City Manager Tom Bonfield is considering a request from the Carolina Theatre for an extra $103,739 this year, but first he wants to know more about “broader financial challenges” the nonprofit faces.

Those challenges include several years of operating deficits. According to Carolina Theatre Inc.’s annual report and its most recent Internal Revenue return, it lost $223,992 in the 2010-11 fiscal year, with its liabilities exceeding assets by $146,793.

“It’s more than that now,” Bonfield said last week. The theater’s management estimates it finished the 2011-12 fiscal year with liabilities (accounts payable, future bookings for which tickets had been sold) exceeding assets (cash, accounts receivable, equipment etc.) by $325,965.

Carolina Theatre CEO Bob Nocek is asking the city “to compensate us for the time the theater was closed” for $1.8 million worth of renovations and deferred maintenance last year. He acknowledged the red ink, but said the theater has been making profits since reopening in November 2011 following a four-month shutdown.

“We’re moving in the right direction,” he said.

A month-by-month report given to the city does show improvement, with net profits for November through May with a June deficit of about $4,000. Combining month-by-month figures from the Carolina’s chart shows a loss, or net income deficit, for fiscal 2011-12 of about $85,000.

“It’s not anything we’ve audited,” Bonfield said, and he has asked theater management for more information before he decides about giving any more money.

“As I get information, it’s generating more questions,” he said.

According to the Carolina’s tax returns, its expenses exceeded revenue each year 2008-09 through 2010-11. On June 30, 2008, its assets exceeded liabilities by $144,557 – meaning its net assets have fallen more than $470,000 in four years.

Under contract

Carolina Theatre of Durham Inc., a nonprofit corporation, manages the theater under contract with the city, which owns the building. The city appropriated $614,520 for the current fiscal year, but Nocek said it needs more to cover revenue lost during the renovation.

“I try not to make a judgment about it myself,” said Joel Reitzer, the city’s General Services director. Nothing in the management contract obligates the city to make up for an operator’s loss, he said, and the Carolina knew long in advance it would be closed for several months.

Nocek said he had planned for a revenue loss: laying off a full-time audience-services manager and eliminating the position; leaving two other positions vacant; employing minimal part-time help during the renovation; closing the box office for six weeks and selling tickets for future performances only online; and booking extra events for the weeks after reopening. Still, after reopening, the theater’s accountant concluded that renovation cost Carolina Theatre of Durham Inc. almost $104,000.

According to city emails, Reitzer, city Budget Director Bertha Johnson and Finance Director David Boyd advised against granting the Carolina’s request after it was received in March. Interim Community Development Director Reginald Johnson, the city’s liaison with the theater’s board, favored giving the money at that time, but Bonfield wanted more information than the theater’s own analysis of 2011.

Bonfield said he is not convinced the four-month closing and the theater’s shortfall is a case of cause and effect. Hence his interest in the “broader financial challenges.”

“I am concerned that we own the facility and we want it to stay operational and we want to understand what it will take to do that,” Bonfield said. “I’m hopeful the investments we have made in the theater will result in ... better performance.”

Asking for money and asking for information have been going on since March. Nocek said he would have liked to have had the $103,739 before closing his fiscal year, but does not need the money immediately.

And if City Hall says No?

“We understand there’s a real possibility of that,” he said. “It won’t change how we operate,” but the theater will make up the loss somewhere.

Carolina Theatre Inc. has a five-year management contract, which expires in 2013. Noceck said he isn’t concerned that the deficits will affect the nonprofit’s future in the building. Bonfield said “there are a lot of pieces” to take into consideration before a new contract is signed. Among them is just how well the theater is dealing with its “financial challenges.”

“We are very interested in understanding before we would agree to another management agreement,” Bonfield said.