Kearney arch may be too big to fail - Omaha.com
Published Monday, July 8, 2013 at 12:30 am / Updated at 12:21 pm
Debt-ridden attraction on Interstate 80
Kearney arch may be too big to fail

KEARNEY, Neb. — Tattered cloth clings to the frame of an abandoned Conestoga wagon. A damaged piano slouches nearby, its keys pounded only by the sun. A man and two children bow their heads over a loved one's grave.

The exhibit within the Great Platte River Road Archway Monument drives home a singular point: Not all pioneers discovered Eden as they journeyed west. Some dreams of success died along the way.

In coming weeks, the scene may come to represent a metaphor for the Great Platte River Road Archway Monument, the 300-foot Western history museum that has spanned Interstate 80 southeast of Kearney since 2000.

Supporters of the archway are working to make sure no roadside funerals are held. But they face a daunting challenge.

The archway is bankrupt, burdened by more than $20 million in debt and insufficient revenues from dwindling attendance. Yet the plan to reorganize the debt in federal bankruptcy court offers the Archway Foundation the chance to burn the mortgage and perhaps exit the road to ruin.

The plan calls for using $100,000 in private donations to pay the creditors.

If the creditors accept the offer and a judge approves it, the foundation will take the next step to save the arch.

The foundation will seek $1.2 million in taxpayer support over three years, split evenly between the City of Kearney and Buffalo County. That money would be used to help cover the gap between operational expenses and admission revenue.

The archway may be too big to fail, they say. It could well cost taxpayers more to dismantle the massive structure than to keep it open — at least in the short run.

Supporters point to a 30-year lease with the Nebraska Department of Roads. It requires the archway to educate visitors about the Platte Valley's history as a transportation corridor for covered wagons, steam locomotives, cars and trucks. In other words, the state lease allows for only a museum that tells the story the archway tells.

So much for those holding out for a Great Platte River Road Casino and Cowboy Buffet.

“There's a lot of misunderstanding about how it can be used,” said Michael Morgan, Kearney's city manager. “But the lease stipulations are very clear. People say 'Make it a casino or a car museum,' but that's not allowable.”

So if the bankruptcy plan fails, the archway probably closes. And the foundation probably folds, because it is, essentially, broke. And even the building's salvage value would be less than the $4 million to $6 million it could cost to bring it down, said Joel Johnson, a former state senator from Kearney and the foundation's president.

“Let's just say if we no longer exist and the bondholders go away, the state is responsible for taking it down,” Johnson said.

The archway went up with great fanfare in 1999, with the Interstate shut down so it could be put into place. The attraction was the brainchild of the late Frank Morrison, a former governor of Nebraska who recognized the unique role the Platte Valley played in the human migrations that settled the West.

Arch timeline


1996: Plans are announced to erect a museum over Interstate 80 to commemorate historic trails, roads and rails that traverse the area and to tap into the 12 million travelers on I-80 yearly.

1997: The Archway Foundation signs a contract with the Nebraska Department of Roads leasing air space above the Interstate to operate the museum. Terms of the 30-year lease call for annual payments of about $15,000 and stipulate that the building be used for educational purposes.

1998: Solomon Smith Barney sells $59.7 million in revenue bonds to finance construction. Groundbreaking takes place in July.

1999: During a nighttime ceremony, the 3 million pound, football-field-long archway is installed over I-80.

2000: The Archway opens in June. Some predict annual attendance approaching 1 million. President Bill Clinton walks through the arch during his only official visit to Nebraska.

2001: Just under 250,000 go through the arch during first full year of operation, a figure that has never been approached since. Kearney voters reject a half-cent sales tax increase that would help finance an I-80 interchange near the arch.

2002: A tax filing reveals an operating loss of $6 million in first full year. The Archway Foundation refinances with bondholders, cutting the debt from $60 million to $22 million. A scene in the commercially successful Alexander Payne film “About Schmidt” shows Jack Nicholson at the arch.

2005: A total of 88,507 visit the arch, the first year annual attendance drops below 100,000.

2011: The state breaks ground on the long-awaited second I-80 interchange, one mile east of the arch. Museum supporters say the monument has been hampered by poor access.

2012: A total of 49,960 pay to see the arch, the first time attendance falls below 50,000. Operating expenses exceed income by $365,000.

2013: The Archway Foundation files for Chapter 11 bankruptcy protection, which allows the museum to stay open while it attempts to reorganize debts. The arch owes $20 million to bondholders and about $130,000 to 100 other creditors.

