Wednesday, January 14, 2009
The Overture Center Board's losing crapshoot and what to do about it
I took this photo in the Overture Center for the Arts in December before the holidays but didn't post it then. It didn't seem very festive, in fact a bit gloomy, despite the lobby's tower of holiday lights in the background. Now, the encroaching darkness, the ceiling pressing down as if burdened by a mountain of debt, and the solitary figure at the box office all seem to hint at the growing financial distress of Madison's lavish arts center on State Street. Even the lights are starting to seem like a waterfall of money being thrown away, pouring into a hole in the ground like a shower of coins.
I remember scratching my head several years ago when I read about the Overture board's all too imaginative refinancing scheme. As nearly as I could tell, it consisted of mortgaging the Overture Center and using the proceeds to invest in the stock market in hopes of earning enough to pay off the mortgage and also endow a fund for operating expenses. Or something like that. I remember thinking at the time that this could only work in a perfect, alternative universe of high investment returns and zero risk -- sort of like what Bernard Madoff was promising, come to think of it.)
Imagine a homeowner who borrows money on his house with the intention of taking it to Ho-Chunk Casino and winning enough to both pay off the mortgage and, say, send his kids to college. The inevitable failure of this plan and the ensuing bankruptcy would be greeted by contempt and ridicule. Yet, for some reason, when the Overture Development Corporation's cockamamie investment plan collapsed, they seemed to expect sympathy, instead of ridicule. In fact, they suggested city officials ought to pony up $12 million for them to pay off the mortgage and avoid bankruptcy. Mayor Dave Cieslewicz opposed the suggestion, rightly so.
Still, something has to be done if we don't want a white elephant on State Street that remains perpetually dark, a blight on the downtown. Here's my modest proposal: The three banks that hold the loans are hardly innocent victims. They presumably thought this was a perfectly legitimate thing to do with Jerry Frautschi's gift to the city. They also are part of an industry that has received the largest taxpayer bailout in U.S. history, aimed at helping them get out from under the bad assets they hold. Well, this is just another bad asset. Surely there enough in those billions for a bit to trickle down to Madison, Wisconsin, and let them write off the Overture Center loan.