Project Analysis and Staff Recommendation National Underground Railroad Freedom Center

Project Analysis and Staff Recommendation
National Underground Railroad Freedom Center

Commission Assessment Team: Tony Capaci, chief analyst and Amy Rice, chief project manager
National Underground Railroad Freedom Center 50 E. Freedom Way

Cincinnati, Hamilton County
Facility and Project Sponsor Information
Executive
Summary: The National Underground Railroad Freedom Center (“Freedom Center,”
“NURFC,” or “the Sponsor”) is a museum that explores a range of freedom
issues. The center offers lessons and reflections on the struggle for freedom and
features three pavilions celebrating courage, cooperation, and perseverance.
The state appropriated $15.5M to the Freedom Center, which opened in August Deleted: .
of 2004 on the Cincinnati riverfront. The Commission previously approved Deleted: The Commission is holding in escrow
$14.65M of the funding, which has been reimbursed to the Sponsor. Under approximately $462K, provided by the Sponsor,
i
NURFC’s current operating structure, sustainability is an issue and the sponsor is
seeking approval of the $850K appropriation and release of a $462K escrow Comment [dpw1]: Can we wrap this paragraph
up with a summary recommendation at this point?
currently held by the Commission, in the event the Sponsor is unable to continue
to operate the facility. The Sponsor is requesting return of the escrowed funds in Comment [t2R1]: The last paragraph serves as
the summary. Kathy entered the verbiage in red
exchange for a guaranty in an equal amount. The guaranty funds would be used
to heat, cool, secure and insure the facility until a new cultural organization user Deleted: In such an unfortunate event, these
escrowed funds would be used to heat, cool,
could be identified, or the building sold to satisfy the Freedom Center’s obligation secure and insure the facility until a new cultural
to return to the Commission the amount of any outstanding unamortized portion organization user could be identified
of the state bonds. Deleted: .
Comment [dpw3]: I think it’s more clear to state
On February 11, 2010, the Commission authorized a Memorandum of this as “the unamortized portion of the state funds.”
Understanding (MOU) spelling out the conditions under which full approval could Or “the unamortized portion of the state investment”
be granted to the Freedom Center for the most recent appropriation of $850,000. Comment [dpw4]: I think this flows better
following the discussion of guaranty for the $850K
The MOU contemplates that the Freedom Center will obtain Congressional appropriation. The primary focus is project approval
approval to federalize the facility, and federal funding will be provided for a (and the discussion of this has been initiated via the
MOU); the secondary item is the Escrow.
Ohio Cultural Facilities Commission National Underground Railroad Freedom Center

1st Quarter 2011 Meeting Page 1 of 12
portion of the annual operating costs. NURFC’s vision is that the federal
government will establish a federal museum and an oversight commission to
commemorate the ending of chattel slavery in the United States. A discussion
draft of this legislation was completed in October 2009. Preliminary terms include
gifting 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 been approved, but the Freedom Center anticipates it
will be approved in 2011.
Subsequent to the February 2010 Commission approval of the MOU, the

Freedom Center has eliminated its debt, developed alternate plans for continuing
its operations, and has offered to provide a guaranty to secure the $850K
appropriation. Commission staff recommends approval of the $850K
appropriation, and the release of the $462K escrow contingent on the Sponsor
providing a guaranty for both the $850K appropriation and the $462K escrow as Deleted: the $850K
well as a business plan outlining operational contingencies in the event Deleted: and
federalization is delayed.
Facility Overview: The Center consists of a 160,000-square-foot facility located on the Cincinnati
riverfront that opened in 2004. Features of the facility include a museum,
interactive story theaters, computer networking to other Underground Railroad
sites, arts and education facilities, and a public forum space.
The Center is currently owned and operated by the Sponsor, an Ohio nonprofit
corporation 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 current appropriation will 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. In addition, the
Sponsor is requesting return of the $462K in escrowed funds, in exchange for a
guaranty in an equal amount.
Regional Support
Comment [dpw5]: If the Commission made the
finding in 2001, the substantiation/verification in
Matching Resources 2008 should follow the discussion of the original
finding. Given that it happened well after the
The Sponsor demonstrated a minimum of non-state matching resources equal to at least 50 percent of Commission finding, I think it is important to state it
the total state funding of $15,500,000 (a minimum of $7,750,000). On October 9, 2001, Substantial as a follow-up verification (which, of course, it was).
Deleted: Matching resources were
substantiated in November 2008.

