The Haas trusts have grown. But will Phila. area nonprofits gain from the growth?
The Haas charitable trusts, the creations of Otto and Phoebe Haas in the 1950s and early 1960s, have swelled to financial giants, topping $2.7 billion in assets when Dow Chemical Co. bought the Haas family business, Rohm & Haas Co.
With the Dow-Rohm deal, the Haas trusts are one of the largest private sources of philanthropic funds in Philadelphia, after the Pew Charitable Trusts, and offer the potential for a windfall of giving, officials say.
Even before Dow-Rohm, which was finalized April 1, the Haas trusts had distributed more than $40 million to nonprofit organizations in 2007, much of it to arts and cultural organizations, churches, land-conservation groups, and arboretums.
With the money from the sale of the company, if the Haas trusts spend at a rate similar to 2007, they could boost funding to nonprofit groups to $67 million a year, according to court records.
That should be heartening to institutions, hungry for funds, that are critical to the fabric of the region. Yet the trusts have key aspects - among them a controlling family growing generations apart from the wishes of its founders - that could alter their charitable giving and Philadelphia-centric focus.
Any increase in gifts would be a huge help: Nonprofit organizations are cutting back on staffing and grant-making because of the bad economy. In Philadelphia, the death in March of Leonore Annenberg resulted in that family moving its foundation to California.
"The [Haas] trusts are very large, and the income from those trusts is presumably substantial and can do a lot for the public good," said Michael J. Hussey, assistant professor of law at the Widener School of Law in Harrisburg.
Dow Chemical's acquisition of Rohm & Haas for $15.4 billion has drawn no comment from the very private Haas family, although the family has acknowledged that the trusts could broaden their philanthropy.
Trust documents, court records, and experts, meanwhile, indicate that an immediate charitable windfall isn't guaranteed.
The Haas trusts do not specify actual spending levels for charitable beneficiaries and, because of their age, there are no federal requirements on them. The trusts are supposed to distribute "income," such as cash dividends, to charities.
When the Dow-Rohm deal closed, the trusts were heavily invested in cash, which doesn't generate a lot of income.
As for where the charitable gifts will go, the Haas family's philanthropic arm has diversified its beneficiary base in recent years, moving away from a singular focus on supporting the Philadelphia-based William Penn Foundation.
Once very focused on Philadelphia, the family is aging, dispersing geographically, and growing in number - which puts strain on the financial resources of the charitable trusts and alters the Haas family dynamics.
Family control of the trusts is divided among John Haas, the 90-year-old patriarch; Carole Haas Gravagno, the former wife of John's brother, F. Otto; and several middle-aged grandchildren of Otto, a founder of Rohm & Haas, and his wife, Phoebe.
Most surprising is that these are not enduring trusts, such as the Hershey Trust, which finances a school for disadvantaged children in central Pennsylvania, or Pew, that should last forever.
The assets in the Haas trusts eventually will revert to the members of the growing Haas family - and out of the instruments for charitable giving - in four or five decades. That is, unless the family decides to devote the money to philanthropy.
The Haases offered a statement through a spokeswoman:
"The Haas family's commitment to Philadelphia remains unchanged. The Trusts will continue to support the William Penn Foundation, as has been the case for many decades.
"As the Trusts have broadened their charitable reach beyond the Philadelphia area over the years, the closing of the deal with Dow Chemical has enabled the Haas Trusts and individual Haas family members to further expand their commitments locally and outside the region."
The Haas Trusts' statement continued: "The Trustees remain committed to their fiduciary responsibilities and to ensuring that the resources of the Trusts continue to support worthwhile causes."
In addition to four charitable trusts, worth about $2.7 billion, Otto and Phoebe Haas had two separate family trusts. These were worth about $2.3 billion when the Dow-Rohm deal closed.
The six trusts, worth a combined $5 billion, are run jointly in an office in Center City. The charitable trusts do not have a Web site.
The most information on the Haas trusts, a trove of it, is found at Montgomery County Orphans' Court. A public accounting was filed with the court in mid-2008.
