CARMEL, Ind. (AP) - The Center for the Performing Arts that Carmel taxpayers bought is not the one they were originally sold.
Somewhere between the 2005 sales pitch and its 2011 opening, the $80 million facility became a $175 million one. A $309,000 worst-case scenario government subsidy turned into more than $2 million a year in taxpayer assistance, according to an examination of the center’s finances by The Indianapolis Star. And the $40 million endowment that was supposed to be the center’s financial lifeblood hasn’t materialized, three years after its first show took center stage.
Some of the unmet expectations can be explained by the recession and a nationally struggling arts industry, others by the sheer difficulty of predicting a budget that was then six years away. But mostly, the plan simply changed - and few were told.
Today, the operating subsidy is an annual point of contention. Public information is hard to come by because financial reporting requirements are being ignored. Carmel City Council members, who control the funding, complain of broken promises and unexplained costs. And Mayor Jim Brainard fires back that the outcry is staged to score political points.
But they largely agree on what it all means for taxpayers.
“You can pout and say ’I don’t like it,’ but you can’t say ’I don’t want to pay for it.’ We have to make it as successful as we can make it,” Councilwoman Luci Snyder tells The Indianapolis Star (https://indy.st/R30h5n ). “So, we’re in this uneasy tandem: the council and the mayor.”
In 2005, the Center for Performing Arts was envisioned by project designers as a rental hall with a private promoter.
If Willie Nelson comes to town, the promoter pays his artist fees and the costs of producing a show, then eventually turns a profit through ticket sales and concessions. If a string quartet doesn’t sell enough seats to cover expenses, the promoter would take the loss - or, more likely, avoid the risk of presenting classical music, aside from household names.
Consultants used that business model to project a $2.5 million annual budget for the center’s nonprofit operating group - about $1.5 million for salaries, and another $1 million to pay for facility and support costs. With a promoter taking on the costs of bringing artists to town, all but $300,000 of the center’s expenses would have been covered by rental fees; there would have been no need for government support if modest annual fundraising goals were met.
But that model didn’t match what Brainard and the Carmel Redevelopment Commission, which owns the facility, wanted the center to become - ground zero for an arts renaissance that would help Carmel compete with cities around the country for businesses and their affluent workers.
“It’s very important, especially when we’re competing against San Diego and New York and Miami, and places with much better weather and natural amenities,” Brainard says. “Young people pick places they want to live.”
In the 1,600-seat Palladium, the center’s anchor, city leaders had what they say is a world-class concert hall, an acoustical marvel that could drive tourism. Add the Tarkington, a 500-seat theater with an orchestra pit, and the 200-seat Studio Theater, and Carmel had a venue for everything - music, drama, dance and comedy.
But it also had a community resource, one that could promote the arts and educate, if someone were willing to pay for it.
“What (promoters) are focused on is the bottom line - the money,” says Tania Castroverde Moskalenko, the center’s executive director. “We have a mission. And it goes beyond that bottom line.”
When an Italian theater company, Teatro Di Piazza D’Occasione, came to perform “Blue! The Mediterranean Sea,” the artists worked with special needs kids during their stay in Carmel. When Rioult Dance Company visited from New York, members taught classes for Butler University graduate students. They also held workshops for local instructors on the challenges of running a dance company.
But as result, artist fees and production costs have become the center’s largest expenses, making up more than a third of its budget. The costs weren’t in the original feasibility study, which was used to justify the project to the City Council in 2005 when it approved $80 million in bonds to build it. And those missed projections have led to howls from critics who point to $9 million a year in spending since the center opened in 2011 and $12 million in government assistance from 2010 through 2013.
In the nine years since the initial pitch, council members say the dramatic shift in operations never has been clearly explained to them, even though the center has come back to the council for more funding three of the last four years.
Councilman Rick Sharp says he knew there was a change in philosophy before the center opened, but insists that the council was never brought in on discussions.
