Striving to preserve a vital community institution, the San Jose City Council voted 10-0 Tuesday night to bail out the struggling San Jose Repertory Theatre with a $2 million line of credit.
Separately, the council also voted to approve $34.1 million in expenditures recommended by City Manager Les White, including a new $4 million ``arts stabilization fund'' to finance the Rep's loan, as well as future bailouts of ailing arts groups.
The expenditures -- which arose from an end-of-year budget surplus -- also include $5 million to clean up toxic Watson Park.
The council declined to vote for one suggested expenditure: $500,000 to improve the ground floor of City Hall to make it ready for future restaurant tenants. Council members said they wanted to wait to see if future tenants might agree to make those improvements as part of a deal to operate out of City Hall.
Council members indicated they were approving the line of credit to the Rep to rescue the city's flagship theater company. Councilman Dave Cortese was absent for the vote.
``I need you, we all do, to be around for a long, long time,'' said Vice Mayor Cindy Chavez to Nick Nichols, the Rep's interim managing director.
Chavez is also a candidate for mayor.
The council waited until late in the 6 1/2-hour meeting to approve by a 9-1 vote the creation of the arts stabilization fund, as recommended by White. Mayor Ron Gonzales voted against the fund, saying it was an improper use of the city's surplus.
The money to the Rep comes with strings, however. It must develop a business plan by the end of the year and show it can raise $1.5 million in donations.
The troupe has also agreed to an ongoing rigorous scrutiny of its finances by the city, designed to catch red flags. The theater must submit monthly reports to the city, account for any divergence of 10 percent or more from its projected goals and maintain a $50,000 contingency fund. Also, a city official must serve as a non-voting member of the audit and finance committees of the Rep's board.
If the Rep fails to meet any of the conditions for the line of the credit, the city may call the loan.
``If the Rep goes into a tailspin next month, I want us to be able to bail out before they hit the ground,'' said Councilman and mayoral candidate Chuck Reed.
The city will disburse funds to the Rep on a monthly basis according to its needs.
It will have access to the revolving line of credit for 10 years, making monthly interest payments for the first five years, and paying interest and principal for the second half of the loan period.
The city will charge an interest rate comparable to other city investment returns -- about 4 percent. The funds will come out of the newly created $4 million arts stabilization fund.
The city manager's office recommended this plan because it sustains the Rep in the short term, buys the company time to retool its operations and protects the city's investment through close monitoring of the theater's turnaround plan.
``It would be devastating for the city to let this Rep theater just disappear,'' Councilman Forrest Williams said.
The San Jose Repertory Theatre is one of several arts groups seeking financial help from the city.
In early September, the American Musical Theatre also asked the city for a $1 million loan to help it recover from a cash-flow crunch, and asked the city to purchase a sound system it had installed at the Center for the Performing Arts for $470,000.
The city approved the sound-system purchase Tuesday as part of its approval of the budget surplus funds, and will vote on any additional bailout at next Tuesday's meeting. The city manager's office has recommended extending a five-year, $1 million line of credit to the 72-year-old AMT, which is retooling its programming by shifting away from costly touring shows to focus on homegrown productions.
The Mexican Heritage Corp., which manages the Mexican Heritage Plaza, also has asked for a large increase in its annual operating subsidy and forgiveness of $500,000 in debt.
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