LATC Acts Out a Financial Soap Opera : Theater: The company was doomed from the start by optimistic projections and factors beyond its control, officials say.

Though more dramatic than most, the Los Angeles Theatre Center’s eleventh-hour reprieve from insolvency last week --with an anonymous $100,000 gift--was just the latest in a series of fiscal emergencies for the critically acclaimed theater group.

Before it even opened the doors of its four-stage complex on downtown’s derelict Spring Street, the theater center was millions of dollars in debt.

But the magic of live theater has helped audiences--as well as public and private benefactors--to sometimes forget that behind the greasepaint and the elaborate sets, the LATC has consistently been a financial soap opera.

As city officials tally up its $27 million in public assistance and theater officials ponder its possible demise, the main players acknowledge that the experimental, multicultural theater group never had much chance of surviving on its own and has been victimized by some factors beyond its control.

Proposed Community Redevelopment Agency projects surrounding the theater center failed to materialize. Projections of theater attendance and concession sales proved to be wildly optimistic. Fund raising by the theater board never lived up to expectations. Also, city and theater officials looked to each other to bail out the center.

“I never thought we’d have $20 million-plus into this,” said Pierre Lorenger, the CRA’s deputy administrator for finance. “We never contemplated spending this kind of money.”

The LATC has been acclaimed as an artistic success, an innovative company that has consistently produced plays that attract an ethnically diverse audience. “It was a triumph of optimism over reality,” said Susan Stockel, an attorney and former LATC board member.

The theater center narrowly avoided closing last week, but officials said the company still is in debt and faces the possibility of insolvency at the end of this month if an additional $250,000 cannot be raised.

While many in the arts community are saddened at the prospect of losing the respected theater group, some city officials are still smarting over the expenditures on LATC--equal to city spending on all other arts and cultural projects combined for a decade.

“We were hoodwinked into believing they could do it” City Council President John Ferraro said. “They nickeled and dimed us. But it wasn’t nickels and dimes, it was big money and we made a big mistake.”

Even Councilman Joel Wachs, a longtime friend of the city’s arts community, questioned whether the theater should have opened its doors if it were to always be a ward of the city.

“The council didn’t get involved . . . until it was already a reality,” Wachs said. “You make decisions differently when the plane is in flight. You still have to land it safely.”

Some of the founders also look back and acknowledge that its financial failure was inevitable. Doug Ring, a prominent downtown lobbyist and former president of the LATC, said: “Anybody who took a serious look at the arithmetic knew it couldn’t break even on the box office.”

But in a continuing effort to keep the complex afloat, the CRA made 15 separate financing agreements with the center since 1982. Each agreement was supposed to be the last.

“You can make a decision to fix something (at an) enormous cost, or you can put another patch on it,” said Gerald T. Horton, an executive professor of management at the University of Georgia who has studied the LATC.

“When they put a patch on it, it worked . . . for another six, 10 months . . . another season,” Horton said. “The plays would go up and everybody would be happy. (But) then they’d come back and say . . . , ‘There’s another leak.’ No. It was the same leak.”

The LATC opened on Spring Street in 1985, after negotiations between the CRA and the theater center’s predecessor, the Los Angeles Actors Theatre. The CRA agreed to help finance the purchase of a vacant landmark Spring Street bank building, gut it and construct an adjoining high-tech complex, including four auditoriums seating a total of 1,215.

It was intended to be the spark for a miraculous transformation of the Spring Street corridor--perhaps even what the CRA calls the “historic core” of downtown. The artistic seed--the LATC--would cause a complex of restaurants, clubs and night life to sprout.

With CRA help, two parking garages would be developed in the area, and aging, largely vacant offices would be revived. Finally, the state would construct the Ronald Reagan Office Building and move 3,000 workers to Spring Street. All of this would turn the Spring Street corridor into a vibrant community like New York’s SoHo.

But little of what the CRA proposed came to pass on time--and only two modest CRA-financed projects, a parking garage and an unsuccessful condominium conversion, were completed. The Reagan building opened, but five years late. The only viable theater restaurant--Irwin’s, next door to the LATC--went broke.

“I think a lot of folks misunderstand what the agency’s all about,” CRA chief Ed Avila said.

“It’s about risk,” he said. “Because it has a very specific role in revitalization and elimination of blight. . . . It has to go into places no one else will go.”

“If Spring Street had become the kind of urban area they planned . . . I think the theater would have been more successful than the Music Center,” said Ronald Peterson, an attorney and former LATC board member. “Maybe it was the concept of a revitalized Spring Street that was myopic.”

All sides relied on a series of feasibility studies and projections that made detailed assumptions about the pace and extent of the Spring Street revival.

According to the prospectus for the sale of $4.6 million in bonds to finance the theater’s purchase, the center was projecting attendance and concession sales levels that would have exceeded all other theaters in the Los Angeles area.

Rick Cohen, an attorney who represented the theater center, said that in retrospect, some of those assumptions are laughable.

“One of the things that was planned and proposed, for instance, was outdoor dining in front of the theater center,” Cohen said. “I chuckle about that now,” because Spring Street remains a dangerous corridor where most theatergoers have learned not to stop walking if at all possible. “You can see how ludicrous that is six or seven years later,” Cohen said.

