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The state of Maryland is nearing the conclusion of talks that could transfer ownership of the state's goodwill ship, Pride of Baltimore II, before the end of the year to the nonprofit organization that has operated it since 1988.

The transfer would mean one less annual bill for the cash-strapped state and free the nonprofit's fundraisers from a public perception that the ship is kept afloat by tax dollars, perhaps making it easier to raise money.

Officials at Pride of Baltimore Inc. note that the state has already ended its $164,000 annual subsidy for the ship's operation and maintenance. It continues to cover the ship's insurance.

"Our proposal is to take all the financial burden off the state," said Linda Christenson, the nonprofit's executive director. "It's one financial burden they don't need. ... We look forward to the final stages of the negotiations."

In 2007, then-Transportation Secretary John D. Porcari notified Pride Inc. Chairman Alfred Tyler that the state planned to end its annual subsidy, saying, "MDOT has had fewer resources available to fund annual grants" and that the fiscal 2007 payment would be the last.

But that payment was delayed until January 2009, an MDOT spokesman said, while Pride Inc. resolved issues raised in April 2008 by a state audit.

Auditors found that Christenson had received bonuses that were "not consistent" with her employment agreement and that the increases "were not reported to the board." With bonuses, her compensation grew from $75,000, or 9 percent of the nonprofit's total revenues, to $211,000, or 24 percent, in five years.

The audit issues were eventually resolved to Porcari's satisfaction. But turmoil over the issue reportedly led to three resignations from the Pride's board. The 16-month delay in the state's payment put a pinch on the Pride's finances. And a letter from Porcari a year ago made it plain there would be no more cash from the state "due to the severe economic downturn."

That spurred the Pride's board to pursue an amicable divorce from the state and full custody of the ship.

"We've been dipping into our endowment over the last couple of years to allow us to fund part of our annual budget," said R. Christopher Rosenthal, a Pride board member and an accountant with Ellin & Tucker, Chartered. "We're confident as a board that we can raise the funds after the boat is turned over to our ownership, and that we can meet our annual budget goals."

The negotiations began more than a year ago. Jack Cahalan, spokesman for the Maryland Department of Transportation, described them as "positive."

"We share the same goal here," he said. "We're trying to figure out the best way to continue the mission of the Pride, as well as protect the taxpayer. The Maryland taxpayer has a lot invested in the vessel."

Rick Abruzzese, a spokesman for Gov. Martin O'Malley, said, "Any future arrangement would need to ensure the mission of the Pride is preserved, namely the promotion of the state as a place for business and tourism and the education of youth on maritime heritage."

A 109-foot replica of an 1812 Baltimore privateer, the Pride II was built at the Inner Harbor in 1988. It was designed to be a safer replacement for the original, city-owned Pride of Baltimore, which capsized and sank in an Atlantic squall in May 1986, with the loss of four lives.

The state contributed $1 million toward the $4.5 million construction effort. In 1989, title to the vessel was transferred from the Pride of Baltimore Inc., for one dollar, to the Port Administration. The state, in turn, agreed to contribute $164,000 a year to the ship's operation and maintenance.

Christenson said that payment has stopped, but the state has continued to pay for the ship's insurance - about $41,000 a year.

The nonprofit's finances are "in good shape," she said. "We have the money to continue operating the ship, maintaining and repairing the vessel as we do every winter," an annual task that costs about $230,000.

The Pride II is tied up in Canton, preparing for its "winter layup." Plans for next season's cruises in the Chesapeake and into the Great Lakes are in the works.

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