A blog post I read this morning contains this pearl:
A “problem” is something that can be solved. A “predicament” is something that must be endured, for which there is no real solution. (City Ethics)
While the Wilson Center situation bears all the hallmarks of a political predicament, it is surely more responsible for civic leaders to treat it as a problem, so long as its fate is still undetermined. We’ll do the same.
How did we get here?
I soon learned that, after raising 36 million dollars, the original projected cost of the facility, the August Wilson Center opened with a debt of 11 million dollars. That debt was a result of costly overruns at the end of the project’s construction phase, as well as a need to borrow funds to initiate day-to-day operations. Considering those challenging economic circumstances, the financial success of AWC was only a hope. One might even question the wisdom of opening the Center before that debt had been eliminated. (Aaron A. Walton, PUM)
The facts that our Center was overbuilt…
“We decided early on in this process that we had a right to dream big, that we had a right to a new building, that we had a right to have a building smack-dab in the Cultural District,” [center founder Sala Udin] said. “We decided we had a right to go first-class, and that’s what that building represents.” (P-G, Mark Belko, Feb. 8 “Rise and Fall”)
… then encountered cost overruns, and finally the financial challenges typical to all new arts-related nonprofits, certainly contributed to its difficulty. We can only chalk that up to hindsight being 20/20.
However, we ought not forget some other factors: an aloof selectivity about the programming it would deign to host (be it local artists, certain Black mass-market touring productions, or certain private functions), a seeming lack of energy or ambition to reach out, and a curious lack of actual August Wilson-related material.
After our Center stopped paying its mortgage and insurance bills for many months (and apparently stopped picking up the phone) Dollar Bank foreclosed to force a resolution.
A conservator (not a receiver, significantly) was appointed by the courts to solicit and evaluate proposals to manage its assets, satisfy creditors, and preserve the mission of the nonprofit. The two noteworthy bids were from a consortium of nonprofits offering less than the total due, and a hotel developer offering a sum in excess.
Now, things are getting contentious:
[T]he foundations said they had “significant concerns” about the higher bid. They contended it “would apparently give the center only limited access to its own theater and create an arrangement whose eligibility for future charitable funding is questionable at best.” (P-G, Mark Belko)
How do they mean, an “arrangement” whose prospects are “questionable”?
Although their bid was lower, the foundations planned to create an ongoing revenue stream to sustain the center, the mayor said, and set up a new structure for managing the facility, one overseen by a board made up of representatives from the African-American community. (P-G, More Belko)
Ah… ha! A light flickers on.
It sounds as though the Foundation-led, City/County supported bid compels the installation of a different board for the crucial project, one with far broader representation among Pittsburgh’s African-American arts community. And along with that, a diversity of inspirations and energies.
Since $4 million would go a ways toward placating Dollar Bank but not make it whole, it might even act as a further guarantor of accountability: ensuring leadership chases after new and engaged audiences with gusto, as though its survival depends on it.
Meanwhile, the $9 million from a private hotel developer would take care of the present (moribund? on hiatus?) board’s financial responsibilities, forever limit our nonprofit’s activity and potential, but allow its personnel to persist — in the memorable words of one particularly disparaging P-G commenter — in “playing office”.
A difficult situation. Is the most important thing to satisfy creditors, save face and put the struggle behind us? Or is it to mollify creditors while building the August Wilson Center that Pittsburgh deserves, and that lives up to the laudable and enormous aspirations with which its founders imbued it and promised us?
MORE: Dr. Goddess, writing in January, including a glimpse at Attorney General Kathleen Kane’s concerns about the court-appointed Conservator’s interests, mirroring what are now the Mayor and County Executive’s own.
RELATED: Buses are Bridges, Part 2 of an interview with Richard Carrington, on public safety, civil rights and legacy Black leadership (audio).
UPDATES: Trib, Bill Zlatos; P-G op-ed by Sala Udin; City Paper Slag Heap.
