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Overture Center experiences financial difficulties
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by Cara Harshman
Monday, March 31, 2008
After resolving issues with corrupt leadership last year, the Overture Center is now facing financial problems due to downturns in the U.S. economy, an official said last week.
A special trust fund, established to finance the facility’s construction debt with the city and provide for its future capital needs, is supposed to bring in an 8.25 percent return every year over a 36-year term. According to Tom Carto, president and CEO of the Overture Center, the fund has earned about 6.5 percent over the past two years.
Carto said as of mid-March, the trust contained a little over $100 million, compared to December. 2005 when it contained $108 million. The fund is supposed to provide $1.4 million annually to a maintenance and operations reserve, but delivered only $900,000 in 2007, Carto said.
The trust’s investment strategy, controlled by an independent board of investment professionals, is guarded and conservatively invested “so big swings in the stock market won’t affect it,” Carto said.
The decline in funds threatens the viability to live up to a complex plan to repay debts from the massive construction project and additions completed in spring 2006. If the fund continues to fall, the city will go to the first source in line of safeguards to meet debt payments.
Taxpayers are not on the hook for any problems related to the trust, Carto said, as the trust is completely separate from the Overture Center’s day-to-day operations.
Carto said the reasons for the trust’s poor earnings lay in the “sluggish” U.S. economy.
“When everything is pointing south, [the fund] is going to lose value. It’s going to be a challenge if the economy continues to drop,” Carto said. “There will have to be a supplemental effort to take care of the rest of the debt.”
Jerry Frautschi, a philanthropist who gave the Overture Center $205 million for its new construction projects, is the first in a line of fire walls and would provide $5 million in case of financial problems.
“The city could come into play eventually, but we’re pretty far back in the line,” said George Twigg, spokesperson for Mayor Dave Cieslewicz. “There’s not much the city can do directly at this point because [the fund is] not controlled in any way by the city.”
InitallyInitially, half of Frautschi’s gift was put in the operations and maintenance trust while the other half was coupled with a $115 million loan to build the Overture Center’s new structures.
Carto said the original plan failed because of a major downturn in the economy, so the city approved a refinancing deal in 2005.
According to Carto, business for the Overture Center, a 400,000 square- foot facility with seven venues holding between 60 and 70 events per year, has been doing well this year.
The $13 million the performing arts facility operates on to bring in artists, pay employees and overhead is not affected whatsoever by the diminishing trust’s valuevalue of the trust because they are two separate entities, he added.
“The Overture is not going to go away,” Carto said. “However, it is figured out to pay off the rest of the construction debt; that’s going to happen. People read Overture’s financial problems and equate that to the overall picture. That’s not a fair assessment at all.”
Anonymous (March 31, 2008 @ 6:52am):
Wow--good thing they hired Carto for his fundraising abilities, then went out and hired a fulltime director of fundraising. That'll do the trick! Oh, and only spending $18000.00 on Christmas lights was a definite savings.
nancy gores (April 2, 2008 @ 10:10pm):
It's easy to discredit people, but facts count. Being the president of Overture requires you wear many hats. Fundraising in Tom Carto's position is the equivalent of being a sitting senator running for re-election and the presidency. Do you want all of his time spent fundraising, or on operations? That position walks a fine line between both, and how can both be equally achieved? That's why a director was hired, I would guess, to supplement the effort.
As to $18k on xmas lights ... everyone demands holiday lights and decorative ornaments in a public setting of that magnitude. I'm sure there was a cost-benefit analysis as to expenditures year-to-year vs. something that lasts and is "green" for a new facility that lacks those ornaments.
Think about it.
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