Town still open to transferring title to CB Center for the Arts

Concerns being raised and deed restrictions discussed

BY Mark Reaman

While expressing multiple concerns about the idea of transferring the title of the Crested Butte Center for the Arts building from the town to the Center’s board, the Crested Butte council has agreed to continue the conversation at a July work session. Before that meeting, the council wants a title issue addressed with Gunnison County, the original owner of the site that was once a county shop. They also made it clear they would want long-term protections to guarantee the building would be used for public purposes connected to the arts and they wanted the Center administrators to provide examples of how such a partnership works successfully in similarly sized communities.

Center executive director Jillian Liebl and director of finance and development Brett Henderson said they could address those issues before the next scheduled meeting in a month. The two Center reps have met with the council several times lobbying councilmembers to transfer the title of the building. 

They have said some prominent donors are hesitant to increase contributions through planned giving or future capital campaigns to the Center without that ownership transfer and have said one donor has pledged to pay off the current $1 million in debt (a savings of 1.4M over 10 years including interest) as soon as the transfer takes place. Town staff has recommended against a title transfer at this time.

Concerns were expressed by councilmembers over the Center using the building as collateral in a future loan situation; figuring out if the town was better protected by transferring title to the building but maintaining ownership of the land beneath it; making sure the Center had plans to beef up its reserve funds to be financially healthy enough to cover maintenance and replacement costs; the perception of such a move taking a community asset and transferring it to wealthy individuals on the board; and making sure that local nonprofits would have continued access to the facility well into the future. Liebl and Henderson said there were ways to mitigate those issues in an agreement that included tight deed restrictions and public use covenants.

As for the title issue with the county, the property was originally conveyed to the town in 1984 with a so-called “executory interest” stating the land must be used for “public purposes;” otherwise the title reverts to Gunnison County. 

Town attorney Karl Hanlon informed the council that while the “Center for the Arts is a nonprofit, potentially satisfying the public purpose requirement, transferring ownership introduces risks related to enforceability of that interest and the town’s ability to intervene if issues come up.”

He and the council agreed that county officials would probably not balk at removing that from the deed as long as future protections were declared in a title transfer guaranteeing that public use of the building would remain in perpetuity. But he recommended cleaning up the title before proceeding with any transfer of title. Liebl told the council she would be happy to talk to the county regarding that situation.

Henderson said overall, the Center was in stable financial shape and without debt service, it would be operating in a better cash flow situation. 

  “A big issue I have is that we transfer the property and the Center uses it for collateral in a loan,” said councilmember Mallika Magner. “The town would be on the hook in a default. Do you want to use it as collateral?”

Liebl laid out a potential situation where that might happen. She said for example, the Center might want to renovate the original building. In that case the board might consider using the building as collateral in a gap funding situation for construction if pledges were made over several years for such a capital project.

“What is the enforceability of a pledge,” asked Magner.

“There isn’t much but our rate of default on our pledges is less than five percent,” said Henderson. Liebl added that the situation might mean obtaining more pledges than a project’s estimated cost. 

“The real issue is timing,” suggested Billick. “If the economy tanks 50%, then everybody doesn’t have money. That would be a concern. A Black Swan event is the issue, not 10 or 15% in pledge defaults.”

“I wouldn’t transfer the title without a deed restriction prohibiting the building being used as collateral,” said councilmember John O’Neal. 

“What about if the Center needed council approval first so future councils could decide depending on circumstances at that time,” said Billick.

“The driving intent seemed to be to more easily raise money from donors, not use it as collateral,” said O’Neal. 

Billick suggested perhaps the town could retain ownership of the land while the Center board got title to the building.

“There are multiple ways to structure the transfer,” said Liebl. “For example, we don’t desire to own the old building right now.”

“There are different tools to use and maybe town keeps the land, so it gives us more leverage,” said Billick.

“We can create frameworks for any of the structures you are talking about,” said Hanlon. “But in a worst-case scenario, the building could still be lost to a lender so we would want to draft provisions in that scenario to keep its public use.”

“You could get down to the point where it has to be a nonprofit operating the building for the arts,” said Henderson. “That would we think still satisfy the donors.”

Billick asked about the Center’s financial health and stockpiling reserves for upkeep. 

“We are undertaking a pretty methodical process of determining future maintenance and replacement costs and the timeline,” said Henderson. “While having a year’s worth of operating revenues is the gold standard, we probably have three months’ worth. We are increasing that. Our recent history includes paying down debt and without that, we would be in a pretty good spot.”

In response to a question from Billick, Henderson said they “would hate to see the title revert back to the town in a situation where the Center didn’t meet certain financial metrics. Some things like the economy are out of our control,” he said.

Billick asked about “soft goals” to guarantee a certain number of local nonprofits always had access to the facility. Henderson said they were all for that as it matched the mission of the Center and its desire to maintain solid alliances, “but you never know what the future will hold.” He also said a regular accounting report to the council would be appropriate. 

“My hesitation is how would such a transfer protect the community beyond the current intention,” said councilmember Gabi Prochaska. “Like you said, it’s hard to see into the future and what the needs will be. I don’t want to let go of something that is hugely important and very public facing. What are the risks going forward in the worst-case possibilities that we can prevent so it doesn’t come back to haunt us?”

“That’s what I was trying to address with the nonprofit participation into the future,” said Billick.

“The future is hard to predict on both sides,” said Prochaska.

“I really think most issues can be solved in the deed restrictions,” said Henderson. “There are tools being used in other communities to protect themselves.”

“I’m hearing the council’s intent is to have protections 50 or 100 years out,” said Billick. “Bring us examples of what has worked.”

Henderson said he could do that and would provide potential agreements using examples from other communities.

“From my perspective, those examples should be of similar communities with similar economic size to that of Crested Butte,” said Prochaska. “Jackson Hole with its size and access to money is not a good one to extrapolate to Crested Butte.”

“So what communities are they? Does Steamboat count? I’m not sure they really exist, but I’ll try,” said Liebl. Henderson indicated he was unclear about which economic elements from comparable towns would be acceptable and how those examples would be applied to our situation.

“Use your best judgment to bring us examples close to Crested Butte,” said Billick.

There was a brief discussion on not only the legal and practical aspects of the title transfer, but also the political. Several councilmembers said a perception in the community was the town was considering giving up a community asset to the rich. “There is the idea by some that we are handing over the building to wealthy people,” said Billick.

“I would say you are transferring it to a nonprofit group serving the community,” countered Liebl. “I’m happy to talk to anyone about that perception.”

“We all want the Center for the Arts to succeed spectacularly,” concluded O’Neal. “We are trying to find a better plan to help everyone succeed.”

“I’m leaning toward conveyance with enough restrictions and safeguards,” said councilmember Kent Cowherd. 

A work session on the issue is scheduled for July 21.