Childcare foundations buckling under pressure

On December 23 last year, a group of 10 boys from the Hatzikonsta children’s welfare foundation arrived at the Maximos Mansion. On the occasion of its 160 anniversary, the foundation’s director, Leonidas Dragoumanos, had nailed a privileged spot on Prime Minister Antonis Samaras’s busy agenda. While the boys sang Christmas carols to the premier, the real agenda was quiet different.

“Help us, we’re on our knees,” Dragoumanos told Samaras. “We won’t be able to make ends meet very soon.”

Dragoumanos started working at the foundation as a teacher in 2009 and subsequently experienced the crisis years. The institution currently hosts 300 children. “What’s the problem?” Samaras inquired. “Since 2010 we have paid over 2 million euros in taxes alone,” he replied, before the PM interrupted him and told him there was nothing he could do about that.

Dragoumanos left the Maximos Mansion rather disappointed. By pure coincidence an agreement for the prolongation of cooperation between the Hantzikonsta foundation and the Zanneio orphanage had just been signed at the former’s headquarters.

Following three years of rising taxes and complications over leasing agreements, the Zanneio foundation was facing a financial impasse. Rents from the foundation’s 10 most important properties, leased by the state, were either running late or not being paid at all. Beginning in 2010, the state had imposed a 30 percent slash in payments. At the same time the government had vacated three of the properties without prior notice or compensation, while the foundation had carried out costly renovation work.

Faced with mounting pressure last year, Zanneio president Giorgos Gavriil asked for the amount of the institution’s due taxes (350,000 euros) to be offset against the state’s dues (40,000 euros). The request was rejected and the state subsequently sued Gavriil over debts to the state. The foundation’s 38 children are currently being looked after by the Hatzikonsta foundation.

The majority of leading Greek childcare institutions now face a similar impasse. In many cases this is directly related to their properties, which are their main source of income. A series of tax hikes, delays in payments and red tape have turned property investment, which up to just a few years ago was considered smart and lucrative, into an unbearable weight. In the case of childcare foundations, the repercussions are principally felt by the children themselves.

“At the beginning of the crisis we didn’t feel anything,” said Dragoumanos. Wealthy foundations such as the Hatzikonsta, which owns a larger number of properties, appeared sheltered. When discussions over a first memorandum tax law started, however, news of their income from rent being taxed and tax relief being abolished made them anxious.

The heads of the country’s four largest childcare foundations whose main source of income came from properties – the Hatzikonsta, the Hatzikyriakeio Childcare Institution, the Zanneio and the Amalieio Girls’ School – began a round of meetings.

They contacted both the government and the opposition. They heard various things: Some blamed the memorandum and the troika for the government’s need to produce immediate revenues, while they were also informed that another reason for the circumvention of tax relief directives had to do with the existence of several fake charity institutions.

In the absence of a control mechanism capable of providing a legitimate overview of the country’s approximately 6,000 charity institutions’ activities, the law was an easy solution. “It’s not our fault if you can’t carry out checks,” those in charge of institutions responded angrily.

“Behind closed doors you hear understanding words and promises, but then there’s nothing,” said Michail Stroumboulis, a member of the Hatzikyriakeio board of directors for the last 16 years. His personal struggle had begun long before the memorandum, after the 1999 earthquake, which left its mark on the foundation’s building.

The Hatzikyriakeio Orphanage was erected in 1889 by Smyrna tobacco merchant Ioannis Hatzikyriakos who had envisioned a state-of-the-art girls’ orphanage. Besides thousands of children, the institutions also hosted injured soldiers and refugees from Asia Minor.

During the recent recession years, however, the building remained vacant due to quake damage. Although it was defined as a listed building, the cost of repair works had skyrocketed and was labeled “prohibitive” by successive governments. At the same time it was also forbidden to make any changes to the building or its premises, although that apparently did not apply to the state, which expropriated one hectare without the foundation’s consent to build a school complex.

Fifteen years after the quake, 130 girls aged 6 to 18 are still living in eight prefabricated houses next to the main building, which stands empty. Some recent efforts proved successful and repair works to be carried out using EU funding are now in the pipeline. In the meantime, over the last four years the foundation has received an annual tax bill of 33,000 euros for the dilapidated building. Over the last few years, meanwhile, the foundation came into possession of other major buildings, which under different circumstances would have secured its smooth running, but have ended up adding to the overall problems.

