City attorney outlines legal steps and risks for creating a nonprofit; council discusses partnering with Ed Foundation

City Attorney Christy Gideau briefed the council on legal and administrative considerations if the city or council wishes to establish a nonprofit entity to receive donations or manage charitable funds.

Gideau said municipalities can form nonprofit corporations but cautioned that establishing and, importantly, maintaining them raises multiple issues: governance and appointment of board members, clarity of purpose and day-to-day operations, financial structure, audit requirements, insurance, fundraising and potential ethics and public-records implications. She said separate nonprofit entities are distinct legal entities and may require ongoing oversight similar to an advisory board.

Gideau explained the city itself is a political subdivision and is not a 501(c)(3) nonprofit. Donors sometimes ask for documentation for tax purposes; the city can request an IRS letter that confirms political-subdivision status, but donors should consult their tax advisers about deductibility. A separately formed 501(c)(3) could provide donors with tax-deduction receipts, but that requires formal setup and ongoing administration.

Council member Noble noted prior conversations about using a foundation to manage scholarships; the mayor said he had an initial exchange with James Gavrilos, CEO of the Education Foundation, who indicated a willingness to partner. Councilmembers discussed that using an existing foundation could simplify donor tax questions and relieve the city of maintaining a separate nonprofit oversight structure.

Gideau and council members emphasized that forming a nonprofit is feasible but that the city should prepare a resolution and governance framework at the outset and anticipate ongoing administrative responsibilities.