22-04nurfc pasr 2011 02 08
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Ohio Cultural Facilities Commission Stan Hywet Hall and Gardens3rd Quarter 2010 Meeting Page 1 of 6
Project Analysis and Staff RecommendationNational Underground Railroad Freedom CenterCommission Assessment Team: Tony Capaci, chief analyst and Amy Rice, chief project manager
National Underground Railroad Freedom Center 50 E. Freedom WayCincinnati, Hamilton County
Facility and Project Sponsor Information
ExecutiveSummary: Under NURFCs current operating structure, sustainability is an issue. NURFC is
working with the federal government to establish a federal museum and oversightcommission to commemorate the ending of chattel slavery in the United States.A discussion draft of this legislation was completed in October 2009. Preliminaryterms include the gifting of the facility to the United States government and theUnited States government, via an appointed board of trustees, operating thefacility in cooperation with the Secretary of the Interior and other federalagencies. This legislation is not expected to be approved for at least 12 months.
According to NURFC officials, the plan would call for the existing bond debt to betransferred to another yet-to-be established entity, unsecured, leaving the facilitydebt-free (a condition of the federal transfer).
Facility Overview: The Center consists of a 160,000-square-foot facility located on the Cincinnatiriverfront. Features of the facility include a museum, interactive story theaters,computer networking to other Underground Railroad sites, arts and educationfacilities, and a public forum space.
The Center is owned and operated by the Sponsor, as an Ohio nonprofitcorporation since 1995.
Culture Presented: The preservation and presentation of features of historical interest or significance.
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Ohio Cultural Facilities Commission Stan Hywet Hall and Gardens3rd Quarter 2010 Meeting Page 2 of 6
SponsorBackground: The Sponsor states, The mission of the National Underground Railroad
Freedom Center is to reveal stories about freedom's heroes, from the era of theUnderground Railroad to contemporary times, challenging and inspiring everyoneto take courageous steps for freedom today.
Project Information
Scope: The Freedom Center is a $117.7 million project, opened in August 2004, and featuresthree pavilions celebrating courage, cooperation, and perseverance. The currentappropriation will reimburse the Sponsor for construction expenses previously incurredbut not yet reimbursed (the Project).
Regional Support
Matching ResourcesThe Sponsor demonstrated a minimum of non-state matching resources equal to at least 50 percent of
the total state funding of $15,500,000 (a minimum of $7,750,000). Matching resources weresubstantiated in November 2008. On October 9, 2001, Substantial Regional Support was confirmed bythe Commission in resolution R-01-26. The following table is provided for informational purposes.
Amount
$0
$0
$0
$0
$0
$34,000,000
$0
$4,500,000
$12,000,000
$0
$0
$50,500,000
$7,750,000
City Government
Source
Cash-on-Hand
Funds Already Expended on Project
Federal Government
Site Valuation
Other
Total Matching Resources
Minimum Match
Irrevocable Written Pledges
In-Kind Contributions (up to 50%)
Operating Endowment
Private Contributions
County Government
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Ohio Cultural Facilities Commission Stan Hywet Hall and Gardens3rd Quarter 2010 Meeting Page 3 of 6
Funding ModelAlthough on October 9, 2001, the Commission confirmed Substantial Regional Support in resolutionR-01-26, the Project is no longer Fully Funded. In order for the new state capital funds to be paid out,the Sponsor must demonstrate that the Project is Fully Funded. Since the Sponsor did not meet bankcovenants in 2008, the bank required the Sponsor to sell $19M in investments to pay down the localbond balance. The $7.75M unsubstantiated funds listed in the table below were the projected
investment income from these $19M in investments that were sold.
