Arts Garage In Jeopardy Due To Cash Flow And Withheld Funds

image001MA30741962-0006By Bill Hirschman

The future of the Arts Garage in Delray Beach is in serious jeopardy, its executive director said, because of a nearly depleted cash flow, crucial operating funds being withheld by a funder and an impossible-to-meet March 15 deadline to buy its home base that otherwise may mean eviction.

City officials say they want Arts Garage to continue providing a cultural hub for the community, but they are concerned whether the organization can provide responsible fiscal management.

Illustrative of its troubles is that the group withholding funds, the Delray Beach Community Redevelopment Agency (CRA), would release the money if Arts Garage would deliver a new audit – but the company doesn’t have the money to pay for one, said Alyona Ushe, president and CEO.

Ushe praised the CRA for its essential support of the past. “Delray Beach would not be the same without their vision, commitment and dedication to the arts,” and she pledged “We are committed to providing any and all information that is required of us and look forward to resolving this quickly.”

But of the current absence of 20 percent of its budget from CRA, she said, “the impact is devastating” especially with shows going into rehearsal including the drama Smoke and the musical The Devil’s Music: The Life And Blues Of Bessie Smith.

The interlocking crises converge just as the nearly 5-year-old venue for theater, art exhibitions and concerts has renovated the space to include a second black box theater, and has increased its offerings and programs. But the controversy is making it difficult for the group to raise large donations, Ushe said.

The worst case scenario is that on March 15, the organization could be nearly broke and be evicted from its home in the built-out office space at on the first floor of a city-owned parking garage at 94 NE 2nd Ave just west of Old School Square.

Few people interviewed want that denouement and the key players are struggling to find alternatives. But Arts Garage first has to provide the city and the CRA more detailed information about their fiscal situation, plus a sound feasible business plan for the future, and “some assurance that whatever is agreed to will actually be performed,” said City Manager Donald Cooper.

That negative perception has been fueled by whispered rumors of poor financial management, Ushe and others have said. More concretely, Arts Garage submitted an audit for the 2013-2014 fiscal year that it describes as a “clean” bill of health. But it voluntarily added the auditors’ private “management letter,” which cited several shortcomings, such as not having the original AT&T bills to back up payments.

Ushe said this month that many of those issues were already being corrected when the audit was released and others have been targeted by a newly-hired director of finance and “a team of solid people able to create miracles.” Besides, the auditors’ comments “are stepping stones and guidelines,” she said.

In a letter to the city commission, the organization’s leaders wrote, “Arts Garage went above and beyond the standard protocol for any arts organization by providing an internal management letter and additional information requested by the CRA staff. Our effort to be transparent is now being harshly and unfairly used against us.  The organization makes its financials available on our website…. The question that Arts Garage’s board wants to know is why are our funds being withheld indefinitely when it has been proven, by external auditors that we have a clean audit and it has been proven exactly how the CRA grant money was allocated.”

Ushe contends that the backlash has caught Arts Garage flat-footed: “For months, everything was fine. Then suddenly out of nowhere there is this uncertainty. People are criticizing us.”

Arts Garage leaders claim to have strong support from patrons and they are circulating a petition on its Facebook page. But there are unnamed forces in the community that are not supportive, Ushe acknowledged. Some don’t believe in spending public money on the arts. Some don’t support the arts in the first place. Some think the property could be used better in other ways including for commercial purposes. Some, Ushe said, don’t like her brash, exuberant, abrupt personality that she attributes to her Russian heritage.

The first problem centers on relations with the CRA, an economic development agency created by the city commission but independent of it. Since its inception, Arts Garage through its non-profit parent organization Creative City Collaborative Inc. (CCC) has received grants from the CRA in hopes that the venue would help develop the adjacent burgeoning Pineapple Grove Arts District.

The CRA planned to distribute money quarterly after receiving financial reports from CCC. Following accounting practices, each quarter’s funding reimburses Arts Garage for funds already spent and documented in each quarter’s subsequent request. But when the CCC gave the CRA its 2013-2014 audit and the management letter, the CRA withheld the fourth quarter funding for July, August and September worth $68,725.