There are some assertions you have made about the tradeoff being presented that I think are worth questioning a bit more:
“It sounds as though the Foundation-led and City/County supported bid would compel the installation of a different board for the crucial project . . .”
Yep, apparently they would be replacing the old entity with their new entity, which would necessarily require a new board. But of course the old entity could also get a new board.
” . . . with far broader representation among Pittsburgh’s African-American arts community, and along with that a diversity of inspirations and energies.”
How do you know this? All they claimed is that their new entity would be governed by a Board “made up of representatives from the African-American community.” The idea that it would necessarily have “broader” representation than any Board that could be set up for the old entity, that it would necessarily have more diverse inspirations and energies, and so on doesn’t seem to be something they are actually promising, and in fact I am not sure how they could make such promises.
“That, and since $4 million would go a ways toward placating Dollar Bank yet not make them whole . . .”
Would it actually “placate” them? My understanding is Dollar Bank has the option of rejecting a plan if it doesn’t fully satisfy their claim, in which case they could seize ownership of the building. And if they know there is a buyer out there willing to pay $9.5 million, they may not be “placated” at all by a $4 million partial settlement.
” . . . it might act as a further level of accountability — ensuring leadership chases after new and engaged audiences with gusto, like its survival depends on it.”
Again, I don’t see anywhere in the foundation’s statement where they are suggesting they would carry over the mortgage debt to the new entity. Rather, it looks to me more like they are looking to simply dissolve the old bankrupt entity, and replace it with a new entity free of the debts. And in fact, apparently they are also promising to provide “an ongoing revenue stream to sustain the center,” so I am not sure it is consistent with their pitch to claim they plan to force the new leadership to chase audiences as if their survival depended on it.
“Meanwhile, $9 million from a private hotel developer would take care of the present (moribund? on hiatus?) AWC board’s financial responsibilities . . .”
Seems so, or at least most of them.
” . . . forever limit our nonprofit’s activity, scope and potential . . .”
How so? Is this just a reference to only having “at least 120” theater days? If so, then I would suggest there is a lot of activity, scope, and potential not subject to that limit. I’d also suggest that not being responsible for facilities costs could be a significant reduction in practical limits in its own way.
“. . . but allowing its personnel to continue . . . .”
I don’t think carrying over the prior staff is necessarily part of the developer deal, nor for that matter necessarily not part of the foundation deal.
“Is the most important thing to satisfy creditors, save face and put the struggle behind us?”
I think part of the problem is that it may not “save face” among the foundations in particular if they don’t get to play the white knight role at this juncture.
“Or is it to mollify creditors . . . .”
Again, you might want to check with the creditors first before claiming they will be “mollified” by the foundation bid under the present circumstances.
“. . . while fashioning an August Wilson Center that Pittsburgh deserves, and that lives up to the laudable and enormous aspirations with which its founders imbued it and promised?”
So does transferring ownership of the building to the foundations, and allowing them to structure a new operating entity and pick a new Board according to their own agendas and interests (subject only to the promise that the Board members will come from the AA community), actually guarantee that the new entity will “live[] up to the laudable and enormous aspirations with which its founders imbued it and promised”?
There may be some merits to a wholesale Board replacement. There may even be some merit to extinguishing the old legal entity and replacing it with a new one (although I would like to see any such claim fleshed out in more detail). But it is putting a lot of faith in these particular foundations to assert that if given control of that process, they will be able to deliver on such lofty promises.
The bottom line is the foundations obviously feel entitled to take over the building having invested so much into constructing and sustaining it. Unfortunately for them, that is not a legally-enforceable claim. So they are turning to the political arena instead to make their case–but I would pay close attention to what they are actually promising to do, and I would also be a little more skeptical about arguments they might make in favor of their plan, or in denigration of the developer plan.
“The bottom line is the foundations obviously feel entitled to take over the building having invested so much into constructing and sustaining it.”
Well, the foundations AND the taxpayers / public institutions, both. Which makes it appropriately public concern.
“I would pay close attention to what they are actually promising to do…”
And the unknown hotel developer too, right?
