Overture & Some Perspective
June 23, 2010 5:14 PM
After months of negotiations, Overture officials and banks holding the remaining debt on the building announced an agreement today that would retire that debt. The banks are absorbing about half of the remaining debt and a group of generous donors led once again by Jerry Fratutschi will handle the rest. I made a statement at yesterday's press conference and you can read that here: http://www.cityofmadison.com/news/view.cfm?news_id=2098.
The agreement meets my top goal, which was that city taxpayers not get stuck with any of the debt. This was a significant accomplishment because under the refinancing approved five years ago, taxpayers might have been on the hook for as much as $5.8 million.
It's likely that the most controversial issue going forward will be the added cost to the city if we take ownership of the building as is proposed under the agreement. On the one hand we would be getting a $205 million asset for no cost. But we would also be taking on the long-term maintenance of the building. There won't be much of that in the initial years, but by about 2014, we'll need to start replacing things. We've done our due diligence, and we estimate the annual debt service on the building to be about $800,000 over the next fifteen years, but not starting for a couple years.
But compare that to what we would have faced if Overture hadn't been built. The old Civic Center, owned by the city, had about $15 million of deferred maintenance needs before it was replaced by Overture. In other words, for less than what it would have cost us to repair the old Civic Center, we will get a much larger, better and more beautiful building.
Much of the debate about Overture is about what happened in the last five years. But if we regain our perspective by comparing where we are right now to where we were before Jerry Frautschi announced his gift more than ten years ago, there's little question that we are miles ahead today.