The Problem of the Crystal Lake Civic Center Authority – Part 7 Raue Cannot Afford the Debt

A continuation of the October 2, 2016 minutes.

Lucy’s Cafe is on the Raue Center’s marquee in this photo.

Gary Reece asked why they were projecting increased income this year.

Mr. Kuranda stated that they were focusing on more well known artists, such as David Sedaris, but if there were a pull back in the market, they would not spend additional money for those artists.

Ms. Miller, the Raue Center’s auditor, stated that their largest cost was the building, with expenditure last year of $200,000 on electrical, garbage collection, insurance, etc., and although the $150,000 provided by the City from hotel tax funds helped with those expenses, it did not keep up with cost increases.

She stated that they were hoping for a viable solution and her opinion was that the Raue Center could not afford the debt.

Mayor Shepley observed that the original debt had been for $8 million, which had been paid down considerably, and if there had been no debt, there would be no Raue Center for the Arts.

Lisa Waggoner asked if the building and facilities expenses at $10,000 a month included improvements, repairs and maintenance.

Mayor Shepley advised that the City has underwritten some of those expenses.

Ms. Miller stated that the City had replaced the roof, but the insurance cost at $46,000 a year was huge.

Ms. Waggoner asked if there were ways to cut expenses and Mr. Kuranda stated that they have a Board of dedicated professionals who are always looking for ways to cut costs, noting that the push for the Williams Street Repertory Company had been to lower costs for artist fees, for which he gave the example of Bill Cosby’s $125,000 fee for one night a number of years ago.

He added that the Raue Center also has an educational program and raises funds from donors.

Tom Hayden asked if the CCA needed to appoint a General Manager, and Mr. Filippini stated that would only be necessary if the City were to self-manage the Raue Center.

Mayor Shepley emphasized that the CCA was the property owner only with no operations authority because their sole asset, the building, had been leased to the Raue Center for 100 years.

He stated that if bonds are issued by the CCA, there will need to be some conditions associated with them, but none tantamount to hiring a General Manager.

Mayor Shepley stated that the CCA’s mission was to evaluate the feasibility of issuing bonds, with or without conditions, and if the CCA voted to do so, present a financing plan that would allow for the issuance of the bonds.

He stated that they were not at the financing plan stage yet because PMA needed more information from the Raue Center, but it would be reasonable to gather information, finalize discussions with Home State Bank, and finalize a plan to present to the CCA Board.

Mr. Lewis stated that he would contact Ms. Miller regarding PMA’s questions, and do a “pro forma” to show how to pay the bonds.

He noted that Mr. Kost would need to draft legal proceedings to complete his analysis on the legal ability of the CCA to issue the bonds, and Mr. Kost added that he could informally do a shortened version for the CCA (more like a term sheet than a 30 page bond ordinance) to explain it all.

Mike Splitt asked if any other banks had expressed interest.

Mayor Shepley stated that most likely, Home State Bank would be the only interested bank.

Mayor Shepley asked what would be a reasonable amount of time to get the needed information and documents prepared, and Mr. Lewis stated that could most likely be accomplished before the next CCA Board meeting, when an additional presentation could be made to the CCA Board.


Comments

The Problem of the Crystal Lake Civic Center Authority – Part 7 Raue Cannot Afford the Debt — 6 Comments

  1. I’ve been reading the articles and the comments, and I’d appreciate it if people more knowledgeable than I would tell me if I have the key facts correct:

    1) The City provides direct and indirect cash subsidies annually and through the Downtown Association of about $180,000.

    2) The Raue Center has an operating budget of about $200,000.

    3) With a subsidy equal to about 90% of its operating budget, it still loses money.

    4) The City has also quietly paid for expenses such as a new roof; at this time we don’t seem to know the extent of this type of subsidy.

    If anyone has copies of the Raue Center’s actual financial statements, it would be great to see them posted here.

  2. Crystal Lake payments to benefit Raue derived from hotel tax revenue:

    The City budget indicates $150,000 to Raue annually from the hotel tax.

    ——–

    The City budget indicates $35,000 to the Historic Downtown Association annual from the hotel tax.

    But, the Historic Downtown Association consists of much more than the Rue building and parking to attend Raue events.

    What percentage of the City “grant” (what is the proper term?) to the Historic Downtown Association is attributable to Raue is a judgement call.

    Maybe one could allocate based on the EAV of Raue and the EAV of the Historic Downtown Association.

    One might argue the allocation should be larger based on the fact the Raue is a big draw to bring people downtown.

    ——

    The City budget indicates $1,000 annually to Williams Street Repertory from the hotel tax.

    It seems all or most of Williams Street Rep performances are at the Raue; if so; 100% of that could be attributed to the City cash subsidy for Raue.

    +++++++++++++++++++

    What is the source of information that the Raue Center operating budget is $200,000?

    —————

    Raue Center for the Arts files an annual IRS Form 990.

    A Google Search for that reveals some website which translated some of the data into the following:

    “It had revenue of $1,654,063 and expenses $1,877,742 between July 2014 and June 2015.”

    http://nonprofit-990.bugaco.com/nonprofit/364147140/raue-center-for-the-arts/tax-returns

    +++++++++++

    We can’t understand the problem until the City and Crystal Lake Civic Center Authority become more transparent.

    This problem is repeated constantly throughout the state.

    The taxpayers can’t understand the problem because the government does not proactively provide the necessary documents to understand the problem.

    Then the watchdog gets criticized for not understanding the full scope of the problem.

  3. Raue 990 with the in house theater company was $2,103,194.

    Grants are restricted as are donor advised funds.

    Raue people run a good ship.

    The city does not give away money.

    They all apply for grants.

  4. Wasn’t the Crystal Lake Civic Center Authority (CCA) Board Meeting October 4, 2016?

    Not October 2, 2016?

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