Mona Shield Payne / Special to In Business Las Vegas
Friday, April 9, 2010 | 3 a.m.
Las Vegas-based Harrah’s Entertainment is widely known as the company that owns Caesars Palace and other big Strip resorts.
But what isn’t as widely known is the company’s philanthropic arm, the Harrah’s Foundation, which is run by Executive Director Thom Reilly, a former Clark County manager.
As county manager from August 2001 to August 2006, Reilly oversaw the $5.8 billion budget. Today, he leads the Harrah’s arm that distributes about $10 million a year to charitable causes across the country.
Reilly has a doctorate in public administration, but his passion is social work. He teaches classes in that area at San Diego State University.
Reilly talked with In Business Las Vegas about how the Harrah’s Foundation works, its emphasis on giving to senior citizen organizations and causes, and about his views on the financial problems of local governments:
IBLV: Why is the Harrah’s Foundation important to the corporation?
Reilly: We’re a separate nonprofit and really the philanthropic arm of Harrah’s Entertainment. Harrah’s awhile ago established a code of commitment to its employees, customers and to the community. The company has a number of avenues for philanthropic work, but we operate as a separate nonprofit. The fact that we put the face on Harrah’s giving in various communities is important.
We operate strategically three ways. Internationally and nationally, our focus is on seniors. Since we were established in 2002, we’ve given $70 million — about $10 million a year. We’re the largest corporate sponsor of Meals on Wheels; we’re in a three-year multiple partnership with AARP (American Association of Retired Persons); we’ve worked with Caring for Your Parents, Alzheimer’s groups. So the theme is about care-giving for seniors. The fact that we have been strategic has been helpful for us because there are so many good causes out there, so many people in need. We’ve found that seniors are a good niche because for many corporations, they really aren’t a sexy population for them. The second aspect of our strategy is that we tend to support organizations for multiple years. We don’t give one-time gifts. We basically establish relationships, and we’re there in good times and in bad times. So during the recession, we haven’t abandoned our core partnerships that we have established. During the really tough economic times, that’s when organizations need you more than ever. It’s usually the converse, people cut in hard times. The third piece of the strategy is that all our gifts have the requirement that they have an employee-engagement component. They have to allow our employees to get involved.
In 2008, the Harrah’s Foundation distributed nearly $9.3 million to nonprofit organizations across the country and overseas. What was the amount in 2009?
It was about the same. We’re averaging about $10 million a year.
From where does the money come? Is there a set percentage formula coming from Harrah’s operating income contributed to the foundation?
They give a percentage of their operating income. So we’re funded 100 percent from their profits.
Is that from the Harrah’s corporate or is that from the individual properties?
The foundation is part of Harrah’s corporate social responsibility programs that includes the Harrah’s Entertainment Reaching Out (HERO) volunteer program and CodeGreen for environmental improvements. Generally, with the company facing fiscal restraints because of the recession, are these programs on the chopping block or has Harrah’s been able to maintain them?
It has been able to maintain them. Like anything in the past couple of years, the amount of the funds from the properties was reduced. This year, it’s back to prior levels. The company deliberately said “we’re going to continue funding the foundation.” It’s important because everybody’s struggling and we don’t want to abandon those relationships we’ve had or the good work that’s being done through the foundation. We have to constantly communicate to employees as well as externally why we’re doing this. When there are cuts in salaries, why is it we continue giving when we’re making cuts? It’s part of the commitment we have when we operate in communities that we continue that commitment and not abandon it in tough financial times. We continue to be very visible even during these tough economic times and continue giving these large gifts, these multiple-year gifts. But we have a really important job in communicating why we’re doing that to employees.
The foundation distributes money in three categories: seniors, education and civic. You talked a little about the giving to seniors, but what are some other examples of some of the giving that has occurred in the other categories?
