Photo: Todd Gill, Fayetteville Flyer
FAYETTEVILLE — TheatreSquared officials hope to convince the Fayetteville City Council to foot the bill for a portion of the nonprofit theater company’s annual operating expenses.
The council next week will consider a proposal to pay for some of the performing arts center’s ongoing utility bills, insurance premiums and maintenance costs.
The move would come through a change to the city’s longterm land lease agreement with TheatreSquared, which was approved in June 2016 to allow for construction of the company’s new facility in downtown Fayetteville.
The 25-year lease can be renewed up to three times, and does not include any rental fees for use of the city-owned land where a 54-space public parking lot was once located.
Approving the rent-free lease was the first of two major commitments from the city in the run up to the construction of the facility. The council in 2017 voted 7-1 to give TheatreSquared $3.1 million to help build its new venue.
The financial gift was one of many large donations that helped fund the $34 million facility at the southeast corner of West Avenue and Spring Street. The Fayetteville Advertising and Promotion Commission matched the city’s commitment, the state gave $2.9 million, the Walton Family Foundation gave $9 million for construction and $3.5 million for design of the new facility.
The proposed lease amendment is sponsored by council members Sonia Harvey, D’Andre Jones and Sarah Bunch at the request of TheatreSquared executive director Martin Miller.
Miller said the funds freed up by the change — which amount to a little over 2% of TheatreSquared’s annual budget — would help TheatreSquared offer educational programs and free or reduced-price tickets to Fayetteville citizens who couldn’t otherwise afford to attend. He also said TheatreSquared would commit to substantially increasing its minimum level of economic activity — increasing performances by 30%, and dollars spent by over 100% from the baseline set in the original lease.
Miller said it’s not uncommon for local governments to approve ongoing funds for anchor arts institutions operating in city-owned facilities, especially those that contribute to the local economy.
Citing a case study commissioned by TheatreSquared in October 2021, Miller said in Fayetteville’s peer markets, similar organizations receive a total of 5% to 15% of their total annual operating expenses from local municipalities.
He said TheatreSquared has grown to become Arkansas’s largest producing theatre, but has never received any form of operating support from municipal sources.
“Our current request is simple,” Miller told the Flyer. “We’re asking our landlord, the City of Fayetteville, to be responsible for certain fixed facilities costs — like property insurance, and maintaining the building’s exterior.”
According to the proposed resolution, the lease change would shift some the costs of the arts center from the theatre company to the city, including maintenance and repair of the building’s structure, roof, envelope, finish and all of its mechanical, electrical, plumbing, drainage, lighting protection, fire suppression and elevator assembly. The city would also be responsible for building insurance and utility payments for electricity, water, gas, sewer and trash service.
Specific cost estimates are not included in the language of the proposal, but City Attorney Kit Williams estimated it could cost the city “tens of thousands of dollars” per year for the next 94 years if the lease is extended to its full 100-year potential.
In a May 25 memo to the council, Williams said he paid great attention to detail when drafting the original agreement to ensure the legality of a rent-free lease of public property to a private nonprofit.
He said he used the lease for the Walton Arts Center as a model, as it seemed logical to treat both theatre organizations leasing city property in the same manner.
“Much of the legal consideration flowing to our taxpayers to support this 100-year lease requested by TheatreSquared mirrored the Walton Arts Center’s longterm lease with its promise to ‘operate, manage and maintain the premises,'” Williams wrote. “The maintenance requirement was specifically agreed to by TheatreSquared, Inc. in their lease and constituted a substantial amount of consideration for our citizens to justify.”
Williams reminded the council that former Council Member Justin Tennant was the only representative to vote against the $3.1 million gift to help build the new theater because of a specific concern over operational costs. At the time, Tennant said he loved TheatreSquared, but was worried that the organization did not have a maintenance plan in place, which at best could lead to another request for help or at worst leave the city with an empty building.
“His prediction appears to have been correct, as TheatreSquared is now, less than six years later, asking the council to take over all significant maintenance costs, as well as building insurance costs and utility expenses,” wrote Williams.
Miller said worked closely with J. Cliff McKinney, a transactional attorney who serves as chair of the real estate law section of the Arkansas Bar Association, to ensure that the city has the full legal authority to fund some of TheatreSquared’s operations.
He said there are similar arrangements in states like Texas, North Carolina, Wisconsin and other areas with cities that have been identified as peers or aspirational peers to Fayetteville.
The T2-commissioned study found that the ZACH Theatre in Austin, which is located on publicly owned land at the Butler Shores Park, receives maintenance money from the city that’s written into its lease agreement. The study also showed that the Carolina Theatre in downtown Durham, which is operated by a nonprofit that leases the building from the city, receives about 11% of its annual operating budget from direct city grant support.
“Every city with staying power on the ‘Top Ten Places to Live’ list is working hard to invest in its creative economy, as our research shows, but our city is pacing behind,” Miller said.
Williams said Tuesday he’s still concerned about shifting three of the major components of what TheatreSquared agreed to pay for to the city.
“That endangers, I believe, the consideration for the lease,” Williams said. “And if the consideration for the lease is not adequate fair according to a court, then that would mean that we are subsidizing a nonprofit, which is against our (state) constitution.”
Williams said he frequently attends TheatreSquared performances and has contributed to the organization’s fundraising efforts, but doesn’t want to let that cloud his judgement.
“I like TheatreSquared, I am a season ticket holder, and I donate money,” Williams said. “But there is a limit to what the city can do, so yes I am concerned and I hope the City Council will carefully consider what I’ve said.”
Miller told the Flyer he hopes the council will also take into account the additional activities that TheatreSquared has committed to provide as an increase of the nonprofit’s consideration for the lease.
The council is set to discuss the proposal during its next regular meeting on June 7.