Amount Substantiation
$15,500,000
$0
$63,000,000
$0
$6,000,000
$22,200,000
$11,650,000 $7,750,000 not substantiated
$106,700,000
$117,744,000
Source
State Funding
Total Funding Sources
Total Project Budget
Cash-On-Hand
Private Contributions
County Government
City Government
Federal Government
Other (future investment
income)
Project Need
The Freedom Center is in danger of not continuing as a going concern and, accordingly, the consortium ofbanks which previously held the debt for the Freedom Center have forgiven $47M in bond debt in exchangefor approximately $24M the Freedom Center was holding in investments. The net result of the bondforgiveness is an extraordinary gain of approximately $23M in YTD10. Going forward the Freedom Centerwill no longer be responsible for interest expense or exorbitant bank fees. Also, material to the FreedomCenters financial position is the adjustment of the carrying value of the building on the FYE09 financialstatement. The previous balance of $78M in FYE08 was written down to $32M in FYE 09 as a result of FAS144, the GAAP pronouncement applicable to Additionally, the Freedom Center continues to operate ata deficit, as is evidenced by a pre-depreciation, pre extraordinary gain, operating deficit of ($700K) atYTD10, a pre-depreciation loss of ($3.9M) at FYE 09, operating deficits in previous years and the sponsorprepared pro-forma indicating pre-federalization losses exceeding ($1.8M) for the out years. Federalizationis the prospect that the facility will be gifted to the Federal Government (free and clear of any liens) and usethe Freedom Center to operate a museum commemorating the ending of chattel slavery in the UnitedStates. And, according to the sponsor, if Federalization takes place the Freedom Center should receiveapproximately $3M/year in operating revenues and turnover operating surpluses starting at $1.15M in theFederal fiscal year opening October 1, 2011. Therefore, when reviewing the Freedom Centerssustainability staff heavily considers the probability of a successful Federalization of the Freedom Center.
According to the sponsor, the best available information we have is that Senator Sherrod Brown is backingthe legislation which was discussed in draft form in October of 2009 and the Freedom Center managementis optimistic. However, if Federalization is successful a pending issue regarding cash flow needs beingmetuntil Federal funds are received remains. The Freedom Center has expressed a sense of urgency to theCommission
FUNDRAISING ISSUES; FEDERALIZATION ON CONTINGENT ON FREE AND CLEAR
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Provision of General Building Services
Although experienced in the provision of general building services at the Facility, the Sponsor hasmarginal financial capacity to continue providing general building services at the Facility. Inanticipation of the Sponsor completing the proposed Facility transfer to the federal government,Commission staff conditionally confirms the Sponsor continue to provide these services as permittedby section 3383.07 of the ORC.
Approval of the Project and Authorization of the Expenditure of Funds
Appropriation History:
AppropriationName
BillNumber
AppropriationDate
G.A. AppropriationAmount
Comments
NationalUnderground
Railroad FreedomCenter
Am. Sub.H.B. 562
6/24/2008 127 $850,000 Funding this project.
National
UndergroundRailroad FreedomCenter
Am. Sub.
H.B. 699
12/28/2006 126 $2,000,000 Funded construction of the
freedom center.
NURFC H.B. 16 5/4/2005 126 $4,150,000 Funded construction of thefreedom center.
NationalUnderground
Railroad FreedomCenter
H.B. 675 12/13/2002 124 $4,000,000 Funded construction of thefreedom center.
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Ohio Cultural Facilities Commission Stan Hywet Hall and Gardens3rd Quarter 2010 Meeting Page 5 of 6
NationalUnderground
Railroad FreedomCenter
Am. Sub.H.B. 640
6/15/2000 123 $3,500,000 Funded construction of thefreedom center.
NationalUnderground
Railroad FreedomCenter
Am. Sub.H.B. 850
3/18/1999 122 $500,000 Funded construction of thefreedom center.
Cincinnati RiverfrontDevelopment
Am. H.B.748
9/17/1996 121 $166,668 Architectural fees andcontinuing development
work on the freedomcenter.
Cincinnati RiverfrontDevelopment
Am. H.B.748
9/17/1996 121 $333,332 Funded construction of thefreedom center.
Total $15,500,000
Recommendation: The materials submitted by the Sponsor were reviewed and analyzed, and theCommission project analyst, project managers, and executive director recommend approval of Resolution R-10-17 and recommend the approval of the Project and authorization of the expenditure of funds.
Commission Actions This Meeting:In Resolution R-11-XX, the Commission is asked to do the following: determine need for Project; determinesubstantial regional support; determine the provision of general building services; approve the project andauthorize the expenditure of funds, pending certain requirements; and authorize the execution of legalagreements.
Chief Analyst Project Manager
Executive Director
Exhibits
A Provision of Culture
B Detailed Project Budget
C Facility Project Info
D Project Team Resumes and qualifications
E Financial Statements
F Evidence of Local Match
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Ohio Cultural Facilities Commission Stan Hywet Hall and Gardens3rd Quarter 2010 Meeting Page 6 of 6