City officials and a new leader at the historic Carolina Theatre said Tuesday they are still trying to understand a deficit that could reach $1.6 million by the end of the year.
Carolina Theatre of Durham Inc. “was losing money on every show and didn’t know it,” City Manager Tom Bonfield said.
Bonfield estimated the venue’s current debt at about $1.3 million and said by year’s end the theater could be anywhere from $800,000 to $1.6 million in the hole.
A plan former CEO Bob Nocek proposed to begin paying off the debt is off the table, he added.
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The city pays the nonprofit $654,000 a year to run the downtown theater. Nocek had asked for $600,000, or a $75,000 advance for each of the remaining years on the contract, which runs through 2024.
“The solution – just give us $600,000 and everything will be fine – is not even close to being realistic,” Bonfield said. “I think that’s pretty much shelved.”
Bonfield met with interim CEO Dan Berman and board members Monday. They will meet again next Monday, Bonfield said, as the groups get a firmer grip on the numbers.
The theater reported a record $5 million in revenue last fiscal year, but Bonfield said it was paying current expenses with future show revenue, digging itself deeper into the hole.
Nocek had ramped up live shows, from about 60 to 100 per year. But the organization’s business model and 1,000-seat concert hall made it very difficult to make much money on a show and “made it easy to lose a lot of money on a show,” Bonfield said.
Berman said Nocek’s plan was premature.
“We are not expecting the city to write us any kind of check until they have confidence in the organization and the work we’re doing to make certain we understand the scope and consequences of the problem,” he said.
But Berman also said he thinks the nonprofit can regain public confidence.
“I think the organization has made the changes necessary to move forward and run responsibly,” he said.
Nocek resigned last month after announcing in December that the theater had discovered it had lost $800,000 since July 2013 – on top of an existing deficit.
Previous information released by the nonprofit had indicated it ended the 2013 and 2014 fiscal years with small surpluses and cut its long-term debt to $224,909.
Less than a week after Nocek resigned, chief operating officer Aaron Bare also resigned.
In December Nocek and board Chairman Scott Harmon blamed the surprise losses on faulty accounting and a finance director they said no longer worked there.
They said they learned of the problems in May 2015 after the state notified the nonprofit it owed $155,000 in unpaid sales tax.
A state Department of Revenue spokesman said the group should have known about that part of the problem several months earlier because the state sends a notice 45 days after tax revenue is not received.
The Carolina had fallen behind by October 2014, according to records.
Berman, who is not being paid, said the theater’s employees are embarrassed by the deficit.
“Our (remaining) staff had nothing to do with the decisions that were made; my heart goes out to them,” he said.
“The organization is capable of correcting its course,” he said. “That’s what we’re going to do.”