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Published January 30 2012

Millions of tax dollars on the line as Bluestem Center for the Arts fundraising falters

FARGO - In a no-interest loan and a bond backed by its tax dollars, the school district here has nearly $5 million on the line to support the fundraising nonprofit that supports its performing arts program.

And last month, for the first time, the nonprofit couldn’t make its bond payment of nearly $300,000, forcing the district to cover the entire bill.

The missed payment has prompted school officials to reconsider the operating agreement between the two entities.

The arrangement stems from a 2008 deal in which Fargo Public Schools agreed to back a $3.5 million bond to build the new Trollwood Performing Arts School in south Moorhead, part of the $15 million price tag for the project.

Officials from both the district and the school’s nonprofit fundraising arm were confident a steady stream of donations would cover the payments.

But when donations slowed last year, the district had to step in to cover a $286,000 payment in December, and millions more in taxpayer dollars could be at risk if new fundraising efforts fall short.

It’s the first time the facility – now known as the Bluestem Center for the Arts – hasn’t collected enough donations to make a semiannual payment on the bond, due each June and December. Bluestem still owes $2.1 million in bond payments and another $2.7 million from a separate no-interest startup loan from Fargo Public Schools.

That’s why the school district may take a stronger hand in running the facility so Bluestem can focus on raising the money to meet those obligations.

Jim Johnson, chairman of the Fargo school board, said such a move would free up Bluestem get back to what it does best: raising money for the arts. The mission of the organization, originally Future Builders in Support of Trollwood, was once exclusively drumming up donations for Trollwood.

It has since branched out into managing the non-Trollwood operations of the performing arts complex, like outside concerts and other programming.

“I think they did a nice job with that, but it kind of diffused their efforts on the fundraising side, too,” Johnson said. He said the district could readily take over day-to-day operations of the complex while Bluestem redoubles its fundraising efforts.

Dave Olig, chairman of the Bluestem board, said he’s in favor of that plan. He said the organization’s prospects remain strong going forward in spite of last year’s shortfall.

“Bluestem is a very, very positive asset to the community,” he said. “Is there a cash-flow problem? Sure. That’s nothing new when it comes to a nonprofit.”

He said donations are always unpredictable, and economic turmoil in recent years may have been a factor. Tax forms show Bluestem raised

$7 million in 2009, for instance, but just $625,000 in 2010.

He also said the timing of the bond payment – Dec. 18 – makes it tricky to collect donations on time from donors who may be waiting until the very end of the year for tax purposes. This year, Bluestem asked some donors to give sooner in the month rather than later.

The Fargo School Board won’t make a final decision until next month, but Robin Nelson, another board member, said there’s broad support for narrowing Bluestem’s role to fundraising.

She also said a new operating arrangement would clarify the “maze of agreements” that govern the complex.

The city of Moorhead owns the complex, because it was funded in part by a Minnesota grant requiring the participation of a Minnesota governmental organization.

Moorhead leases the facility for a token amount to Fargo Public Schools, which runs the Trollwood program, and to Bluestem. The school district backs the building bond and pays for Trollwood staff salaries and productions.

Bluestem manages outside events and also contributes some of the money it raises to Trollwood, about $94,000 last year.

Kathy Anderson, executive director of the Trollwood Performing Arts School, says there is no reason to worry about the future of the program.

“I am not concerned about that at all at this point,” she said. She said she believes the district “is taking care of things to make sure Trollwood remains where it is.”

Even without the Bluestem site, TPAS as a program would continue to operate.

“I don’t think it’s about the space. Our program is about what we could do for kids,” Anderson said. “As sad as that would be, that would be just awful for us emotionally, but from a programming standpoint, we’re always going to be (in the community) for the kids we serve.”

Broc Lietz, the business manager for Fargo public schools, said it wouldn’t come to moving Trollwood even if Bluestem never raised another dime.

“There would still be the opportunity for business as usual to go on out there,” he said.

However, Lietz said in that scenario, the district’s $2.7 million loan to Bluestem would be in jeopardy. The nonprofit hasn’t made any payments on the loan, and no repayment schedule has been set.

How Bluestem was financed

When plans were finalized in 2008, initial financing for the project included:

<•> About $6 million in pledged donations for construction and operation.

<•> About $5.5 million in matching funds from the state of Minnesota.

<•> A $2.7 million interest-free loan from Fargo Public Schools.

<•> A $3.5 million bond backed by the school district.

Forum reporter John Lamb contributed to this story.

Readers can reach Forum reporter Marino Eccher at (701) 241-5502