Rochester Civic Theatre financial situation prompts tough questions from City Council

The Rochester Civic Theater benefit on Sept. 24, 2016.
New details about the Rochester Civic Theater's finances raised questions about who is ultimately responsible for the theater’s financial health.
Jerry Olson for MPR News 2016

When the Rochester Civic Theatre announced last month that its executive director, Kevin Miller, had resigned, board members said it was because he wanted to spend more time with this family in Wisconsin.

But new details about the theater’s finances released at a City Council oversight meeting Tuesday paint a more complicated picture — and raised additional questions about who is ultimately responsible for the theater’s financial health.

"It's insulting to me that you'd sit here and say, 'Oh jeez, we didn't know what was going on.’ You are on the board. You're in charge of everything that's going on,” City Council member Shaun Palmer said to the theater’s board president, Jeff Haynes.

Palmer is among several officials who say they want to rethink the city’s financial relationship with the theater because it appears to have been poorly managed by staff and board members. The city most recently gave the theater $200,000 to maintain its building, which the city owns.

As Rochester, Minn., grows and aims to become a more sophisticated, global destination, the drumbeat at City Hall for more transparency and scrutiny of how taxpayer dollars are spent has grown, as well.

“I'm ashamed that we gave you $200,000 and I'm on the City Council,” Palmer told Haynes Tuesday. “I think we were misled, I think we were duped. And I'm just offended by that.”

Any changes the city makes to the ways it supports the theater could also spill over into larger discussions about its support for other institutions, like the Rochester Art Center and the senior center. All told, the city gave the theater, the Rochester Arts Center and the senior center more than $860,000 in the last budget cycle.

Financial distress, muddied by records

Late last month, the theater's executive director Kevin Miller resigned abruptly. He'd been on the job just under two years, and had brought new life into the theater after accusations of sexual harassment were leveled at the theater's former executive director.

Miller has not responded to requests for comment.

As city officials prepared for Tuesday’s routine oversight committee meeting, they asked theater staff and board members for additional financial statements. That’s when they first learned of the Civic Theatre’s financial woes.

According to documents filed with the city, the theater had a net loss of roughly $461,000 in the 2019 fiscal year, which ran from August 2018 to July 2019. So far, the theater reports $97,000 in net income for the current fiscal year, which ends in July.

But officials are especially concerned about a $300,000 loan the theater took out last fall to cover expenses, which they had only learned about after Miller’s departure.

At the meeting, Haynes told city officials that part of the problem was that the theater had begun hiring more professional actors for its productions, in hopes of attracting larger audiences.

It was a costly strategy, and with a fixed number of seats the theater could sell for each show, leaders knew they needed to find additional money to support the organization, Haynes said.

“The board felt very confident that the enthusiasm that our current and potential donors were sharing with us would translate into monetary support for our efforts. As has become painfully aware to us all, this did not materialize as we had hoped,” Haynes said.

Concerns about the budget, he said, started internally in June 2019, as the board was beginning to work on the next year’s budget.

At the time, Kay Hocker, who is also a regional director for Minnesota Public Radio in Rochester, was board president while Haynes was vice president. Hocker is still on the theater board, and has declined to comment on the theater’s financial situation, saying she no longer speaks for the board.

Haynes said that theater staff had promised the board big private donations that didn’t materialize, and provided financial reports that didn’t accurately reflect the organization’s fiscal reality.

It wasn’t until September that the board instituted new financial safeguards, including a requirement that multiple board members sign off on some forms of new spending and a mandatory weekly meeting with Miller and members of the board.

"I want to assure you that the board is very engaged in this situation and is operating with an extreme level of urgency," Haynes told the oversight committee.

Board members, Haynes said, have personally given the theater a combined $100,000 to remain afloat — but about $60,000 of that amount came in the form of loans that must be repaid.

Meanwhile, the theater missed payroll twice last year and also missed some tax payments as the result of its financial distress.

City Council negotiating a way forward

Next week, three members of the city’s oversight committee will hammer out recommendations for how to move forward with the Civic Theatre. They’ll present their recommendations for the entire city council to consider.

City Council members discussed possibilities including having the theater pay back the $200,000 the city gave it this year — and getting that money in installments going forward. Another possibility is instituting more routine financial updates on the theater throughout the year.

Those changes and others, if adopted, could apply to more institutions than just the Civic Theatre.

City Administrator Steve Rymer also suggested that it’s time for Rochester to think more broadly about improving the operations of the organizations it funds. Recently, he oversaw an overhaul of the Mayo Civic Center and the city’s visitors bureau after budget projections showed the facility was on an unsustainable financial path.

“It’s time to explore new models in building off of what we have done with the Mayo Civic Center,” Rymer said. “We should look at ways of sustaining performing arts for this community, but that doesn’t mean sustaining the Civic Theatre as it is today. They may be a part or a partner in this, but I think those are the conversations the Council should really think of.”

The oversight committee plans to come up with recommendations at a meeting on Feb. 12. It’s likely the City Council will discuss them at a meeting on Feb. 19.

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