The Overture Center for the Arts announced Friday it will liquidate an important trust fund in the wake of last week’s Wall Street stumble.
The dissolution of the trust fund leaves questions about whether Madison taxpayers will ever have to lend support to the semi-public fine arts facility.
Friday’s decision to liquidate came after the fund’s principal fell bellow $97 million, the minimum to sustain the Overture Center’s loan payments.
The recent dip in the fund is a result of last week’s economic crisis, said Jonathan Zarov, vice president of marketing and communications at the Overture Center.
The trust fund was established to pay construction debt and create a revenue stream for the Overture Center, which first opened its doors in September 2004.
According to Zarov, the fund had been functioning well enough to fulfill both of these purposes through 2008. However, it has been underperforming since the beginning of the year, making only the minimum construction debt payments and providing no revenue.
Zarov said the proceeds from the liquidation would pay off approximately $87 million of the Overture Center’s construction debt.
The center’s primary benefactor, W. Jerome Frautschi, has agreed to give the center $5 million for debt payments, and the Madison Cultural Arts District (MCAD), which governs the Overture Center, will contribute a $5 million reserve to make debt payments.
These funds will carry the Overture Center through 2011, when the current loan agreement expires, Zarov said.
Zarov added it would be premature to make an alternative financial plan at this time because the economy is unpredictable.
It is unclear whether taxpayers will have to financially support the Overture Center when private funds run out.
The Overture Center has yet to establish what it will do to financially sustain itself after 2011, but MCAD will be meeting sometime in November to discuss a strategic plan, Zarov said.
Linda Baldwin, chairwoman of the MCAD board, said the development planning for the Overture Center began in the late ’90s and was primarily funded by Frautschi.
In 2001, MCAD, a sector of city government, was formed making the project semi-public.
Baldwin said Frautschi put a funding structure into place to provide long-term funds for the capital of the center.
Now that the fund has been liquidated, it is time to pull support from the community, Baldwin said.
“The job of the folks that are involved in the Overture Center now is to go out and raise funds for the long-term needs of the Overture Center,” Baldwin said.
Zarov said the recent trust fund liquidation will not have an impact on daily operations at the Overture Center.
“Like anybody in a tough economy, we’re going to be watching costs,” said Zarov, adding the issue at hand is not about day-to-day events at the center but rather the future of the Overture Center’s financial situation.
Numerous University of Wisconsin students and events have used the facilities at the Overture Center, Baldwin said, including last Monday’s goodbye celebration for Chancellor Wiley.
Although the financial future of the Overture Center remains uncertain, Zarov and Baldwin both emphasized the Overture Center will be around for a very long time.