Aug. 27: A ceremony is planned to mark the opening of the second Kearney interchange.

The museum painted the pavement red almost from the beginning. The peak attendance of nearly 250,000 in 2001 was well short of predictions by some promoters. In 2012, just under 50,000 paid to tour the museum — a record low. The foundation filed for bankruptcy reorganization earlier this year.

Rather than frame their recovery plan as the lesser of two evils, archway supporters would rather convince the public that they can write a new chapter for the attraction.

They point to the long-awaited second I-80 exit for Kearney, which will open in late August about one mile east of the museum. Although the interchange won't have an impact this summer travel season, supporters predict attendance will increase at least 25 percent with a more direct connection to a roadway traveled by more than 12 million vehicles annually.

Now, westbound drivers must exit at Kearney and backtrack about two miles on city streets to get to the archway. Eastbound vehicles must drive five miles to the Minden exit and turn back seven miles to Kearney.

“Ninety-five percent of the people who go through it are thrilled with it,” said Gary Roubicek, the archway's executive director. “The one complaint we get is it's hard to get to.”

Supporters also mention the $140,000 in financial pledges from Kearney's business community, which includes W. Lynn Thomas, owner of Ace Irrigation. Although he was a critic of the project when it was proposed, Thomas has since come to view the arch as an asset that should be preserved.

“It's too valuable a piece,” he said. “You can't junk it now.”

Others say 13 years is more than enough time for the archway to prove its value. The project was oversold from day one, they argue, bringing up predictions of nearly one million in annual attendance that have since proved wildly unrealistic.

Those who always thought the arch would fail as a private enterprise may be ready to rally against requests for public assistance. John Lillis, a retired university librarian in Kearney, has been an outspoken critic of the plan to save the arch, saying he would resent seeing his tax dollars thrown into what he calls a “bottomless pit.”

“Once it's gone, it's done,” he said. “If the taxpayer picks it up, it's endless. It will go on for decades.”

Neither the Kearney City Council nor the Buffalo County Board has yet voted on the request for public funding.

Francis “Buss” Biehl, a County Board member, said he has already decided to vote against it.

“I represent a district almost 100 percent opposed to putting tax money directly into that thing,” he said. “It should be a vote of the people anyway if we're going to do something like that.”

The City Council has sought more information about what the city's portion of the funding would do. Morgan, the city manager, said the city has provided money out of its $68 million annual budget for capital improvements to other museums in the past but never for operating expenses.

Before the council even considers whether to approve the request, the archway would have to make it through bankruptcy, Morgan said.

Under a plan recently filed with the U.S. Bankruptcy Court in Omaha, the archway would pay $50,000 to settle the $20 million in debt owned to the bondholders. And it would pay an additional $50,000 to settle about $130,000 owed to 100 unsecured creditors for goods and services such as electricity, insurance and legal representation.

The deadline to file objections to the plan is July 25. After that, the law firm representing the archway will be allowed to solicit votes for the plan among the bondholders and unsecured creditors. At least one of the two groups must vote in favor of the plan before the bankruptcy judge will approve it.

The earliest the bankruptcy might be resolved would be mid-August, said Randall Wright, the Omaha lawyer representing the archway. He expressed optimism that the plan will be supported by at least one of the creditor groups.

“They may look at it as 'I'm better off with something than nothing,'” Wright said.

If the minimum number of creditors refuses to support the plan, Wright said the Archway Foundation would likely refile for bankruptcy and try again.

Very soon, the fate of the archway will rest with those who are owed money.

Bondholders already agreed to write off $40 million of the $60 million debt in 2002. The bonds could be held by individuals or institutions, but they are not listed by name in the bankruptcy papers.

An attorney for Wells Fargo Bank, the trustee for the bondholders, declined to comment for this story.

Johnson, the foundation's president, said if the archway can free itself from debt, it stands a much better chance of securing additional financial support from donors and charitable foundations. As it is, people and foundations won't give if their money ends up in the accounts of unknown bondholders, he said.

A lot of pieces must fall into place, but Johnson said he's confident they will — in part, he said, because the archway now has a plan for its future that is more realistic than speculative.

“We certainly have a dire need for help,” he said. “But this is a great community and I have faith in our community to recognize what an asset this is.”

Contact the writer: Joe Duggan

joe.duggan@owh.com    |  

Joe works in the Lincoln bureau, where he helps cover state government, the Legislature, state Supreme Court and southeast Nebraska.

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