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Nestled on Stillwater’s Main Street, the Zephyr Theater is a welcome addition to the Valley St. Croix since it arrived in 2016, hosting live theater, musical performances and one-of-a-kind events.
Audiences came and donors pitched in to help the theater make its home permanent in 2018 when it bought the former Zephyr Railroad Depot. After being hit by COVID-19, the small theater fought back by creating an Ice Palace maze that drew 47,000 people and grossed $745,000 this year in ticket sales.
And then it derails.
The problem became public in October when Zephyr suddenly laid off most of its staff, canceled productions and executive director Calissa Hall resigned. Hall’s interim replacement has since left, as has the former board chairman and treasurer.
Adriane Lepage, a Stillwater consultant hired in August to write the theater’s strategic plan, cut her work and urged the board to suspend Hall after discovering financial mismanagement, including a lapsed registration that made it illegal for the theater to solicit donations.
LePage’s report focused on Hall, citing a toxic work environment and evidence that Hall had misled the board of directors about the nonprofit’s finances. Former officials confirmed the findings, saying the theater had become increasingly chaotic as missteps piled up.
The board released two statements in mid-October, attributing the chaos to a lack of proper financial protocols, COVID-19 and overworked staff. Attempts to reach former board members were unsuccessful.
The new chairwoman, Nicole Bartelt, said the organization was still evaluating what happened and that no final judgments had been made about Hall’s role. But former staff members described Hall’s management as haphazard and controlling, a boss who asked at least two employees for personal loans, even as wages, he could not repay.
Hall’s talent was in directing a play, former employees said, not in day-to-day business operations. Checks can be written without being recorded, so it’s not known which checks are still outstanding and uncashed, said former employee Bill McLesley, who took over the job on an interim basis after Hall resigned.
In an interview and statement, Hall said she made mistakes but disputed the consultant’s report. The financial problems arose in the third quarter of this year, she said, when fundraising efforts and donations fell short.
“Theaters really have cash flow issues,” Hall said. “It’s hard to run an arts organization right now. That’s why I’ve resigned. I hope there’s someone who can do it better.”
Financial problems
Interviews, financial records and meeting minutes paint a picture of what led to the turmoil at Zephyr.
Donor support and ticket sales have supported the theater, according to tax returns from the state attorney general’s office. Revenue reached $631,832 with a surplus of $236,997 in 2018, the year the theater bought its downtown building.
Although revenue held steady in 2019, the theater had a deficit of $166,918, a trend that continued in 2020, when revenue fell to $489,047 and losses totaled $114,344. 2021 tax returns, year one of the Ice Palace Maze, are not yet available.
Consultant Lepage’s report said the board believed Hall set the budgets. But financial information was never shared in staff meetings, former employees said, and they were not consulted about finances for upcoming shows.
“No one was following the budgets,” said Jennifer Stanek-Anderson, a former Zephyr grant writer.
Hall acted as executive director, human resources director and chief financial officer, overseeing so many aspects of the theater that it was difficult for anyone to understand what was going on, former employees said.
A year ago, the attorney general’s office revoked the nonprofit’s registration — a legal requirement to accept donations — notifying Hall in a letter that the 2019 and 2020 annual reports were overdue. Still, the theater held its annual fundraising gala on September 25.
Minutes from a September 23 closed board meeting show that board members acknowledge the dire financial straits the organization is in. The fact that the board does not have a finance committee – a standard for a not-for-profit organization – has raised “serious concerns” from members. “If we don’t do that, then we are responsible for part of this situation,” the minutes said.
It wasn’t until Oct. 7, the day Hall resigned, that Zephyr Treasurer Chris LePage filed to reinstate his nonprofit registration, records show. (Lepage is married to consultant Adriane Lepage and stepped down when the board hired her.)
Chris Lepage has since resigned. He declined to comment.
Hall did not explain why the leaked charity application form was not corrected for a year. She said Adriane Lepage’s report contained “substantial inaccuracies” but did not specify which parts were incorrect.
