Carolina Theatre of Durham Inc.’s contract to manage the city-owned Carolina Theatre expires at the end of June, and City Manager Tom Bonfield still has concerns about its financial health.

“We need to talk about that and come to an agreement” before the contract is renewed, Bonfield said.

Carolina Theatre CEO Bob Nocek said last week that the theater’s financial situation has improved, but “we’ve still got a significant deficit.”

The nonprofit Carolina Theatre Inc. has run operating deficits for several years, according to its annual reports and Internal Revenue Service returns.

The theater’s management estimated it would finish the 2011-12 fiscal year with liabilities exceeding assets by almost $326,000, after it had asked the city for $103,739, on top of the $614,520 appropriated for it in the 2012-13 budget.

“We reviewed (the request), and we declined and indicated that we did not feel it was appropriate,” Bonfield said.

Continued operating losses above what the city contributes, cash flow and just how the Carolina covers its day-to-day expenses remain concerns, he said.

“They feel they’re developing a long-range financial plan,” Bonfield said. “They feel like they’re in a better financial condition. But that still doesn’t completely answer the questions.”

Nocek said, midway through its fiscal year, the Carolina is in the best position it has been in for several years. “We’re within $10,000 of budget (and) we’re tracking really well,” he said. The Carolina’s current annual budget is “a little over $3 million,” Nocek said.

Nocek said he is “optimistic” about the upcoming negotiations with the city on renewing the nonprofit’s management contract.

“One of the things we’re hoping for is some – I don’t even know how to phrase it – obviously, we’d like to find a way to deal with the deficit,” Nocek said. “We’re not looking for a handout. We think we bring a great deal of value to the city.”

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