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Non Performing

Terry Sanford's dream of a performing arts complex is nearly broke and hoping for taxpayers' support.

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It's called the Performing Arts Institute of North Carolina. But it has become just an extended tap dance. Terry Sanford's dream of a multi-building campus dedicated to the peforming arts, a center for theater, dance and teaching that would be the South's answer to Juilliard and Lincoln Center, has been reduced to a string of missed deadlines and misleading assurances.

Despite requests from the State Planning Office, the Institute has consistently missed deadlines for filing financial reports tracking its fundraising, and the state has failed to enforce them. Federal tax forms suggest a project in financial free-fall, a consistent, four-year downward spiral in charitable contributions from $138,000 in 1998, after the idea was first announced, to just over $9,500 last year.

A major fundraising effort has yet to materialize. The project has no executive director. After four years, the first major donor has yet to step forward and declare their support for the project.

Far from raising the $230 million organizers need to move forward (or even the $1 million, $10 million or $60 million the group's spokesman says has been raised, depending on when you ask him) the bottom line is this: $1,897. That's how much money the group reported to the IRS that it had on hand at the end of 2001.

Why does it matter? Because you could be asked to pay the difference. The only thing of value the Institute actually has is a five-year lease on 68 acres of choice state land in West Raleigh near the Entertainment and Sports Arena. The lease was signed by former Gov. Jim Hunt on his last day in office after some powerful political strings were pulled to get the last-minute deal. In return, the backers of the institute made a firm commitment: They would raise all $230 million from private sources and start construction before January 2006, when the lease was up.

Now, however, the spokesman for the group says it's doubtful that the entire $230 million can be raised by then, and that the state (taxpayers, that is) likely will be asked to help pay the bill.

"Our feeling on the thing is that, and it's just an instinct, is that the state will not close down a project that has attracted over $100 million in private funds," said Tom Drew, president of Durham-based Phoenix Communications and the Institute's spokesman. "And what would they do? Say, tear it down, we're going to take it over, get out of our way, we're going to make it into a pasture? We've been given, I guess, some sense that, you know, let's see how well you can do and then come talk to us. I mean, that's not a commitment one way or the other. In five years, who's governor? Who's the legislature? Who's the speaker and the president pro tem of the Senate? There's a lot of ifs. What's the economic climate?"

That's not the sense of everyone in state government.

"I think that a number of people in the government were privately very concerned about exaggerating and overpromising in order to get the land at the time that this agreement was reached," says state Sen. Wib Gulley of Durham. "But there were a great deal of explicit reassurances at the time that that was not the case.

"I think a number of folks take very seriously the explicit commitments that were made and expect them to be followed through on," Gulley said. "With all of the discussion and firm, clear commitments that were made to the state by the folks who wanted that land, I don't know that anyone should assume that you can just disregard all the commitments you've made to the state and continue merrily down the road."

Particularly since it's been a very bumpy road.

A litany of setbacks The greatest blow, of course, was Sanford's illness and death in 1998. The former governor, U.S. senator and Duke University president had made the Institute his last wish. For Sanford, who had helped bring the American Dance Festival to North Carolina when he was governor, the Institute would be his crowning achievement. It would give ADF a permanent home, and much more.

The Institute's rehearsal rooms, classes, dormitories and offices would support around 500 students, faculty and staff. Its three performance spaces--two theaters seating 2,000 and 800 patrons respectively, and an intimate black box space--would allow ADF and other groups adequate room to properly host world-class artists like Pina Bausch, whom the festival honored, but could not present, in 1999.

The theaters also would help fill a crucial gap in the region, providing centrally located, mid-size venues for a host of local musical, dance and theater companies.