Regional Support was confirmed by the Commission in resolution R-01-26. Matching resources were
substantiated in November 2008. The following table is provided for informational purposes. Comment [dpw6]: If the Commission made the
Source Amount finding in 2001, the substantiation/verification in
2008 should follow the discussion of the original
Cash-on-Hand $0 finding. Given that it happened well after the
Commission finding, I think it is important to state it
Funds Already Expended on Project $0 as a follow-up verification (which, of course, it was).
Irrevocable Written Pledges $0 Comment [dpw7]: In recent PASR’s, we have
eliminated lines with a zero for simplicity.
In-Kind Contributions (up to 50%) $0
Operating Endowment $0
Private Contributions $34,000,000
County Government $0
City Government $4,500,000
Federal Government $12,000,000
Site Valuation $0
Other $0
Total Matching Resources $50,500,000
Minimum Match $7,750,000
Funding Model
Old Adjustments New
Funding
State funding $ 15,500,000 $ - $ 15,500,000
Cash on hand - - -
Private contributions 63,000,000 - 63,000,000
County government - - -
City government 6,000,000 - 6,000,000
Federal government 22,200,000 - 22,200,000
Available funding sources 106,700,000 - 106,700,000
Other (future investment income)1 11,650,000 (11,650,000) -
Total funding sources $ 118,350,000 $ (11,650,000) $ 106,700,000
Project
Construction and soft costs2 $ 62,633,000 $ (30,095,954) $ 32,537,046
Exhibits 17,660,000 - 17,660,000
Fixtures/furnishings/equipment 2,790,000 - 2,790,000
Pre-opening expenses (other) 32,761,000 - 32,761,000
Project cost approved by Commission 115,844,000 (30,095,954) 85,748,046
2004/2005 Operating deficit (other) 1,900,000 - 1,900,000
Total project budget $ 117,744,000 $ (30,095,954) $ 87,648,046
1
Due to the bond settlement transaction, the future investment income projection was never realized
2
The original estimated construction cost of $62M shown above reflects the project cost used for past approvals however, the original
construction cost per the audit was $78M and was adjusted to reflect the impairment charge. The current value of the building per the
12/31/09 audit is $32M after the impairment charge of $42M.

The Project is complete and was previously funded as indicated in the table above. However, two Comment [dpw8]: I’m assuming that the
significant events have since transpired affecting the value of the Project. The first is that the narrative follows the table to maintain pagination; if
it’s possible to have the narrative precede the table,
consortium of banks settled $47M bond debt in exchange for $24M held in investments (a second it’ll flow a little better (but not a big deal)
position lien on the facility was held as collateral; the Sponsor states that the lien has been released) Comment [t9R8]: Yes, pagination was a
The second event is that, appurtenant to Generally Accepted Accounting Principals “GAAP”, because challenge so if you do not mind I would like to leave
the asset’s value is ‘impaired,’ management wrote down the carrying value of the facility from $78M to it.
$32M at FYE09. Therefore, when analyzing the funding for the project, Commission staff reviewed a Comment [dpw10]: Capitalize defined terms
completed project valued at $32M, without any debt, and calculated that the project is fully funded. Deleted: p
Comment [dpw11]: I’d spell out (even though
Project Need it’s likely that most readers know this)
Commission staff analyzed the Sponsor’s financial statements, including the following:
• 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” Comment [dpw12]: I prefer to standardize
acronyms to be “FY##” or “FY####” for consistency
and "FYE08") across all projects, but no big deal. I do think that
• four-year pro forma covering the periods from 2011 through 2014 this definition of the timeframe included in the FY is
really valuable.
Comment [t13]: Our standard on all the pasr we
Statement of Financial Position Summary have out include “FYE”
Comment [dpw14]: Covering what period?
YTD10 % Change FYE09 % Change FYE08 Deleted: ive
ASSETS:
Comment [dpw15]: I have not reviewed the
Current Assets numbers; I trust CB/TC more than my eye on this. I
Unrestricted $ 3,248,185 9.21% $ 2,974,206 -61.47% $ 7,718,885 will, however, continue to review these sections for
Restricted $ - NC $ - NC $ - general flow and continuity.
Long-Term Assets $ 32,639,131 -16.09% $ 38,897,769 -62.27% $ 103,096,322
TOTAL ASSETS $ 35,887,316 -14.29% $ 41,871,975 -62.21% $ 110,815,207
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). Comment [dpw16]: Since current liabilities
does not contain the current portion of long-term
debt (as in the past), this must simply be Accounts
YTD10, the Sponsor had no debt; therefore, a viability ratio was not calculated. Payable. Is this worth noting for clarity, or am I
thinking too much?
Liquidity: Comment [t17]: This is consistent with how we
have handled other “no debt” projects

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 are not used to calculate the current ratio Comment [dpw18]: Since there are no restricted
because they generally are not available to service current liabilities. Including restricted current assets in the current assets, I’d either remove this Note or change
it to a more general instructional “…are not used…”
calculation could have the effect of artificially inflating the current ratio.) A current ratio of greater than 1:1 is
Deleted: were n
considered acceptable.
YTD10 % Change FYE09 % Change FYE08
Current Ratio 5.25 8.58% 4.84 -32.58% 7.17
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.
Leverage:
Leverage is the degree to which a Sponsor is borrowing money. A measure of leverage is debt ratio (debt Deleted: sponsor
divided by total assets).
YTD10, the Sponsor has no debt; therefore, a debt ratio is not calculated.
Change in Net Assets: Comment [dpw19]: There is such a huge

Change in net assets examines changes over several years to see where an entity is headed. The reader change from FY09 to FY10 that it seems to warrant
a brief synopsis of why / what this means); for
will note a ($42M) write down of the building in FYE09 due to GAAP reporting and a $24M Extraordinary example, the +21M is a -$3M when you exclude the
Gain in YTD10 due to debt settlement. extraordinary income. This is better than in the past,
but do we want to say more about this?
Operating Change in Net Assets Summary
YTD10 % Change FYE09 % Change FYE08 Comment [dpw20]: Is the “P” in % Change
intentional or a typo?
Total Revenues (net of capital income raised) $ 5,000,030 17.17% $ 4,267,276 -45.19% $ 7,785,726 Comment [t21R20]: Intentional (it means
Total Expenses (net of capital expenses) $ 5,670,869 -30.48% $ 8,157,132 -22.94% $ 10,584,822 positive; i.e. going from a negative to a positive)
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)
Pro Forma Review:

A pro forma review is a projection showing anticipated expenses and revenues for the period.

