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Judge To Rule On Plan To Convert August Wilson Center

By Mark Hrywna - June 11, 2014

The financially struggling, 4-year-old August Wilson Center for African American Culture in downtown Pittsburgh is at the center of a real estate tug of war. A court ruling is expected by June 30.

The Pittsburgh Foundation withdrew its bid for the center in April, describing it as “futile,” and issued a statement, taking issue the receiver’s report to the court. “If the foundation consortium’s bid had been successful, the participating foundations always intended for the center to be used for its original purpose, as a premier home for African American art and culture programs. The foundations were proposing a structure that would have provided for responsible governance overseen by a board of representatives from the African American community. The foundations are disappointed by the Receiver’s characterization to the contrary in her report, as it was a curiously inaccurate and pejorative depiction of our intent and bid,” according to the statement.

The consortium, which also includes the Heinz Endowments and Richard King Mellon Foundation, raised significant concerns about the receiver’s preference for an alternative bid that would transfer ownership of the facility to a commercial enterprise because it would give the center “only limited access to its own theater and create an arrangement whose eligibility for future charitable funding is questionable at best.” Pittsburgh Foundation spokesman John Ellis declined to elaborate beyond the statement.

A New York developer’s proposal would build a 200-room hotel on top of the building, with free gallery space for the center along with office, storage space and use of the theater for a minimum 120 days of the year. A chorus of elected officials have come out against the plan, with Pennsylvania Attorney General Kathleen Kane claiming in court papers that the sale could violate deed covenants put in before the center opened in 2009.

Mayor William Peduto and Allegheny County Executive Rich Fitzgerald issued a joint statement raising concerns that the court-appointed conservator favors a commercial approach and has not “presented any significant plan to preserve the mission of the center.” The two elected officials “strongly support” the previous bid submitted by the Pittsburgh Foundation, Heinz Endowments and the Richard King Mellon Foundation but also asked the judge overseeing the liquidation to have the conservator removed. They asked Judge Lawrence O’Toole of the Orphans’ Court to remove Judith Fitzgerald because they believe she “does not maintain as her highest priority the public interest of preserving the mission of the center as a public asset.”

Peduto and Rich Fitzgerald said they “strongly disagree” that a for-profit hotel development will allow the center to continue its nonprofit mission while also undermining its public nature and its legal nonprofit mission. They are concerned that Fitzgerald has favored a commercial approach but has not presented any significant plan to preserve the mission while her process has been “devoid of any meaningful interaction with the local African-American Community.”

“As a result, we have lost all confidence in Receiver Fitzgerald’s management of this case.”

Conservator Judith Fitzgerald (no relation) said in an interim report that unless the judge overseeing the case objected, she would pursue a $9.5-million bid from a local developer, which would pay off most of the $10 million debt, including a $7-million mortgage. The developer is looking to build a hotel on top of the building while offering free gallery and storage space, as well as use of the theater for a fee.

The three foundations bid $4 million and two other bids came in at $3.25 million and $4.5 million. The consortium of foundations also promised to create a new nonprofit to continue the center’s mission.

Fitzgerald collected proposals from prospective buyers until March 31 and plans to have the issue settled by June 30. Common Please Judge Lawrence O’Toole of Orphans’ Court is overseeing the case.

Full details of the four proposals have not been released but in a statement earlier this year, Fitzgerald described two as dining/entertainment concepts. “The fourth proposal could be very attractive to the city, the county and the African American community because the commercial operations will generously subsidize the center and bring tax benefits to the city and county,” she said. A variety of essential elements will need to be considered, including the potential of bidders to satisfactorily address the expectations of the creditors, as well as the potential to continue the organization’s vision for the enrichment of the city’s cultural landscape,” she said.

The conservator is biased in favor of the highest bidder and doesn’t make room for the best bid while “distorting” the foundations’ offer, according to Sala Udin, one of the founders of the center and a former city councilman. “She’s supposed to be acting in a neutral, objective and non-interested manner, but she’s acting in a very biased manner. And the foundations didn’t believe that was a sandbox that they could play in,” he said.

“The option that is presented by the receiver is not an option that preserves the mission of the August Wilson Center. It makes the August Wilson Center a tenant and a beggar with no independence and no ability to pursue its mission and its own destiny,” Udin said.

“There’s no real value for the August Wilson Center that we see in the hotel developer’s proposal,” he said, hoping that the judge and attorney general will reject it and get the foundations back to the table. The foundations’ proposal requires Dollar Bank “to put some skin in the game and reduce the amount they’re willing to accept as final payment,” Udin said. “If they’re willing to do that, I think that Dollar Bank can get a lot of good will in the community. People would appreciate that kind of investment.”

The process being overseen by Janera Solomon, executive director of the Kelly Strayhorn Theater, is an important one, Udin said, to organize a “broad conversation that revisits the mission and programming strategy” of the 65,000-square-foot center, Udin said.

The center broke ground in October 2006 but construction did not begin until August 2007 and opened in September 2009 at a cost of $42 million, almost a third more than the $33-million budget devised in 2003. The $33 million included $16 million in public funds — $3.5 million from the City of Pittsburgh, $2.5 million from Allegheny County and $10 million for the state of Pennsylvania.

Dollar Bank moved to foreclose on the building last year and have it sold to recover $7 million owed on the mortgage.

In addition to the recession, there were a number of reasons the center fell on hard times, Udin said, including construction overruns and a new board and CEO that failed to do the kind of fundraising that would have paid down the mortgage. “Some were economic, in the larger sense of the economy, and some were self-inflicted,” he said.

The three foundations have invested more than $20 million in funding and operations of the center and will sponsor a community study to determine how best to structure African American arts and culture programming in the future. “In the future, members of the consortium anticipate supporting a new charitable organization that will be developed as part of this community study to bring exciting and engaging African American arts and culture programming to the region,” according to the statement by the foundations.

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