In the last months of his life, Sanford went to more than 30 wealthy friends and gained commitments of $2 million each, Drew said. Then began a long, sometimes bitter search for a home. Raleigh was favored by most of the Institute's board, but there was pressure from people in Durham to build the project there. Finally, in May 1999, the Institute's backers chose to put it in Raleigh, on the site of the former Polk Youth Center, a correctional facility on Blue Ridge Road adjacent to the North Carolina Museum of Art. The decision would mean moving the American Dance Festival from Durham, its home for the past quarter century. A number of festival patrons and members of the arts community opposed the Raleigh move, and regional legislators, including Gulley, moved to block it. State Sen. Tony Rand was unable to push through a bill authorizing the Institute's land grant in the last days of the 1999 General Assembly. The museum's leadership wasn't crazy about the idea, either, and legislation passed the following summer specifically reserving the Polk Center property for the museum's expansion plans.

None of this deterred Hunt from trying to secure the Polk site for the Institute again in September, a move that museum officials protested. In the ensuing public controversy, it took Hunt two months to find an acceptable substitute: a nearby plot of land just off Reedy Creek Road, adjacent to a then-planned extension of Edwards Mill Road.

In the last days of his administration, the Council of State approved the land grant, and Hunt signed the lease on Jan. 5, 2001, his last day in office. By that time, the project's price tag had risen from $100 to $230 million--and a contingent of backers determined to keep the ADF in Durham had already begun work on an alternate plan to keep the festival.

Three months after the deal was sealed in January 2001, former U.S. Rep. Richardson Preyer of Greensboro, an Institute stalwart and regional institution himself, died. Five months after that came the terrorist attacks of Sept. 11, which crippled fundraising for the arts nationwide. A subsequent national economic downturn translated into what Drew ruefully called "the region's economic version of Hurricane Floyd."

The leaseThe terms of State Property Office Lease file number 92-KKKKK were certainly attractive--exclusive use of 68 acres of prime Raleigh property for 99 years, for the sum of one dollar.

But the deal came with a few strings attached.

Article II, "Definitions," stated that the Institute had to raise at least $180 million dollars for a "Construction Fund" and at least $50 million for an "Endowment Fund" for the institute.

Then Article VI of the lease, concerning the project's "Commencement and Completion," stated: "As a condition of this lease, prior to beginning construction, the Lessee shall raise from private sources and have in hand the total amount of funds ($230,000,000.00) [...] . Lessee shall begin construction of the Project reflected in the Plans within five (5) years of the commencement date of the Lease."

In short, they had to raise $230 million and they couldn't start construction before they finished raising funds. They had to start construction within five years, and the money had to come from private sources--not the state.

Finally, they had to keep in touch. Article XV, "Reporting," insisted that "Lessee shall report to the Lessor semi-annually the balance of funds collected for the Construction Fund and the Endowment Fund during the first five (5) years of the lease term."

Unambiguous: Every six months, the project's management would have to report the balance of funds they'd collected to the state.

Penalties for noncompliance are found in Article XIII, the section devoted to Termination or Expiration, which said that the lease "shall terminate" ... "Upon a breach of this Lease Agreement by the Lessee which is not cured within ninety (90) calendar days' following the written notice from the Lessor (or if such breach cannot be cured within ninety (90) calendar days, then within a reasonable period of time, provided the Lessee proceeds promptly and diligently to cure such default); or ...[i]f the construction is not begun within five (5) years of the commencement date of the lease or if construction is not completed within three (3) years following the commencement of construction."

The time limit was put in to keep the project from dragging on indefinitely. The provisos demanding that fundraising be completed before the beginning of construction--and come from private funds--were designed to keep the state from having to bail out an unsuccessful project or complete a half-finished building with the group still tens or hundreds of millions of dollars away from its goal.

The semi-annual reports were designed to alert the state if the group was having trouble meeting its goal.

No doubt some of these conditions were inserted to appease the Durham constituency. Still, they had the effect of protecting the taxpayers. At least, they would if either side were paying attention to them. Over a year and a half later, neither the state nor the Institute has fulfilled its side of the bargain.

No financial reports By now, the Institute should have filed three financial reports with the state. The first was due six months after the lease was signed--July 5, 2001. The second came due on the first anniversary, Jan. 5, 2002. The third should have gone out this past July 5. As of Aug. 5, the Institute had yet to make its first reporting of funds to the state. And the State Property Office has raised barely a peep.