“a new Board according to their own agendas and interests (subject only to the promise that the Board members will come from the AA community)…”
Well, practically speaking, especially now that the Mayor is involved, it would have to be subject to political acceptability. We had the same conversation about the Land Bank board and its interim board turned out okay. The issue is, just about any effort to assemble a diverse board would be an improvement over the current situation, which seems to have been built organically around a group of like-minded allies / friends. (This is also why I assume that to not alter the board entails not altering the staff.)
You might have me on the “new entity” issue, that’s pretty gauge / unclear to me, but it seems like both sides are accusing the other of making a “new entity” and denying their entity would be “new”. I don’t see why if a new board is installed (by the way, I never called for “wholesale replacement”, nor would I quite recommend it!) it couldn’t be at the head of the old entity.
Contrariwise, without using this crisis as a lever to refresh, I don’t see the board refreshing itself, nor therefore anything improving in terms of programming or management.
I understand that you’re rationally skeptical of the foundations’ designs, but since it’s several foundations and political leaders together which would be undertaking a very public (or at least highly scrutinized) process, I think that puts decision makers in the frame of, “Better appoint all sorts of different folks to the board, so that nobody can be that unhappy with us.” Which is exactly what’s healthiest for the institution.
“Well, the foundations AND the taxpayers / public institutions, both. Which makes it appropriately public concern.”
I think you need to unpack this a bit. There is no doubt the public has a right to be concerned about the fate of the building and the program. However, that doesn’t mean the public has a legally-enforceable right to pick the next owner of the building. Nor does it mean that the foundations are necessarily the best guardians of the public’s interests.
So I am definitely not advocating the public wash its hands of this issue. But I don’t think picking the foundations to own the building is the only, or necessarily the best, way to serve the public’s interests.
“And the unknown hotel developer too, right?”
Absolutely! I think I have been pretty consistent here in suggesting that the various stakeholders should be focusing on the exact terms of the deal with the developer, including negotiating a reasonable leaseback (or whatever they call the document memorializing the AWC’s rights).
“Well, practically speaking, especially now that the Mayor is involved, it would have to be subject to political acceptability. We had the same conversation about the Land Bank board and its interim board turned out okay.”
I don’t think that is a proper analogy. Unless I am misreading their proposal, the foundations want the power to appoint the board themselves. That is not the same thing as a public process to appoint a board.
“The issue is, just about any effort to assemble a diverse board would be an improvement over the current situation, which seems to have been built organically around a group of like-minded allies / friends. (This is also why I assume that to not alter the board entails not altering the staff.) . . . Contrariwise, without using this crisis as a lever to refresh, I don’t see the board refreshing itself, nor therefore anything improving in terms of programming or management.”
So according to the Dr. Goddess post you linked, the old Board has resigned. I’d have to read the bylaws to know what will happen if the legal entity survives the receivership process, but I certainly don’t think you can assume the old Board and the old staff will be reinstated.
I also wouldn’t be so quick to dismiss Aaron Walton’s perspective. Sure, this could be self-serving, but his view is that when he came on the Board in 2010, its hands were already tied by the AWC’s dire financial situation. So I would at least take seriously the idea that getting better programming is not just about changing the faces on the Board, but also getting the financial situation in as good shape as possible, in as sustainable a way as possible
“it seems like both sides are accusing the other of making a “new entity” and denying their entity would be “new”.”
Are the foundations really denying they are proposing making a new legal entity? In fact the mayor apparently called it “a new structure for managing the facility.” I think that newness is supposed to be part of the appeal.
“I don’t see why if a new board is installed . . . it couldn’t be at the head of the old entity.”
Correct, so it could be done pursuant to the developer deal as well. In short, this appears to be about WHO gets to pick the new board, not WHETHER there will be a new board. The foundation plan would grant that power to themselves. Under the developer plan–well, we’d have to check the bylaws.
