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A numbers puzzle

After 15 years, memories fuzzy on how association cut determined

October 05, 2011|By ARNOLD S. PLATOU | arnoldp@herald-mail.com
  • Portions of proceeds from sales of tip jars, a form of paper gambling, above, are given to Washington County fire and rescue companies.
Photo illustration by Colleen McGrath, Staff Photographer

From tip jar players' hands, to restaurants, bars and private clubs across Washington County, the money rolled in to the county's new gaming fund.

In April 1996, in accordance with the county's gaming law, the county government issued its first check — for $124,215.60 — from the fund to the Washington County Volunteer Fire and Rescue Association.

What happened next is unclear.

The money was divvied up, but how, why and on whose authority?

Now, 15 years later, the answers to those questions hold the key to how much money the association keeps for itself and how much it gives each of its member volunteer fire and rescue companies.

Glenn Fishack, president of the Fire and Rescue Association since 2008, said he thinks association members must have voted years ago on a formula. But what it was, "I'm not sure," he said.

Neither are several other officials in fire and rescue and government. Many who were asked expressed surprise to learn that neither Maryland lawmakers nor, apparently, the Washington County Board of Commissioners, ever approved the formula.

Former Fire and Rescue Association presidents L. Jason Baer and George "Glenn" Fuscsick are certain they know the formula.

Baer thought it was written in Maryland law.

Fuscsick said, he "can't find anything in writing to support the way" the association takes a cut for itself. "We never wanted to ask" who authorized that, for fear lawmakers would take all the money back, he said.

The issue is accountability.


The law, and the split

Here's what is known.

In 1995, then-Gov. Parris Glendening signed into law a measure approved by the Maryland General Assembly and requested by officials of county government and local organizations, including fire and rescue companies, to regulate tip jar gaming here.

Tip jars are the common name for a form of paper gambling involving packets of numbered tickets, some of which win cash prizes.

The law established a county Gaming Commission, which was to administer a new gaming fund. Clubs, restaurants and taverns were required to give the fund a portion of any profits they made from selling tip jars.

The Gaming Commission was required to give 60 percent of the fund to charities and the remaining 40 percent to the association. The 60-40 split had been recommended by a task force of county residents, recruited by Del. John Donoghue, D-Washington, who helped shape the legislation.

The law said nothing about what the association was to do with the money or whether it could keep any — or all — of it for itself.

The tip jar profits began flowing to the fund in July 1995. By spring 1996, when the Gaming Commission made its first distributions to charities and to the association, the fund contained $303,010.63, according to commission records.

Of that, the records show, charities got a total of $178,795.03 — which works out to just 59 percent, just under the 60 percent share the law required.

The remaining $124,215.60 — which figures to 41 percent — went to the association. That was the first of two payments the Gaming Commission sent to the association that calendar year.

At the time, the county government was already giving each of the six volunteer fire companies in Hagerstown $20,000 a year and each of the 21 rural fire and rescue companies $40,000 a year to help pay basic expenses, according to county records. Those subsidies continue, although they are higher now.

The county also was paying the premiums — totaling $398,000 in 1996 — for accidental death, workers' compensation and property casualty insurance for all the companies. It still pays for those.

Before the gaming money began to flow, the county was paying some of the association's expenses, for programs that benefited all the companies. In 1995, the county gave the association $142,000.

In general, that money paid "for training, for safety, for fire prevention, different things like that," recalled Charles Shindle Sr., the association's treasurer from the mid-1990s to about 2003.

Even with the gaming money coming in, the county has continued to give other funds to the association — $49,000 in 1996; $63,962 in 1997; and $135,400 in 1998, for instance.

County Finance Director Debra Murray said those payments likely included equipment purchases, rather than operating expenses, because the amounts differ so widely.

The new law was seen as a way to begin regulating gaming and to boost funding for the fire and rescue companies and for charities without increasing taxes, said former County Commissioner Gregory Snook, who became president of the board of commissioners in 1995.

The law gave the fire and rescue share directly to the association, rather than to the individual companies, because "we felt it was better to give to an entity and let that entity distribute it," Snook said.


Taking a cut

Several of those involved in crafting the legislation said they had no idea then that the association would take a cut of the money for itself.

Both Snook and Donald Munson, a local delegate to the Maryland General Assembly in 1995, said they don't oppose the cut now, but they didn't know about it then.

"No, no one had ever perceived anything at that point in time," Snook said.

Still, Snook and former County Commissioner James Wade, who served from 1994 to 1998, said they think the association might have discussed the idea later with the commissioners.

Snook said he doesn't remember association officials' reasons for whatever cut they had in mind, "but it must have made sense."

Wade said all he seems to recall is "that we were going to leave it up to them to fairly disburse (gaming funds) to all their members. They wanted to determine that themselves."

If Washington County Volunteer Fire and Rescue Association leaders did discuss a proposed cut with the commissioners, the county doesn't appear to have an official record of it. Vicki Lumm, clerk to the current board of commissioners, found no reference when she searched minutes of meetings from 1994 through 1997, at the newspaper's request.


Fading memories

If the county commissioners didn't decide how fire and rescue was going to divvy up the new gaming money, who did?

Jim Kershner, who was association president from June 1994 through June 1996, said he doesn't think it was decided during his term.

Told that gaming commission records say the fund's first "distribution" to the association was in April 1996, Kershner said it's too long ago for him to remember for certain.

But he said he thinks that late in his term, he'd begun turning over some duties to Jay Grimes, his first vice president, who was to succeed him.

"I'm thinking Jay handled most of that because that was going to be handled during his term," Kershner said. "I'm pretty sure Jay was handling most of the gaming stuff."