Almost four months after the first report was due, the property office's leasing manager, Tommy Cline, sent Drew a letter on Nov. 2, 2001, requesting he file the Institute's first report. The second report's due date came and went before Drew got around to responding to Cline's request in a letter dated Feb. 13, 2002, 102 days after Cline's written request. That was enough to void the lease right there--it says the contract "shall terminate" if a contract breach isn't cured within 90 days.

Drew's letter had one other problem--it didn't give the balance of funds. In fact, it gave no specific financial information whatsoever. And it appears to be merely a rewrite of an update sent to the Institute's board.

The heading at the top of the letter is to Joseph Henderson, director of the State Property Office. And it starts off promisingly enough: "Dear Joe: We apologize for being quiet for so many months. Hopefully this letter may explain why as it provides a status report."

As it continues, no mention is made of the one thing Cline requested: "the balance of funds collected for the Construction Fund and the Endowment Fund."

Instead, the letter details at length the Institute's unsuccessful efforts to recruit a full-time director. Then it turns to talk about expanding the Institute's advisory committee. The second sentence in the paragraph reads: "Thanks to many of you for suggesting names."

The next to last paragraph speaks in conciliatory tones about communicating better in the future with all members of the advisory committee. It appears to be the group to whom this "status report" was originally written.

Slack is grantedInstead of terminating the Institute's contract, the State Property Office let it slide. Henderson's signed response, written on the Institute's cover sheet, said "Tommy -- This is sufficient for now. We'll require more detailed fund raising info once the economy improves. ..."

No further mention was made of the by-then second missing report, due the month before. The third report, due July 5 of this year, passed without any reminder memo or other action from the SPO, and no word from the Institute.

On July 30, Cline stated that to the best of his knowledge no one from the State Property Office had yet been in touch with Drew, but said that they would be in touch with them that week.

Tom Drew, a tall man whose avuncular manner undercuts what would otherwise be a truly intimidating frame, takes responsibility for not filing finance reports with the state. "I take the blame on that, but I didn't understand what kind of detail was necessary. What I sent in January, I really thought that was adequate. I mean, it's easy because we're having to do the [IRS filings], so to include those numbers with those reports to the state, that's not a problem. And it's only going to show a few thousand dollars on it. We haven't spent a lot of money."

When asked if the State Property Office had been in touch with him, Drew confirmed that Cline had contacted him on Aug. 2 -- two days after Cline's interview with The Independent: "He told me a report was due, and I said I'd get it to you ASAP. He said he'd send me a form."

"A form?"

"A checklist of what exactly he was looking for," Drew said.

"You weren't clear on exactly what they were looking for?"

"No, I really wasn't. And that's my fault, you know. And my accountant didn't really know either," Drew said.

"They've been very nice," Drew added. "They've not been mean nor rude nor pushy."

Part of the reason came from Tommy Cline, manager of leasing for the North Carolina State Property Office. "There's been no reason to suspect, up to this point, that they could not raise the funds as dictated in their agreement," he said.

Asked this month when he'd file the first financial report with the state, Drew said he'd file it within a week.

Three weeks later, the state still had received no word from the Institute.

A moving targetKeeping up with fundraising has been a moving target for anyone trying to follow the Institute.

The first news of fundraising after Sanford's death came in a May 20, 1999 letter from the Institute's board to then-Gov. Hunt that said the group "can begin immediately the process of fundraising." That month, Drew told The News & Observer he "has commitments of $7 million, though none of it has been collected."

In August 1999, State Property Office Director Joe Henderson placed a one-paragraph memo in the lease file that says: "Tom now has funding commitments of $60 million and will continue fund raising efforts."

In March 2000, the Spectator reported that "Spokespersons declined to say how much had been raised, or even pledged."

In January 2002, The News & Observer quoted Drew as saying the Institute had "about $1 million in hand and pledges of about $10 million," a number that was repeated in a March article in The Herald-Sun.

