If last-ditch pledging fails, WTVP faces receivership
“Your pledge is increasingly and desperately important,” says the urgent update on the website of pubTV station WTVP in Peoria, Ill.
It sounds like the pitch that some stations serve up toward the end of any ordinary fiscal year, but WTVP isn’t exaggerating.
Over its head in debt after building a new headquarters, the station needs to raise some $2 million, or it will lose control of its building, its equipment and its future.
Bank of America — with Commerce Bank, a smaller creditor in the debt — will ask a federal court to appoint a receiver to manage the station’s assets, Bank of America spokesperson Shirley Norton told Current last week.
“The banks have indicated that they would like to see WTVP continue broadcasting as long as our cash holds out — that could be a matter of just a few weeks,” WTVP President Chet Tomczyk wrote in the website update last week.
In negotiations earlier this month, Bank of America agreed to accept $6 million instead of the $6.9 million principal due, Tomczyk said, but WTVP at that point had raised just $3.89 million.
By checking for spare change under sofa cushions and elsewhere, Tomczyk said Jan. 17 , the station can now come up with $4 million.
The station’s stumble may be the worst local consequence related to the government’s order for all TV stations to switch to digital transmission 13 months from now.
“The conversion to digital was the largest unfunded federal mandate in the history of the United States,” says Jerold Gruebel, president of Network Knowledge, a pubTV licensee that operates WSEC in Springfield and two other Illinois stations. Hardest hit were stations in small cities and rural areas, which needed the same basic DTV transmission equipment that would suffice at a big-city station with millions of viewers within range of its transmitter.
WTVP admittedly wasn’t required by the federal government to build a new headquarters on top of buying transmission equipment, but, like numerous other pubTV stations that moved to new facilities as they went digital, it didn’t want to install everything in its old building when it needed more space anyway. So WTVP took responsibility for a state issue of tax-free bonds and borrowed $10.3 million.
Banks guaranteed the bonds by issuing letters of credit. Bank of America later acquired the majority of the debt from JPMorgan/Chase. Since then, WTVP’s payments have brought the unpaid principal down to $6.9 million, but fundraising fell short of goals, and the station didn’t have the big interest-bearing balance in the bank with which it had planned to make its annual payments.
Spending some of its regular budget to cover the gap isn’t much of an option. The debt-service payments are $1.5 million a year, while WTVP’s annual revenues come to $3.5 million or less, Tomczyk says.
The station, moreover, has been running at a deficit averaging $288,000 a year for fiscal years 2003-06, reported Jonathan Ahl of pubradio station WCBU.
Tomczyk said WTVP had worked hard on its financing plan, but it ran into what he called a “perfect storm” of problems, starting with bad timing: The bond sale closed Sept. 12, 2001, the day after 9/11.
A recession ensued and pledges went unfulfilled. Interest rates paid to WTVP for its cash balance fell short of expectations: In effect, it was paying an average of 5.4 percent interest on the bonds while earning far less on its bank balance.
Federal spending priorities shifted to war. “Any hopes for earmark money were gone by then,” Tomczyk says.
The station got $585,000 from the Public Telecommunications Facilities Program, Tomczyk says, but when Congress gave CPB more supplemental money to help pubTV to go digital — far less than the federal share requested — WTVP wasn’t eligible for help because it had already gone into debt and bought its DTV gear, he recalls with dismay.
Illinois pitched in to help pubTV, as many other states did, however—it gave each of the state’s licensees more than $2 million. WTVP had moved ahead, launching its digital TV channel in January 2002, seven years before the federal deadline. The station broke ground on State Street at a former trucking depot in Peoria’s waterfront redevelopment area donated by the owners of the O’Neill Brothers firm, including Joe O’Neill, now chair of the station’s board. In July 2003, the station had moved from its old home on the campus of private Bradley University and began operations downtown.
A parade of pubradio stations have sold bonds to buy frequencies and start additional program services, most with advice and brokerage services from Public Radio Capital, a Denver-based nonprofit created for the purpose. But Marc Hand, a managing partner of the group, says that kind of debt is significantly different from borrowing to build a home for ongoing operations. The radio stations that put new channels on the air can predict increased revenues from the expanded operations, Hand says.
Though WTVP didn’t miss its annual payments on the bonds, the bank evidently believed it would. By 2005, fundraising still lagged at three-quarters of the level required by the bond guarantee agreement. Bank of America declared WTVP was in default and warned that the guarantee would expire in two years and would not be renewed. The bank and WTVP began a series of offers and counteroffers without reaching agreement.
Flash forward to 2007, when the economy was again teetering toward recession, billions in mortgage loans had gone bad, and lenders such as Bank of America were looking sternly at other loans that could fall through.
In September, to extend its deadline to Jan. 15, the station paid off $1.3 million of its debt, about double the required amount, but that left WTVP’s coffers empty.
The two banks wanted full payment in January because the debt was about to become theirs. They withdrew their guarantee, the bonds were called from investors, and the banks paid them off.
WTVP meanwhile went public with a Save Our Station campaign in December and within a month raised $1.5 million. With its mortgage and other assets, it offered $4 million Jan. 7. The banks said no.
A big donor could get its name on the building, Tomczyk told a reporter. But there was no white knight in sight. “No yellow knight, either,” Tomczyk says, referring to Caterpillar Inc., the maker of yellow earth movers, one of the largest local businesses whose help was sought. Caterpillar did help, however, by raising the cap on a matching grant it offered.
The station told potential donors that pledges would be due March 1, but only if WTVP has a suitable deal to continue operating.
With that assurance, WTVP Vice Chairman Harry Puterbaugh told the Peoria Journal-Star last week, he no longer hesitated to help the SOS drive. He said he’s pledging $100,000. The earlier lack of that assurance had hurt fundraising, he said.
The banks appear to be willing to accept $6 million, Puterbaugh reported last week after meeting with Bank of America. That, he said, would amount to a “pretty darned generous” donation to public TV.
Web page posted Jan. 21, 2008, updated Feb. 4, 2008
Copyright 2008 by Current Publishing Committee