At the May 8, 2012, Turlock City Council meeting, Council Members struggled to reach an agreement on whether the City should return a large sum of money to the Carnegie Arts Center Foundation.
The Carnegie Arts Center Foundation sent a letter to City Manager Roy Wasden on March 26, 2012, expressing the appreciation and support the Foundation has received from the City since their opening date in September 2011, and requested that the City return the Foundation’s security deposit of $100,000, due to the outstanding performance and success the Carnegie Arts Center has achieved over the past 8 months.
In Section 5 of the Carnegie Lease Agreement, entitled Operation and Maintenance, Paragraph P – Performance Security, the City demanded that the Center shall “provide the City with a cash performance security in the amount of $100,000 to ensure faithful performance of terms and conditions of this agreement”.
In the letter requesting the return of the $100,000, the Foundation also stated that in the agreement, “it was unclear how the amount of $100,000 was arrived at and exactly what it protected”.
The Foundation also explained that for the Carnegie Arts Center, the $100,000 deposit was the only unrestricted funds remaining over and above a construction deposit primarily comprised of restricted funds.
The Foundation has since been operating successfully only on unrestricted funds raised since the opening of the Carnegie Arts Center, however, they explained that $100,000 would provide the Carnegie Arts Center with a level of reserve that is both meaningful and prudent.
“We are requesting that the cash performance security of $100,000, plus interest be returned to the Carnegie Arts Center Foundation in view of its success to date and its reasonable need to have access to these funds,” stated the letter.
Mayor John Lazar did not participate in the discussion and vote, due to a recommendation by City Attorney Phaedra Norton, as there was a potential conflict of interest as his wife, Nellie Lazar, is on the Carnegie Art Center Foundation Board.
The City Council took into consideration a motion to authorize the City Manager, Roy Wasden, to sign an amended agreement between the City of Turlock and the Carnegie Arts Foundation to return $90,000 and all accrued interest on the $100,000 Performance Security to the Carnegie Foundation and to retain $10,000 of the $100,000 as a security deposit for the Carnegie Center and pay the accrued annual interest to the Foundation by July 31 of each calendar year.
While the City claims that such security type deposits are common in commercial leases, Carnegie Arts Center Foundation Executive Director and Curator Rebecca Abbott stated that no security deposit has been required of another non-profit.
“Any non-profit has significant cash fluctuations, most of the time in the summer months, and we’re certainly looking at that,” stated Abbott. “The $100,000, to be honest, seemed like a steep performance security deposit, and I wasn’t able to find any such deposit required of a non-profit. Probably there are some, but I looked pretty hard. I talked to colleagues and no performance security deposit was ever required of a non-profit.”
Abbott shared with the Council the statistics regarding the Carnegie Arts Center’s success, and plans for the summer. Approximately 2,400 children attended the Carnegie Arts Center since the opening date in September 2011, with a total of 15,000 visitors. The Center has also raised $1.9 million in endowment funds, however, a majority of these funds are restricted and therefore not available to the Foundation to use for the coming summer activities they have planned. Abbott also shared that 75% of the Carnegie Arts Center Activities this summer are directed towards children.
Councilwoman Amy Bublak, however, did not see it beneficial to return the Performance Security deposit to the Carnegie Arts Center Foundation, as there has not been an adequate amount of time since the opening date to assess the performance of the Center.
“I have standards and we all came to an agreement and here we are already asking for this,” stated Councilwoman Bublak. “In my mind, it’s a performance security, and the performance is an annual performance that is to be given to the City Manager and/or the City Council.”
“I would feel more comfortable waiting until September, because then I’m not breaking my rule of a year, every year you’re supposed to give your annual report,” said Bublak.
Bublak then suggested keeping $20,000 in the Performance Security after the one-year mark, while returning $80,000 at that point to the Center in September. Bublak based this opinion on wanting there to be further discussion in September, when the Foundation can return to the City Council with statistics on cash performance.
