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Executive
Summary: The National Underground Railroad Freedom Center (“Freedom Center,” Deleted:
“NURFC,” or “the Sponsor”) is (complete a brief summary here). The facility Comment [kf1]: Need intro sentence about the
opened in XXXX. The state has appropriated $XXX, and the Commission has organization
previously approved $XXX for the facility. $XXX in state funding has been Formatted: Font: Italic
reimbursed to the Freedom Center. Under NURFC’s current operating structure,
sustainability is an issue. The Commission is holding $XXX in escrow in the
event that the Sponsor is unable to continue to operate the facility. In May 2009,
the Commission authorized a Memorandum of Understanding, spelling out the
conditions under which full approval could be granted to the Freedom Center for
the most recent appropriation of $XXX. The MOU contemplates that the
Freedom Center will obtain Congressional approval to federalize the facility and
federal funding will be provided for a portion of the operating costs. NURFC’s Deleted: Under NURFC’s current operating
vision is that the federal government willestablish a federal museum and structure, sustainability is an issue.
oversight commission to commemorate the ending of chattel slavery in the Deleted: is working with the
United States. A discussion draft of this legislation was completed in October Deleted: to
2009. Preliminary terms include the “gifting” of the facility to the United States
government and the United States government, via an appointed board of
trustees, operating the facility in cooperation with the Secretary of the Interior and
other federal agencies. The federal legislation has not yet been approved, but the
Freedom Center anticipates that will be approved in 2011. Commission staff Deleted: This legislation
recommends XXX Deleted: is expected to pass
Comment [kf2]: Complete this sentence after we
have a staff recommendation
The Center is owned and operated by the Sponsor, an Ohio nonprofit corporation Deleted: as
since 1995.
Culture Presented: The preservation and presentation of features of historical interest or significance.
Sponsor
Background: The Sponsor states, “The mission of the National Underground Railroad
Freedom Center is to reveal stories about freedom's heroes, from the era of the
Underground Railroad to contemporary times, challenging and inspiring everyone
to take courageous steps for freedom today.”
Project Information
Scope: The Freedom Center facility opened in August 2004, and features three pavilions Deleted: has recently been written down to a
celebrating courage, cooperation, and perseverance. The current appropriation will value of $32M at FYE09. It was
reimburse the Sponsor for construction expenses previously incurred but not yet
reimbursed (the “Project”). The project consists of reimbursing $850,000 on an
appropriation awarded in H,B. 562 and release of a portion of the approximately
$462,000 of escrow monies held under prior agreements with the Commission.. As Deleted:
described further in the financial section of this report, the value of the facility has Deleted: the original base lease
recently been written down to $32M (from $XXM) at FYE09.
Regional Support
Matching Resources
The Sponsor demonstrated a minimum of non-state matching resources equal to at least 50 percent of
the total state funding of $15,500,000 (a minimum of $7,750,000). Matching resources were
substantiated in November 2008. On October 9, 2001, Substantial Regional Support was confirmed by
the Commission in resolution R-01-26. The following table is provided for informational purposes.
Funding Model
Source Amount Substantiation Comment [kf3]: Will need to add some notes to
explain how they arrived at full funding and refer to
State Funding $15,500,000 the recent changes noted later in our analysis.
Cash-On-Hand $0
Private Contributions $63,000,000
County Government $0
City Government $6,000,000
Federal Government $22,200,000
Other (future investment $11,650,000 $7,750,000 not substantiated
income)
Total Funding Sources $106,700,000
Total Project Budget $117,744,000
Project Need
Financial Assessment
• Internally generated financial statements for year-to-date September 30, 2010 ("YTD10")
• Audited financial statements for fiscal-years-ending December 31, 2009 and 2008 (“FYE09”
and "FYE08")
• Five-year pro forma
LIABILITIES:
Total Current Liabilities $ 618,721 0.58% $ 615,126 -42.85% $ 1,076,256
Total Long-Term Liabilities $ - -100.00% $ 27,000,000 -41.30% $ 46,000,000
TOTAL LIABILITIES $ 618,721 -97.76% $ 27,615,126 -41.34% $ 47,076,256
NET ASSETS:
Unrestricted $ 33,357,286 147.29% $ 13,489,393 -78.44% $ 62,563,238
Temporarily Restricted $ 954,643 27.72% $ 747,456 -35.33% $ 1,155,713
Permanently Restricted $ 956,666 4683.33% $ 20,000 0.00% $ 20,000
TOTAL NET ASSETS $ 35,268,595 147.38% $ 14,256,849 -77.63% $ 63,738,951
TOTAL LIABILITIES AND NET ASSETS $ 35,887,316 -14.29% $ 41,871,975 -62.21% $ 110,815,207
Solvency:
An organization is solvent when assets are greater than liabilities. The Sponsor is solvent because net assets
are positive (YTD10 total assets are $35.9M; total liabilities are $0.6M).