“They were just hiding it”
Hall founded the nonprofit Only a Dim Image Productions in 2013, operating as The Zephyr Theatre. Her mother, father and sister worked at the theater in paid positions, out of 11 salaried employees and about two dozen hourly employees.
In 2018, the company purchased the former Zephyr train depot in Stillwater for $2.5 million. The deal was made possible, Hall said, with a mortgage from Lake Elmo Bank and $1 million in donations. However, 2018 tax returns show less than half a million dollars in donations. The depot deal was made possible by a $1.7 million mortgage and a $500,000 bridge loan from the bank, McLesley said.
The deal strained the theater’s budget — about $66,000 in interest payments alone this year from January to July — and stands out as one of two real estate moves that have put the nonprofit in tens of thousands of dollars in monthly payments.
In July, Hall signed a five-year lease worth more than $10,000 a month for a 15,000-square-foot rehearsal space in a warehouse along Highway 36, documents show.
Hall negotiated the lease without the help of a realtor and got a deal where the theater, not the landlord, had to pay for the renovations, according to McLesley. About three months later, just before he resigned, Hall was fighting to cancel the lease, hoping to work with the landlord to cancel it or “some other deferred payment arrangement,” according to board memos.
While the pandemic has devastated many arts organizations, aid from the federal government has helped some to overcome. Only one Dim Image operating as Zephyr received a $30,000 PPP loan that was forgiven.
Former social media manager Amanda Johnson said Zephyr was bustling when she joined the staff last year, but Hall was overwhelmed. “Kalissa was in charge the whole time,” Johnson said. “I think that’s another reason why Zephyr is where it is – no one person can do everything.”
Johnson said it was difficult to get Hall’s attention and the paychecks were often late. Johnson left in June; she was last paid in April.
When Johnson texted Hall about her missing wages and the relevant wage legislation, Hall replied that she was busy and would send them as soon as she could. In the end, Hall sent Johnson less than he was owed, blaming the missing records, Johnson said.
Former events manager Trish Sisson said she saw problems at Zephyr as soon as she started working there in January.
“They were just hiding it,” she said.
Hall asked Sisson for a loan, Sisson said, promising to repay the $9,000 in a few weeks. It took two months, Sison said.
Hall also asked Stanek-Anderson for loans, taking out $14,300, which was repaid within two months, Stanek-Anderson said. She said she later learned the board was unaware of the loans.
Staff members asked to meet with the board to warn them that “what we see from our end is that this theater is going to crash and burn,” Stanek-Anderson said. The board refused, in part because Hall was the only person allowed to stand between the board and staff.
Meeting minutes show the board was unaware of the mounting debt. Former Treasurer LePage told the board on Sept. 20 that he knew of two unpaid vendor bills totaling about $810, and board minutes from Sept. 23 said Hall did not report unpaid vendor bills at the time. But McLesley said he received a notice Wednesday from a vendor owed $78,000 for the theater’s July production of “School of Rock.”
Hall said she was “very, very direct” discussing the theater’s debt with the board in August. Asked if she had taken out personal loans from staff, Hall confirmed they had, but declined to say how large the loans were.
It is not yet clear what debt the theater is in. In a statement last month, board President Bartelt said the organization owes at least $272,000 in back taxes, employee wages and credit card debt. In an Oct. 26 interview, Bartelt said he still does not have access to some accounts and that it is unknown how much is owed to suppliers.
For all its problems, the Zephyr met a need, serving students and attracting audiences. For former staff members, the collapse of the theater is both sad and unsurprising given the financial mismanagement they have seen. It was as if the theater was run as a play rather than a business, with the director hoping to perform a miracle at the premiere.
“The theater is a place where all the misfits go,” said McLesley, the theater veteran the board turned to after Hall resigned. “We are emotional people living in a make-believe world with the real world right outside the door.” If you don’t let the real world in every once in a while to give you some fresh air, the real world will kick down the door and knock you on your ass. And that’s what happened.”
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