“I understand that you’re rationally skeptical of the foundations’ designs, but since it’s several foundations and political leaders together which would be undertaking a very public (or at least highly scrutinized) process, I think that puts decision makers in the frame of, “Better appoint all sorts of different folks to the board, so that nobody can be that unhappy with us.” ”
I think it is a little far-fetched to believe that once the fate of the building is settled, the same level of public interest/scrutiny will continue through to the point the foundations are actually picking their board. I also think it is not consistent with experience to believe that these foundations would necessarily pick Board members from a wide pool. Rather, in most cases these organizations tend to select people for such positions from a relatively small pool of people already known to them.
Again, I think you need to look at what they are actually promising, which is only that the board members would be African American. Beyond that, I wouldn’t assume anything.
As regards the appropriateness of the County Exec/Mayoral pressure to remove Judge Fitzgerald as Receiver, I’d like to run my understanding of the situation by you – please correct me if I’ve muddled the facts:
According to the court testimony described by Dr. Goddess here (thanks for the link, Bram) and the article I linked to in the first bullet point:
1. Judge Fitzgerald was appointed as a Conservator tasked to “preserve the center, stabilize finances and increase revenues, and restore credibility and confidence so that the local foundations, the Allegheny Regional Asset District and others will be comfortable providing funding.”
2. Judge Fitzgerald evidently did not have any experience in nonprofit management when appointed. Perhaps because of that greenness, she did not pursue standard options for such preservation and restoration, at least as contrasted with the options laid out during the testimony of EJ Strassburger. According to Ellis, some observers in the courtroom seem to have far more harshly judged that Fitzgerald didn’t seem to pursue the responsibilities of Conservator with anywhere close to the diligence due the millions invested by City and County governments and Foundations (not to mention the cultural value of the AWC) even though she was paid quite handsomely.
3. Judge Fitzgerald’s testimony also seems to have been contradictory regarding the offers of funding possibilities and plans she had discussed with stakeholders, African-American organizations and potential other donors.
4. Judge Fitzgerald requested the conversion of role from Conservator to Receiver after a scant three months – hardly enough time to put the ship back on course, surely? According to what seems like a very credible witness, Attorney Sandra Renwand of the PA Attorney General’s office, Judge Fitzgerald had a large vested interest in such a request: in the role of Receiver, Dollar Bank had “guaranteed her 5% of any final price paid” of the nearly $18 million formerly assessed value of the building.
5. EJ Strassburger offered to take on the Conservatorship for no charge (he’s also board President of the local ACLU chapter – which, yes, biases me towards him big time) He laid out what seemed like a very reasonable plan for recovery for the AWC.
So, based on what I understand of that testimony, I think the County Executive and the Mayor have very credible reasons for strongly requesting that Judge Fitzgerald be removed from her role based on her conflict of interest and in order to protect public investment of many millions.
Helen, I’d point out a few things before you reach any firm conclusions.
First, you are looking at one narrative description of the proceedings, not an actual transcript. In my experience, different observers, particularly when they have some interest in the proceedings, can recall things differently, and usually the transcript is really necessary to confirm any particular account.
Second, that was in fact a court hearing, and ultimately after considering the arguments made by the various parties, the court decided it was appropriate to convert the conservator to a receiver. That is not necessarily dispositive, but it suggests there may be some counterpoints or perspectives that were not fully reflected in that account.
Third, even crediting that account, it does not appear to have been shown at the hearing that Fitzgerald is getting a percentage commission on the sale. And notably, the mayor and ACE did not include such a claim in their letter–one would think they would have done so if in fact there was evidence to confirm that notion.
So personally, I would suggest we should stick to what is actually in the letter in terms of evaluating their case for her removal.
@Brian Tucker-Hill on April 23, 2014 at 8:47 pm
Sure, Brian, I will agree that large grains of fully iodized salt are in order.
So I am a little puzzled the public interest is being repeatedly cited in this conversation, and yet no mention is being made of the public’s interest in the hotel portion of the developer’s plan.
To briefly summarize, a hotel would directly benefit the public by paying taxes, providing employment opportunities, and increasing land utilization in a walkable transit center. In this particular location it would likely also help increase use of the convention center, a large but currently underutilized public asset.. Visitors to the hotel would likely also spend additional dollars in local businesses, and also help market the City and Downtown.