YTD10, the Sponsor had no debt; therefore, a viability ratio was not calculated.
Liquidity:
Liquidity relates to availability of, access to or convertibility to cash. A test of liquidity is current ratio (current
assets divided by current liabilities), which indicates how many times over the entity can pay its current
liabilities with its current assets. (Note: Restricted current assets were not used to calculate the current ratio
because they generally are not available to service current liabilities. Including restricted current assets in the
calculation could have the effect of artificially inflating the current ratio.) A current ratio of greater than 1:1 is
considered acceptable.
The Sponsor’s YTD10 working capital is $2.7M). Days of cash-on-hand (an indication of how many days an
organization can pay expenses if its revenue stream ceases) at 22 is lower than the 30-day norm.
YTD10, the Sponsor has no debt; therefore, a debt ratio is not calculated.
Total Revenues (net of capital income raised) $ 5,000,030 17.17% $ 4,267,276 -45.19% $ 7,785,726
Total Expenses (net of capital expenses) $ 5,670,869 -30.48% $ 8,157,132 -22.94% $ 10,584,822
OPERATING CHANGE IN NET ASSETS (pre-
depreciation and pre-realized/unrealized
gain/(loss) on investments) $ (670,839) -82.75% $ (3,889,856) 38.97% $ (2,799,096)
Impairment loss (FAS-144 adjustment) $ - -100.00% $ (42,200,000) NC $ -
Extraordinary income (debt settlement) $ 24,150,000 NC $ - NC $ -
Realized/Unrealized Gain/(Loss) on
Investments $ 26,517 -94.22% $ 458,825 P $ (2,447,546)
Depreciation $ (2,494,182) -35.23% $ (3,851,071) -11.24% $ (4,338,937)
OPERATING CHANGE IN NET ASSETS
(post-depreciation and post-
realized/unrealized gain/(loss) on $ 21,011,496 P $ (49,482,102) 416.21% $ (9,585,579)
Total Revenues (net of capital income raised) $ 3,816,900 $ 3,870,000 $ 4,523,000 $ 4,627,000 $ 4,731,000
Federalization Revenue $ 750,000 $ 3,000,000 $ 3,000,000 $ 3,000,000 $ 3,000,000
Total Expenses (net of capital expenses) $ 5,665,400 $ 5,722,000 $ 5,779,000 $ 5,837,000 $ 5,896,000
Pre-Depreciation Surplus/(Deficit) $ (1,098,500) $ 1,148,000 $ 1,744,000 $ 1,790,000 $ 1,835,000
Depreciation $ (3,325,576) $ (3,325,576) $ (3,325,576) $ (3,325,576) $ (3,325,576)
Post-Depreciation Surplus/(Deficit) $ (4,424,076) $ (2,177,576) $ (1,581,576) $ (1,535,576) $ (1,490,576)
Total Revenues (net of capital income raised) $ 3,613,900 $ 3,364,000 $ 3,964,000 $ 4,015,000 $ 4,066,000
Federalization Revenue $ 750,000 $ 3,000,000 $ 3,000,000 $ 3,000,000 $ 3,000,000
Total Expenses (net of capital expenses) $ 5,665,400 $ 5,722,000 $ 5,779,000 $ 5,837,000 $ 5,896,000
Pre-Depreciation Surplus/(Deficit) $ (1,301,500) $ 642,000 $ 1,185,000 $ 1,178,000 $ 1,170,000
Depreciation $ (3,325,576) $ (3,325,576) $ (3,325,576) $ (3,325,576) $ (3,325,576)
Post-Depreciation Surplus/(Deficit) $ (4,627,076) $ (2,683,576) $ (2,140,576) $ (2,147,576) $ (2,155,576)
The Freedom Center is in danger of not continuing as a going concern. Accordingly, the consortium of Comment [kf4]: Did the Auditor’s make this
banks that previously held the debt for the Freedom Center have exchanged $47M in local bond debt for statement or is it our staff opinion? Identify whose
opinion this is.
