Wanted Solutions To Performingarts Centers Cash Crisis
Written by Michael Lewis on April 5, 2007
By Michael Lewis
It would be unthinkable to let the half-billion-dollar Carnival Center for the Performing Arts close, even temporarily, before it can complete its first year.
Yet as losses steamroll toward a mid-May empty bank account, the center’s CEO has broached a temporary shutdown as a last resort.
So the unthinkable has become thinkable
Speaking as the center’s longest-running critic, with several dozen columns over 15 years to back up that claim, the appropriate response to what all now accept as a crisis is not to say "I told you so" but "What can we do?"
Despite myriad mistakes, the center is truly too important to fail:
•It’s vital for a growing arts community.
•A half-billion dollars are tied up in the center, with debt decades into the future.
•Miami’s reputation would take a huge hit.
•We owe it to the community not to give up.
Of course, not giving up is what those who promoted the center have long counted on. As a key player told me long ago, everyone knew costs would skyrocket and private funding wouldn’t cover losses. The aim was to get it built, then let taxpayers fund losses forever.
Volunteers lowballed capital costs, knowing that the government checkbook would remain open wide. So costs for a $168 million project tripled.
They promised that an endowment would fund operating losses, and commissioners swore that if they financed construction, not a penny of public money would aid operations. Yet the county put $3.7 million into operations to start this year and will be asked for millions more to finish it. Even before the headlines, center operators budgeted for $10.1 million from the county for next year’s operating losses next year.
Volunteers pledged that by October, $21 million will rest in an endowment to fund losses — far too small a sum to do the job — yet the endowment still is only $3.5 million. And the county last month had to lend the center $16 million so it could hand the money back to meet its final promised construction donations due before the center opened.
Volunteer leaders in 1994 pledged adequate parking. We’re still waiting — and it’s costing ticket sales.
How bad were the estimates? The center’s first CEO planned for profits from Day 1. So far this first year, losses are $3 million after a $3.7 million subsidy — $6.7 million and counting. Budgeting was so bad that nothing was included for stagehands — $774,000 so far.
The leader who spearheaded a third-rate spot for building the complex — turning adjacent land the Miami Herald had bought for peanuts just before site selection into a pot of gold — now complains about area panhandlers. They’ve been there for decades.
Problems go on and on — from weak programming to the most costly snafu, failure to give county commissioners free front-row seats opening night and not giving them the best dinner tables, also free. Though they have no more right to this than you or I, they will punish the center for the perceived slight.
OK, so what we said could go wrong has gone wrong. Now, how do we fix it?
Think outside the box — far outside because of the control of the center or lack thereof. The county owns it, but operators who work for a center board draw the budget and ask commissioners to fund the planned losses — and then more and more. Everyone pledges to do better, but no one is accountable to do so.
The structure isn’t working, the management isn’t working. No sense pointing fingers. We need solutions, fast.
•Let a firm run the center, keep part of the profits and fund losses itself. County Commission Chairman Bruno Barreiro suggested this before the crisis escalated.
Pitfalls are obvious. A firm might book popular acts to sell tickets rather than those with the most artistic merit or that appeal to all segments of our population. Also, a firm could fail to operate the massive halls profitably. But privatization could rescue the center and relieve taxpayers of a huge burden.
•Strip the endowment’s $3.5 million to get through the first year while those involved try to figure out how to muddle through 2007-08.
The plus is non-tax money. The minus is that the endowment gathered for more than a decade would have to start from scratch. If a decade’s work raised only 15% of the minimum pledged, how much new could we expect by next fall?
•Shift from construction to operations.
The Florida Grand Opera, which uses the center, plans its own tower next door. The New World Symphony, another center resident company, is raising money to build a headquarters in Miami Beach. Can those funds be tapped for the center? Miami’s edifice complex leads each group to build its own home even as it uses the Carnival Center’s stages. How many buildings are donations expected to fund?
•Keep one of the center’s two buildings open, shut the other.
That way, only half the programming and half the attendance would be needed to break even. Operating costs would be nearly halved.
Two buildings were never a good idea, and building on either side of a busy US 1 was even worse. But closing one would require returning $10 million in naming-rights funding and waste a quarter-billion construction dollars.
•Transfer $20 million in bond funds the county has pledged to the Coconut Grove Playhouse to the Carnival Center.
The closed playhouse has little chance to reopen. Shift the funds to pay down debt for the center’s construction, freeing an equal amount to keep the center afloat.
•Allow the Miami Herald to help.
It has a contract to sell its land around the center for $190 million, but the unsold land’s value would plummet if the center shut down. Because the land’s value soared about $180 million as the center rose nearby with the Herald’s strong editorial push, the paper could protect its holding by handing the center, say, 10% of the gain the center caused.
•Accelerate naming-rights payments due from the Knight Foundation and the Carnival Corp.
They owe collectively about $16 million in future payments for center naming rights. In a crisis, collect now.
The downside is that like the Herald payment plan, this one-time fix would solve the current cash crisis, but then the center would have to stand on its own feet.
•Find new leadership now with the insight, drive and civic clout to solve the problem.
In the past, we often asked Alvah Chapman, retired Knight-Ridder chairman, to lead volunteer efforts in crises. He always came through.
Today, we could turn to Jeb Bush, an unemployed governor, for a short voluntary stint to run the save-our-arts-center team before he goes on to his next paid challenge. The center is non-partisan, and Mr. Bush has local respect and the ability to bulldoze a tough civic building job to fruition. Draft him if you can.
•There is another way, of course: Keep relying on more and more county funding to stay open, give commissioners free front-row seats every night and pray that no economic crunch turns off the funding faucet midstream.
This seems realistic in the very short run, but commissioners aren’t committed to the arts center and the real estate boom that filled county coffers has fallen silent. So this solution might last just months, if that.
•The best solutions are probably lurking with you.
We’ll serve as a clearinghouse and publish your notes and letters of suggestion sent to email@example.com. Think outside the letterbox.
One thing is certain: The system whereby a private trust determines spending based on its own estimates of costs and ticket sales and the public as a whole must be responsible for each year’s losses of whatever size is untenable. Just look at what’s happening.
More than 20 years ago, support groups took to wearing buttons asking for construction of a performing-arts center here. The buttons read, "In My Lifetime."
Now that the center’s buildings are done, we need to accept the challenge to keep them open. Perhaps we need to issue new buttons reading, "For My Lifetime."