If it’s a corporatewide national or international gift, we give to seniors. But the regions perhaps have different priorities, based on the communities in which they live in. We broadly define these other areas as “education” and “civic.” For example, in the education area, in the Western region, we have UNLV and we’ve given a sizable gift and continue to support it both in research and capital through the (Nevada) Public Education Foundation. In other regions, we support scholarships for students going to college or to continue education and focus on culinary arts and general scholarships. We have the civic category to represent some of the regional interests. We ask each of the regions to have a focus. It could be support of the arts, which is high in New Orleans, poverty-related programs in Chicago, youth and family issues in St. Louis. So it just really depends on the region and its focus and relationships. Part of the issue is if you operate, you give back to the community. That has to be a dialogue with the community about what makes sense.
How did these priorities come about?
I’m not sure how the seniors became a niche, but what we’ve done with the trustees over time is to establish that we have to stay focused. I’ll tell you, it was hard because there are so many good organizations out there. You can get sidetracked by whatever the exciting charity is at the time, so we have to continue to focus on why we’re doing this and what are the themes of our giving. Before I came here, (Harrah’s Vice President) Jan Jones, who helped establish the foundation, approached AARP. From a branding standpoint, AARP is a great organization and obviously the most well-known senior organization. When we approached it seven years ago, it wasn’t that excited about partnering with a gaming company. It’s money, but it’s also its brand and its brand is very important.
But (the successful relationship) was because of our sustained giving and our partnership on Caring for Your Parents that we underwrote and our commitment since 2002 with Meals on Wheels and the research that we funded for Meals on Wheels. Not only did we start funding it — we gave it over 50 vans for example — but we really felt our giving should be targeted with research. We underwrote research on senior hunger and presented that to Congress in 2008, and in 2009, we presented it to the Senate side. The research explored the issue of hunger, isolation and nutrition. It was because of that sustained commitment to those areas, they were impressed.
They also looked at how we market foundation gifts. All our marketing of foundation gifts have themes and the theme is always on the nonprofit, not Harrah’s. Sure, we have the Harrah’s Foundation out there saying that we’re giving. Let me give you an example. In rural Nevada, we funded the mammovan (a vehicle with equipment to take mammograms) and the campaign we ran was, “Where she lives should not determine whether she lives.” It was an appeal to the public to donate to Nevada health centers. That was the core of it. It’s because of that approach, our sustained commitment, our multiple-year commitment and a commitment to address some core issues and because our marketing was not self-serving and really targeted helping the nonprofit. They love us as a partner. It’s good for the company and we’re doing really good work.
One of the largest donations in UNLV’s history occurred in 2007 when the Harrah’s Foundation offered $30 million to develop the William F. Harrah College of Hotel Administration academic building with $25 million, with another $5 million for related research, recruitment, training and education initiatives at INNovation Village, a series of hospitality education and research facilities to be constructed at UNLV. What’s the status of that project?
There were two components. One was the $25 million for the building and $5 million, given as a $1 million annual gift, for research. On the $25 million portion, we gave $2.5 million initially and under the terms of the agreement, UNLV needed to match the $25 million amount by Dec. 31, 2009. But because of economic issues, it was not able to do that. We’re still committed to the gift and we’re working with UNLV on its ability to raise its match. We’re working with UNLV officials on a longer time period for the match. Technically, the deadline was Dec. 31, but our commitment is still there. I don’t know if they’re going to be able to get their match in the next legislative session because this is a very difficult time. The Legislature appropriated some planning money in the last session, which usually is a step toward full funding. I honestly don’t know how much was appropriated or where UNLV stands on its match. But our CEO, Gary Loveman, wanted to make a significant contribution to the university. It benefits the gaming industry to have the top-rated individuals coming out of culinary, gaming and hospitality programs, so our commitment is still in place. Legally, Harrah’s could have walked away from that because (UNLV) didn’t make its match, but we know it’s tough times economically. So we’re looking at restructuring it to keep it going. The other part of the gift was $5 million toward research. The $5 million is in the form of a yearly gift of $1 million based upon UNLV hitting certain bench marks. We’re on Year Three of the five-year grant, so they already have received $3 million of that.
