How Dallas, donors and two banks plan to erase AT – T Performing Arts Center

#erase debt


How Dallas, donors and two banks plan to erase AT T Performing Arts Center s crushing debt

The Winspear Opera House is a centerpiece of the AT T Performing Arts Center. (G.J. McCarthy/Staff Photographer)

Buried in a budget briefing given to the Dallas City Council on Wednesday was a line that didn t raise a single eyebrow at the horseshoe: $1.5 million in additional taxpayer dollars going to the AT T Performing Arts Center.

There has been no explanation for the bump. So I asked for one.

Turns out, that $1.5 million is the first of 10 $1.5 million taxpayer-funded payments over the next decade that will go toward paying off the bonds used to build the center, the Arts District expanse that includes the Winspear Opera House and the Wyly Theatre, as well as Annette Strauss Square and Sammons Park.

Dallas isn t alone in helping the center vanish that debt. As a matter of fact, two banks are going to do something unfathomable: They re going to eat $45 million apparently for the good of the city.

Until recently, that debt was around $150 million in bonds guaranteed by JPMorgan Chase and Bank of America. And it has been a crushing burden on the 7-year-old, $360 million center, which was built almost entirely with private funds and turned over to the city in phases beginning in 2009, when it bowed as the Dallas Center for Performing Arts.

If we’re going to have a great performing arts center in this city for decades to come, said Doug Curtis, the AT T PAC s president and CEO, we need to solve this debt now and not let it linger.

The Dee and Charles Wyly Theatre (G.J. McCarthy/Staff Photographer)

The city s initial $1.5 million payment is classified as an additional cost, and is, for now, part of the $19 million gap in the budget separating expenses from revenues that lame-duck City Manager A.C. Gonzalez will have to close by Aug. 9.

It s also completely unexpected: When the city took control of the center seven years ago, it was never with the expectation that the city would have to assume any of its debt. It was a gift, plain and simple.

But the city s contribution is just one part of the equation intended to get that debt to zero.

The AT T PAC recently put $56 million in cash reserves toward paying down the bonds. Another $8 million in previously pledged money is also coming to the rescue, said the president. And, Curtis said Thursday, there s more on the way: Based on a survey of donors, the center s backers figure they can raise another $27 million.

We’re committed to Dallas, its people and its quality of life, said Anne Motsenbocker, managing director of JPMorgan Chase in Dallas, via email. That’s why JPMorgan Chase and Bank of America are making a substantial accommodation of about $45 million in debt forgiveness, plus reducing debt costs over the next decade. Along with other key contributions and support, this will protect a cultural treasure for future generations of Texans.

Here s a similar statement, again via email, from Richard Holt, Bank of America s Dallas market president:

Bank of America has reached an agreement with the DCPA so the center can continue playing a vital and unique role in the city of Dallas and North Texas for generations to come. We recognize the value it brings to the community.

This is the first time you re hearing about this deal. But AT T PAC officials say it s been in the works for a long time. Chris Heinbaugh, the AT T PAC s vice president of external affairs, said Mayor Mike Rawlings was informed of the center s initial discussions with the banks in the fall of 2014, though a resolution with the banks wasn t reached until the beginning of this year.

Love story, from left: Mayor Mike Rawlings, Ali McGraw, Micki Rawlings, Doug Curtis and Ryan O Neal at the Winspear in March. (Brandon Wade/Special Contributor)

Heinbaugh and Curtis have also spent recent months visiting with every council member to explain the agreement reached with the banks. Matrice Ellis-Kirk, who became chair of the AT T PAC s board of directors in the spring of 2014, has also been along for most of those visits. Even former City Manager Mary Suhm, who sits on the center s board, has gone to City Hall on the AT T PAC s behalf, which now explains what she and Heinbaugh were doing outside Mayor Pro Tem Monica Alonzo s office when I bumped into them a few months ago. At the time, they wouldn t say why they were there.

Curtis said the banks have never demanded the AT T PAC pay up or else for one simple reason: Because we were able to pay the carrying costs every year the interest, letter of credit fees, remarketing of the bond and some years that was a substantial number.

From the time the center kicked off fundraising in 2000 until close to its grand opening, the AT T PAC raised about $330 million in capital campaign contributions. But those weren t paid at one time.

In 2006, the AT T PAC got $150 million in construction bonds to bridge the gap between what it had and what it needed. Two years later, just before the ribbon-cutting in 09, the recession hit. Pledges stopped coming in; some promises dried up and blew away altogether. And according to a 2012 University of Chicago case study about the center. subtitled Fundraising and Uncertainty, concerns lingered for a long time.

As of August 2011, the AT T PAC was still $50 million short of covering these bonds, said the study. Both the sluggish pace of recession fundraising and operating deficits in the first two years of operations contributed to this shortfall.

The AT T PAC when it was nearing the end of construction in 2009. (Guy Reynolds/Staff Photographer)

I said, I don’t think it’s something we’ll be able to overcome on our own, Curtis said.

Deloitte was hired to crack the books and make suggestions, and meetings were set with the banks. Almost immediately, in the fall of 2013, the AT T PAC cut the banks a $30 million check out of cash reserves. A second payment, for $26 million, was made on March 4 of this year. Now, it s the city s turn to ante up.

The city already pays the center $2.5 million annually for utilities and maintenance less than 10 percent of its overall budget. This $1.5 million will go on top of that.

Council members sound like they re on board with the deal, mostly because this is the best way out of a bad situation.

Paul Simon at the Winspear last month. (Allison Slomowitz/ Special Contributor)

Jennifer Staubach Gates, chair of the council s Budget, Finance Audit Committee, said she doesn t love having to do this, but it s the right thing to do, especially given the generosity of the banks.

Philip Kingston, whose district includes the AT T PAC, is even less thrilled. But he s also not against it.

It s frustrating to have to bail out the facility because of the bad decisions and lack of transparency of the people responsible for building it, he said. But because the city owns the facility, we re left with no better options.

Curtis said the city will get something for its $15 million maybe some marketing for small and midsize arts groups that can t afford it, free educational programs, something. And, he said, vanishing that debt will allow the center to build an endowment, which has been impossible so far. I asked if the deal tanks if the council votes against the $15 million. Curtis said it will make settling harder, but not impossible.

In seven years, we’ve gone from a construction site to an institution that s had a significant impact on the community, Curtis said. We did all of that while carrying the debt. One can only imagine what the center can do for the city without it.

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