Comment [CB22]: LPS provided updated pro
forma on 01/14/11: it does not include
federalization. These can be deleted.
Deleted: ¶ ... [1]
Deleted: ¶
¶
Footnote: According to the sponsor
Operating Pro Forma Summary Comment [dpw23]: Look out for this stray mark
Revised - 01/14/2011 / word.
FYE11 FYE12 FYE13 FYE14 Deleted: , if legislation approving federalization
is passed prior to September 30, 2011, $3M will
be remitted by the federal government to the
Total Revenues (net of capital income raised) $ 4,811,900 $ 4,198,000 $ 4,271,000 $ 4,419,000 Freedom Center immediately. For purposes of
Total Expenses (net of capital expenses) $ (5,132,416) $ (4,192,589) $ (4,263,000) $ (4,335,000) the pro forma, Commission staff reported the
federalization income on the accrual basis and
Pre-Depreciation Surplus/(Deficit) $ (320,516) $ 5,411 $ 8,000 $ 84,000 recognized only three-twelfths of the projected
remittance in FYE11.¶
Depreciation $ (3,325,576) $ (3,325,576) $ (3,325,576) $ (3,325,576)
Post-Depreciation Surplus/(Deficit) $ (3,646,092) $ (3,320,165) $ (3,317,576) $ (3,241,576) Sp Deleted: which
onsor Deleted: has
Deleted: ve
In assessing the Freedom Center’s sustainability, Commission staff reviewed the impact of several events Deleted:
that occurred over the last several years, and which affect the Freedom Center’s current financial position. Deleted: must be
Arguably, the most significant event was: The consortium of banks that previously held the debt for the
Deleted: lobbying
Freedom Center has exchanged $47M in local bond debt for approximately $24M the Freedom Center was
holding in investments. The difference between the amount owed and the amount paid is shown as Comment [dpw24]: Per fiscal year?
extraordinary revenue. This is a one-time gain and is not operating revenue. The net result of the bond Comment [dpw25]: I’d probably eliminate the
settlement is an extraordinary gain of approximately $24M in YTD10 and the elimination of interest expense “one of” b/c it’s explained in the next sentence.
and bank fees going forward. Deleted: S
Deleted: sponsor
The Freedom Center is actively asking Congress to pass legislation whereby the Freedom Center would be Deleted: Federalization…ederalization would
... [2]
‘gifted’ to the Federal Government and the Federal Government would contribute $3M of operating revenue
Deleted: only
for the continued operations for each fiscal year. Per a review of the Sponsor’s projections federalization
would result in a net operating surplus of approximately $1.5M, assuming their other fundraising activities Deleted: sponsor…ponsor’s pro-forma ... [3]
meet the goals specified. However, due to the uncertainty of such legislation passing, Commission staff Deleted: account for
analyzed the Freedom Center’s sustainability as if federalization will not occur and included for the Deleted: Federalization
Commission’s review only the Sponsor’s pro forma which does not assume federalization. Deleted: , for the Commission review
Comment [dpw26]: What is the impact moving
Also material to the Freedom Center’s financial position is the adjustment of the carrying value of the forward? We’re now in discussion of forecasting, so
building on the FYE09 financial statement. The previous building balance of $78M in FYE08 was written it seems relevant.
down to $32M in FYE 09 as a result of FAS 144, the GAAP pronouncement applicable to Accounting for the Formatted: Font: 11 pt
Impairment or Disposal of Long-Lived Assets. The $42M write down increased the FYE 09 deficit to ($49M). Comment [dpw27]: Do we know what the FY-
end projection is?
Additionally, the Freedom Center continues to operate at a deficit, as is evidenced by a pre-depreciation, Comment [t28R27]: No, at this point we do not
pre-extraordinary gain operating deficit of ($670K) at YTD10, a pre-depreciation deficit of ($3.9M) at FYE09, know the fye 10 projection, nurfc does not want to
and operating deficits in previous years. However, the Freedom Center’s Executive Committee has commit to it although we should have unaudited... [4]
approved a new budget and business plan for FYE 2011 and FYE 2012 and although the pro forma Deleted: loss
indicates a pre-depreciation deficit of ($320K) for FYE11 in FYE12-FYE14 small pre-depreciation surpluses Comment [dpw29]: For clarity, I’d state the
... [6]
are projected. This business model, which forecasts how the Freedom Center might become sustainable
Deleted: , and the Sponsor-prepared pro forma
... [5]
without federalization, relies on further operating cost cuts and maintaining elevated levels of private support
Deleted: s exceeding ($1.8M) for the out ... [7]
(as compared to FYE 09) in FYE 2011 and FYE 2012. Actual results of private support increased from 2009
to YTD10 by substantial margins, approximately 160% at YTD 10 (nine months of actual activity) and this Deleted:
increased level of private support is projected to drop in 2011 and rise again in 2012 to approximately the Deleted: indicates …orecasts how the ... [8]
Deleted:

