Crippled by debt from a 16-year-old building it can't afford to maintain, the Arts Center of Coastal Carolina says the only way to survive might be to hand it over to someone else.
President and CEO Kathleen Bateson on Wednesday asked Hilton Head Island Town Council to advance $346,000 to the nonprofit organization. The money would come from accommodations-tax funds already committed to the arts center for 2013 and would keep it afloat through the winter.
Bateson told council the arts center needs a transfusion of about $5 million to cover debt and repair costs.
"This building has been eating our lunch for a long, long time," she told council members. "... Maintenance expenses have eroded our cash flow. The economics don't work. ... Revenues cover administrative and program costs -- and nicely so -- but I don't know what to do with the building. We plug along and it creates debt."
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While giving money to the arts center early would buy it more time, council members say it will do little to address a larger problem: how to properly support island arts groups.
"It's been very unsatisfying on an annual basis to divvy out an inadequate amount of funding for the arts in a piecemeal fashion that meets nobody's needs," Mayor Drew Laughlin said. "We have a patient on life support and that life support is no longer adequate. We need to make sure the limited resources we have are used as efficiently and effectively as possible."
A TOUGH SELL
Council asked town staff to prepare information for launching an island-wide study of how arts groups are supported and operated, with a focus on consolidating funding and performance venues.
"We need a strong cultural foothold on this island," Councilman Bill Harkins told Bateson. "Our residents want it and our guests want it ... but I will have a real hard time asking us to dip into another's pocket to sustain your operations, unless some systemic change is considered by you and other members of the island's arts community."
Harkins wasn't the only council member critical of the arts center.
"It's hard for me to understand why an organization like yours with talented people on the board would get to the point where you have a $5 million nut that's almost impossible to fix," Councilman George Williams told Bateson. "I don't know how we got this far for this long. That's my frustration. ... There needs to be a major shift in the thinking of all of our arts organizations and how we allocate tax money to make this enterprise successful."
FROM MILESTONE TO MILLSTONE
The 45,000-square-foot building opened in March 1996 and was seen as a milestone by many on Hilton Head, even as detractors questioned the dollars and cents of the $10.2 million project -- more than half of which came from government.
For the first time, the area's disparate arts organizations had a place to call home, with state-of-the-art facilities and room for educational and outreach programs on a scale not offered before.
When the center opened, it was $558,500 in the hole -- the money was needed to pay for and outfit the building. It tapped a $2.5 million line of credit to pay bills while waiting for additional money to come in.
Center officials have since poured about the same amount into the building, beginning in 1999, by borrowing for maintenance and repairs, with another $2.5 million in restorationsstill to tackle.
The center spends more than $400,000 annually out of a budget of about $3.6 million on property insurance, utilities, maintenance, fuel, janitorial services and upkeep, according to financial records provided to the town. That leaves no money, however, for repairs and maintenance, Bateson said.
The arts center has operated at a loss every year since 1999, with deficits ranging from more than $460,000 last year to $47,693 in 2003.
Bateson argues the arts center has covered all of its program and administrative expenses every year since 1999, with annual operating surpluses between about $100,000 and $500,000. Yet those surpluses were quickly consumed after accounting for interest payments, maintenance costs and capital improvements.
"This is a community asset and was built without a long-term plan to take care of that asset," Bateson said. "Donors have been extremely generous in helping us provide the education and programming they expect, but the building is starting to get in the way."
Council members acknowledge the arts center is valuable to the community but are reluctant to provide more money for what some called a money hole.
The town has awarded the arts center between $350,000 and $414,000 yearly since 2002 from taxes on overnight lodging.
"If you were coming before us and we were an angel fund and asking us for money, it would be a short conversation," Councilman Bill Harkins said. "Inherent features of your operations are flawed and not sustainable. You're asking us to direct public funds to a bottomless pit. ... Something needs to change."
Bateson said she, the art center's staff and its board of directors have tirelessly tried to control costs, cutting staff to its lowest level in 11 years, putting on less-expensive shows and eliminating an outdoor festival.
The arts center board has also launched a fundraising campaign to reduce debt and fix up parts of the building. But, like other nonprofits, the arts center has been hamstrung by the prolonged recession, Bateson said. About 40 percent of its budget comes from donations. The rest comes primarily from ticket sales.
"Ticket prices have hit a ceiling in this community and discretionary income has declined dramatically since the recession," Bateson said. "We are a performing and visual arts facility without the standard municipal or university financial backing of like organizations nationally.... Without relief from building expenses beyond ticket revenues and contributions, we will not be able to provide programming as it exists for visitors and residents."
Follow reporter Tom Barton at twitter.com/EyeOnHiltonHead.