How Not to Finance an Amphiteater

A lot of people have talked about whether or not it made sense to pay off the debt for the Verizon Wireless Amphitheatre at Encore Park (VWA) early when those funds could have been used to support the general operating budget of the Atlanta Symphony Orchestra (ASO). There are arguments worth considering on both sides of that issue, but what I haven’t heard anyone mention is why the debt exists in the first place and what it says about the folks currently in charge of the ASO’s future.

The land acquisition for and the construction of the VWA began in January of 2007. At the time, as the Woodruff Arts Center (WAC) management keeps helpfully pointing out, the ASO was running a deficit. It was also running a fundraising campaign to build the (now scrapped) Atlanta Symphony Center. While one might think that management might want to finish the existing fundraising campaign or try to do something about about the deficit before taking on such a large project, they jumped at the opportunity to build the new Amphitheater. There had been discussions about it for years and, for some reason, they apparently felt that it couldn’t wait any longer.

The VWA was projected to cost $35m to build. That’s pretty good compared to the Symphony Center’s projected costs of $300m or the High Museum of Art’s expansion that had cost $130m just a few years before. It’s even better when you consider that it was expected to increase the ASO’s annual budget from $30m to $50m. (How much of that budget increase would go to running and maintaining the facility rather than funding the ASO’s primary mission has never been clear in any reports or financial documents that I’ve been able to find, but it sure does sound impressive.)

There was, of course, one glaring difference between the other two projects and the VWA that might make someone pause before diving in: it wasn’t going to be funded primarily through grants, donations, and sponsorships. There would be no grand fundraising campaign specifically for this project before it was built like the exceptionally successful one for the High’s expansion. Yes, the Robert W. Woodruff Foundation did kick in $5m and Fulton County and the City of Alpharetta each gave grants of $1m for the project, but the remaining $28m — 80% of the costs — would come from bonds issued by the WAC. Whereas the High’s expansion was completely funded by the time it opened to the public, the VWA remained a financial liability until its bond was paid off this past fiscal year. The debt and its financing costs were on the books for half of the 12 years of deficits that upsets WAC leadership so much.

Now, if you are like me — and I certainly am — you’re wondering why this project is different from all other projects. Why couldn’t they take their time to secure the funding in advance of starting the project the way that they did with all of the other capital construction projects that the WAC has undertaken in the past? Wouldn’t that be the responsible thing to do? Moody’s sure seemed to think so in 2009 when they downgraded the WAC’s bond rating.

I don’t have an answer to why the ASO/WAC leadership believed that they absolutely had to start this project when they did. I was, however, surprised when I found out where the land for the project came from: Cousins Properties and Duke Realty. You’d think that having Larry Gellerstedt, III, the CEO of Cousins Properties, and Howard Feinsand, who was then Executive VP of Duke Realty, on the board of trustees would mean that the land would have been donated. Indeed, both companies have been regular donors to the ASO. But, no, the WAC had to buy the land, although Duke Realty did hold onto the property for a few extra years and discount it for the WAC.

It certainly raises an eyebrow that it was the bond that was issued in part to fund that particular purchase that was paid off early. It’s also funny that two of the folks on the board of governors who are so concerned about the ASO’s deficits would have been involved in selling the land to the ASO that helped create the leverage ratio that Moody’s cited when they downgraded the WAC’s outlook from stable to negative last year. Maybe it’s guilt from being part of the rash decision to go ahead without first establishing funding that drives their hawkish stance on balancing the budget. Maybe it’s just plain foolishness. Perhaps they just don’t realize how this looks.

Honestly, I don’t see any particular evidence that there were shenanigans involved. Heck, Gellerstadt didn’t even join the board until 2009 and Feinsand didn’t come on board until 2010. That said, Thomas D. Bell, Jr. was on the board at the time of the sale and he was the CEO of Cousins Properties until 2009, at which time Gellerstadt took over for him both at the company and the WAC board of trustees.

One does have to admit admit that it can sometimes seem better to do business with a board member and donor than with some company that will take your money without giving you a dime back. That said, one also can’t help but wonder about the ability of some of the leadership at the WAC to make rational decisions with the ASO’s best interests in mind if they were willing to support taking on this debt during a period that the organization was running such problematic deficits.

Right now you have at least two people on the WAC’s board of governors who represent interests that are responsible for a big chunk of the ASO’s debt and who also seem to have favored paying down that particular debt early rather than funding the orchestra’s upcoming season. On top of that, you have Hepner giving away revenues from the sale of the 14th St Playhouse to an organization on whose board she serves because it’s “the right thing to do,” all the while refusing money to the musicians to feed their families or cover their medical costs even though a talk-and-play strategy clearly would not have bankrupted the organization. The optics on this are awful and it’s hard to have faith in that kind of leadership. The WAC needs people in positions of governance and management who patrons and donors can trust to put the mission of the WAC before their own interests and, frankly, I don’t think that they have that now. It’s time for a change.

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This post originally appeared on Save Our Symphony Atlanta’s Facebook page HERE.

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2 thoughts on “How Not to Finance an Amphiteater

  1. John Cooledge

    Having been present at ASO Board meetings where the pros and cons of constructing Verizon Wireless Amphitheater were discussed at length, I think it’s fair to say that the speed of going ahead with the project was prompted by financial projections that the facility would be an excellent and immediate source of income for the ASO. Unfortunately the opening of the VWA coincided with the onset of the “Great Recession,” resulting in cancellation of tours by a number of the major pop/rock/country acts which the VWA had expected to book profitably over succeeding seasons. For that and other reasons, VWA has not been the money-maker that was anticipated when its bonds were issued.

    Liked by 1 person

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    1. Robbie SOSA Post author

      That is very interesting. I really appreciate hearing that from someone who was there. Hopefully the Woodruff Arts Center will release the minutes of the meetings in which this decision was made so that this can all be cleared up.

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