approximately $24M the Freedom Center was holding in investments. The net result of the bond settlement
is an extraordinary gain of approximately $24M in YTD10. Comment [kf5]: Need TC & CB assistance to
understand this
Also material to the Freedom Center’s financial position is the adjustment of the carrying value of the
building on the FYE09 financial statement. The previous building balance of $78M in FYE08 was written
down to $32M in FYE 09 as a result of FAS 144, the GAAP pronouncement applicable to Accounting for the
Impairment or Disposal of Long-Lived Assets.
Federalization is the prospect that the Facility will be gifted to the Federal Government (free and clear of any
liens), and the U.S. Government will use the Freedom Center to operate a museum commemorating the
ending of chattel slavery in the United States.
According to the sponsor, if federalization takes place, the Freedom Center expects to receive Deleted: F
approximately $3M/year in operating revenues on a permanent basis, enabling the Freedom Center to Deleted: should
generate operating surpluses starting at $1.15M for each twelve month period beginning with October 1, Deleted: opening
2011, the start of the next Federal fiscal year. Therefore, when reviewing the Freedom Center’s
Deleted: beginning
sustainability staff heavily weighed the probability for successful federalization of the Freedom Center.
According to the Sponsor, the most updated information currently available indicates that Senator Sherrod Deleted: considers
Brown is backing the legislation that was discussed in draft form in October of 2009, and the Freedom Deleted: of a
Center management is optimistic that the legislation will be passed. The Sponsor anticipates “that the funds Deleted: F
would be received in the [fourth] quarter of 2011, if [it is] successful in getting the language signed and Deleted: we
passed prior to [September 30, 2011].” Even if federalization is successful, there remains a pending issue
Deleted: have
regarding cash flow needs being met until the Federal funds are received. A review of the liquidity position
calls into question the ability of the Freedom Center to meet its obligations in the first quarter of 2011 and Deleted: F
may be depleted in the first quarter of 2011. Part of the solution to the sponsor’s anticipated cash flow Comment [kf6]: enthusiasm?
problem may lie with the Freedom Center’s renewed ability to raise funds. Although the Freedom Center Deleted: a
must contend with a challenging environment for fundraising, including an uncertain economy, possible Deleted: also includes positive influences,
donor fatigue, and the effect the write down of the building may have on potential donor perspective, the
Deleted: a
fundraising outlook may be influenced positively by certain factors including the effect the bond settlement
has on donor perspective as well as the prospect of federalization. A recent spike in fundraising has enabled Comment [kf7]: Is this both a positive and
negative factor?
the Freedom Center to close the gap on its operating losses, so much so that the sponsor believes they
Deleted: very real
may break even by year end.
Deleted: F
In formulating the recommendation to the Commission, the staff observes that one approach appears to be Comment [kf8]: Is this true even if they don’t
most likely to enable fulfillment of the overall goal: to have the Freedom Center Facility provide culture to the receive our funds by 12/31/10?
public for at least the next fifteen years. Because operating costs, which have been cut drastically in years Deleted: the Freedom Center
past, cannot realistically be cut too much further and because operating revenues have historically been Deleted: staff
insufficient to cover costs, it appears that the most promising option is successful federalization as Deleted: bases its rationale on the strategy we
contemplated by the Sponsor. The alternative of not approving the Commission funds and thereby believe will
exacerbating a dire financial position may lead to the demise of the Freedom Center before federalization Deleted:
can be approved.. Approval for the $850,000 (“The Project”) and a portion of the $462,000 escrow release
Deleted: the Commission to meet its ultimate
appears to be necessary to moving the Freedom Center closer to federalization. objective
Deleted: staff believes
However, staff recommends such approval only conditionally, to mitigate the risk. Accordingly, staff is
Deleted: to achieve the Commission’s
recommending the Commission approve the Project and release of the escrow funds contingent on objective relies on
execution of a guarantee in an amount equal to both the appropriation of $850,000 and the partial escrow
Deleted: F
release of approximately $462,000. This guarantee would be in the Commission’s standard form. Such a
guarantee would ensure the Commission is placing the yet-to-be-approved state funds at no greater risk Comment [kf9]: Need to calculate how much if
any of the escrow is advisable to release.