As far as the cultural program is concerned, generally arts and entertainment venues benefit from attached hotels. Further, in this case the hotel would be helping to subsidize what appear to be very favorable leaseback terms (the leaseback terms themselves would be the main benefit, but to the extent the hotel helped make that lease sustainable, that would be a significant benefit).
So at a minimum, I would think these benefits merit significant consideration as we weigh different plans, even if they are not by themselves determinative.
You guys have your facts wrong. Number one, Judge Fitzgerald was originally appointed as conservator, because that is what happens with non-profits. At that stage her role was to assess and try and preserve the mission. But, the entity didn’t have enough money to pay its ongoing debts. Accruing more debt is anathema to the process. During that time she reached out to anyone that would listen and asked them to fund future operations and help stabilize the AWC. That included the foundations. None of them ponied up. They left her high and dry. Then, the Judge was converted into a liquidating receiver. The primary role there is maximize value for creditors. In fact, and actually in either scenario, state law requires that a non-profit that can’t pay its debts be liquidated to satisfy creditors. That is the law.
Once the Judge was converted to a receiver the role changed to finding a buyer. She did exactly that, and a good buyer. The Judge had zero ability to accept an offer that didn’t pay the secured creditors in full without their consent. As a side note, under today’s regulatory environment it is virtually impossible for a federally chartered bank to accept less than payment in full when there is an offer that would pay the bank in full. Despite what our illustrious leaders say, this isn’t simply about “paying a few banks.” The reason for those pesky federal regulations is that the interest at stake is the depositors. For anyone that knows how banks work, banks take depositor money and lend it back out. Hence, the reason the banking crisis was so serious. Not just because a few rich guys in NY might lose a bunch of money, but because all those depositors would lose THEIR money. So, to put it in perspective, the bank has a fiduciary obligation to get the best return on their depositors money. If they have an offer that pays them in full it is almost a breach of that duty to not do so.
So then the foundations make a half heart offer of $4,000,000 to do something, which no one is exactly sure what. Remember, these are the same foundations that gave the AWC $30,000,000 without ever checking in to make sure that money was being used wisely. They didn’t have any controls in place. They didn’t negotiate any agreements that would allow them a junior debt interest or ability to take control if things went wrong. They were asleep at the wheel. But now, somehow, in the eyes of the “everyone in the private sector is bad” crowd, Judge Fitzgerald is at fault. Hogwash. She is merely the last person to turn out the lights. The board of the AWC failed. The foundations failed. The elected officials that gave grants and loans failed. Judge Fitzgerald is just cleaning up the mess and getting blamed for it.
Besides, this might all be a game. Why did the foundations withdraw the offer? There was no reason for that whatsoever. They could have gone in an plead their case. They didn’t gain anything by withdrawing the bid, other than plausible deniability. Now they get to parade around and act like they got a raw deal. They get to call people names and blame others. And, they get their cheerleaders in Mayor’s office and AWC to do their bidding. But if they really wanted the AWC it was easy. All they had to do was pay off the bank. The Heinz Endowments gave out $70,000,000 just last year. What would another one or two million be to save the AWC if it were really so important to them? Or, they could have made a big pay down and used the court system to drag it out while they came up with another plan. They didn’t do that and people need to ask why. My guess? The Mayor and ACE actually want the hotel deal. They love the deal. It makes something happen on that corner and fixes the problem that everyone created (AWC board, foundations, politicians) and puts it behind them. But, in the meantime, they get to disparage a well respected Judge and the judicial process to pander for a few votes.
I don’t think the Mayor and ACE get much political or psychic dividend from assailing the private sector and a Judge — that sounds like a conservative’s idea of what motivates liberals, but not something that motivates real life humans. And while it’s absolutely appropriate for politicians to pursue things which please voters, I don’t believe even the crude political numbers favor fighting for the Center at this point — not even within the Black community, which I bet on mass knows the score, how this is a predicament not a problem. Rightly or wrongly, I think Bill & Rich just prefer the foundations’ option.