One of the foundation’s properties, a three-floor neoclassical building on the corner of Stadiou and Korai streets, once the famed Grand Hotel d’Athenes, which was abandoned after the war, became the subject of a tender a few years ago. Spanish fashion chain Zara won the competition and was set to take on the building’s entire renovation and sign a 19-year lease. The foundation would enjoy a steady income and be in possession of an entirely furbished building.

Delays in permit issues and the involvement of the Central Archaeological Council (KAS) when antiquities were discovered on the premises along with an appeal addressed to the Council of State regarding the building’s interior halted all plans.

“If we lose this project it will be the end of us,” Stroumboulis told SYRIZA MP Panayiotis Lafazanis, who at the time was a Greek Communist Party (KKE) municipal councilor who was leading a group of architects in the appeal. The Spanish company was eventually issued new permits and the store opened following a six-year delay. Today the building’s rent covers more than 50 percent of the foundation’s entire yearly income.

A similar situation – but without the happy ending – was faced by another of the foundation’s landmark buildings, located on the corner of Voulis and Kolokotroni streets. The building’s last tenant, a glazier, disappeared sometime in the 1990s. Twenty years on, the foundation is still awaiting a court decision regarding 60,000 euros’ compensation. In the meantime, three new tenants signed leases, began renovation works but gave up after a while due to red tape obstacles and impossible limitations imposed by the state in the name of the listed building’s protection. The building is now slowly collapsing behind the scaffolding, which along with property tax is costing the foundation some 14,000 euros per year.

“We have this private joke,” said Stroumboulis: “Instead of protecting the kids, we have to protect our archaeological heritage; but that’s not what we do.”

Once a key earner, real estate woes now affecting organizations’ work

A list of 22 properties whose tenants owe the Hatzikonsta foundation over 2 million euros lies on Dragoumanos’s desk. Among them is a listed building at 37 Ermou Street, leased by Greek jewelry and accessories brand Folie Follie. In 2010, when the foundation and the company agreed to a lower rent, due to the crisis, the Attica region’s supervising body notified them that under a 1939 royal decree (which up to last year had determined the foundation’s business operations), a new tender would have to take place. The tender proved fruitless, and then, from a position of power, Folie Follie withdrew a new offer, worth 10,000 euros less, which had been made with certain demands which were not accepted by the foundation. Years later the two sides are in court, the company is paying an even lower rent, while discussions for an out-of-court settlement have started.

The building hosting the Prytaneion restaurant in the district of Kolonaki is in a similar situation, with the foundation demanding over half a million euros in unpaid rent. According to a deposition by the restaurant owner, the financial crisis, renovation work carried out 20 years ago, along with the unfair – according to him – readjustment of the leasing agreement rendered the situation impossible. Beginning in 2012, the tenant unilaterally decided to pay a lower rent, while last year, when a court granted him an extension to pay his dues and vacate the premises, he simply stopped paying altogether. Meanwhile the foundation has to pay 44,000 euros in income tax from rent money it has not received.

The daily struggle to make ends meet continues at the Hatzikyriakeio, where an increasing number of families are asking for help and the number of employees is at the lowest possible point. Every day, for instance, five women take care of 134 children. They do so with some outside assistance, including volunteers helping at the foundation’s premises and food donations.

The same applies at other childcare institutions across Greece. At the Hatzikonsta, where budget cuts have reached 40 percent, the in-house doctor has left and the children are looked after by Doctors of the World in Perama, southeastern Attica. Activities have been reduced and the foundation has had to refuse calls for help from families.

“Two years ago we were assisting 450 families and now we have been forced to reduce assistance to about 280 to 300 children while we have stopped all aid outside Athens. It’s a painful situation,” noted Dragoumanos.

“Things will be tough for as long as the crisis persists, demand for taking on children is rising and the country continues to treat us as profit-making businesses and tax us mercilessly,” added Stroumboulis.

In the meantime, the people managing the foundations are showing resilience. Zanneio president Gavriil and Hatzikonsta officials frequently meet for marathon meetings in an attempt to find solutions. “We came to terms with the idea that the state cannot help us a long time ago. But they could at least stop adding the extra hurdles. I think it is now obvious that we have reached our limits,” he said.