FAYETTEVILLE — Elected officials are not taking a proposed reorganization of the Walton Arts Center’s governance structure lightly.
The proposal, as presented in a May 13 “term sheet,” would create a nonprofit board to oversee all fundraising, programming and operations at the arts center. The board would choose its members. The City Council, University of Arkansas Board of Trustees and the Walton Arts Center’s existing governing boards must approve any changes.
City approval, at this point, appears unlikely.
“I’m not taking anything to the (City) Council,” Mayor Lioneld Jordan said Thursday. “If a council member wants to take it, they can.”
Jordan said, “I have concerns about turning over my votes on the present Walton Arts Center board to a regional self-appointed board.”
For more than two decades, the center has been governed by two bodies: the Walton Arts Center Council and the Walton Arts Center Foundation. Both nonprofit groups’ boards have city and university appointees. The council was created “to construct, operate, manage and maintain the Walton Arts Center as agent for the University of Arkansas and the city of Fayetteville,” according to 1986 articles of incorporation. The foundation is responsible for managing the center’s endowment and distributing money as needed.
A proposed reorganization, as presented to Jordan, university Chancellor David Gearhart and members of the arts center council, would keep the council and foundation intact, but would change the makeup of each board. The council would become an oversight board strictly for the Fayetteville campus. The foundation’s role could also be limited to the existing building in Fayetteville.
A new nonprofit board, called the Arts and Entertainment Foundation of NWA, would take over “governance, fiduciary and strategic responsibilities” for the overall organization, according to the May 13 term sheet. The 20-member board would feature one ex-officio member apiece from Fayetteville and the university with possible ex-officio members from Bentonville and Rogers. The term “ex-officio” often refers to a non-voting, advisory member of a group. Members of the existing arts cent council’s nominating committee would appoint members of the new board. Vacancies would be appointed by remaining board members.
Peter Lane, arts center CEO, said Thursday governance changes and a revised lease agreement are needed to allow appropriate regional representation and ensure a successful capital campaign for planned renovations to the arts center and a new venue in Bentonville.
At A Glance
Walton Arts Center Reorganization
A May 13 “proposed term sheet for reorganization of the Walton Arts Center” calls for the creation of a nonprofit organization called the Arts and Entertainment Foundation of NWA. Suggestions for the new organization include:
• Be responsible for constructing and/or operating venues
• Be a 20-member, self-appointed governing board. Initial selections to be made by the Walton Arts Center Council’s nominating committee. The board could have ex-officio members from Fayetteville, University of Arkansas and possibly Rogers and Bentonville.
• Members of the Walton Arts Center Council could serve on the new board and vice versa.
• The Fayetteville City Council and University of Arkansas Board of Trustees must approve the creation of the new nonprofit group.
• The Walton Arts Center Council transfers the administrative management team, intellectual property, mailing lists, computers financial assets to the nonprofit group. In return, it commits to raise $20 million for the renovation of the Fayetteville center.
• The new nonprofit group enters into a 25-year lease with the city and university to use the Fayetteville campus, including Nadine Baum Studios.
• Future endowments, unless specifically earmarked, will be administered by the new nonprofit group.
Go to the online version of this story at nwaonline.com to read a copy of the proposed term sheet.
Source: Staff Report
Lane said specific language could be added to a revised lease agreement spelling out what level of programming patrons can expect in Fayetteville. The property at 495 W. Dickson St. is jointly owned by the city and University of Arkansas. The two entities lease the building to the Walton Arts Center. The lease ends March 30, 2017.
“We need to have in place a lease that can ensure the long-term viability of the Walton Arts Center here in Fayetteville,” Jeff Gearhart, executive vice president, general counsel and corporate secretary for Walmart, told fellow members of the arts center council Monday.
“Our governance documents have confused the ownership of the organization with the ownership of the Fayetteville facility,” Lane said.
Although the center was built using public money, Lane said about 95 percent of its operating revenue comes from private sources. According to the interlocal agreement that helped created the theater, the mayor and the chancellor must approve the annual budget for the foundation.
“Given our multi-campus plans, the potential for a veto by a future mayor or chancellor is unacceptable,” according to the May 13 term sheet.
