Overture's $28.6 million debt has suddenly vanished.
News officially came at a press conference this morning: lenders will write off part of the outstanding construction loan. The rest, $15.1 million, will be settled by donors led by Overture patron Jerome Frautschi, as detailed in a press release (PDF) detailing the deal.
"The negotiations with M&I Bank, U.S. Bank and JPMorgan Chase were a bit of a sense of chicken," says Linda Baldwin, chair of the Madison Cultural Arts District, which runs Overture. (Baldwin is also Isthmus' associate publisher.) "Our attorneys would ask the banks' attorneys about how much Overture would have to pay before they'd forgive the loan, and the banks' attorneys would say, 'Well, what have you got?'"
At first, Baldwin says, the banks didn't understand why Overture couldn't raise money from the community to pay back the debt. "We had to explain to them how, in these times, it would be very difficult for people to raise money for debt of any sort. There was a lot of education on the part of the banks to learn about the whole situation."
The deal that was finally worked out comes with strings.
Donors require that the city assume ownership of the building, as reported on June 8. The first of many Overture votes, on "negotiating parameters," will go to the common council July 6.
The city would continue its annual $1.3 million operating subsidy and assume maintenance costs of about $800,000 per year, starting around 2014. That will likely come from room tax.
Mayor Dave Cieslewicz and Overture CEO and president Tom Carto expect the city will require that management be given to a nonprofit corporation. That would likely be Overture's fundraising arm, a separate nonprofit called the 201 State Foundation (which, in an anticipatory mood, is in the process of changing its name to the Overture Center Foundation).
The change in management will have consequences for Overture's staff. Nearly the entire staff is employed by the city, though the city has never owned the building. The proposal is to flip-flop that: The city will own the building, but employees will work for someone else. Staff members are almost all union-represented city employees. That will be the political third rail as decisions go forward.
Carto promises a slow and sensitive transition, with employment of some kind, somewhere, for everyone.
"Everyone weight $28 million less today," says Baldwin. "It was really hard to move forward in any way with that heavy weight on us. This represents an opportunity for the new beginning of the Overture Center."