2010 results. Also, projected total operating costs in 2012 are about half of actual total operating costs in Deleted: balances
FYE09. Deleted:
Although the Commission staff is hopeful the sponsor will meet its objectives regarding the approved 2011 Comment [dpw30]: It seems incongruent to say
and 2012 budgets and cash flows from the Freedom Center Executive Committee, Commission staff has its we’re “cautiously optimistic” about the budgets, but
have reservations about the two key components...of[9]
reservations as to whether fundraising levels can continue to be maintained and operating costs reduced
Deleted: if
further. Noteworthy to the Commission staff’s assessment regarding fundraising projections is the Board
Support projection of $750K for FYE 2011, $880K for FYE 2012 and increased levels for the remaining Deleted: d
years. Such support by the Board indicates overall confidence in the business plan; however, Commission Deleted:
staff’s reservations go beyond that which the board controls and are primarily due to the effect a down Comment [dpw31]: This discussion shifts...from
[10]
economy typically has on non profits: In order to reach and maintain projected fundraising levels, grants and
Deleted: ..
contributions from the Federal Government (Dept of Education), the City Government, Corporations, Board
members and individuals would have to be realized. In a slow growing or uncertain economy this may not Deleted: .
be possible to the extent the Freedom Center is projecting. Comment [dpw32]: See the agency writing
... [11]
Deleted: funds
Although Commission staff based its recommendation on the most conservative projections which do not Deleted:
include federalization, if federalization were to pass it would result in the Facility being gifted to the Federal
Deleted:
Government (free and clear of any liens; it is not yet clear what will be required regarding the Commission’s
property interest in the facility. The Commission has a leasehold interest, which was required under the Deleted: contributed
“old” Ohio Building Authority bonds.) Under the federalization scenario, the U.S. Government would operate Deleted: plausible
the museum commemorating the ending of chattel slavery in the United States. Comment [kf33]: TC/CB evaluate accuracy
... of
[13]
Deleted: It appears that the Freedom Center is
... [12]
According to the Sponsor, if federalization takes place, the Freedom Center expects to receive
Deleted: sponsor
approximately $3M/year in federal operating revenues on a permanent basis, enabling the Freedom Center
to generate operating surpluses starting at $1.15M and increasing slightly for each fiscal year end. Deleted: Sponsor
According to the Sponsor, Senator Sherrod Brown supports the legislation that was discussed in draft form Deleted: ships or gifts are received. ¶
in October of 2009, and the Freedom Center management is hopeful that the legislation will be passed. The Comment [dpw34]: Everything above this
...point
[14]
Sponsor anticipates “that the funds would be received in the [fourth] quarter of 2011, if [it is] successful in Comment [t35R34]: I am not sure if headings
... [15]
getting the language signed and passed prior to [September 30, 2011].”
Deleted: Federalization
Even if the effort to secure federalization is successful, there remains a challenge in meeting operating cash Deleted: F
flow needs until such time as the Federal funds are received. A review of the liquidity position calls into Deleted: sponsor
question the ability of the Freedom Center to meet its obligations in the first quarter of 2011 and beyond. Comment [dpw36]: What is the timeframe?
Commission staff requested and reviewed a Sponsor-prepared cash flow schedule that starts in the fourth
Deleted:
quarter of 2010 and ends at the fourth quarter 2011 and another cash flow for fiscal year 2012. The cash
Deleted: for each twelve month period ... [16]
flows exclude federalization funds and assume Commission funding of $850K and the return of the $462K
escrow in February of 2011. Each cash flow indicates positive cash balances throughout 2011 and 2012 if Deleted: optimistic
financial projections are met. Comment [dpw37]: Federal FY or calendar?
Deleted: a
Deleted: s
Deleted: Federalization
Deleted: s
Comment [kf38]: CB/TC verify
Comment [CB39R38]: Correct
Comment [kf40]: Need to update based upon
... [18]
Comment [kf41]: This phrase may no longer be
... [19]
Deleted: and
Deleted: until federalization is anticipated
... to
[17]
Comment [dpw42]: And the state dollars...
are[20]

Proportion of Revenue
Proportion of Revenue
Revenue Category FYE09 YTD10 2011 Est 2012 Est 2013 Est 2014 Est
Private Support 21% 62% 49% 71% 67% 69% 80%
Private Support
Government 22% 15% 29% 4% 7% 6% 60%
Earned 57% 23% 20% 23% 23% 23% Government
Other 0% 0% 1% 2% 3% 3% 40% Earned
Total 100% 100% 100% 100% 100% 100% 20% Other
0%
FYE09 YTD10 2011 2012 2013 2014
Est Est Est Est
Trends in Operating Results

