with no strings attached, how would you spend it ?

If you had a pet locomotive project, or a locomotive that was too expensive to dedicate the cash to under normal circumstances, perhaps it would be a good well into which you might pour the cash. In my best judgment, I'd say erecting a permanent locomotive shed for both display and work facilities would be the most prudent use of such a windfall.

Create an endowment, use the interest to help pay operating costs (salary, fuel, electric).

I suspect that may museums would keep on running until the money was used up.

I suspect many would finally be able to finish the last project they started that was only supposed to cost a million dollars!

Endowment, yes.
Operating costs, no.

Roll 1/2 of the interest back into the principal, to help compensate for inflation, and "grow" your endowment.

Use the other half of interest to fund building indoor storage for everything, then fund restoration of the collection, and other "improvements" that will make your organization more attractive to the cash paying public.

Jeff

EXACTLY the right idea. Maybe buy land while it is cheap also.

Jim

Strangely, a million isn't that much... at 5% interest a year a million dollars generates $50,000 per year, half for museum activities, half returned to the endowment...

At that rate it would take 6 or 7 years to generate enough for a medium size carbarn. If dedicated to restoration it would keep an active volunteer crew in material for one or two streetcar restorations...

Buy your railroad so you're not buying land next to somebody else's railroad.

Buy your land so you aren't putting carbarns on somebody else's land.

Buy carbarns so your restoration work isn't an exercise in futility.

Bootstrap the endowment.

Then visitors center, parking lots and all that.

It should be noted that all these goals are donor-friendly. I.E. they are the types of goals that donors naturally *want* to support. This means you can aim much higher than $1 million.

Of course, mistakes can be made in all these areas.
- Buying a railroad that's too encroached by urbanity.
- Buying land in a floodplain. How many pictures have we seen in the last 3-4 years?
- Buying too little land and having to buy adjacent parcels at a premium.
- Building shoddy carbarns that don't protect the equipment.

A million just doesn't go too far these days.

Probably would go into the lawyer's fund to fight off environmental lawsuits, zoning laws, hungry politicians and feed the bureaucracy.

Maybe invest it with lobbyists to ask for a trillion. That's the new number of choice.

Ah, but I digress.

So, keep all the interest in the account for those 6 or 7 years, and let the interest compound. doing it this way, 5 years after you have the first barn built you should have funds in hand for a 2nd barn, and a 3rd barn 4 years after that.

Jeff

An endowment ought to do a heck of a lot better than 5% interest. Though it should lose money some years, if it doesn't, you are invested too conservatively. Since your planning horizon is very long, I think it's reasonable to invest roughly the way Suze Orman would tell a 20 year old to invest an IRA.

At BAERA, our $5 million (formerly $6M) endowment is drawn down by 4% (of current value) per year. We find that has no trouble keeping up with inflation.

I am glad to see that the word endowment is being used by evrybody; It is the gift that keeps on giving!

This is a trend that is long in coming; but it shows that more and more of the organizations are becoming museums rather than grown ups playing with trains.

I am also glat to see people thinking about buildings that house and display trains both electric and steam. Neither of them were outdoors in the "good old days" and they should not be today1

Sure bring them out for summer displays but they should be under cover in the winter when the most damage occures like frozen pipes!

And how to go about getting that $1 million or more? Think about Tea-21 money. There are more and more states that are spending some of their transportation enhancement money on museum/cultural projects.

It is loaded with paperwork; but nobody ever said that historic preservation was easy! Think about the early years of this web site; those Federal grants were never mentioned here, now they are almost routine!

Go out and get them folks!

Ted Miles

If your orginaization operates a train ride and your track is in marginal condition you should definately consider investing in track repairs. Nothing will close you down faster than an accident resulting in a lot of injuries or worse. Safety is more important than anything else, especially now.

John Bohon

Well there are a couple other things about endowments.

First is the original proposal idea: What if your organization came into $1 million? The IRS doesn't like it when most of your general-fund revenue has come from a single source other than program services. It can actually threaten your nonprofit status. However, if you have an endowment, that's much less of a problem, because large endowment gifts are commonly quite large.

Second, there's approaching people to consider your organization in their will. The endowment is an attractive choice to donors, because it assures them that the money will be used to guarantee the future of the museum. Getting the money in an endowment isn't as convenient as getting it in the general fund, but it beats another museum getting it because they had an endowment and you didn't.