Their concerns are illustrated by the fact that they say Arts Garage failed to meet a deadline asking the CRA for an extension to turn in its new audit. In response, the CCC wrote to the city commission that “Arts Garage was in dialogue with the CRA addressing this issue during the process.  It was awaiting the completion of its first audit to assure the accuracy of the report.”

As a result, in a vote Jan. 28, the CRA reaffirmed that it would retain the fourth-quarter funds and also table CCC’s request for another $275,000 for the current fiscal year. Its new demand was for CCC to provide a 2014-2015 audit that showed the earlier problems have been addressed and that the current management has improved. The CRA meets again Feb. 11.

That means the organization’s cash flow is now short both the fourth quarter funding as well as the first quarter of the current fiscal year – $137,500 which was being counted upon for spending that has already occurred.

Ushe says the money isn’t in the cupboard for a new audit. During an interview for this story, CRA Executive Director Jeff Costello wondered whether Arts Garage could ask the CRA for just enough money to pay for the new audit – although he did not know if his board would grant it.

“They have great programming there. They are an asset to the community,” Costello said. “It’s not that (the CRA board) wouldn’t want to fund (Arts Garage), but they suspended them until the documentation is sufficient.”

The second problem centers on the Delray Beach City Commission, which actually owns the property. The commission initially rented the space to the CCC. In 2013, law firm Kanner and Pintaluga asked to buy the property for office space for $2.5 million. Then Arts Garage board member and developer Bob Schmier agreed to match the price. The city agreed finally to allow the CCC to raise the $2.5 million by March 15, 2016 and to lease the space for $800 a month in the meantime. That lease expires March 15, a date based in part on the idea that the CCC would be ready to buy the facility.

But raising money for the sale from donors has been fruitless, Ushe said. Plus, a deed restriction stats that the space can only be used for arts-related purposes has discouraged banks from accepting the property as collateral on a loan, she said.

Without any public announcement, Arts Garage has given up on the idea of buying the property, she confirmed. Cooper said that formally that’s news to him.

Instead, CCC wrote the city commission a letter Jan. 15 asking that it be given a lease for the next 10 years. The quiet understanding that it would really be the beginning of an open-ended arrangement, she said.

If no deal is reached by March 15, they face eviction, Ushe said.

“When the organization was only two years old, we were tasked with raising $2.5 million dollars to buy this venue in two and a half years on top of soliciting funds for programming and general operating. This challenge proved to be unattainable to us and we may now lose our awesome home,” the Arts Garage petition reads.

The current rent “is significantly lower than the market rate and certain promises were made to the city that were relied upon and these promises are apparently not going to be kept,” Cooper said. “From the commission standpoint, they want to be good trustees of the city dollars. It’s not that they don’t feel the Arts Garage is a worthwhile endeavor or a good cultural venue, but it’s just being responsible to taxpayers.”

In that letter to the city, Arts Garage contends that it has been a success that has pumped an estimated $2 million into the local economy. It estimates that 22 percent of its patrons come from Delray Beach, 28 percent from Boca Raton, 30 percent from other locations in Palm Beach County, 18 percent from Broward County and 2 percent from Miami-Dade.

Starting in fiscal year 2011, it had total revenues of $247,271. That grew through fiscal 2014 to $1.56 million. Of that total, $819,000 was earned revenue meaning tickets sales and other sources; $466,000 was contributed from various sources including grants and the pledge of $275,000 from the CRA. The CRA contribution was about 18 percent of its revenue in the past fiscal year as opposed to 41 and 39 percent in previous years.

Cooper plans to make a full report to the city commission Feb. 17 and ask for direction. While he has not polled the board, the city generally wants that space used for cultural pursuits.

One scenario circulating the community is to have the venue operated by or under the supervision of the Delray Beach Center for the Arts next door, which hired a new CEO Rob Steele last fall. But Cooper said Steele emailed him recently that his group needs to focus on its own internal challenges and would not be eager to take on any more.

Meanwhile, Arts Garage has taken to social media, asking supporters to sign a petition   and make donations at

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