Snyder said she “wasn’t aware of the particulars.” Council President Eric Seidensticker continued to treat the initial projections as a benchmark years after the center opened, asking at public meetings why tax dollars were needed to fund it at all.
Brainard acknowledges that the change in direction was never effectively communicated to the public.
“I’ll take the blame for it,” he says, with a caveat. Politically, he said, he has found himself constantly on the defensive in recent years. “Every month, it’s a different (criticism).”
One such exchange at a 2010 council meeting provides a compelling example of why the bad expectations persist.
Council members said that by requesting $2 million for pre-opening costs that year, Brainard broke a promise that no tax dollars would be used to pay for the center’s operations.
In an attempt to defend himself, Brainard read aloud from sections of the proposal that said government money might be needed to support the center’s budget if fundraising fell short. That much was true; but in doing so, he also reinforced the old business model that by now was inaccurate - the one that said taxpayers wouldn’t be on the hook for much of the cost.
“The general expectation was a $300,000 shortfall that would be funded somehow,” Brainard said, according to the council’s video archives.
A year later in 2011, the center budgeted another $2 million shortfall it wanted the city to fill.
No one asked, and no one offered why the amount was so different from the projections.
The Center for Performing Arts’ reliance on government funding isn’t unique in the arts industry. Nationally, most groups have struggled in recent years, says Randy Cohen, a policy analyst for Americans for the Arts.
According to studies by the national advocacy group, more than 42 percent of all arts organizations had an operating deficit in 2011, when Carmel’s center opened. Arts spending has declined steadily as a share of total consumer dollars since 2002, predating the recession. And donations to the arts hit a 10-year low in 2011 when adjusted for inflation, although giving recently has increased.
“Even getting a project of that magnitude finished during a big recession is a pretty remarkable story,” Cohen said. “There were a number of facilities that went into multi-year delays.”
For a suburb to build a facility of this pedigree would have been remarkable even in better economic times. The original sales pitch compared Carmel’s center to Carnegie Hall in New York, the Adrienne Arsht Center in Miami and the Meyerson Symphony Center in Dallas. Brainard stands by those comparisons.
“We realized that Indianapolis was one of the larger cities in the United States that didn’t have a concert hall, as opposed to a theater,” he said. “We saw this missing niche - we can make a regional facility and bring money into Carmel.”
While the buildings may be comparable - the Center for Performing Arts actually was more expensive, in 2006 dollars, than the Meyerson when it was built in 1989 - their operations are not.
Carnegie Hall had a $66.9 million budget in 2012. Dallas is a city of 1.2 million people in a metro area of 6.4 million. Carmel has about 80,000 residents in a region of 1.8 million, according to U.S. Census figures. The center spends $9 million a year.
These market differences and variations in business models make it hard to say if the center’s operating costs are in line with its peers.
Center spokesman John Hughey points to other suburban facilities as a closer match, but they still miss the mark. The arts center in Germantown, Tenn., the Memphis suburb where Castroverde Moskalenko last worked, spends less than a third of what Carmel does. And, while it is supported by a nonprofit organization, the center is staffed by city employees.
The best comparison might be the Strathmore in North Bethesda, Md., a suburb of Washington, D.C. It has a similar operating budget, spending $8.6 million in 2012, and its population is just 43,828.
But The Strathmore’s resident performers include bigger names, like the Baltimore Symphony Orchestra and the National Philharmonic. The Indianapolis Symphony Orchestra has played some at The Palladium, but remains committed to the Hilbert Circle Theatre in Downtown Indianapolis.
Brainard is upbeat about where Carmel fits among its peers. In just over three years in operation, people have attended shows from all 92 counties of Indiana, every state but New Mexico, and 16 countries, according to center records. It hosts a national high school vocal competition, The Great American Songbook Initiative is run by Grammy nominee Michael Feinstein, who is also the center’s artistic director. And it’s home to six resident companies, including the Carmel Symphony Orchestra, the Indiana Wind Symphony, two theater groups and two dance troupes.