than they are currently and—in fact—lessens the state’s risk associated with $14.5M of appropriations
previously approved as the Freedom Center moves closer to federalization. Also, staff recommends the Deleted: and the unenviable position of the
state owning a singular-use building, the use
... [1]
Commission require a board-approved business plan addressing cash flow concerns from fourth quarter
Deleted: Staff views the a
2010 through federalization and until a projected positive cash and working capital position can be re-
established. Finally, noteworthy for the Commission’s deliberations regarding the Freedom Center, is the Deleted: as
Federal requirement that the Facility be free of all liens in order for Federalization to take place. This Deleted: getting
criterion would require the Commission to release its first lien position on the facility at the point in time Deleted: F
when the federal government commits to providing operating funds. As stated previously, it appears that
Deleted: and ultimately closer to the ... [2]
the lower risk alternative at this point in time is to release the state funds in exchange for a guaranty in an
Deleted: ¶ ... [3]
equal amount. The future release of the state’s first lien position at the time of federalization was approved
by the Commission in May 2009. Deleted: a
Deleted: , acceptable to the executive director
... [4]
A review of the Sponsor’s solvency, liquidity, leverage, change in net assets and pro forma indicates it is Comment [kf10]: See note above about ... [5]
marginally likely the Sponsor will be able to operate the Facility and present culture to the public over a
Comment [kf11]: need to discuss after TR ... [6]
sustained period of time in accordance with Section 3383.07 of the ORC.
Deleted: F
See Exhibit E for a summary of the Sponsor’s financial statements. Deleted: F
Deleted: staff believes
Deleted: best option to ensure the Facility... [7]
Deleted: exchange
Deleted: for
Deleted: F
Provision of General Building Services
Deleted: is
Deleted: a worthy one.
Appropriation History:
Appropriation Bill Appropriation G.A. Appropriation Comments
Name Number Date Amount
National Am. Sub. 6/24/2008 127 $850,000 Funding this project.
Underground H.B. 562
Railroad Freedom
Center
National Am. Sub. 12/28/2006 126 $2,000,000 Funded construction of the
Underground H.B. 699 freedom center.
Railroad Freedom
Center
NURFC H.B. 16 5/4/2005 126 $4,150,000 Funded construction of the
freedom center.
National H.B. 675 12/13/2002 124 $4,000,000 Funded construction of the
Underground freedom center.
Railroad Freedom
Center
National Am. Sub. 6/15/2000 123 $3,500,000 Funded construction of the
Underground H.B. 640 freedom center.
Railroad Freedom
Center
National Am. Sub. 3/18/1999 122 $500,000 Funded construction of the
Underground H.B. 850 freedom center.
Railroad Freedom
Center
Recommendation: The materials submitted by the Sponsor were reviewed and analyzed, and the
Commission Chief Analyst, Chief Project Manager, and Executive Director recommend approval of Deleted: project a
Resolution R-10-17, the approval of the Project and authorization of the expenditure of funds, under the Deleted: p
following conditions: Deleted: m
Deleted: s
Commission Actions This Meeting:
In Resolution R-11-XX, the Commission is asked to do the following: determine need for Project; determine Deleted: e
substantial regional support; determine the provision of general building services; approve the project and Deleted: d
authorize the expenditure of funds, pending certain requirements; and authorize the execution of legal Deleted: and recommend
agreements. Comment [kf12]: list conditions
Deleted: .
Executive Director
Exhibits
□ A Provision of Culture
□ E Financial Statements
However, if the Commission were to approve the funds and Federalization did not come to fruition, the
Commission would be responsible for placing those additional funds at risk.
Page 7: [4] Deleted Kathy Fox 11/21/2010 8:18:00 PM
, acceptable to the executive director at her sole discretion on
Page 7: [5] Comment [kf10] Kathy Fox 11/21/2010 8:25:00 PM
See note above about calculating the amount. It cannot be the full escrow.
Page 7: [6] Comment [kf11] Kathy Fox 11/21/2010 8:25:00 PM
need to discuss after TR reviews Q's from John Pepper's attorney
Page 7: [7] Deleted Kathy Fox 11/21/2010 8:20:00 PM
best option to ensure the Facility provides culture for the next fifteen years relies on Federalization,
and t