As it turns out, the sale would violate Internal Revenue Service regulations for tax-exempt organizations.
The proposal, intended to help the orchestra pay down its debt (expected to reach $12 million by 2008), was that the hall would be sold to a nonprofit subsidiary, which would lease it back to the orchestra.
The nonprofit would pay for the hall with $30 million in tax-exempt bonds, and the orchestra would reclaim ownership of Meyerhoff when its debt was eliminated.
The IRS, however, does not permit nonprofits to issue tax-exempt bonds for such projects as debt reduction: only for construction. The proposal can move ahead if the nonprofit uses taxable bonds with significantly higher interest rates.
Jeff Shapiro, the BSO's chief financial officer, outlined for the Sun some of the orchestra's current options, such as borrowing against the orchestra's endowment, borrowing against the orchestra's existing line of credit, and selling taxable bonds to the public. In all of the cases, the idea is to extend the amount of time the orchestra has to pay back its debt, perhaps, if it can be managed, at a lower rate of interest.
"We have a very strong balance sheet," Shapiro said, "with an endowment of $85 million and a building worth about $40 million. The debt ratio is not unbearable, and the Baltimore financial and business community has been very supportive."
BSO president James Glicker said that the season's second half is selling more briskly than the first, with programming aimed at audience favorites. "Revenues are still declining," he said, "but we're on target to reach our goal. In general, I am pretty happy with where we are."
The BSO's debt was created by a drop in ticket sales; the orchestra's concerts are currently filled at an average of 60 percent of capacity. The orchestra is also committed to raising $30 million to put toward its second home, the Music Center at Strathmore outside Washington.
In addition to its financial woes, the BSO is searching for a new music director to replace its renowned director Yuri Temirkanov, who leaves at the end of the 2005-06 season.