You don't have to back the stadium to like fund-raising trust's tax breaks

February 11, 2000

In a community where hating baseball frequently seems to be a more popular sport than baseball itself, it's perhaps fitting that many of the private donors who come to the stadium's rescue likely will not be from this area, nor will they have heard of the Hagerstown Suns.

One of the most intriguing angles of the stadium project is the source for private funding, which boosters believe has the potential to far outstrip the $3 million to $5 million needed to make the project work.

As stadium task force committee chairman Dick Phoebus noted, even if a stadium isn't built, this funding instrument, known as a charitable remaining trust, would be a good thing to have in place for a variety of community projects.

The trust is appealing to older, wealthy individuals who have watched the value of their stock portfolios soar to the point where they'll be crushed by capital gains taxes if they sell, or inheritance taxes if they die.


As an alternative, they can commit some of the stock to a trust, which has been established to fund a public project.

When they do this, two things happen. First, they get an impressive tax write-off. Second, they continue to receive their quarterly dividends from the stock until they die.

On their deaths, clinically known in the business as an "actuarial event," ownership of the stock legally passes into the hands of the trust. But the public project that's to be funded doesn't have to sit around in the meantime waiting for enough actuarial events to proceed with construction.

That's because the trust can borrow against the value of the stock which - the only two certainties in life being actuarial events and taxes - is bound sooner or later to come into the trust's possession.

The stock market's dramatic rise in recent years has created a serious need for - what's a nice word for loopholes? Lots of stocks purchased for $15 last year sell for $150 today. But taxes almost make it impossible to sell.

Curiously though, as wealth in America has increased, conventional charitable donations have not. This would imply that for the very rich, God love 'em, a straight tax write-off for charitable giving doesn't pay.

The trust, as it would be structured for the baseball stadium, sweetens the pot by allowing stockholders to keep collecting an income from the stock as long as they are alive, as well as reaping the tax benefits that come with charitable giving.

I know. There's a sort of "better living through greed" flavor to the whole thing, but this moral pea is under such a stack of practical mattresses that it really shouldn't bother anyone too much.

Further, once it has been established, it's conceivable this trust could be used to fund a number of other projects beneficial to the town, such as the fairgrounds park project and the arts and entertainment district improvements.

You can't really expect certain segments of the community - segments which still seem to believe that the stadium would be paid for with their tax dollars, or that hotel taxes could somehow be used to pay off the water and sewer debt - to be able to noodle through the concept and desirability of a charitable remaining trust.

But in truth, I think anymore it's not so much a matter of people not understanding, as it is a matter of people not wanting to understand. Elected officials have addressed most all serious community concerns. The stadium won't be controlled by Hagerstown Suns owners. It won't be paid for with property taxes. It will only be built if sewer-debt repayment is accelerated.

Yet everytime a concern is addressed, stadium opponents dream up some other reason why it shouldn't be built. It's growing apparent they would find a reason to hate a stadium if one floated down from heaven above as a free-and-clear gift from the Almighty himself.

Now they're saying it's unfair to the charities to cut back on their tip-jar take. It is interesting that these people would suddenly develop such a profound concern for the poor, when many of them are the same people who led the opposition to charitable, tip-jar taxation law in the first place.

Further, the tip jar reformulating frees up funds for sewer-debt repayment, not for stadium construction. The stadium will be paid for with an increase in the hotel tax (which will still leave Washington County with a room-tax rate well below the national average), with state funding and with the charitable trust. Not a penny of tip jar money goes to the stadium - even though that might not have been a bad idea.

Right now, the success or failure of the private trust contributions appear to hold the key to the success or failure of the stadium project. Without a strong private contribution, Phoebus flatly states the stadium will not be built.

Meaning that for the future of minor league baseball in Hagerstown, this novel and largely untapped and unknown instrument of public-works funding, is a matter of life and actuarial-event.

Tim Rowland is a Herald-Mail columnist.

The Herald-Mail Articles