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City council delays decision on bailing out San Jose Rep

By Monica Heger

The fate of the San Jose Repertory Theatre will have to wait until October. The San Jose City Council voted unanimously to postpone its decision on whether to give the theater a $1 million bailout loan.

The council's decision has the potential to set the stage for other financially struggling nonprofit groups to ask for city loans. The American Musical Theater and the Mexican Heritage Corps are both asking for more city money to stay afloat.

At the Sept. 19 meeting, deputy city manager Kay Winer presented four loan options to council members. The first option would give no assistance. The other three options were variations on a $1 million loan--with varying amounts of city oversight and time the Rep would have to pay back the loan. The $1 million loan would be paid out of the city's General Fund.

City staff recommended the council approve an option that would distribute the $1 million in monthly sums over a year. The Rep would begin repaying the loan after three years, and the interest on the loan would be paid in one sum at the end of the fifth year. Staff also recommended establishing an arts stabilization fund, where all loan and interest payments would be deposited to assist nonprofit groups.

"Without a loan, the Rep cannot operate for the remainder of its season," Winer told council members.

While the prospect of the Rep closing for good did not sit well with the city council, members were reluctant to approve a loan without reassurances the Rep would not be back asking for more money.

"The Rep has been around for so long," said city councilwoman Nancy Pyle, "what would we do without our Rep? But we absolutely cannot condone this kind of fiscal irresponsibility."

Councilman Forrest Williams said, "It's so important from a budget perspective that if we allocate the money, the board of directors live within their means."

The managing director of the Rep, Nick Nichols, assured the council its business practices would change.

"We asked for this assistance not to continue business as usual, but to enable us to change," Nichols said. "The only way we are going to become fiscally healthy is to change."

An audit by the city auditor found the Rep has adopted financially unsound business practices over the last several years by consistently incurring more expenses then revenues earned. The audit found the Rep had a debt liability of $3.3 million; even a $1 million loan would not solve all of its problems

"If the council doesn't lend the Rep $1 million, they will be out of business by the end of this calendar year," said city auditor Gerald Silva, "and if the council does, the Rep will not be out of its financial troubles."

Silva noted current fundraising projections proposed by the Rep appeared ambitious, and did not coincide with its history of fundraising. Representatives for the Rep said last year the theater was without development staff so it was unable to raise as much money. Representatives also told the council they will be able to cut its $5.9 million budget by $1 million.