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Colonial at center of latest South Hill dispute

South Boston NewsSouth Boston News
South Hill’s Colonial Theatre and managing member, Earl Horne, shown in a 2016 photo from his time as mayor.
SoVaNow.com / May 12, 2021
South Hill’s historic Colonial Theater was the chief point of contention at a South Hill Town Council meeting that ran almost five hours Monday night.

Council members mostly sat passively as a parade of citizens decried what they said was a push by a few people in town to defund the performing arts center. The Colonial is seeking $175,000 in operating capital from the Town of South Hill for the coming fiscal year starting July 1.

The debate swirled around what at least two Council members — Shep Moss and Gavin Honeycutt — said was a mistaken belief that there is a push to end town subsidies to the Colonial Theater.

“I support the Colonial,” said Honeycutt, who has appeared in more than five dozen performances at the downtown venue. “I just want transparency.”

Honeycutt is one of a handful of Council members and board directors of the South Hill Community Development Authority who oppose taxpayer funding for the Colonial through the CDA until the theater is willing to provide evidence of how that money is being spent.

Citizens who spoke at Council’s Monday night meeting shared their collective view that the theater is indicative of the community’s character — family friendly, welcoming, and nurturing. Most speakers ended their remarks with a plea for Council to appropriate $175,000 for the Colonial in the town’s 2021-22 fiscal year budget.

Members of Council’s budget and finance committee included the request in the FY2022 draft budget, though the panel recommended a reduction in funding to $155,000.

In recent months, theater operations and its funding have come under the microscope as new members of Council and the CDA board question how town dollars are being spent, and why the theater, which is a for-profit entity, is being subsidized by South Hill.

At the start of the town’s budgeting process, the CDA board, as owners of the theater facility, voted against including any monies for Colonial operations in the budget request it submitted to the Town. The reason for excluding the request was tied to the refusal of former mayor Earl Horne, the managing member of the Colonial, to provide any financial data regarding theater operations to the CDA.

Moss and other members of the CDA board said they were not comfortable asking for public dollars to be given to a for-profit entity, particularly one that has refused to show how it was spending these public dollars to benefit the public.

Instead, they asked CDA president and Town Manager Kim Callis to submit the funding request from the Colonial directly to Town Council as a separate budget line item, not as part of the funding request to the CDA. The CDA is an independent not-for-profit entity created to acquire, finance, and hold property, which the town is not authorized to do. It is funded by the town but governed by a board of directors appointed by the mayor and the chamber of commerce.

The theater building is owned by the CDA however entertainment programming and day-to-day operations are handled by two private entities — The Colonial Center of South Hill, LLC formed in 2007 and The Colonial Center of South Hill Manager, Inc. formed in 2009.

A separate lease agreement struck in 2009 between the CDA, as landlord, and Colonial Center of South Hill, LLC, as tenant, gives the private entity the exclusive right to operate the theater for a period of 40 years.

For more than a decade the town has approved a budget line item, as part of the CDA funding request, that includes money for the Colonial Theater. At first the money was used to pay down the debt service from a general obligation bond issued by the town to cover renovation costs. When the bond was repaid in 2018, the town continued to fund theater operations.

Monies given to the theater come from a one-cent tax increase on meals and lodging approved by Council in 2008.

While the initial plan was for the tax increase to remain in place until the debt was repaid, eight years later in 2016, Town Council, at the behest of then-Mayor Earl Horne, agreed to keep the meals and lodging tax at its current rate in perpetuity so long as the monies raised would support theater operations.

The one-cent increase raises about $400,000 per year, according to South Hill Town Manager Callis, but the theater has never sought the full amount since the bond was repaid in 2018. It only asks for enough money to cover operating expenses.

In addition to the money received from the town, the Colonial Theater collects revenues from event ticket and merchandise sales, donations, and other sources. The exact amount of that revenue and its sources are unknown since Horne, the titular head of both the LLC and the corporation, refuses to disclose that information to the Town or the CDA.

His reason, which is echoed by Callis, is that the Colonial Theater is a private entity and not subject to public disclosure of its revenues or expenses.

However, according to a provision in the 2009 lease agreement read into the record Monday night by Council and CDA Board member Moss, The Colonial Center of South Hill must, at a minimum, disclose its gross receipts to the CDA on an annual basis. The gross receipts are used to assess rent payments due from the theater each year.

The language read by Moss provides that “payment of percentage rent shall be accompanied by a certificate executed by an authorized officer of Tenant certifying the gross receipts for the calendar year. Upon receipt of the percentage rent and certificate, Landlord may request such supporting documentation as it determines is reasonable under the circumstances, in Landlord’s sole discretion, to verify the amount of Tenant’s gross receipts. Failure to provide the supporting documentation within one month is a default hereunder.”

Queried on this passage after the meeting, Moss said he could not say if the CDA as landlord has ever received any evidence of gross receipts from the Colonial Theater or, for that matter, if it has determined any percentage rent payment. Moss also reiterated a point he made during Monday’s marathon meeting that questions regarding the operations of the Colonial Theater could be resolved if Horne would simply allow the CDA to review the check register.

Moss’ call for transparency was repeated by Judy Jacquelin. She was one of the original members of the committee formed to restore the theater building. She asked for “straightforward answers” and transparency “to restore faith and trust” in the organization that operates the theater. “I want us to know what’s going on in this theater,” Jacquelin said.