Harrah’s Foundation has come up in recent conversations about building a new sports arena in Las Vegas. What’s the organization’s role in that?
None. Zero. Harrah’s Foundation has no relationship to that. Years ago, Harrah’s Entertainment was looking to build an arena. (Company officials) went through the economic issues, it didn’t pencil out, so they dropped it. Since then, they’re looking at giving some land behind the Flamingo — not the original site behind Bally’s — to a foundation to build an arena. But it’s not Harrah’s. The land is from the holding company. They’ve asked (former Clark County Commissioner) Bruce Woodbury to chair that foundation to begin the discussion about an arena. Bruce asked me to be on the foundation with him, so it’s in a separate capacity. The link is interesting because it’s a foundation and my name may have come up and Harrah’s is donating the land. If that goes forward, it would be a separate incorporated foundation board led by Bruce Woodbury and he’s putting the people together.
How has the rough economy changed the operation of the foundation?
Our core focus of trying to be strategic has helped. The number of requests that have come in has increased. We’ve tried to maintain our partnerships with the groups that are out there. When we look at funding groups, we’re cognizant of the multiple-year gifts and the relationships, which evolve over time and involve our employees. The number of requests has skyrocketed. The needs that are out there are hard. These are hard times. I keep going back to the focus and staying true to the strategy. That means making tough decisions. That leads to some interesting conversations among the board members. “We want to support this great group. And so are the 40 other great groups.”
You mentioned that while the actual support from the corporation was down the past couple of years, it’s going to be back to where it was.
The percentage from the properties has, at this point, been re-established. The last two years, it was reduced — not a whole bunch, but it was reduced.
A percentage reduction?
Can you say how much that percentage is?
It worked out to being a couple of million dollars per year total. Because it’s a three-year commitment, it’s sometimes a little difficult to track it by percentage. On some of these, we made a commitment three years ago. The good thing is that once we make the commitment, we’re in, even in hard economic times. We just gave fewer new gifts.
Also during the recession, charities report soaring demand for their services as people lose their jobs and homes, yet see donations to support their programs decline. What are you hearing from local groups that have counted on Harrah’s Foundation for money?
They’re presenting their stories and they’re painful stories. They’re stories of reduced contributions year-round and they’re demonstrating real need. That makes it really difficult and why we have to go back to our strategic plan and stay true to the groups we’ve supported. We feel we’ve identified causes that resonate in the community.
How has corporate philanthropy changed over the years in Las Vegas? Do you perceive there will be more or less of it on the horizon?
If you look at corporate giving all around, it’s just declined and a direct reflection of the economy. Some companies have abandoned it totally. What’s helped us is the code the company adopted years ago — commitment to employees, commitment to community and commitment to customers. Whenever we have that talk, we go back to the code and say, “This is it.” It’s a privilege to operate in your community and we’ll make a commitment to give back to the community. I’ll tell you, regulators are concerned about it, they ask us questions. There’s an expectation from our employees that we continue giving, there’s an expectation from our customers that we keep giving. We’re not going to abandon our commitments.
If you look at a program like Meals on Wheels, which we’ve had a relationship since 2002, it’s dependent on us. If we stop donating these vans and the hours, it would have a huge impact on the organization. It took me out to Arkansas and I went to the delta region there — it’s not a place that we even have a property, but the research conducted on hunger showed that it’s worst in these isolated rural areas. So instead of just putting vans in communities where we have gaming properties, we went to the places where the research showed there was serious senior hunger problems. It was two hours from Little Rock. The van travels 35 miles to reach one little old lady who the only person she sees on a daily basis is the person giving her the meal. That’s it. It’s not only giving her a nutritious meal, that is her contact with the world, the human contact. Those types of stories really help us because we know if we stop giving, she may not get it because (Meals on Wheels has) been so heavily dependent on us for so many years.
You formerly served as Clark County manager. What are some of your observations on the county’s financial deficit and its negotiations with firefighters?