($ Thousands) FYE09 YTD10 2011 Est 2012 Est 2013 Est 2014 Est
Operating Revenues
Private Support
Board Support 750.0 880.0 900.0 950.0 Revenue ($000)
Individuals 303.0 305.0 308.0 311.0
Corporations 625.0 705.0 720.0 730.0 6,000.0
Trust/Foundations/Charities 650.0 948.0 963.0 973.0
MLK 38.9 20.0 20.0 125.0 5,000.0
IFCA, net 150.0
Total Private Support 1,159.3 3,083.8 2,366.9 3,008.0 2,911.0 3,089.0 4,000.0
Year-over-year change 166% -23% 27% -3% 6%
3,000.0 Total Earned Income
Government Total Government
Department of Education 275.0 50.0 200.0 150.0 2,000.0
Total Private Support
OCFC 850.0 0.0
City of Cincinnati 300.0 100.0 100.0 100.0 1,000.0
Total Government 1,182.4 744.4 1,425.0 150.0 300.0 250.0
Year-over-year change -37% 91% -89% 100% -17% 0.0
Earned Income
Admissions 595.0 600.0 619.0 631.0
Facility Rental 190.0 200.0 198.0 202.0
Retail 140.0 140.0 146.0 149.0
Membership 40.0 40.0 42.0 43.0 Expenses ($000)
Café 15.0 20.0 15.0 15.0
Total Earned Income 3,107.9 1,171.9 980.0 1,000.0 1,020.0 1,040.0 9,000.0
Year-over-year change -62% -16% 2% 2% 2%
8,000.0
Other Income 70.0 100.0 115.0 130.0 7,000.0

Year-over-year change NC NC 43% 15% 13% 6,000.0
5,000.0
Total Revenues 5,449.7 5,000.0 4,841.9 4,258.0 4,346.0 4,509.0 Total Non-personnel
4,000.0 Costs
Year-over-year change -8% -3% -12% 2% 4%
3,000.0 Total Personnel Costs
Expenses 2,000.0
Total Personnel Costs 4,078.6 2,835.4 2,453.2 2,085.2 2,127.0 2,170.0 1,000.0
Total Non-personnel Costs 4,078.6 2,835.4 2,709.2 2,167.4 2,211.0 2,255.0 0.0
Total Expenses 8,157.1 5,670.9 5,162.4 4,252.6 4,338.0 4,425.0
Year-over-year change -30% -9% -18% 2% 2%
NET SURPLUS/(DEFICIT) (2,707.4) (670.8) (320.5) 5.4 8.0 84.0
In reviewing the projected cash flow, Commission staff notes that projected operating cash outflows are
significantly less than recent actual operating costs shown in the prior year audit and the YTD financial
statements. The projected decreases are due to planned cuts in expenses for fundraising and professional Comment [dpw43]: planned cuts?
lobbying. In response to inquiries as to how projected fundraising cash inflows will be achieved when Deleted: expenses
cutting fundraising expenses, the Sponsor responded that they hired a new director of development, which Deleted: sponsor
should enable the Freedom Center to cut fundraising costs while achieving their fundraising goals. The
Comment [dpw44]: There must be some
Sponsor’s response regarding the impact of cutting professional lobbying expenditures before federalization fundraising metrics out there that must be helpful in
is secured was to clarify that the lobbyist will not stop working, but will be working pro bono. substantiating or refuting their claim.
Comment [dpw45]: …, reducing the
In order to achieve the positive cash balances anticipated in the projected cash flow, fundraising cash fundraising expenses by…
inflows must continue to be realized at a level which has only recently been accomplished, as indicated by Deleted: :
the year to date financials, but which is substantially higher than years past. In evaluating the Freedom
Center’s ability to achieve the fundraising cash inflow, Commission staff notes the Freedom Center and its
new director of development must contend with a challenging environment for fundraising, including an
uncertain economy, possible donor fatigue, and the effect the write down of the building may have on
potential donor enthusiasm. Also, the fundraising outlook may be influenced positively by certain factors