For more than an hour in his comments to Council, Horne recounted the history of the Colonial Theater, explaining how his efforts garnered nearly $2 million in grants for the renovation of the building — $572,000 from HUD (U.S. Housing and Urban Development), $242,000 from VDOT (Virginia Department of Transportation), $834,550 from the Virginia Tobacco Commission, $35,625 from the Virginia General Assembly, $125,000 from USDA Rural Development and $20,000 in CDBG (Community Development Block Grant) money.

Horne said the balance of the renovation dollars was raised from a general obligation bond the town issued. Jacquelin during her comments said that several private citizens also made significant contributions to the restoration project. She said two unnamed persons each donated $35,000.

Horne said he took issue with individuals he did not name who have been talking “about it [the theater] in a negative way,” noting that they “never volunteered” at or for the Colonial.

He blamed “the China Project” — Horne’s words to describe the COVID pandemic — for some of the current problems the theater is facing, although he did not say what those problems were or how the pandemic contributed to them, aside from an explanation that The Colonial could have lost nearly $16,400 in revenues per show had it staged any performances in 2020. The theater has been idled due to the pandemic.

Horne explained why he was a good steward of the theater even in the midst of the troubles of the past year, keeping key people employed and not wasting funds on shows that few people could attend under COVID-19 crowd limitations.

He sharply criticized unnamed people who he said were accusing him of pocketing $80,000 from the sale of a grand piano that was gifted to the theater in honor of one of its founding and beloved board members, Martha Hall. The piano was not being used, according to Horne. The lift needed to move the piano onto the stage from its storage area in the basement was not operational.

Horne said he decided to sell the piano after consulting with Ursula Butts, president of the Ladies Performing Arts group. While valued at $80,000, the Colonial only received $34,500 for the sale, after commission. “I did not rat hole $80,000,” Horne said.

He called a suggestion that Council withhold funding for the Colonial until December or after it converts from a for-profit entity to a not-for-profit entity — something he says is in the works — “a blow to our gut.”

Steve High took exception to Horne’s claims of being fiscally responsible. He laid out for Council a number of grant opportunities that were and remain available to the Colonial since it was forced to close its doors for much of 2020. High said Horne never applied for a fully forgiveable payroll protection loan even though the Colonial could have received over $47,000 to pay its employees, and also did not act to secure separate grants of up to 45 percent of its 2019 gross revenues through a program for shuttered entertainment venues or additional monies through the Rebuild Virginia grant program.

For the most part, those who spoke Monday night turned out to support the theater.

Millie Bracey, who served as chair of South Hill’s Budget and Finance Committee when the town first began efforts to restore the theater, described it as a “tremendous asset and a drawing card” and called on Council to “do your duty” by agreeing to continue its funding.

Rev. Brian Siegle, pastor of the South Hill United Methodist Church, implored Council, “Whatever the problem is, we need to fix it. Let’s not take the funding it [the Colonial] needs to survive.”

Other speakers, many wearing stickers with the words, “I Support the Colonial,” shared their personal reasons for asking the town to continue financial support of the theater. They included Elizabeth Black and Sophie Crowder, both of whom started performing there at three or four years of age, Jimmie Keith Crowder, Michael Carter, theater director Doug Wright, Bill Solari, and Karen Terry, who oversees exhibits and art classes at the theater.

Local business owner and head of the merchant group The Shops of South Hill Robert Smith was one of the last speakers of the evening. He shared his belief that the questions being raised about the theater were not a sign of discord. “We’re here to help you” and “it’s good to ask questions,” said Smith.

In other business, Callis asked Council to “do two primary things” to facilitate the transition of The Colonial Center of South Hill from a for-profit to a not-for-profit entity. He asked Council to encourage the CDA to “adopt a motion to forgive the remaining balance of a Secured Credit Line Note on the CDA’s balance sheet.”

The proposed motion reads, “As part of the steps involved in dissolving the Colonial Center LLC and forming a Non-Profit organization to continue the Colonial Center’s mission to provide a venue and opportunities for people of all ages and backgrounds to experience and participate in a variety of arts and entertainment activities, and as neither the Town of South Hill nor the South Hill CDA have any outstanding debt related the Colonial Center LLC, I move to forgive the remaining balance of the Secured Credit Line Note as Amended and dated September 30, 2008 between the South Hill Community Development Authority (Noteholder) and The Colonial Center of South Hill LLC (Maker).”

According to Callis, the note was done for accounting purposes and no money was loaned by the CDA to the Colonial.

Moss questioned why would the CDA need to hold a promissory note from The Colonial Center of South Hill, LLC, if no money were loaned. Callis answered, that is how the lawyers and accountants said it needed to be recorded.

Callis also asked Council members to encourage the CDA to enter into a long-term lease agreement with the Colonial Center for the continued use of the facility.

He acknowledged that no formal action was required by Council on either motion for the non-profit formation to move forward. He felt that Council should make their wishes known to the CDA.

After Council member Mike Moody confirmed with Callis that their refusal to approve the proposed motions would not hinder the transition of the Colonial Theater to non-profit status, the motion failed by a vote of 6-2. Only Ben and Joseph Taylor supported the motion.

Moss, Moody, Honeycutt, Alex Graham, Delores Luster and Lillie Feggins-Boone voted against the motion. None of the members gave a reason for casting their vote either for or against Callis’ request.

As part of the discussion, Moss had also suggested that a long-term lease would tie the hands of future councils.

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