There are dueling representations of whether Ms. Fitzgerald really pro-actively reached out to all comers, and gave that process enough time to percolate. I guess it’s that second clause that has me skeptical.
My main point is, I think Pittsburgh’s philanthropic community positively DOES NOT WANT to rescue this Center if it can’t gain a significant say in determining its board makeup and management. Again, we can argue whether or not that’s appropriate, but it’s clear they don’t want to again save the Center for the sake of its status quo — which is apparently what the hotel bid would do, and with a lowered potential of unknown degree. I think the foundations are pleading their case — in the only arena where those pleadings might find purchase.
Now, I totally missed it in Dr. Kimberly Ellis’ (Dr. Goddess’) write-up that apparently the whole AWC board has long resigned. So now I’m back to being entirely confused. Let’s say the Bailout Fairy bails them out — how is the AWC going to reconstitute its board, and who would decide that outside of the sort of architectures that either public officials and/or equity stakeholders and/or a sitting board can provide?
There are many different kinds of political advantages. The people behind these foundations are, to be blunt, powerful and rich, so advocating on their behalf is not necessarily a politically neutral choice. By the way, I wouldn’t assume these particular foundations represent the entire philanthropic community. These are specifically the foundations that feel entitled to own the building, but that doesn’t mean every other philanthropic entity and individual in Pittsburgh has signed a pact to boycott the cultural program if these foundations don’t succeed in that goal.
Anyway, as previously noted I would want to check the bylaws for guidance on how a new board could be determined. But I believe it is common for non-member non-profits to have the Board elect nominees to fill Board vacancies. If that is how the AWC bylaws work, then there would obviously be a problem if the entire Board is empty.
Assuming all that is true, you might need to turn to state law for guidance. Off hand (and this is pure speculation), I wonder if a conservator could appoint an interim Board, which could then elect a permanent Board.
Brian is correct. The foundation heads and controlling families are extremely wealthy and powerful. Emphasis on extremely. They now show up in everything the City does and push a position. While some may believe their aim is noble, they are powerful and wealthy private individuals pushing a private agenda. Somehow we have ended up in a place where the populists believe it is a good thing that the absolute wealthiest and most powerful among us are calling the shots.
This foundation backlash deserves addressing on its own. The City and its residents are looking to the foundations for much the same reason they’re looking to UPMC: because that’s where all the money is.
It helps that the bulk of foundation money goes towards unquestionably altruistic things. Does it all? No. Does some of it come with strings? Sure. Bad strings? Sometimes. Is everyone in the foundation community nice and without ulterior motive? No.
However, the City is determined to partner with the foundations to a much greater extent. Partnering means going in with both eyes open. There’s no call to infantalize that by claiming anyone thinks it’s “good” if foundations “call the shots.” We’re open to them helping on matters of mutual interest.
Tucker-Hill made a fair point about the politics of this situation, but let’s not go generally nuts. Just because progressives and foundations have formed an alliance, that doesn’t mean anti-progressives can make hay by smearing foundations en mass.
“The City and its residents are looking to the foundations for much the same reason they’re looking to UPMC: because that’s where all the money is.”
And yet in this case, not so much. That is what the bidding process successfully determined.
Anyway, I don’t think there is any need to “smear” the foundations. I’m just pointing out that in this particular case, it is far from clear that their proposed plan would do the most to further the original mission of the AWC, let alone provide the most total public benefit.
Bram, you missed the point. You are not progressive. Progressives don’t think that giving extremely wealthy people control of government is a good thing. Bill and Rich are not progressive. Progressives don’t believe in maligning people (especially former judges) simply because they don’t like their decisions. You guys are all far from being progressive. You are just power hungry.
Anon 8:45 – Maybe I shouldn’t respond, but it bears repeating yet again that nobody ever, ever, EVER claimed “progressive” was a synonym for “nice” or even “ethical”.