Still, the LATC held on. Since the complex opened, the theater center has presented 91 plays--many of them world premieres of works by acclaimed young playwrights. It has attracted more than 250,000 people a year.

By late last year, the CRA had invested $20.4 million in initial capitalization of the LATC and in an ongoing series of operating subsidies. Members of the City Council greeted each new request for a subsidy with growing skepticism.

Finally, the council agreed to buy out private bondholders who legally owned the LATC complex for $5.25 million. The council appropriated nearly $1 million for repairs and to help underwrite a Cultural Affairs Department program to attract other users to the complex. In all, the city has invested $27 million in the LATC since it opened.

To at least some degree, sources said, the center’s financial problems were compounded by the forceful presence of Bill Bushnell, the LATC’s dynamic artistic director, combined with the disinclination of the board to assert itself.

Mary Anne Chalker, an insurance executive and LATC board member, said she believes that the center could have done better financially if it had put on more commercial productions rather than experimental ones. But Bushnell saw commercial productions “as violation of his integrity,” she said.

“Without an appropriate business plan and mission, it wouldn’t make any difference how many dollars we threw at it,” Chalker said.

Chalker also was concerned about what she saw as lax board oversight of LATC management. The board met only quarterly, and attendance was light, she said.

William R. Robertson, executive secretary of the Los Angeles County Federation of Labor and an LATC board member, acknowledged that he and some other directors paid little attention to the theater. “I’ve been derelict in attending meetings. . . . From the start it’s been cosmetic,” Robertson said. “I did not recognize the full extent of the crisis at LATC. . . . One could say you didn’t fulfill your fiduciary responsibility.”

Bushnell is widely known as an intense, demanding taskmaster sometimes given to fits of temper and often unwilling to compromise.

“Because of that, the board never got any real strength,” said one source familiar with the board. “The bottom line is that Bush is such a strong personality, he isn’t going to allow anyone else to have any power.”

Director Stockel, an ardent supporter of Bushnell, said: “He has taken a leadership position in every way. His will has kept it open. . . . It was him against the world. The board wasn’t pulling its weight.”

She added: “The board always went along with his vision. The alternative would have been to fire him, and that was something we never wanted to do.”

Bushnell agrees that his personal style has often been a factor. “The theater is a very passionate place, and the people involved in the theater--particularly those of us who are artists--are very passionate about what we do,” he said. “Sometimes, there’s a personality difference between the approach of certain business types and artists. . . .

“I understand I have a reputation for being hard on trustees, and I suppose I also have a reputation for being hard on our staff. I’m a pretty exacting taskmaster, but at the same time, I think I am eminently fair.”

“I think he wanted a board that would raise money, with no questions asked,” Chalker said. But fund raising is one of the center’s weakest points.

“There was always an assumption (by CRA) that they could do more from grants and contributions,” the CRA’s Lorenger said.

“When you have counterculture theater and go to mainstream givers, you have a serious problem of incentives,” Ring said.

Others faulted the weak economy for the disappointing fund raising.

“It’s true, the economy has not helped,” Chalker said. “But there is enough money in this town,” for the LATC to be able to raise the $2 million in annual contributions needed to break even, she said.

In the fiscal year that ended in April, officials said, the theater center set a goal of raising $1.77 million, but the campaign produced $1.35 million. Sources said it ended the previous fiscal year $449,000 in the black, but plunged to $685,000 in the red 12 months later.

With weak fund raising, the theater center turned increasingly to the CRA and the City Council for support. “Bushnell is one of the most politically astute people in the city of Los Angeles,” said one director.

Busloads of children were brought to the theater from minority communities and they wrote letters to their council members in support of the theater.

“The mayor was pushing it, the CRA was pushing it,” said City Council President Ferraro. “They did as good a job of lobbying the council as I’ve (ever) seen.”

Despite the mounting annual losses, Bushnell gained a reputation for running a lean operation.

Horton, who assisted in a study of LATC requested by the mayor, found last year that LATC produces dramatic works more cheaply than eight other nationally prominent theaters. The problem was not overspending, but underfunding, Horton said.

“Mismanagement means those guys are screwing up the money. There isn’t enough money around here to screw up,” he said.

Horton and others said the current financial crisis is really the culmination of a series of financial maneuvers that did not solve the center’s basic problems.

Steven Lavine, president of CalArts in Valencia and an organizer of the LATC study group, said the center’s fate was sealed in July, when it agreed to be responsible for $1 million in annual maintenance costs in exchange for the City Council’s approval of a deal to buy LATC’s building. Horton and Lavine said the theater center’s economics simply made it impossible to pay for the maintenance, which previously had been underwritten by city subsidies.

It was just days after the city closed escrow on the center property that theater officials announced that they were on the verge of closing their doors.

“We had no leverage except the threat to close,” said one director, who spoke on condition of anonymity. “So you take a deal you know won’t work.”

CRA officials acknowledge that they were overly optimistic about keeping the center alive. “We kept trying to wean (LATC away from city financing), kept trying to put controls on.”

But the biggest fear, he said, was: “Pull the plug . . . and it’s dead.”