including the effect the debt settlement has on donor perspective as well as the prospect of federalization. Deleted: ,
Commission staff concludes that there remain formidable uncertainties regarding achieving the fundraising Deleted: only one alternative is available...to[21]
levels necessary to create the projected positive cash balances. Deleted: Federalization…ederalization is...not
[22]
Deleted: can
In formulating its recommendation, the Commission staff observes that if federalization is not successful the
Deleted: ,.
Freedom Center must achieve elevated fundraising levels while further reducing payroll and other operating
costs. Because operating costs have been cut drastically in years past, they may not realistically be cut Deleted: and because operating revenues
... [23]
much further. Nationally-recognized bond council created an amortization schedule for the outstanding Comment [dpw46]: Do we mean the ... [24]
principal related to the Sponsor. The outstanding balance of state funds was included as an appendix in the Deleted:
Second Amendment to the Base Lease dated July 1, 2008. According to this schedule, the dollar amount of Deleted: It
outstanding bonds allocated to the Freedom Center is $6.6M as of February 2011 out of an original balance
Deleted:
of $14.7M. The outstanding bonds will be paid off by the state over the next 9 years. The unamortized
balance of the state bonds decreases by approximately $1M per year for the next several years. Therefore, Deleted: Commission staff calculated …he
... [25]
the state’s exposure decreases rather substantially each of the next several years. These calculations do Deleted: 7.4
not include the $850K currently being considered for approval by the Commission because this new $850K Deleted: October …ebruary 2010 ... [26]
would be guaranteed to be returned if the Freedom Center fails to continue operations. Commission staff Deleted: 10
evaluates the risk to the state as ‘high’ if the Sponsor were to stop operating in 2011 or 2012. Therefore, the
Deleted: …he unamortized balance of the
... [27]
alternative of not approving the $850K in state funds or the $462K in escrow funds, and thereby
exacerbating a very difficult financial position, may lead to closure of the Freedom Center before Comment [dpw47]: 6.6M divided by 9 is... [28]
733K
federalization can be approved or the new business plan be implemented. Approval for release of the Comment [t48R47]: It is $1M for the next
... [29]
$850K state appropriation and return of the $462K escrow appears to be necessary to keep the Freedom Deleted:
Center open while they continue to pursue federalization or the implementation of their new business plan. Deleted: sponsor
Since these two amounts would be guaranteed under the Freedom Center’s proposal, release of these
Comment [dpw49]: “is” or “can be”
funds does not increase the risk to the State.
Deleted:
Because the state’s exposure regarding the unamortized amount of the bonds decreases substantially over Comment [dpw50]: keep
the next several years, risk to the state is reduced if the Commission’s actions assist the Freedom Center in Deleted: ,000…and return of the $462K ... [30]
continuing its operations. Accordingly, Commission staff recommends the approval of the $850K Project
Deleted: Project …ppears to be necessary to
... [31]
and return of the $462K escrow; however, Commission staff recommends making these approvals only
Comment [jd51]: TC & KF to revisit on 1/10/11
conditionally in order to mitiagting any additional risk. Commission staff recommends the Commission
approve the Project contingent on execution of a guaranty in an amount equal to the proposed project Deleted: implementing
approval for the release of the most recent appropriation of $850,000. John and Frances Pepper have Comment [kf52]: Discuss w/ KF rewriting...this
[32]
agreed to sign the guaranty. Mr. Pepper is a founding board member of the Freedom Center and Chairman- Comment [kf53]: CB/TC to redraft based...
upon
[33]
emeritus of Proctor & Gamble. Such a guaranty would ensure the Commission is not placing the new state
Deleted: Since
funds at risk; in addition, this contingent approval reduces the state’s risk associated with state funds
Deleted: it behooves the Commission to ...
…isk
[34]
previously paid out because the Freedom Center will have time to continue to seek federalization or another
long term operating strategy. Should the Freedom Center cease operations before the unamortized amount Deleted: the
of bonds decreases to zero, the state would either 1) identify a new non-profit or local government cultural Deleted: p…oject and return of the $462K
... [35]
or educational organization to provide programming in the building, or 2) utilize the state’s first lien position Comment [dpw54]: making these approvals
... [36]
and sell the facility (recently written down to $32M by the auditors) to repay the unamortized bonds.
Comment [dpw55]: this seems strong: can
...we
[37]
Deleted: eliminate
The Commission holds approximately $462K in an escrow fund for a “management transition” in the event
the Freedom Center is unable to continue to operate. The Sponsor is requesting return of the $462K in Comment [dpw56]: Proposed project approval
... [38]
escrowed funds, in exchange for a second guaranty, signed by John and Frances Pepper. The guaranty Deleted: current appropriation o
would be called in if the Freedom Center defaults under its legal agreements with the Commission and the Deleted: f
guaranty funds would be used to pay costs of heating, cooling, insuring, and securing the building until such
Deleted: ,…a founding board member of...
the[39]
time as another appropriate organization could be identified to operate the building. Commission staff notes
Comment [kf57]: Need to revisit in light of
... new
[41]
that return of the $462K in escrowed funds in exchange for a guaranty places the Commission in a position
equitable to the current position, so long as the guaranty provides that the guaranty amount account for the Comment [jd58]: TC & KF to revisit on 1/10/11
accrual of interest, equal to the earnings that would be accrued were the escrowed funds to remain in the Deleted: Commission staff also recommends
... [40]
state treasury. Deleted: 0… in an escrow fund for a ... [42]

