The Heron Speaks: Building Our Building

In April of 2016, Vashon celebrated the opening of the Katherine L White Hall.  The multi-use, LEED Silver certified building features a state of the art performance hall with supporting back stage spaces, the 1,000 square foot Hans and Cindy Koch Gallery, and the 2,900 square foot Judith Fong and Mark Wheeler Lobby.

Since that time, “The Kay,” in keeping with its mission to support the island’s dynamic arts culture, has been host to a rich and diverse display of the arts from paintings to ceramics, fiber art, photography, dance, jewelry, chorale, chamber music, crafts, yoga, arts education, drop-in knitting, Zumba, community meetings, drama, jazz, folk, rock, auctions, quilts, lectures, children’s art, free outdoor movies, and more.

The story of how the building was financed and built has been told in chapters but never as a single story.  Like any complex story, this one is filled with twists and turns.  This report attempts to construct the entire narrative.  It is based on interviews with those involved in the process, as well as a thorough review of relevant documents.

Where to Begin?

It’s hard to pick a definitive starting date for this story.  While we can point to a fateful call in 2007 from an attorney representing an anonymous client, we could also point to a number of dates from the mid 80’s onward, and observe that Vashon’s growing arts community was even then competing for limited performance and gallery space.

In 1994 a report written by the noted non-profit consulting firm The Collins Group noted about the Blue Heron:

Performance space is “cozy” but is extremely limited.  The “Blue Heron is too small for what they want to do.”  While Vashon is fortunate to have the Blue Heron, there is little opportunity for program growth.  It cannot serve as the primary performance space for the island.

Fast forward to 2007.  The anonymous potential donor was of course Katherine L. White. Starting with an initial gift of $75,000, Kay’s generosity would ultimately total some $11 million dollars, and become the financial foundation on which the building bearing her name would be constructed.

From that first phone call to opening day, the building took nearly a decade to complete. During those years, the project progressed through numerous design revisions and accompanying cost increases based on input from community focus groups, changing permit requirements, a global financial crisis and ensuing recession, a booming building trade recovery that dramatically pushed the contractor’s bid upwards, and unanticipated costs incurred from an historically wet winter in the middle of construction.

As of April 2018, the $20.2 million project is almost completely paid for.  The remaining loan principal is approximately $750,000.  At the same time, VCA has secured gifts and pledges of about $3 million, and our cash on hand is approximately $700,000.

Kay, of course, was not alone in her support of this project.   Indeed, the building could not have been built without the generous financial support of more than 600 island households, the M.J. Murdock Charitable Trust, the remarkable efforts of State Senator Sharon Nelson, King County Executive Dow Constantine, and King County Councilmember Joe McDermott, and generous donations of time and money from Sellen Construction and LMN Architects.

Of equal importance were the endorsements from our “Partners in the Arts” . . .  Drama Dock, Vashon Island Chorale, Vashon Opera, Vashon Chamber of Commerce, Vashon Island School District, Vashon Island Fire Department, Vashon Island Youth Chorus, Voice of Vashon, Vashon Be Prepared, Vashon-Maury Heritage Association, Vashon Chamber Music, Vashon Center for Dance, Vashon-Maury Chamber Orchestra, both individual visual and performing artists, and audience members, VCA members and others.

The effort that one woman catalyzed did indeed become the community’s Arts Center.

The Generosity of Kay White

It is hard to overstate the importance of Kay White to this project, as a source of inspiration, as a driving force helping move the project forward at key intervals, and of course, as a source of financial support.

Kay White was most definitely in charge of her own philanthropy.  It is also true that her contributions — the amounts, structure, and terms or her various gifts and bequests — changed over the years in response to the progress of the project, and her desire to see the building completed in her lifetime.

Kay’s gifts came in stages and in different forms. Her first gift of $75,000 funded a feasibility study, which determined that we needed to buy the corner parcel where the Katherine L. White Hall now stands.  Kay then gave us the funds to cover the first-year’s payment on the purchase.

Soon after, Kay made a pledge of $6 million, which was later converted to a trust fund.  Income from that trust fund completed the purchase of the land.

There are always unanticipated challenges with a project of this scope and scale, and one of the early lessons was the challenge of non-profit construction financing. For example, we assumed early on that we would be able to secure bank financing using Kay’s pledge, and later her trust, as both security and a source of payment.  Our assumption turned out not to be true of the pledge and was even less true once the trust was created due to the fact the trust was not under our control.

The trust also introduced an unexpected actuarial risk to the project:  The final value of the trust would depend on 1) how long Kay lived, and 2) changes in the financial markets in the interim.

