News

Mayor: no to Overture refinancing

By a narrow vote, the City of Madison Board of Estimates voted not to approve the city's refinancing of the Overture Center for the Arts at a meeting Monday.

Mayor Dave Cieslewicz's new proposal regarding the future of the Overture — that the city purchase and run the facility — was a better financial option for half the board. The mayor broke the tie by voting against refinancing. According to Cieslewicz, the gamble of refinancing was too great to support the option.

"Refinancing comes with a great risk to the city," Cieslewicz said. "By refinancing, we would risk vaporizing taxpayer money if the stock market turns bad."

The current endowment fund for the Overture Center, which totals about $107 million, is invested in the stock market. Growth of the endowment depends entirely on the direction of the market. If the council approves refinance, the city would be obligated to pay $5 million over the course of five years if the investment does not perform up to expectations.

The mayor's plan would obligate the city to pay only for maintenance of the facility, which would cost around $1.5 million per year. Ald. Mike Verveer, District 4, who proposed the refinancing, pointed out this would equal more than $5 million for five years.

However, according to Ald. Zach Brandon, District 7, the consequence of a poorly performing market in the refinancing option is more than $5 million.

"It isn't just a $5 million risk," Brandon said. "There's a $40 million mortgage that goes along with the Overture that the city would be responsible for."

George Austin, who represented Overture Development Corporation, the entity that owns the center, said the city would not be entirely responsible for the mortgage though.

"There is no way you're going to have to pay $40 million to purchase the building in 2011," Austin said. "The mortgage carries with it a defensive mechanism that would give us a series of alternatives the city would have to cover the mortgage."

However, Dana Chabot, who is in charge of finances for the Madison Cultural Arts District Board, admitted if the endowment fund did not grow as much as is necessary over the course of the five years, the city would likely face the same question, whether or not to refinance or purchase the building.

For Ald. Tim Bruer, District 14, the answer was simple.

"I'd rather have [the city] in direct control of something we hold stake in," Bruer said. "With refinancing, the city's liability is tremendous. My concern is that we would mortgage away the future of our city as a result of voting to refinance."

Common council will make a final decision on the refinancing of the Overture Center for the Arts Oct. 18. Bruer expressed the importance of the council's upcoming decision.

"What [the council] is going to do with regard to the Overture is going to have the greatest financial impact you will see as a member of the council," he said.