“Our largest donor — who contributes more than 20 percent of our total annual support — has asked that our governance be addressed before any consideration for future capital support,” the term sheet goes on to say. “We can’t be successful in our renovation of the Fayetteville campus … without their continued support.”
Lane would not identify the donor.
City Attorney Kit Williams said he understands arts center officials’ desire to restructure the organization.
“The group needs more regional representation. That’s not a bad thing,” Williams said. “We should try to address their legitimate concerns, but not throw the baby out with the bath water.”
Williams said Mayor Jordan authorized him to begin drafting a counter-proposal. He suggested an arts center council with members appointed equally by the city, university and Walton Family Foundation, a philanthropic organization guided by the descendants of Walmart founder Sam Walton.
“All of the players who have invested millions of dollars into the organization would have input and controls,” Williams said.
His proposal would also change the articles of incorporation to say only two of the three outside entities would have to approve the foundation budget.
“That would allay the fears of the Walton Family Foundation and Benton County,” Williams said. “It would show that we’re not going to do anything to stop them from successfully running their building.”
Williams, in a May 15 memo, questioned the legality of transferring the center’s assets to a nonprofit without guarantee of city representation.
According to Article 12, Section 5 of the Arkansas Constitution, “No county, city, town or other municipal corporation, shall become a stockholder in any company, association, or corporation; or obtain or appropriate money for, or loan its credit to, any corporation, association, institution or individual.”
Multiple attorney general’s opinions have indicated the provision applies to nonprofit corporations.
“A municipality cannot contribute to a private, nonprofit corporation regardless of whether the corporation serves a ‘public purpose,’” former Attorney General Mark Pryor stated in a 2001 opinion. Pryor was responding to an inquiry from then-Rep. Jan Judy, who asked if the city of Fayetteville could dedicate two years of property taxes to help build the Boys and Girls Club. Following the attorney general’s opinion, the city did not give the organization money and it had to rely on private fundraising.
Williams said other city contributions to nonprofits, in the form of contracts for services or development of infrastructure, are permissible. He said a recent pledge of up to $1 million to the Partners for Better Housing group is OK, because public dollars would be used for public streets. A yearly contract with the Walton Arts Center for parking attendants and arts programming is legal, because the city receives services in return for its payment, Williams added.
It’s yet to be seen how a new Arts and Entertainment Foundation might use public money.
The May 13 term sheet mentions the possibility of keeping city and university money used to build and endow the arts center in the restructured council or returning money to the city.
Fayetteville voters in 1986 approved a $3.5 million sales-tax-backed bond issue for the arts center. Another $1 million came from the city’s general fund. The university committed $4.5 million using a private donation from Sam and Helen Walton.
“I think residents and citizens have bent over backward for the Walton Arts Center,” said Justin Tennant, Ward 3 alderman. “(The organization) was set up in a way that the city was a partner in the WAC, and the city needs to continue to be a partner.”
Alan Long, Ward 4 alderman, said there’s already regional representation on the arts center council. The board has members who work for Walmart, Tyson Foods and General Mills.
“I think it’s in the best interest for the city of Fayetteville to keep the current governance structure,” Long said.
Andrew Gibbs, chairman of the university’s drama department and a founding member of the arts center council, said reorganization is needed.
“Now’s as good a time as any,” Gibbs said.
“What we have in front of us is only a proposal,” he added. “I suspect there will be further conversations between the city, university, regional folks and Walton Arts Center staff.”
David Gearhart was at a Southeastern Conference spring meeting of chancellors, presidents and athletic directors last week in Destin, Fla. In a message relayed by Judy Schwab, associate vice chancellor for administration and arts center council member, Gearhart said, he too, understands the need to reorganize the governance structure. The chancellor declined to comment further until a more developed proposal is put together.
Reorganization and a revised lease agreement are scheduled to be discussed at the arts center council’s June 13 meeting. No date has been set for City Council consideration.
“It’s important that we continue to work together to find a solution that moves toward protecting the city’s ownership of the Fayetteville campus and also reflects the reality of the nonprofit organization we run,” Lane said. “If we take the emotion out of this and just look at the facts, I know we as partners can find a good solution.”