Too, it’s become a source of local pride for residents. Those who have attended shows rave about them, and many of those who haven’t speak highly of the venue.
“It put Carmel on the map,” says Virginia Kerr, a Carmel resident since 1969, and a former Carmel Symphony subscriber.
“To have something like that in our city, I mean, it draws national acts,” says Sean Litke, owner of Canine Cloud Nine. “I think it’s awesome.”
The City Council approved the project in 2005 amid a swell of community enthusiasm.
Alongside the projections showing minimal government assistance, council members were given a 100-page booklet of letters pledging community support. The mayor also assured that a $40 million private endowment could be raised to cover operating costs and pay for extras, such as lobby upgrades and a concert organ.
But while construction was in mid-swing, the economy collapsed. And suddenly, it was city taxpayers, not the enthusiastic donors, who would be footing the bill for the extras, the startup costs and the annual operations.
“Fundraising was supposed to cover the startup costs - they didn’t,” Sharp said. “They didn’t materialize. What caused the biggest problem was that the upgrades to the hall were done with no money to pay for them.”
Today, unexpected expenses are still coming in. The CRC in February agreed to settle a lawsuit with construction firm Crider & Crider for $575,000, with other contractor disputes still lingering.
And public information is at a premium. According to its lease, the nonprofit organization that runs the facility is required to provide quarterly and annual financial reports to the CRC. But Hughey said that no such documents exist.
“Our position is that the CRC is updated via board participation,” Hughey wrote in an email. “The CRC’s Bill Hammer is a member of the center’s board of directors. He is updated at all center board meetings. His role on the board honors the agreement.”
City leaders appear unconcerned. Council members insist that the group has been transparent, with them, and provides financial records on request. “We’ve had an excellent relationship with the foundation,” Sharp said. “Their CEOs have come forward and briefed the council on more than one occasion.”
But the lack of reporting makes less information available to the public, which pays a large share of the center’s bills. The nonprofit does have to file federal 990 financial disclosure forms, but the most recent is a year-and-a-half old because of a lag in filing deadlines.
The mayor’s office provided more recent information. In 2013, the group made $4.2 million in earned income, which represents about half of the group’s revenue. The center received another $2.3 million (30 percent) from government and $1.3 million (17 percent) from fundraising. For comparison, Germantown received 48 percent of its money from government, and North Bethesda got 10 percent.
Expectations for the future vary, but city leaders hope to wean the center off the government subsidy.
Brainard’s goal is the most ambitious - he wants to see the operating subsidy at zero, starting with reductions of $250,000 a year. Sharp is shooting for around $1.5 million - “and I think that’s achievable,” he said, “but it’s not achievable today.” Snyder expects funding to say the same for three or four more years, before settling below $2 million.
Castroverde Moskalenko is focused on building the center’s donor base, a task that will require her to make up for lost time.
The center lacked stable leadership for a year beginning in July 2011 when the first executive director, Steven Libman, resigned amid an alleged sexual relationship with a subordinate. He left with a $100,000 settlement and letters of recommendation from multiple council members and Brainard, who says he can’t discuss the matter.
Castroverde Moskalenko replaced interim director Frank Basile in August 2012, and saw fundraising drop to $1.3 million in her first year from $2 million the year before, according to the center’s audited financial documents. But council members and the mayor alike preach patience, expressing confidence in her leadership.
“I think that we are really on our way - it’s just that it’s hard to do that overnight,” Castroverde Moskalenko said. “You have to build relationships with people and with corporations. It’s a process.”
Whatever the operating subsidy is, Brainard, for one, isn’t showing any buyer’s remorse.
“People say why would you build something that loses money?” Brainard said. “I say it’s the same reason we have a police department. That’s why government exists, to provide things that the private sector doesn’t want to do.”
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Information from: The Indianapolis Star, https://www.indystar.com
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