Progressive is a synonym for liberal — with maybe a little more bookwormish respect for science than otherwise, and a little more willingness to be flexibly practical on liberal economic tautology.
But just because someone is politically progressive, doesn’t mean they don’t also have room to be described by all the other adjectives in the world, or possess all the desires and motivations, positive and negative. And just because two progressives are allied in their progressivism, doesn’t mean they have to share a single other trait in common.
Now, who is talking about “giving control” of anything over to anybody?
This seems like it is being more complicated by the name change that occurred before the building( an asset) was built. The non-profit, under whatever name you wish to call it, was formed long before the building was designed. That non-profit has gone bankrupt, not the building. The non-profit has outstanding debts. It must honor its debts by selling its assets.
The non-profit can find a new building or take hypothetical bidder #1 up on its offer. The public lost money. That money is gone. That is generally what happens when you gamble. Make no mistake, it is a gamble to give money to a non-profit whose revenue will be based upon entertainment. Anyone would consider it a gamble to open a for-profit entertainment venue, right?
As far as the current board of the non-profit, I hope no one would want them involved in any way going forward. Scrap it all together, make a new non-profit. Hopefully this time it won’t contain any words associated with a building. At some point, people will recognize that the non-profit was taking money from employees pay, under the auspices of union dues, and never paying those dues. I beleive that is theft. I also don’t think the person cutting checks decided to creatively account that way by his or her self(conspiracy?). Why give more money to people who operate or hire people that operate in such a manner?
None of this has anything to do with August Wilson, it is just a poorly run non-profit. I understand the passion. I just think that reincarnating the idea in a new place, with new people, is a better plan than asking a financial institution to take a loss under political pressure.
You are correct, of course, that entities which simply grant funds to a non-profit have no legal claim on their assets in the event of a bankruptcy. But obviously regardless of what the law says, these foundations and their political allies feel entitled to take ownership of the building in light of the magnitude of their investments. It is precisely that conflict between what the law says they can have and what they believe they are entitled to have that is causing them to withdraw from the legal arena and enter into the political arena.
This dynamic, of course, is not unique to non-profit bankruptcies. In many for-profit bankruptcies, people who invested a lot of money in return for equity can get very, very angry when they find out the lenders are taking everything and they are getting nothing. There is a proven logic to bankruptcy law and policy, and you are right that rational investors should understand the risks they are taking, but that is just a hard thing for a lot of people to accept emotionally when those risks materialize.
Proven logic? Seems the law in such cases doesn’t give nonprofits the logical, fair recourses which would prevent rational anger. Seems like these laws need work/revision to better reflect what we conceive us as fair and just.
The repeated use of the word “entitled” seems gratuitously loaded. Like me and like a lot of Pittsburghers, they’d like to see an AWC succeed, and feel that for it to succeed it requires a significant restructuring. And sure, they must feel they have a right to speak out because of their prior involvement. But to stress an “entitlement” angle is a bit ad-hominem.
Helen,
Part of the proven logic of the bankruptcy laws is that if you give in to the temptation to screw the lenders in any one case, it will make it much harder for the same or other entities in the future to get loans. And it would be very bad for non-profits in particular if the law made it unusually difficult for lenders to recover from bankrupt non-profits.
Note that banks and other financially-motivated lenders know that they are rarely the most sympathetic parties in these cases. So if your measure of who should recover is based on which plan would make the fewest people angry, then banks et al. will want no part of your system.
bram,
I think my word choice is fair in light of the arguments and rhetoric they are actually employing.
You are cleaning it up for them here by suggesting that all they are discussing is the need to restructure the AWC, and claiming a right to “speak out” on that subject.
But of course they want more than a right to “speak out” on the restructuring of the cultural program: they want to own the building, despite not being the high bidder. As an aside–what do you think they would think of a deal in which the developer got the building (subject to the leaseback), but they got to be in charge of restructuring the cultural program? Do you think that would satisfy them? I think not.
And their argument for why they should get to own the building despite not being the high bidder is, in part, that their prior investment of so many dollars should be considered when determining who should get ownership now.