It’s very painful. Anytime you talk about cutting anyone’s salary, reducing wages, it’s a tough, painful discussion to have. But I said this when I was county manager — and took a lot of heat for it — but I’ll continue saying it: Government is a service industry. We either delivered services directly or we facilitate it. The bulk of the cost to deliver services is in personnel. The lack of revenue coming in and the forecast over the next several years is frightening. (County officials) have no choice but to deal and trim labor costs. What’s happening here is happening all over. The discussion the mayor has had on labor is playing out in every city across the United States. Over the years, the unions, to their credit, have been very effective in developing very favorable compensation packages. The unwillingness to make concessions can only result in layoffs.
The problem for Nevada is that we consistently rank at the top of how we pay our local government employees — always in the top five. But we are always at the bottom in the number of employees per 1,000 residents. That means we have less employees serving the public. So the effect of no wage concessions means layoffs. Layoffs further exacerbate service delivery. The role of government is to deliver services and to facilitate services. It’s not to have the highest wage packages.
I know that’s not a popular thing to say. I’m not out there advocating that they should have their salaries slashed. We don’t have the health care or social services infrastructure in this community. Now, we have a recession that is really impacting the most vulnerable people in the community and we’re suggesting making cuts to those. There’s not been one local government in this community that has had any wage concessions at all. All they’ve agreed to do is reduce the amount of increases. They have a defined benefit package that’s immune to the recession because there are no reductions to health care and no loss of a 401(k). All they’ve discussed is that perhaps instead of getting a 3 percent increase to get 2 percent.
That’s a hard pill to swallow for many individuals that have seen their retirement slashed and their jobs gone and we’re asking them to approve benefits and wages that they won’t see in their lifetime. That’s the battle that’s going to go on. It’s painful. It’s difficult. But there’s no choice. The Pew Research Group did a study that indicated that what happened with the mayor and his plan to fire all employees and hire them back at reduced wages was something going on in major cities. Unless you do wage concessions, they’re going to lay off. For Nevada, because we have so few public employees, it will have a detrimental impact on how we deliver services to this community.
Do you think public employees are overpaid as the Las Vegas Chamber of Commerce has suggested?
I don’t know if they’re overpaid. You get what you pay for. But the standard you should use in setting wages is that it’s a fairness and equity issue and a comparable issue to the private sector. The whole argument of raising salaries in the public sector has always been that people doing comparable work should be paid accordingly. What has happened over the last 10 or 15 years is that the wages of the public sector have outpaced the private sector. Just wages. When you add benefits, it further exacerbates that differential.
Look at the latest Bureau of Labor Statistics. For blue-collar and white-collar jobs, wages alone have outpaced the private sector. Then you have to go back to the focus of government — to deliver services. In many cases in this community, we’ve not been able to deliver the type of services to the community, especially for those who are most vulnerable. When you have less revenue, you have to make tough decisions. This is the decision that counties and cities are making. You either have wage concessions to keep people employed, you cut benefits and wages or, the flip side, you lay off individuals so what we’ll have is fewer very high-paid employees and fewer people serving the public.
What can the county and state do to gain sounder financial footing?
The forecast is not promising. The counties and cities will lag behind the recovery of the private sector. There will be less revenue coming in because of how things are set up with property taxes. Given that a good portion of the stable funding has been from property taxes, and we all know what’s happening in the market down here. There’s a lot of reassessment of values so there will be a lot less money coming in. They’re going to have to look at new ways to deliver services — contracting out, looking at ways to combine functions. Instead of having five fire departments, maybe have one with one training school and one rookie school. Those types of efficiency measures.
This issue of wages and benefits is not going to disappear. Not that I want to say, “I told you so,” but several times a year, I would get up in front of the county commissioners and I would show them this chart and the chart would say we are doubling the western consumer price index every year with our employees and every year, we’re reducing the number of employees to the public. This cannot be sustained. And I said that every single year and I would produce that chart every single year and that’s when we had money. It’s not an easy solution. Rightfully so, the unions that have bargained so very hard for the wages and benefits, to give them up voluntarily puts them at a disadvantage when they have to renegotiate.