The Artscape Case Paints a Picture of the Perils of Privatization


For four years Mayor Kurt L. Schmoke has been amazed that former city Artscape officials have refused to turn over nearly $700,000 raised for the summer festival when William Donald Schaefer was mayor.

The dispute took a more surprising turn last week when it reached the state's highest court: Several members of the Court of Appeals expressed doubt that the city has any legal right to the money.

Why was the court so skeptical about the city's right to money for the city's arts festival raised by city employees? Money raised on city time, using city offices, city equipment and city stationary? (Some of the money may even be city tax dollars.)

Because the Schaefer administration, in one its legendary sleight-of-hand tricks, invented a private corporation to handle the festival's money.

For the impatient William Donald Schaefer, it was easier that way. The festival's expenses would not be scrutinized by any government body. And the city's Board of Estimates wouldn't be bothered with approving contracts with performing artists who appeared at the annual July festival along Mount Royal Avenue near the Lyric Opera House.

Last July a city Circuit Court judge ruled the money belongs to the city and ordered former Artscape officials, led by Artscape founder Jody Albright, to turn it over to the Schmoke Administration. Mrs. Albright, a long-time Schaefer confidante, headed the Mayor's Advisory Committee on Art and Culture and went to Annapolis as cultural adviser when Mr. Schaefer became governor.

For a moment, it seemed like this bizarre episode in the Schaefer-Schmoke political feud was finally over.

But an appeal of the Circuit Court's decision has kept this odyssey alive.

And several Court of Appeals judges, upon hearing arguments in the case, said the circumvention of city government may have come at a price.

"If the city's going to avoid all . . . the red tape by setting up a private corporation, they have to take the risk that goes with it," said Judge John F. McAuliffe.

"Later, he added, "If I give my money to my wife so my creditors won't get it, I might head off my creditors, but I may run the risk of my wife running off with my money."

Perhaps this legal battle should warn governments about the perils of losing control of municipal resources through quasi-privatization.

This is not a case about a government selling an airport to a private corporation or contracting with a private group to take over a center for juvenile delinquents.

This is about elected officials taking it upon themselves to transfer money into private bank accounts to avoid public scrutiny.

During the Court of Appeals arguments this week, Judge John C. Eldridge told Ambrose T. Hartman, the deputy city solicitor, that the city's use of a nonprofit corporation was "an illegal sham to circumvent the Baltimore City Charter."

The judges, several of whom snickered and whispered during much of the arguments by Mr. Schmoke's lawyers, were particularly amused to learn that the current city administration has taken a cue from its predecessor and formed a new private corporation to carry out Artscape without the red tape.

(The Schmoke administration's corporation, however, requires its assets be turned over to the city if the corporation goes out of business.)

Nevertheless, Judge Robert L. Karwacki mused that if Mr. Schmoke is someday elected to the U.S. Senate, he might decide to take his Artscape officials -- and the money -- with him to Washington.

And maybe the next administration would bring suit to get its hands on the money.

Since Mr. Schmoke found out about the elusive Artscape money, he has also discovered the Baltimore Municipal Golf Corporation, a private nonprofit corporation that runs the city's four golf courses, thanks to William Donald Schaefer.

Mr. Schaefer contracted with the golf group to take over the money-draining golf courses seven years ago, hoping to save the city money.

The golf corporation made $800,000 in 1990 on fees at the city-owned golf courses and kept it all -- until Mr. Schmoke demanded a share. After a bitter dispute last year, the mayor finally got a promise of $225,000 a year for children's recreation -- programs.

He hasn't been so lucky with Jody Albright.

In court papers, Mrs. Albright says the money her corporation holds was intended as an endowment fund, although city arts officials who worked for her dispute this.

"We wish to retain control," William A. McDaniel Jr., the attorney representing Mrs. Albright's corporation told the Court of Appeals this week. He said his clients "hoped to give a small amount every year," for the festival. They apparently don't want to see the city spend all the money at once.

Meanwhile, the money has sat in bank accounts, gathering interest, during the last four Artscape festivals, while Schmoke officials scrounge for new private donations to match with scarce tax dollars.

So far, Mrs. Albright has meted out two grants for Artscape in the last four years, totaling $120,000. Meanwhile, the city has spent $1.4 million in tax dollars and private donations to run the last four Artscape festivals.

This year's fair is expected to cost $480,000.

The Schmoke administration sure could use the money -- if it's the city's to spend.

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