The Henderson City Council turned to the Embassy Square Foundation for help Tuesday night and wound up all but apologizing for any bad public relations the Embassy project has suffered.
A week after some council members expressed doubts during a Finance and Intergovernmental Relations Committee meeting about the next phase of the Embassy project, the 1,000-seat theater, the foundation’s heavy hitters appeared before the FAIR Committee to put those questions to rest.
Foundation Chairman Sam Watkins, Executive Director Kathy Powell, executive committee members Rick Palamar and Bob Fleming, foundation board member Rick Brand, and project supporter Eddie Ferguson attended a FAIR meeting that drew every council member except Lonnie Davis. Also present were City Manager Eric Williams and, for the first time during the spring series of FAIR budget meetings, Mayor Clem Seifert.
“What we’re doing is going through budget deliberations, and one of the issues, or categories, involves the city and the Embassy Square Foundation,” FAIR Chairman Bernard Alston said in opening the meeting. “What we want to do is get an understanding of where everything is in terms of where the project is, get an understanding of some kind of commitment if possible of when some level of reimbursement will occur … and try to get an understanding of where we are and where we’re going.”
An hour or so later, after a discussion dominated by Watkins and Seifert, the talk had shifted from reimbursement to what the council can do to help the foundation.
Much was said about the good work the foundation has done, the importance of the council’s bold vision in initiating the project in the 1990s, the necessity of a united front moving forward and the certainty that the opening of the new library will propel the foundation toward its fundraising goals for the theater.
Much was also made of what Watkins considers misperceptions of the Embassy foundation’s work. Here’s the night’s consensus on the project:
* The Embassy project is a crucial step for the future of Henderson. It is cultural, educational and economic, all in one. “Bill Friday actually said, ‘Most people are at home plate; you’re at second base,’ ” Watkins said. “Communities have to invest their money wisely,” Palamar said, adding that the Embassy represents a sevenfold return. “This in my opinion is the most important community project that’s ever been attempted in Henderson.”
* The only debt the Embassy Square Foundation owes is the $5.5 million construction loan it took out to build the new H. Leslie Perry Memorial Library. The foundation is under no obligation to pay the city $1.8 million (the amount of cash the city spent on the cultural side of Embassy Square), $1.3 million (the amount the city was budgeted to spend on the cultural side of Embassy Square) or $400,000 (the amount the city counted on from fundraising in the original Embassy capital budget). “They don’t owe us nothing,” council member Ranger Wilkerson said. “We just gave it away.”
* The city committed all of that money to land purchases and such professional services as architectural work before the Embassy foundation existed. (No one disagreed with the repeated statements that the city spent the money before the foundation was created, but city records show that many of the expenditures occurred after the foundation’s formation in 2000.) “This was a city vision, a city dream, and we think the correct one,” Watkins said. “We commend the council for having a thought like that. … It became obvious to the city that they couldn’t handle everything on their plate.”
* Watkins, Palamar and other foundation leaders got involved at the city’s request because a nonprofit organization can raise money more easily than a municipality, and the city and foundation worked together over the years to bring in grants and pledges totaling almost $9 million. (At least $2 million of that money came from federal grants to the city for the project; those grants came through the work of the Ferguson Group, a lobbying firm hired and paid by the city, not the foundation.) “We’re doing things you couldn’t do. You did things we couldn’t do,” Watkins said.
* The city set up the original capital budget involving $400,000 in fundraising and $900,000 in loans before the foundation existed. That budget was never adjusted to reflect the new reality of a project financed independently by the foundation, nor was it changed to reflect the city’s ability five or six years ago to pay $1.3 million in cash out of a then-swollen general fund balance. Seifert said the city paid cash because it could, and the land provided an asset that could be used as collateral for a loan if the city needed the money later. “All those expenditures were done before we even came into existence. We never really borrowed anything,” Palamar said. “You basically said, ‘Here’s the football. Can you run from the 5 to other end zone and score a touchdown?’ ”
* The $400,000 attributed to fundraising in the original capital budget was not the Embassy foundation’s idea or responsibility. Watkins said he knew nothing about the city forecasting a $400,000 payment from fundraising as part of the upfront money.
* The unbudgeted overrun of more than $400,000 in the city’s Embassy-related spending is an internal city problem, not a foundation problem. Seifert and council members were sorry that because the city spent the money on the Embassy project, the project and foundation have faced criticism related to the excess spending.