Finally, noteworthy for the Commission’s deliberations regarding the Freedom Center, is the apparent
Federal requirement that the Facility be free of all liens in order for federalization to take place. As we
understand it, this criterion would require the Commission to release its property interest in the facility at the Deleted: first lien position on
point in time when the federal government takes ownership and commits to providing operating funds. The
Commission may be prohibited, by the bond documents pertaining to the bond money which funded the
original appropriations, from releasing its property interest in the facility. Therefore, Commission staff is
recommending the Sponsor be required to provide an opinion from nationally-recognized bond counsel on Deleted:
this subject prior to federalization and prior to the Commission releasing or subordinating its property Deleted: issue
interest. As stated previously, it appears that the lower risk alternative at this point in time is to approve the
release of the state funds in exchange for a guaranty in an equal amount. The issue of the release of the
Commission’s first lien position on the facility is a decision for a future point in time.
A review of the Sponsor’s solvency, liquidity, leverage, change in net assets and pro forma indicates it is
marginally likely the Sponsor will be able to operate the Facility and present culture to the public over a Comment [dpw59]: It seems like we should
sustained period of time in accordance with Section 3383.07 of the ORC. adapt this wrap-up more to the analysis above. i.e.,
describe the likelihood of success if no federalization
as well as the likelihood if federalization happens.
See Exhibit E for a summary of the Sponsor’s financial statements.
Deleted:
Provision of General Building Services
Although experienced in the provision of general building services at the Facility, the Sponsor has
marginal financial capacity to continue providing general building services at the Facility. In
anticipation of the Sponsor completing the proposed Facility transfer to the federal government or fully
implementing its new business plan, Commission staff conditionally confirms the Sponsor continue to Comment [dpw60]: What does this mean?
provide these services as permitted by section 3383.07 of the ORC. Either the Commission confirms or they confirm if X
happens. What is X, and can it happen before the
execution of legal agreements for the new $850K?
Alternatively, the condition could require additional
documentation of payment to vendors, or some other
check-in if we this that would be beneficial (and
enforceable).
Deleted: ,
Approval of the Project and Authorization of the Expenditure of Funds
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
Railroad Freedom
Center
National Am. Sub. 3/18/1999 122 $500,000 Funded construction of the
Railroad Freedom
Center
Cincinnati Riverfront Am. H.B. 9/17/1996 121 $166,668 Architectural fees and
Development 748 continuing development
work on the freedom
center.
Deleted: and
Cincinnati Riverfront Am. H.B. 9/17/1996 121 $333,332 Funded construction of the
Development 748 freedom center. Deleted: ,
Total $15,500,000 Formatted: Indent: Left: 0.75", No bullets or
numbering
Recommendation: The materials submitted by the Sponsor were reviewed and analyzed, and the Comment [kf61]: Add to Resolution
Commission chief financial analyst, chief project manager, and executive director recommend approval of Comment [jd62]: TC & KF to revisit on 1/10/11
Resolution R-11-06, the approval of the Project, authorization of the expenditure of funds and return of the Comment [kf63]: Need to revisit given recently
escrowed funds, subject to the following conditions: provided info?
Deleted: ¶
1) The Sponsor provides a guaranty by John and Frances Pepper in <#>The Sponsor provides a business plan,
approved by the Freedom Center board of
conformance with the Commission’s standard form guaranty document, directors, addressing the necessary steps the
guaranteeing the $850,000 appropriation; Freedom Center will have to undertake in order
to meet the potential needs should the Sponsor-
prepared projected cash flow positive balances
2) The Sponsor provides a guaranty by John and Frances Pepper in not be met;¶
conformance with the Commission’s standard form guaranty document, Comment [dpw64]: We should consult counsel
guaranteeing an amount equal to the current amount held in escrow plus the on the impact of making this approval conditioned
amount of interest that would be earned were the funds invested in the state on things we want them to do at a point in time that
will likely be well beyond when we disburse the
treasury; funds. What is the remedy if they fail to / choose not
to do this?
3) Prior to federalization, the Sponsor provides to the Ohio Public Facilities
Also, we need to be careful not to imply the
Commission (the “OPFC”), the Treasurer of State and the Commission an Commission’s approval of the transfer of property
opinion of nationally recognized bond counsel, acceptable to the Treasurer of conditioned on these two items (#3 and #4) alone –
State, and addressed to the OPFC, the Treasurer of State and the might we need something else in the future? The
agreements require the Commission’s approval for
Commission, stating that the financing structure, ownership and/or them to transfer property, and typically, the
operational/management structure will not a) adversely affect the validity of agreements require that the approval of such transfer
shall not be unreasonably withheld. It seems to me
the state-issued tax-exempt bonds; and b) will not adversely affect the that in this case, it may be very reasonable to
exclusion of the interest on the state-issued tax-exempt bonds from the gross withhold approval pending the review (and a vote) of
income of the holders of the state-issued tax-exempt bonds for federal the entire Commission. Counsel may want to
recommend a specific course for reviewing and
income tax purposes; approving NURFC’s request to transfer property,
which would then impact how we need to write these
conditions.

4) Prior to federalization, the new financing structure, ownership and/or Deleted:
operational/management structure for the project and Sponsor organization is
approved as acceptable to the Commission Secretary-Treasurer, in his/her
sole discretion; and Comment [dpw65]: We don’t contemplate what
happens if federalization doesn’t happen or does not
happen by a certain point in time. At some point,
5) Provide evidence that the bank lien on the facility has been released. they need to trigger Plan B – what is that point and
what do we want to know/see/aprove?
Commission Actions This Meeting:
In Resolution R-11-06, the Commission is asked to do the following: confirm need for Project; confirm
substantial regional support; confirm the provision of general building services; approve the project and
authorize the expenditure of funds and return of the escrow, pending certain requirements; and authorize the Comment [kf66]: Add to Resolution
execution of legal agreements. Comment [dpw67]: Subject to certain
conditions
Chief Analyst Chief Project Manager
Executive Director
Exhibits Formatted: Indent: Left: 0"
□ A Provision of Culture Formatted: Indent: Left: 0"

Formatted: Indent: Left: 0", Hanging: 0.25"
□ B Detailed Project Budget Formatted: Indent: Left: 0"
□ C Facility Project Info
Formatted: Indent: Left: 0"
□ D Project Team Resumes and qualifications Formatted: Indent: Left: 0", Hanging: 0.25"
Formatted: Indent: Left: 0"
E Financial Statements
□ F Evidence of Local Match Formatted: Indent: Left: 0"

Page 6: [1] Deleted Chris Bruner 1/18/2011 8:02:00 AM
Page 6: [1] Deleted Chris Bruner 1/18/2011 8:02:00 AM
Page 6: [2] Deleted Chris Bruner 1/19/2011 1:03:00 PM