Kershner, who said he left the association right after his term ended, said he hadn't thought the organization needed any of the gaming money for itself. "Back then, the association was stripped to the essentials" financially, he said.

"I didn't think we were (going to take a cut). I thought it was all going to be divided up among all the companies," Kershner said.

Grimes, who was association president through 1999 and is now president of Williamsport Volunteer Fire and Emergency Medical Services, can't recall what happened back then, according to his wife, Vicki. She said he has suffered three strokes in the past year.

But, she said, Grimes thinks the association's minutes should have an account of what happened.

Sam Murray, the association's current secretary, looked through the minutes at the newspaper's request, but said he couldn't find any records of what happened.

Richard C. Blair, association treasurer since about 2003, said he doesn't know how it was decided that the association would get a cut, but he doesn't think it had a choice.

After the gaming money began to flow, Blair said, the county stopped helping the association pay its operating costs.

"I haven't seen any money come into the fire and rescue association from the county for years. They cut the funds, not us," Blair said.

"We get no funding on the $48,000 (the county's current subsidy to each rural company). We pay the electric and all our water and sewer right out of the gaming fund. So, we're not crying poor-mouth here. They cut it down to zero, other than what the insurance (is), basically."


The rule of 10

Shindle, the association's treasurer before Blair, said he doesn't know how it came to be that the association takes a cut of the gaming money.

The rule he remembers though, is 10 percent.

As treasurer, Shindle said, whenever he received a county gaming check, he took out an amount equal to 10 percent of what had been the balance in the county's entire gaming fund.

For most years of its existence, the entire fund has topped $2 million each year.

For simplicity's sake, let's say the entire fund for both the charities and the association contained $1,000. Ten percent of that is $100.

Under the law's current 50-50 split, the county would have sent the association a check for $500. From that, the association would have set aside $100 — or 20 percent — for its administrative and programming expenses.

The remaining $400 would have been divided into 27 equal shares, with a share going to each of the volunteer companies.

Under this example, the association's $100 cut would have been 20 percent of fire and rescue's total share.

That also works out to 10 percent of the entire gaming distribution, but the association does not have access to the 50 percent that goes to charity. That means, all of the association's cut comes from the fire and rescue share.

Fuscsick, who is an accountant and was association president in 2006 and 2007, said that is how it was done during his term, and before and after it.

"They took 10 percent of the total gaming (fund), and equated it to 20 percent of each distribution" the county sent the association, Fuscsick said.

The 10 percent rule confirms some of The Herald-Mail's own findings during its yearlong investigation.

Examining financial reports the association filed with the Internal Revenue Service (IRS), the newspaper determined that the association kept 20 percent of the fire and rescue share of the gaming money every year from fiscal 2001 through fiscal 2010.

Baer, president from 2000 through 2003, said he thought the association's 10 percent rule was written into the gaming law when it was amended in 2000.

And, he said, he thought the county commissioners set the 10 percent as part of a deal designed to ensure the association would never get less than a certain amount of money for its own expenses.

But county officials, including longtime finance director Murray, said they've never heard of such a deal.

And the 2000 gaming law amendment says nothing about the 10 percent rule or any other portion of gaming funds for the association.

The amendment's primary purpose seems to have been to change the fund's 60-40 split between charities and the association to the 50-50 split that remains in effect today.

Donoghue said he can't remember who proposed the even split, but said it wasn't controversial.

Donoghue said the feeling was "it would be more fair if you split it down the middle, because the message we wanted people to understand is that charities and fire and rescue were very noble and there was no reason to favor one over the other."


Doing the math

While the association's practice of taking 10 percent explains how it has divvied up the fire and rescue share of the gaming money since 2001, it doesn't necessarily explain what happened earlier.

With, for instance, that first gaming check in 1996.

Back then, the gaming fund was split 40-60 between the association and the charities, rather than the 50-50 split of today.

If the rule of 10 percent was being used back then, the association would have been keeping 25 percent of the fire and rescue share for itself, the newspaper determined.

A 25 percent cut of that first $124,215.60 gaming check would have given the association $31,053.90 for its own expenses.

Was that enough to cover its expenses in 1996?

Is that perhaps the reason the rule of 10 percent — rather than 5 or 15 percent — was adopted?

There isn't enough information in public records to answer those questions.

The association didn't mention even the idea of a cut in 1996 when it asked the IRS for tax-exempt status.

In a statement dated June 14, 1996, and signed by Shindle, the association said, "Monies derived from gaming are transferred from the county government gaming commission to this organization and then divided equally to each member company."

When the tax-exempt status was granted, the association was required to send a financial report to the IRS every year.

In the first of those Form 990 reports, the association says it gave $29,792.12 to each of its 27 member companies during its July 1997 through June 1998 budget year, for a total distribution of $804,387.24.

Presumably, that money came from the gaming fund, although the Form 990 only identifies the source as a "grant."

Also, the Form 990 says the association received $122,408 "from county government" — but it's not clear whether that also was from the gaming fund.


No degree of certainty

The county finance department's own records show that in addition to the $804,398 in gaming money it gave the association during its July 1997 through June 1998 budget year, it also gave the organization $135,400 in what the records call "operating" money. But Murray said those "operating" appropriations were often to help the association buy equipment.

In all, the report said, the association spent $941,873 on several expenses including a recruitment program and training, plus the distribution to the companies.

If both the $804,387.24 and the $122,408 came from the gaming fund, that suggests the association kept 13.2 percent of the fire-rescue share that year.

So, what are the answers to the how, why and who mystery of the association's cut?

Mike Reid, chief of Clear Spring Volunteer Fire Co. and a volunteer firefighter for more than 30 years, might have the best answer.

"I've never been exactly sure," he said.

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