But in its filing with the IRS, the Institute reported a cash balance of $1,897 as of Dec. 31, 2001--not the $1 million stated to newspaper reporters. That's what's left of $257,896 the Institute has told the IRS that it raised since 1998.

Drew's February 2002 letter to the State Property Office promised that a fundraising initiative was around the corner: "Our future plans call for a meeting of the advisory committee in March. At this time, we plan to go public with a program designed to complete the project."

Five months later, with no project still in sight, Drew said, "We really didn't have [the March meeting]. We're going to do [the campaign] this fall."

Asked when it would happen, Drew said, "We haven't set the date."

When asked to explain the discrepancies, Drew replied, "You've got to understand what happened. Terry Sanford before he died asked a lot of people for $2 million. A lot of people said yes to him. If you added all that up, it equaled about $60 million. And so what we'd really done since the January that we got the property is to try to really qualify them and get them in writing and do that kind of thing."

"At this stage I'd say we're at about $16 million," Drew said. "If I had to in 30 days go get it, I'm confident I could."

Drew confirms that Sanford asked between 30 and 33 people to donate $2 million each. Then, Drew calculates that the $16 million he says he's confirmed equals "about eight donors."

He then confirms the quotes attributed to him in a March 2002 article in The Herald-Sun, in which he said that at an upcoming planning meeting "we're going to discuss whether we need to have the full $220 million or do we have to be well on our way with $60 or $70 million to start."

When asked to clarify, Drew says, "There's no agreement with the state one way or the other on how much money has to be raised within the five years before the deal will be considered real. We do believe that it's got to be more than $10 million. And it probably can be less than $220 million. So that," he laughs, "is a pretty broad spectrum."

The lease he negotiated clearly states that $230 million of the funds have to be raised before construction can begin. It states that the lease will be terminated if the funds have not been raised.

"There's always been within the group two camps," he notes. "One group never wants to wander from the full $220 million goal, and the other group says, hey, come on, let's talk about phasing this thing in three parts and building two parts and the endowment one part.

"You see, you can get the performance hall completed and then move into the other things as money came," he says. "It would be a snowball effect anyway, but the way it's designed, the first two theaters are so dramatic, you would brand your site with those things, which would allow you to continue and build upon that to finish."

It's a nice vision. It's just not the legally binding one in the contract the Institute signed.

A Certain UnderstandingAfter detailing the setbacks, Drew brightens. "We've spent part of the spring and early summer reconfirming some of our pledges. No one went south on us, and I was very pleased with that. Some of them I was surprised by."

When asked why he was surprised, Drew noted the time it had taken to get the project this far. "People of those means find other things to do."

When asked about the group's public silence since January 2001, Drew defended the decision.

"We've been purposefully quiet. We haven't gone public. One reason is because I think to announce a million dollars here and a million dollars there is not going to help our cause. We really need to announce $10 million here and $20 million there, if you know what I mean. So that's what we're working on."

That's when he expresses doubt that the Institute can raise $230 million, and that the state will help with the shortage.

"There's some doubt," Drew admits. "Let me put it this way: There's no doubt that this group of people can pull off the $230 million. I guess the question is in five years."

Then he sums it up: "I think there's the sense that the state is our partner, and wherever we are at that time we'll all just sit down and reason together." Drew laughs. It's only when he's directly asked about state funding for the project that he turns cautious. "In this climate, I can't imagine asking the state for any amount of money," he says.

Even with the Institute's current problems, Gulley expressed interest in reaching out to the project. Durham's efforts to build a performing arts theater downtown has moved ahead while the Sanford project has been stymied. "Perhaps there'll be a way to bring these efforts together in the future," he noted.

"I know from conversations with the mayor and others that folks in Durham are still very interested in meeting and working with the group, to try and find a way to join forces and work together on this, particularly around the performing arts facility in downtown Durham," said Gulley. "I'm still hopeful that we can end up finding a fitting way to honor former Governor Sanford." EndBlock

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