Pittsburgh's August Wilson Center: 'Classic mistake'

| Sunday, Jan. 26, 2014, 7:36 p.m.

Pitched as a grand addition to Pittsburgh's cultural district, the gleaming August Wilson Center for African American Culture has never fulfilled its organizers' promises.

Only four years after the stunning, four-story facility opened, a court-appointed receiver and the state Attorney General's Office are dueling over whether to sell the $40 million center and liquidate its assets to pay off an estimated $9.5 to $10 million in debts.

Early projections painted a bright picture of a cultural landmark that would host a boutique hotel, a restaurant and multiple arts venues.

More than 100,000 people would pour into Downtown in the first year alone, and the facility would generate about $120,000 a year in tax revenue to support the equivalent of 66 full-time jobs, according to an economic impact analysis the Pittsburgh Urban Redevelopment Authority submitted in support of a $6.5 million state grant application in 2006.

Although the state approved the grant and public investment from the state, county and city grew to $17.4 million — plus millions more from foundations and corporations — neither the hotel nor the restaurant materialized.

Attendance peaked at 19,838 in 2009 but plummeted to 9,136 by 2012, undercutting projections analysts said were necessary for the success of the center. Nearly half of visitors in 2012 paid no admission.

Valerie McDonald Roberts, a founding leader who left in 2005 and returned as an ex-officio board member in 2011, said the center was born in a burst of optimism and enthusiasm.

“Mistakes were made. We never had a sustainable business plan. I just hope some lemonade can come from this lemon, that there will be lessons learned to guide others in the future,” Roberts said. “We can't be pointing fingers at anyone because if we do that, there will be three fingers pointing back.”

The seed for the development of such a center grew out of conversations that began in 1997, when the NAACP held its national conference in Pittsburgh, and some questioned the lack of a major center for African American arts here.

Roberts joined Mulugetta Birru, Oliver Byrd, Yvonne Cook, Sala Udin and Nancy Washington in signing documents to incorporate the center's predecessor, the African American Cultural Center of Greater Pittsburgh, in November 2000. Birru was the director of the Urban Redevelopment Authority under then-Mayor Tom Murphy, and Udin was a city councilman.

Neither Byrd, who recently resigned as the center president, nor board Chairman Aaron Walton answered messages seeking comment.

Red flags flew almost from the start.

A confidential study the founders commissioned in 2001 warned an initial proposal to raise $50 million — $15 million for an endowment and $35 million for construction — was optimistic, according to documents the Tribune-Review obtained.

The analysis by Chicago-based Jerold Pansas, Linzy & Partners concluded the group could “raise in the range of $20 to $25 million,” and cautioned that “named gift opportunities must be part of your campaign plan.”

Organizers would forgo the biggest naming opportunity — that of the center itself — to bestow it on a favorite son who had a love-hate relationship with his hometown, two-time Pulitzer Prize-winning playwright August Wilson.

While the group raised $35.6 million by 2009, its endowment — income from which it could support programming — never reached $1 million. Meanwhile, construction costs grew dramatically, ballooning from the $20 million cited in grant applications to about $40 million.

By the time the center opened in September 2009, it had millions in loan debt. By July 2011, an audit showed the center had an $856,907 deficit in fiscal year 2010 and was $11.2 million in debt.

“Too much money was poured into the building and too little was used for an endowment. It's a fairly classic mistake that some other nonprofits have made from time to time,” said Ken McCrory, a CPA and nonprofit consultant at the Downtown office of accounting firm ParenteBeard. “If you had to do it all over again, what would you do? You'd probably spend $20 million on the building and put $15 million into an endowment that would produce about $750,000 a year in programming — and have no debt.”

David Donahoe, executive director of Allegheny County's RAD board, a body that doles out tax dollars to regional arts and entertainment venues, said RAD was not involved in underwriting construction but provided grants for programming once the facility was built.

Although RAD has provided about $3.5 million for center operations beginning before the facility was complete, Donahoe said he harbored concerns for years after getting a glimpse at the organization's business plan.

“I remember seeing some estimates. I don't remember specifics, but it seemed particularly overly optimistic on the earned revenue side of the equation. And that was going to be important because most everyone we fund has a mixture of sources of revenue, and earned revenue is part of it,” Donahoe said.

By spring of 2013, finances deteriorated dramatically. Unbeknownst to many, the center, which often was closed and dark, had defaulted on a $7.06 million mortgage and allowed its insurance to lapse.

In September, Dollar Bank filed papers to begin foreclosure. In October, state Attorney General Kathleen Kane filed papers demanding a full accounting of the center's finances, noting the $17.4 million in public money that went into construction.

Later, when local courts appointed a receiver to study the issue, it became apparent that the center, which finished fiscal 2012 with a $1.8 million deficit, was in worse shape than anyone knew.

Court-appointed receiver Judith Fitzgerald, a retired bankruptcy judge, called the center's financial condition “dire.” She said that about $85,000 in employee withholding and benefit payments were deducted from workers' wages but never paid.

Kane's office on Friday proposed appointing a new conservator, attorney E.J. Strassburger, who said he would appoint a new advisory board and restore confidence in the operation. Common Pleas Judge Lawrence O'Toole said he expects to rule by Monday on the request.

Murphy, whose administration planted the seeds for construction of the center, said everyone wanted it to succeed.

“I think there's one fundamental lesson: When you're trying to build a facility like this, you also need to think about the day-to-day maintenance 10 years later and figure out how that's going to happen,” said Murphy, now a senior resident fellow at the Urban Land Institute in Washington.

Debra Erdley and Adam Smeltz are staff writers for Trib Total Media.

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