* The city considers its upfront spending to be part of the project cost and thus part of the $15 million or so the foundation is trying to raise. In other words, the foundation’s goal should be to raise enough money so that it can give the city the land, two new buildings and a lot of cash. That fits with the letter the state’s Local Government Commission sent the city in February in response to an audit showing that the city’s general fund balance was below 3.5 percent of annual spending. “It is our understanding that the City anticipates being reimbursed for these costs at a future date that may be a few years away,” T. Vance Holloman’s letter says.
* The Embassy foundation will be happy to give the city any leftover cash after it builds the theater. Watkins said he hopes to raise money beyond the construction expenses, but he can’t promise anything. “We’re going to raise all the money we can and hope we’re going to be able to pay you.”
* The foundation will not commit to paying any of that money and thus will not make a repayment plan for any amount of money. Watkins said it’s not possible to complete the fundraising and the construction while funneling money back into the city’s budget. “It can’t be done,” he said. The foundation officials urged a long-term viewpoint. To think that people will donate to pay the city’s debt, Watkins said, “is folly.”
* Operational funding for the buildings never was a foundation concern, but the performing arts center might not be much of a drain on the city budget. Watkins said the second-phase Embassy committee is taking up an operational study of the theater that was 75 percent completed before. Watkins said the goal is a center that won’t need any county or city funds each year. Palamar said: “The performance hall, I believe, has the capability of being very close to self-supporting after some initial operating grants.”
Palamar said it’s impossible to predict how the fundraising will go, but Watkins said the goal is to raise the money for the theater within two years.
He said the foundation put its Commission II back together Monday to study the theater’s operations in preparation for fundraising. “Public confidence is critical to raising money.”
Watkins said there won’t be anything to operate if the community keeps showing signs of dissent.
“We think we keep sending mixed signals to the public,” Watkins said, and that’s bad for fundraising. “If we could all bond together … we will get through it.”
“Discord” instead of “harmony” will hurt the foundation’s ability to raise money and thus eventually to pay back the city, Palamar said.
“The library will put us over the top to raise $15 million and hopefully get your money too,” Watkins said.
“This is the hub of our community,” Palamar said. “We believe it will be. … If the community doesn’t embrace it, I think that’s a terrible tragedy.”
He said the foundation has received pledges of $9 million but has only $3 million or $4 million in hand. The foundation’s success at collecting on those pledges could be hampered if community support falters.
Council member Elissa Yount objected to labeling as “discord” any questions at a time of financial crisis for the city. “It is not discord. It is just facing the financial reality of where we are.”
Alston said there’s a problem of public perception on where the money came from and when it should come back.
“I don’t see the problem out there with the public,” Watkins said. He said publicity about questions creates a problem with the public.
Much of that perception problem has to do with the city’s shrunken fund balance, which was less than half what the LGC considers the minimum safe amount at the end of the last fiscal year. The LGC pointed at the accounting of the $400,000 overrun in the city’s capital budget for the Embassy project, which the city had to cover with cash from the general fund when the land was deed to the foundation.
But Williams said Embassy Square wasn’t the source of the financial problems that put the fund balance on the brink of collapse. Instead, five or six things came together at the same time to drain the city’s savings, he said.
Watkins said he told the LGC he sees Embassy Square as a deferred asset, one the city can’t borrow against but eventually will regain. But that doesn’t help with the short-term problem.
Seifert said the city spent its fund balance as the LGC recommends, using the accrued savings to cover tax shortfalls as the tax base fell by $50 million and to take advantage of special opportunities, including Embassy Square.
“We have a terrible PR problem, and because we do, you do,” Yount told the Embassy officials. “What are we going to do to get the mind-set that when the water bills go up and the taxes go up and everything is going up that it is not the fault of the Embassy.”
“I don’t think that I as mayor am going to address a PR problem to satisfy 50 people,” Seifert said. “There are 16,500 people in this community, and I believe 14,500-plus don’t have that same opinion.”
Council member Harriette Butler definitely isn’t among the dissenters. “I for one just appreciate everything you do,” she told Watkins and the other Embassy officials.
Watkins said he’s determined to see the project through. “I’m going to be a cheerleader. I’ve been accused of being a cheerleader my entire life. We need cheerleaders.”