Financial analysis shows steep debt, revenue dropoff for Intermedia Arts

Just over a week after Intermedia Arts abruptly laid off its entire staff amid an existential crisis, the organization's dire financial situation is ­coming into focus.

With a pre-crisis annual budget of $1.4 million, the eclectic arts organization faced growing costs and declining revenue for the past several years. By early fall 2017, it had run out of money and could no longer meet its liabilities, including paying its staff.

"At this point, we as a board are focused exclusively on the future of the organization and the mission," said Intermedia board co-chair Omar Akbar, an investor with a background in law and mergers and acquisitions. "We really are racing to save it, and that's all I can say at the moment."

A Star Tribune analysis of tax records shows consistent expenses in recent years, even as Intermedia saw a precipitous drop-off in grants and other contributed income, which constituted the bulk of its funding.

The high water mark came in fiscal year 2012 (July 1, 2012 to June 30, 2013) when Intermedia took in $1.7 million in individual donations and grants, partly by landing a multiyear million-dollar commitment from the Kresge Foundation in 2013. In 2015, the last year for which tax records are available, Intermedia had grant and contributions income of just $535,241.

Expenses remained constant or grew slightly during that time. Payroll, however, rose by more than $100,000 from 2013 to 2015 — reaching $528,315, roughly equivalent to income from grants and donations for the same year. The organization handled the situation by running deficits — $335,743 in 2014 and $848,628 in 2015. Intermedia's latest tax returns, which are under audit and thus not available, likely show further deterioration in its financial standing.

Intermedia also has a ­mortgage of about $425,000.

Now the Twin Cities arts community is asking: Why was there such a steep drop-off in revenue, even as expenses stayed constant or grew? Why didn't the board rein in costs? And how did things grow so out of whack?

For 44 years, the multigenre arts organization served as a haven for vulnerable populations. It's especially known for fostering poets, dancers, visual artists and filmmakers. Mexican-American artists and patrons thronged to Intermedia for its Day of the Dead celebration on Sept. 28, the very day employees learned that they would be laid off.

"There's really no place like Intermedia in the Twin Cities for an emerging artist and curator like myself," said Johnnay Leenay, 24, a regular at Intermedia for five years and co-curator of its recent "Queertopia" show. "If you're an emerging artist, if you're gender-nonconforming, a person of color, an immigrant — this was a place where you always felt welcomed and loved. I'm mad at [the leadership] for not asking for community support much earlier instead of waiting until what looks like the last breath."

Intermedia is among a cohort of nonprofit arts groups that funders consider most vulnerable — those with budgets between $500,000 and $2 million. These organizations have little in cash reserves to help weather economic downturns and other turbulence. And while they're usually able to land grants for special programs, they often struggle to secure dollars for general operating funds.

In fact, similarly sized Twin Cities arts organizations such as the Southern Theater and the Soap Factory were rocked by near-death experiences in recent years. Intermedia itself had a prior close call during the economic downturn of 2008-09. It stayed afloat then by laying off staff, cutting expenses and rallying emergency financial help from foundations and individual donors. Overseeing it all was Intermedia's longtime leader Theresa Sweetland, who won a Sally Award in 2015, the year she left the organization.

Longtime Intermedia staffer Julie Bates MacGillis served as interim director for a brief period. In February 2016 — well into the 2015 fiscal year — the board hired visual artist and educator Eyenga Bokamba to steer the organization. Bokamba inherited a deficit that grew during her 18-month tenure, partly because she sought to strengthen the organization's commitment to its progressive ideals. For example, she put longtime contractors on staff, "partly because we would've been in legal jeopardy because some of these people worked like full-time employees but weren't treated as such," she said.

But her idealism and goodwill were not matched by a corresponding fundraising prowess.

"Intermedia is a complex organization that would be a challenge for the best of managers," said former board chairwoman Andrea Jenkins, who left in the spring to focus on running for public office. "It is a nightmare for those who were merely good."

The company moved to its current home in 1994, taking out a mortgage on coveted property at 2822 Lyndale Av. S. in the trendy Lyn-Lake neighborhood. Its property was last appraised at $1.5 million about 18 months ago, according to internal notes seen by the Star Tribune.

When it laid off its staff, Intermedia's board called a 45-day "timeout" to figure out solutions and assess its options. It has been meeting with funders and other stakeholders. It has also discussed the possibility of selling its coveted property. But even the board represents a vulnerability for Intermedia. The group is small — just seven members — and they have fiduciary responsibility for the organization's debts.

On its website, Intermedia's board posted a message to the community that it is "evaluating options to preserve the mission of the organization."

That could force the board to sell a building that served as a haven all these years.