In his 1956 charitable trust, now the largest of the six, Otto Haas mentions an annual target of a 3.5 percent distribution of assets over the life of the trust. (Federal law currently requires family foundations to distribute 5 percent of a trust's assets to charity each year.)
The public accounting of the individual Haas trusts indicated that the charitable spending was 2.5 percent of assets in one charitable trust in 2007, and 2.7 percent in a second.
Kathy C. Mandelbaum, a law professor at Temple University, said rules on charitable trusts were tightened in 1969, requiring creators to be more specific about charitable payouts so the trusts were not managed to benefit families and restrict the flow of funds to charities. "The government didn't want people to starve the charity," she said.
One distinguishing factor of the Haas charitable trusts is how long they have lasted. They won't terminate until after Otto's and Phoebe's grandchildren die.
Otto Haas "went right to the max" in seeking to delay the distribution of the trust assets, said Jane Baron, a Temple law professor.
A hallmark of big-time philanthropy is bold ambitions - steel magnate Andrew Carnegie's construction of 2,500 libraries or Bill and Melinda Gates' plan to eradicate global diseases.
Otto and Phoebe Haas didn't state a grand ambition. Otto Haas expressed a desire for a "committee to determine charitable beneficiaries."
The committee would consist of five members. Three of them "shall be individuals of prominence in the community," the 1956 trust states. The Haas trusts declined to comment on the existence of a committee.
Lawrence Barth, senior deputy with the Pennsylvania Attorney General's Office, which has regulatory authority over trusts, said: "Advisory committees show up in many different guises and usually they don't have much control. I don't know whether it was ever established or just fell into disuse."
Maybe the greatest insight into the workings of the Haas trusts is found in the court list of beneficiaries.
The Otto Haas Charitable Trust No. 2, worth about $1.7 billion after Dow-Rohm, is the biggest.
The families of F. Otto and John Haas jointly control this trust, and a smaller sibling trust, the Otto Haas Charitable Trust No. 1.
Between 1993 and 2007, the No. 2 trust gave $201.5 million to the William Penn Foundation. Indeed, in the early years of its accounting period, Otto Haas Charitable Trust No. 2 supported only the William Penn Foundation, whose board is controlled by the Haas family.
But in 1998, the trust branched out and gave $3 million to the regional performing arts center in Philadelphia. After that, the No. 2 trust aggressively diversified its beneficiary base, contributing to 345 groups between 1998 and 2007.
Among the largest beneficiaries were the New Hampshire Charitable Foundation, which got $10.7 million. Thomas Haas, a grandson of Otto and Phoebe Haas, operates a charter-jet business in New Hampshire.
The trust gave about $1.7 million to the North Branch Land Trust in upstate Pennsylvania, near where William Haas, another grandson of Otto and Phoebe, lives with his family.
Open Connections Inc., a home-schooling organization in Newtown Square attended by two Haas children, got $3.4 million toward the purchase of a new campus. "Members of the Haas family have a very expansive vision of the future of education," said Jeff Westphal, chairman of the Open Connections board and a business executive in the western suburbs.
A slightly different picture emerges with the Phoebe Haas Charitable Trust A, which is directly controlled by the family of F. Otto Haas. Among the trustees is Carole Gravagno, who now is married to a member of the Philadelphia Orchestra.
This charitable fund spent $14.3 million on philanthropy between 2005 and 2007 and heavily supported Philadelphia music and arts groups, orphans' and adoption groups, and churches.
The Philadelphia Orchestra Association was the fifth-largest recipient of funds, with $350,000, and the Arden Theater in Old City was ninth, with $175,000.
Amy Murphy, managing director of the Arden, said the funds were used to help develop new plays. The money paid for rehearsal time and commissioning new work, she said. Two recent plays, My Name is Asher Lev and Something Intangible, benefitted from the Haases.
"They really investigate what they put their money into and you have to fulfill your responsibility," Murphy said.