The recent liquidation of the trust fund that was designed to pay off the Overture Center's construction debt is a big deal. But it's unclear if the city of Madison will take a hit because of it.
In fact, city government may not be involved in retiring the rest of Overture's debt until 2011, when a refinancing deal hammered out between the Madison Cultural Arts District, Overture benefactor Jerry Frautschi and the city of Madison comes to an end.
City comptroller Dean Brasser says it's possible that the city could have to cover one or more of the quarterly payments on the center's remaining $27 million of "series B" debt. But it's not likely.
Brasser notes that the 2005 refinancing deal requires Frautschi to pay the debt service through 2009, after which payments will come from a $5 million reserve fund controlled by the Madison Cultural Arts District. "That should last through 2010 into 2011," Brasser explains.
Should the reserve be insufficient to make payments through 2011, the deal stipulates that "any available resources" of the Madison Cultural Arts District, the Overture Development Corp. (which owns the center) and several endowment-related funds be used to complete the payments through 2011. If all those resources are exhausted, city coffers could be tapped.
What happens after 2011? Well, Overture and the city are likely to get together and work out a new refinancing deal. After all, with a principal amount of approximately $25 million still to pay off by then, the center will need to come up with some serious cash to make certain that the debt continues to be serviced.
But Brasser admits that there's another, more ominous option: Come the end of 2011, the city could just walk away. "Legally, our responsibility to make these debt service payments ends in 2011," he says. "There is no contract to do anything beyond that. Then it becomes a public and political discussion."
He adds that an old financing agreement contained a clause in which, under a certain set of conditions, the city could buy Overture for a single dollar. But no such clause applies now.
Would the city walk away? It's hard to imagine that happening, and at any rate the city will continue to pay its annual subsidy toward Overture's operating budget.
But who would have thought that one of the most spectacular building projects in Madison history would end up so muddled?