, 49, who got out of treatment last year and runs Harbor City's clothing recycling program.

"This is it. This is it, sir," promises Rick Anderson, 42, who says he wants to stay clean as a Harbor City employee after 24 years of cocaine use and six treatment programs.

The business model has its challenges.

Workers sometimes relapse and don't show up. Herron gives them another chance. (Such glitches are "invisible" to customers, he says.) Often clients don't call until it's an emergency or they're seeking the lowest quote possible. Success is when Harbor City's customers hire away its best employees.

The company has struggled since it lost a big client a few years ago. Some jobs are irregular. Money is tight. Harbor City lost $80,000 last year on revenue of $375,000. Bosses at other "nonprofits" make well into six figures or even more; Herron's board pays him $78,000, a salary he supplements with outside consulting.

So why not give up and hire a fundraiser? Or at least tap into the billion-dollar Javits-Wagner-O'Day program, which reserves federal janitorial and other contracts for Herron's type of clients, or its state counterpart?

"We never thought it was to our advantage to take set-asides rather than just compete on price," Herron says. "It just never seemed that was the way to go."

Homelessness, addiction, unemployment - "each area of need is dramatically greater than the willingness of society to fund it" on a charitable or subsidized basis, says Robert C. Embry Jr., chief of Baltimore's Abell Foundation. By forging into the marketplace, he says, social enterprises can expand philanthropy and become self-sustaining, "and they also train people who need help - and they become self-sustaining themselves"

What a great idea. I think I'll send Harbor City a check. Except they might refuse it.

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