Nonetheless, we gratefully accepted the benefit of the trust, and carefully tracked the trust’s value with the changing market conditions.

Later in the project, Kay made an outright gift of $3.5 million in cash and marketable securities.  Importantly, she also named Vashon Allied Arts as the secondary beneficiary to two additional Charitable Remainder Trusts and transferred ownership of her home and surrounding properties through her estate.

In 2014, we worked with Kay and her attorney to restructure her initial trust into annuities that would meet her current living needs, as well as provide the cash we needed to begin construction.

From Concept to Construction

In 2007, we hired LMN Architects to do an initial concept study.  At that time the firm estimated project costs around $14 million for a 14,000 square foot facility.  Unfortunately, the initial concept did not include offices or support space.  So, it was back to the drawing board.

In 2008, we created a Campaign Feasibility Study Committee.  We hired the Alford Group as our campaign consultant and determined that as long as we could attract off-island grants, Vashon had the financial means to raise the necessary funds to build a new facility.

The study also confirmed a growing  need for a central place for the community to learn about, create, and enjoy art of all mediums.

  • Local arts organizations were growing at an exciting rate, and their needs for rehearsal and performance space had increased significantly.
  • Parents and students were clamoring for additional classes in both performing and visual arts.
  • Current space configurations in the Blue Heron were inefficient at best and allowed no room to grow. Despite best efforts to shoehorn, there’s still wasn’t enough room in the historic building for all of our teaching artists and program participants to share the facility.

There are a number of arts facilities on Vashon:  Open Space for Arts & Community, Vashon High School and several churches. None offered a multi-purpose community performance space with a flexible stage, an orchestra pit, fully functional technical capabilities, high-quality acoustics, dressing rooms, and other necessary back-of-house areas to appropriately showcase the variety of artistic productions that our Island arts consumers had come to expect — and deserve.

As we continued studying the project, it became clear we also needed to buy the two-acre parcel to the east of what is now our parking lot (which we have restored and preserved as wetlands).  Through another cash gift, we were able to complete that transact

In 2008 we were awarded a $1 million “Building for the Arts” grant from the state of Washington . . . an auspicious bit of timing given the onset of the global financial crisis.  In the end, we were unable to claim more than a sliver of that grant dealing us a significant setback.

In July of 2011, we presented our building plans to the community at large.  We set up booths at Strawberry Festival and held open houses at The Blue Heron seeking feedback.  More than 500 people stopped by and shared their thoughts, concerns, and ideas.  More design modifications ensued.

Around this time, Vashon High School began planning for a new building, which opened in 2014.  Our Board explored the possibility of collaborating with the school on a single new stage. In the end, however, the school district, our Board, and the respective architects determined that a joint venture would not adequately serve either organization.

From 2011-2014, the building design continued to evolve.  We eventually finalized on a 20,000 square foot facility with what we thought was a maximum cost estimate in the early fall of 2014 of $18 million, a significant increase from the initial concept and budget.

Among the project heroes are State Senator Sharon Nelson, King County Executive Dow Constantine, and King County Council Member Joe McDermott, all of whom believed in our vision. Through their great efforts, we were able to secure a 4Culture grant for $1 million and a state grant for $2 million, contingent on our ability to break ground by late 2014.

Indeed, by mid 2014 we were confident enough with our financing and cost estimates that we staged a ground breaking. The next step was to secure final bids and draft contracts.

In the space of less than two weeks, however, the projected costs increased by more than $3 million. Literally before our eyes, the Kay White Hall had become a $20 million project.  Our project manager was stunned.  Sellen, our contractor, was equally jolted by increases they claimed they had never seen before.  With the local commercial and residential real estate markets booming, subcontractors had no desire or need to get on a ferry to find work.  King Country added to the pain by forcing expensive and unanticipated changes to the site during the permitting process.

It was like the sky had fallen.

Build it or Lose it

As many people have noted, there was a period of time when VCA staff and trustees felt confident we could preserve the principal of Kay’s original trust as a long-term operational reserve.  This line of thinking was based on two key assumptions: (1) that we would be able to use what was then a Charitable Remainder Trust to secure a construction loan and pay that debt, and (2) that we would be able to raise sufficient funds to pay for a significant portion of the project costs and thus minimize the sums we would need to borrow.

The first assumption proved incorrect, especially in the years immediately following the global financial crisis of 2008.  Banks essentially stopped lending.  That we were undertaking to build a highly-specialized arts center on an island with 10,000 people made it doubly hard to secure financing.

Keep in mind we had already secured what we understood to be a conservative “cost to build” of $18 million.  The explosion in costs in late 2014 laid an axe to the second assumption.  We would have to borrow money.