Federalization
Federalization
sponsor
sponsor
Page 6: [4] Comment [t28R27] tonyc 1/20/2011 2:32:00 PM
No, at this point we do not know the fye 10 projection, nurfc does not want to commit to it although we should have
unaudited FYE 10 numbers next week. However, Kathy does not want to hold up the pasr for it. (i agree; even if
nurfc breaks even it will not change our recommendation)
Page 6: [5] Deleted tonyc 1/18/2011 9:11:00 AM
, and the Sponsor-prepared pro forma indicating pre-federalization losse[dpw1]
Page 6: [6] Comment [dpw29] davew 1/20/2011 11:25:00 AM
For clarity, I’d state the FY11 deficit first, then explain the projected surpluses coming in the out years.
s exceeding ($1.8M) for the out years.
Page 6: [8] Deleted Kathy Fox 1/19/2011 6:38:00 PM
indicates
indicates
It seems incongruent to say we’re “cautiously optimistic” about the budgets, but have reservations about the two key
components of the forecast. It seems like we need to restate the sentence to carry a singular message.
This discussion shifts from concerns re.- board participation to concerns re.- all fundraising.
See the agency writing style guide re.- capitalization.
It appears that the Freedom Center is in danger of not continuing is a going concern unless
federalization is realized or an extraordinary set of
Page 7: [13] Comment [kf33] Kathy Fox 1/14/2011 7:14:00 PM
TC/CB evaluate accuracy of this sentence based upon new business plan
Everything above this point seems to discuss projectsions without federalization, and below make note of significant
I am not sure if headings will do the trick however i added the first sentence in the paragraph which i think should
clarify the transition from not considering federalization to considering it.
Page 7: [16] Deleted tonyc 1/20/2011 3:35:00 PM
for each twelve month period [dpw2]beginning with October 1, 2011, the start of the next Federal fiscal
year
until federalization is anticipated to take place in October of 2011[kf3], at which time the Freedom
Center would possibly receive $3M in federal funding. [kf4]
Need to update based upon new cash flow and business plan
This phrase may no longer be relevant
And the state dollars are disbursed – right?
only one alternative is available to potentially enable fulfillment of the overall goal that the Freedom
Center facility continue to operate
Federalization
Federalization
Federalization
and because operating revenues have historically been insufficient to cover costs, it appears that the
most promising alternative is federalization as contemplated by the Sponsor
Page 9: [24] Comment [dpw46] davew 1/20/2011 12:08:00 PM
Do we mean the outstanding unamortized bonds used to fund the state investment? Or …to fund the state share of
the project?
Commission staff calculated
Commission staff calculated
October
October
Page 9: [27] Deleted davew 1/20/2011 12:12:00 PM
Page 9: [27] Deleted davew 1/20/2011 12:12:00 PM

6.6M divided by 9 is 733K – I think rounding to $1M is too broad
It is $1M for the next several years(4-5 years) and after that it drops down to several hundred thousant and then a
couple of hundred thousand. so every year nurfc makes it over the the next 4-5 the remaining balance decreases
approx $1M a year which lessens our exposure considerably.
,000
,000
Project
Project
Discuss w/ KF rewriting this paragraph
CB/TC to redraft based upon new business plan CB to review 1/17/11.
it behooves the Commission to
p
p
p
making these approvals under certain conditions
this seems strong: can we use the concept of mitigating risk instead of eliminating?
Proposed project approval for the release of the most recent appropriation of $850,000
,
,
,
,
,
Commission staff also recommends the Commission require a business plan, approved by the
Freedom Center board, with fallback arrangements in the event the Sponsor-prepared cash
projections prove infeasible[kf5][jd6].
Need to revisit in light of new information just received.
0
0

Project Analysis and Staff Recommendation National Underground Railroad Freedom Center

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Project Analysis and Staff Recommendation National Underground Railroad Freedom Center

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Project Analysis and Staff Recommendation

National Underground Railroad Freedom Center

National Underground Railroad Freedom Center 50 E. Freedom Way

Ohio Cultural Facilities Commission National Underground Railroad Freedom Center

Subsequent to the February 2010 Commission approval of the MOU, the

Ohio Cultural Facilities Commission National Underground Railroad Freedom Center

Ohio Cultural Facilities Commission National Underground Railroad Freedom Center

Ohio Cultural Facilities Commission National Underground Railroad Freedom Center

Change in Net Assets: Comment [dpw19]: There is such a huge

Operating Change in Net Assets Summary

Pro Forma Review:

Ohio Cultural Facilities Commission National Underground Railroad Freedom Center

Ohio Cultural Facilities Commission National Underground Railroad Freedom Center

Ohio Cultural Facilities Commission National Underground Railroad Freedom Center

Trends in Operating Results

Other Income 70.0 100.0 115.0 130.0 7,000.0

NET SURPLUS/(DEFICIT) (2,707.4) (670.8) (320.5) 5.4 8.0 84.0

Ohio Cultural Facilities Commission National Underground Railroad Freedom Center

Ohio Cultural Facilities Commission National Underground Railroad Freedom Center

Provision of General Building Services

Approval of the Project and Authorization of the Expenditure of Funds

Ohio Cultural Facilities Commission National Underground Railroad Freedom Center

Ohio Cultural Facilities Commission National Underground Railroad Freedom Center

Chief Analyst Chief Project Manager

Exhibits Formatted: Indent: Left: 0"

□ A Provision of Culture Formatted: Indent: Left: 0"

□ F Evidence of Local Match Formatted: Indent: Left: 0"

Ohio Cultural Facilities Commission National Underground Railroad Freedom Center

Page 6: [1] Deleted Chris Bruner 1/18/2011 8:02:00 AM

Page 6: [2] Deleted Chris Bruner 1/19/2011 1:03:00 PM

Page 9: [28] Comment [dpw47] davew 1/20/2011 12:10:00 PM

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