If tough times let you know who your real friends are, the Overture Center must be feeling very lonely right now. $28 million in the hole, with creditors calling and its trust fund gone, the Overture is running out of options. From the beginning, Madison has tried to have the best of both worlds and enjoy the use of the Overture Center while someone else owned it. By now, it is obvious that there will be a day of reckoning, yet the city has turned down each and every opportunity to get involved and prevent the crisis. Each time we do so, the future challenges mount. It is time for us to take our heads out of the sand and solve this before it gets any worse.
Some history is in order. The Overture Center is the result of a series of gifts from Jerry Frautschi. Frautschi decided Madison should have an unequaled arts facility, and that money should not be a barrier. Ultimately, he gave $205 million. All along, he was honest: This was a gift to all of us, and his involvement would end when the building was done, so it was up to us as a city to decide how to prepare for the future of the Overture. To help us, he gave more money than was needed to build it. We chose to use this as a trust fund, which would both pay off a loan for construction and defray the operating costs. The details of the trust fund are well-reported elsewhere, but the gist of it is the returns did not meet what was needed, — even after the City Council approved a 2005 refinancing — and in 2008 the trust was liquidated, leaving $28 million still to pay. Most of this debt will remain when the Overture runs out of reserves in 2011.
We as a city took Frautschi’s gift and gambled in the stock market. The first try was reasonable. However, when we lost, instead of stopping we used what was left to double-down in 2005. Not surprisingly, we lost again, but now the city leadership thinks that we can just walk away with no consequences. This is as outrageous as the Wall Street CEOs who risked and lost billions and still got bonuses while the taxpayers bailed them out. In the Overture’s case, it was the taxpayers who took the risk, and the taxpayers who have an obligation to own up to their responsibilities.
Mayor Cieslewicz deserves some credit here. He was, nearly alone, strongly opposed to the 2005 refinancing because he rightly viewed it as risky. The refinancing plan could not tolerate a faltering economy in its first few years, and it should have been obvious that with three years of Bush to go trying times were still ahead. The Mayor’s plan would have used the trust fund to pay off all of the debt and have the city own Overture free and clear. The Mayor, more than anyone else, has earned the right to say “I told you so” and leave us to pick up the pieces. Unfortunately for the Mayor, that can’t be an option for our elected leaders.
All along, the plan has been for the city or some other public body to own the Overture Center once the construction debt was paid off. The Overture Center recently presented a plan to pay off the remaining debt, which the Mayor pronounced “dead on arrival”. He was right. It was a terrible plan, but it was only a terrible plan because the city refuses to get involved. The entire city leadership calls the remaining construction debt a problem that the banks and Overture have to work out. Furthermore, the leadership insists that we really don’t have anything to worry about, because no matter what happens, Overture will remain. As one City Council candidate said, “It’s not like they can put it on a truck and move it to Chicago.”
There are real risks of not doing anything. If the banks foreclose on Overture, our “public” facility ceases to be public. If the banks own Overture, we lose our say in its future. We would likely get that say back, but under what terms? How many more times are we willing to gamble the future of the Overture?
The city can get involved without taking responsibility for all of the remaining construction debt, but we shouldn’t rule out putting taxpayer money into the solution. After all, it was our choice that the debt still exists. The city’s willingness to put money in will send a signal to other benefactors that their future donations will not go to waste and the Overture saga will finally be over. In the end, we want the city to have some role in the Overture. Every time we let someone else shape its destiny, things get worse.
Erik Paulson ([email protected]) is a Ph.D. student majoring in computer science.