Councilman DeHart shared concerns about not having a year’s long track record, restating Bublak’s opinion that discussion should take place in September.
“I am essentially in favor in returning of funds, but the reality is that at this point, we don’t have enough history to back up the performance study,” stated DeHart.
Councilman Forrest White shared that he would like to see some kind of accounting as to how the money will be spent.
Perhaps the only Council Member to show full support of the Carnegie’s request of returning the full $100,000 Performance Deposit based on their performance to date was Councilwoman Mary Jackson.
“This building was not built for a non-profit to rent, but it was built for the community to use to the best of our ability, and it is a City owned building, I’d like to remind City staff and the Council Members of that,” stated Jackson. “I would rather see the Foundation have the tools, even if that means money to help hire staff, to help bring on more programs and activities and exhibits that bring in more people, and more money.”
Councilwoman Amy Bublak, however, expressed frustration with going back and making changes to the agreement.
“I still struggle with spending so much time working this and everybody being in agreement with everything, and then those very same people going and saying ‘well, wait that’s just too much,” stated Bublak. “We knew that this was a new facility and that it was going to be tough to do and so we discussed all these lease key points.”
“We’re establishing a precedent, we would be telling the world that the City of Turlock makes contractual agreements and then willy-nilly decides whether or not we go with them.”
Bublak still held firm in her belief that the City should grant the Carnegie $80,000 in September, and hold a $20,000 Performance Deposit.
“It frustrates me that all my time was somewhat wasted,” stated Bublak. “And it’s not about me, but it’s about the rest of the community going ‘okay well, contractually, I made this agreement with the City of Turlock, but see what you did with the Carnegie, how about you do that with me?” explained Bublak. “How would we be able to say ‘Well, no that was different.”
Councilwoman Mary Jackson then reminded the Council that she was not originally in agreement with the Performance Security mandate within the lease agreement between the Carnegie Arts Center and the City.
“Let’s be honest, historically I did not support this agreement, and I spoke against it over and over again,” stated Jackson. “I think Miss Abbott has been very clear that she can’t find an agreement like this anywhere else.”
“I want to give the Foundation every avenue to be successful,” stated Jackson. “And I think maybe we just have a disagreement in how we see it. I didn’t support this lease agreement, but this is the way that we got this building built. I think I was quite vocal then, and I’m going to be very clear and vocal now, and again I think we need to give the Foundation every opportunity to be successful.”
“We built this agreement from scratch, we argued over signage being paid, furniture, paint,” explained Jackson to Bublak, “And the way we built this building, Amy, I’m embarrassed about the way this building was built. I’m going to be quite honest and put that on the record.”
“But the building was built, it’s here, and we’re trying to make a great go of it,” stated Jackson. “I just want to make sure that they have everything available to them and the City does everything we can to make it successful. If I’m in the minority, then I guess I’m in the minority.”
Councilwoman Amy Bublak then made a motion to wait until September to return $80,000 to the Carnegie Arts Center Foundation, while keeping $20,000 in the Performance Deposit.
Councilman Bill DeHart seconded this motion. The motion received two yes votes, from Bublak and DeHart and two no votes, from White and Jackson, making the vote invalid.
Councilman Forrest White then made a motion to give the Carnegie Arts Center $20,000 at the time being from the Performance Deposit, with the remaining $80,000 to be allocated in September, at the one-year of performance mark, when more statistics can be provided to the Council.
“I would just assume to get some money out to them, but yet not the majority of the money, because I think there’s some concerns on two of the council members positions to see that until September,” stated White.
While Rebecca Abbott stated that the amount would be a bit short of what she was hoping for to manage cash flow, she stated to the council that $20,000 was “better than nothing, that’s for sure.”
The council voted unanimously to return $20,000 to the Carnegie Arts Foundation at the time being, with the remaining $80,000 Performance Deposit to be discussed and/or allocated to the Foundation in September, with interest to be paid to the Foundation on July 31 of each calendar year.