Long-running debt leads to a crossroads for Salt Lake City’s Leonardo museum: figure out financial problems or ‘you have to burn Rome to build it again’

The nonprofit science and technology museum on Salt Lake City’s Library Square faces an uncertain future after years of struggling to pay its debts, with some wondering whether the best option now is closure.

The Leonardo owes as much as $3.5 million to Salt Lake City and the museum’s board and staff members, leaving some to argue that past financial choices put in doubt whether it’s capable of climbing out of a deep financial hole.

“The problem is that the debt is such a problem for the organization that again you have to burn Rome to build it again,” said Diane Stewart, who until last week was a member of the group’s board. “I think there are other opportunities that might exist for Library Square.”

The museum’s management says it has a plan to move forward. That includes consolidating the mashup of short-term debt it’s struggling to pay into a long-term loan it believes it could more easily manage.

But banks are leery to assume that kind of risk with an organization that has struggled with debt since its 2011 inception. The Leonardo needs either public or private backers who can guarantee a long-term loan that managers say would put the museum on stable ground.

“Since February 2017, we have had a plan ... to consolidate the debt overall,” Executive Director Alexandra Hesse said. “So we can actually service it rather than default on things. That [defaulting has] been really tough on us and our vendors.”

Long-term backing and consolidation needs to happen in the coming months or The Leonardo might risk losing its spot in the cultural center in the heart of Salt Lake City.

If it cannot obtain long-term financing, and possibly more public backing, by summer’s end, Hesse said, “We need to see if there’s a path forward.”

The board will meet Thursday to discuss the future of The Leonardo.

It’s no secret that The Leonardo has struggled to overcome its debt. The organization, which pays just $1 per month to rent its building from Salt Lake City, owes about $270,000 in utility payments, according to city officials.

In recent months, the advertising arm of The Salt Lake Tribune sued the organization for $10,000 in missed payments. That followed a lawsuit filed in late 2016, when a company said it was owed at least $228,000, and possibly much more, for construction of the “Flight” exhibit. Both matters were eventually settled.

The group received a $600,000 loan from the city in 2011 to cover operating costs during a six-month delay in opening. It missed payments on the remaining $248,000 it owes in March, April and possibly this month, according to a city spokesman.

Salt Lake City Mayor Jackie Biskupski’s office said she would like to see solutions that work for The Leonardo and the historic building.

“We want to see a thriving Leonardo,” Biskupski spokesman Matthew Rojas said. “They just need to find a path that puts them on strong financial ground.”

In recent months, The Leonardo has borrowed from its board members to meet debts as they come due. Senior employees, Hesse confirmed, also have given to the organization.

“I’m one of the people that have loaned them money,” said Dinesh Patel, a board member who said he was happy to give the group his money and remains hopeful for a path forward that keeps the museum open. “If there’s a lot of short-term debt, you’re constantly looking for money. If you had long-term debt, the payments are lower and you can stabilize.”

Patel said the debt is as high as $3.5 million, and despite the short-term patchwork of payments, the nonprofit has struggled recently to keep up with payroll, Hesse said. The apparent turmoil has caught the attention of at least one city council member.

“They’ve really mismanaged their books compared to other organizations over the years,” Councilman Derek Kitchen said. “That has left them in a really tight position where they aren’t really able to operate at full capacity and are maybe doing questionable things with their staff and the way they ask for resources.

“They’re using a city facility; we own the building, and they are constantly asking for more. There’s just a question of equity in the nonprofit and cultural world in our city.”

That question will likely come to a head as the nonprofit works the next few months to shore up its books. That will likely test whether the community sees the value in The Leonardo as its supporters see in it.

“We are maybe at a point where we are having this conversation with the community to say, ‘Yes, we need people to step up’ — both the public sector and the private sector to see if everybody sees the same value in our organization that we perceive in it,” Hesse said.

“It’s not a new crisis,” she added, the group just needs “a solution not for the next month or three months but a solution that allows us to operate on solid ground going forward for good.”

from The Salt Lake Tribune https://ift.tt/2H5M2Gc