The first definition here of “entitled” is:
“to give (a person or thing) a title, right, or claim to something; furnish with grounds for laying claim”
http://dictionary.reference.com/browse/entitled
And that is precisely what they are arguing: that their prior investments in the AWC furnish them with a claim to ownership of the building, notwithstanding the fact they were outbid.
In light of the new Zlatos article–so much for Dollar Bank being “placated” or “mollified” by the foundation plan. Understandably, with a bid on the table that would fully satisfy the mortgage, they are not willing to accept only a partial payback (as noted above by another commentator, it is not clear they legally could accept the partial payback under these circumstances).
And in light of the Sala Udin editorial–so much too for the notion that the foundation plan necessarily guarantees a cleaner break with the past governance of the cultural program.
One note on that editorial. Udin asserts:
“Making the August Wilson Center a tenant in a commercial hotel would not preserve this mission. Rather, it would relegate the August Wilson Center to dependent beggar status.”
It is probably worth pointing out that this notion of using the air rights for commercial purposes was part of the original plan. It therefore seems to me that Udin’s argument depends on the proposition that any non-profit which leases rather than owns its space is thereby a “dependent beggar”. I gather he is a big fan of the George W. Bush “ownership society” philosophy, although I thought that had fallen out of favor in recent years–but maybe not so much with the foundations, come to think of it.
Brian, I notice lately that [REDACTED upon further consideration] And that if so, whether your [REDACTED]?
You’d remain 1000% welcome and valued here if that’s the case, it’s far from out of bounds and you’ve been my liveliest and most constructive commenter lately. It’d just be a welcome thing to know.
I have been thoroughly enjoying this exchange of ideas, thoughts and perspectives until this last question by Bram. Why do you want to identify Brian? Is he the only poster here who does not see this through emotions and feelings? With the land bank post’s, you referred to your opinions as “we”. Just who are “you”? Do you work for the City? Committee man? Why do you always take up a liberal cause and never put a price tag to any discussion? Such lofty, high minded pursuits with other peoples money. I understand that the AWC is important to you, but every time you pick a cause “money no object”
Does Brian sound too much like a bankster?
For 7 years I’ve used both the royal “we” to refer to myself at the Comet, and “we” meaning the City of Pgh, as appropriate.
And as a taxpayer, it is partially my money, and as a voting resident, it is my city.
I feel a little funny tryin’ to ID him too, but readers ask questions and I try to satisfy. Besides he’s using his full formal name, so he doesn’t seem terribly insecure.
Looks like I missed something interesting!
I don’t know what the question was, but I can note that while I am not particularly trying to hide my identity, I don’t think it is relevant in any specific way to my opinions on this subject. I don’t think I have a direct personal interest in the outcome, and I didn’t come into the issue with any strong feelings for or against any of the players.
I might note that to the extent my opinions on this subject reflect any of my broader concerns, I have previously (repeatedly, maybe ad nauseum) disclosed them here. Basically, I tend to think increasing land utilization in already-developed areas, particularly walkable areas and/pr those well-served by transit, is a very important public policy goal (both for the region and in fact the whole nation), because doing that typically has benefits that cut across a lot of different policy areas. That doesn’t mean I view all other considerations as illegitimate, but when conflicts arise I tend to look for compromises where other worthy public policy goals can be met at the same time utilization is being increased.
And that pretty much explains why I am inclined to favor the developer plan in the absence of a really compelling reason to favor one of the alternatives. I’d really like to see the air rights used, and the leaseback seems like a reasonable way to also allow the site to continue to host the cultural program. So its a naturally appealing resolution to me, and to the extent I am getting “emotional”, it is mostly just a matter of being frustrated that the politicians, Sala Udin, and certain others are at best ignoring, and often in fact implicitly denigrating, the aspects of the developer plan that I personally think should be given serious consideration.
Glad you’ve returned! I think we should all agree that we can all afford to do a lot less denigrating of others’ perspectives and preferences in this business.