This was hardly the first time the Board had been handed a major setback.  At different times, the Trustees faced a set of challenges and decisions that were described as “go/no go.” With each new obstacle, the Board had to determine if going forward was the financially responsible action to take.  At no time did the Board take the view that it would, “Build the building no matter the cost.”  On several occasions, the Board chose “no go” until new funding was secured.

But the major increase in costs in the space of two weeks was surely the most challenging.  At a special meeting, the Board of Trustees was presented with a confidential analysis that laid out three choices:

  • Attempt to borrow a large sum of money using the trust and our other assets as collateral. From past experience, we knew banks would likely not be willing to do this.  Even if this had been successful, the trust would have been encumbered and essentially unavailable for its intended purpose.
  • Continue with our ongoing capital campaign to cover the growth in estimated project costs. We were literally on a countdown clock to break ground by the end of 2014 or lose the $3 million in State and County grant.  Between the ever-increasing building costs and the loss of $3 million in grants, the funding gap would simply have been too large for private donations to fill.
  • Work with Kay to meet her ongoing income needs, while at the same time freeing more of her gifts and bequests to directly fund the construction of our building.

The Board took the third route.

In the meantime, Executive Director Molly Reed was able to raise an additional $1.65 million literally over one weekend.  We identified another round of cost take-outs.  Ultimately our contractor absorbed a significant percentage of the project’s total costs.  And most significantly, and with her blessings, Kay’s attorney reconstructed her Trust, giving us the financial resources we needed to finally secure a construction loan of $2.5 million at 4%, and begin construction.

Acting Responsibly, But Not Transparently

The part of the story easily lost is the grit, determination, and extreme sense of responsibility of the people closely involved in this project.  If you talk to Board members and staff who were involved at the time, the terms “high-wire” and “going from crisis to crisis” come up often.  On any given day, it seemed we could move forward, but then on the next, it seemed the project would stay stuck forever.  In the end, each problem became a puzzle, and each of those puzzles ultimately were solved.

It’s easy to forget from the vantage of 2018 what it felt like during the 2008 – 2012 timeframe.    It was a time of great financial uncertainty across the country and around the world, and a crazy time to be thinking about a major building project.

So, at the very time VCA was trying to push this project forward, the future of the capital markets and local real estate markets was unclear at best.

In hindsight, it is fair to ask why the Board didn’t talk more openly about the changes to Kay’s trust. In conversations with numerous Board members since, many note the following:

  • While it is true that the original Trust was dissolved, and a portion of the money allocated immediately to project finance, Kay and others did provide additional bequests and gifts that provided, and continue to provide, reserve funding.
  • As has already been noted, VCA today has a modest mortgage on the building and known financial resources of some $3.75 million dollars.
  • Kay was a private person and never comfortable with the idea of allowing people access to the details of her finances.
  • The Board approved, along with the plan to restructure Kay’s trust, a pro-forma plan that plots a path to a breakeven operation.This model assumes a level of operating losses stretching over ten years, with the gap closing each year from growth in both earned and contributed revenues.

In retrospect, a reasonable person could argue the Board could have been more transparent about the need to, and its decision to, restructure Kay’s trust.  As others have noted, the prospect of a sizable “stability fund” was a big part of the story particularly around 2010 – 2012.

Equally, it seems fair to conclude that Kay and the Board acted in good faith and with the best interests of the project, VCA, and the community in mind.  The drama involved with securing a “not to exceed” contract and starting work before the $3 million in grant money went away dominated everyone’s thinking at the time. Having said that, nobody involved, least of all Kay, was interested in building something that couldn’t be sustained and her estate left VCA with significant financial resources with that in mind.

Going Forward

We are deeply grateful to all the islanders who believed in this project and gave generously to support it. We are excited for the Center’s future and how it might serve the island in ways we can only now imagine. With the community’s input and support, together we will deepen and broaden the vital artistic culture that uniquely defines our island.

Like nearly every other arts non-profit, VCA cannot rely on tuition, ticket prices, and gallery sales to fully cover our operational costs.  To balance our budget, we will continue to seek gifts, donations, bequests, and grants to help fund our operations and build financial reserves for the future.  This means that the current Board and staff have work to do (and always will).

As this essay is being published, the Board and staff are launching a significant strategic planning effort that we expect will take the balance of 2018 to complete.  The process will involve numerous small group community meetings and will result in both a plan and an operating model that will reflects a healthy balance of broad access for our diverse community of art producers and consumers, and the financial stability to ensure a long and vibrant future for Vashon Center for the Arts.



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