Hazard Art Station
After years of planning and pre-development work, the Appalachian Arts Alliance partnered with the City of Hazard to renovate an old bus station into a performing arts center, in spite of a lack of faith from the community. After years of false starts with many plan reiterations, the team struggled to gain buy-in. Most funders thought it was an albatross, and some asked if they could just burn it down and start over. The Art Station is an amazing story of perseverance. When most funders thought the project was going to be a failure, this close-knit team scaled down their plans, gained the support of one key investor, and rallied their community to see the project through completion.
Stage of Investment: Management
Population: 5,046
Date Started: 2012
Estimated Completion: 2020
Key Players
Spotter: Appalachian Arts Alliance founding members
Framer: Bailey Richards
Developer: Appalachian Arts Alliance
Engager: Tim Deaton
Project Manager: Bailey Richards & Tim Deaton
Other: FAKY & AIF, TA, City of Hazard, and People’s bank all collectively provided funding, salary, and space.
The Spark
In 2012, the former Greyhound bus station in downtown was foreclosed. Arts Alliance’s founding members saw it as an opportunity to open a performing arts center. The bank offered very favorable terms requiring the nonprofit to pay only interest for several years. Once renovation was completed and the Art Station began making a profit, the bank adjusted the terms of the loan into a traditional, affordable, mortgage payment. Their vision changed several times, and they spent the full $70K on multiple iterations of the project. After a few years of planning, however, they finally discovered their perfect vision for the performing arts center.
The Challenge
It seemed like the plans paid off when the city was awarded a $500K Community Development Block Grant (CDBG), however there was a slight issue. Federal funding sources require that contractors are paid a higher wage rate than is typically used in the region, known as Davis-Bacon wages. Despite the city’s plans estimating a cost of approximately $500K, the Davis-Bacon wages raised the lowest bid near $1.5M. This is a common issue for projects in rural towns that have a low cost of living. Because the project’s total cost could not be raised higher than $500K the city had to return the award, as only one CDBG may be awarded at a time to the same grantee.
The Investment
As the Appalachian Arts Alliance was in its initial stages, the city of Hazard was also experiencing a renewed interest in downtown revitalization. Multiple organizations began collaborating to make downtown a place more locals wanted to be. There was a major shift in the local government as downtown development became a priority. Mountain Association and Foundation for Appalachian Kentucky (FAKY) helped locals form a citizen’s action group called InVision Hazard. FAKY provided backbone administrative support and connections to funding for both InVision Hazard and Arts Alliance.
A committee was formed by InVision Hazard to develop a job description and petition the local government to hire a Downtown Coordinator. The city saw the value in this position and hired Bailey Richards, requesting she spearhead the Art Station project as one of her first major assignments. Not long after this, Arts Alliance hired Tim Deaton as their Executive Director. The duo of Bailey and Tim working together proved to be a very effective duo that propelled the Art Station project forward.
Initially, Arts Alliance had hoped the funding from the loan would pay for the needed predevelopment work, and CDBG would pay for the necessary renovations. When that fell through, efforts stalled until FAKY afforded them an interesting opportunity. FAKY’s social impact fund, the Appalachian Impact Fund (AIF), offered a “catalytic conversion loan” providing an Impact Investment of $250K. AIF also offered to forgive $100K of the principle if payments were made on time for 5 years. To anchor the project, AIF also awarded a $50K grant for general operating expenses. All of this was under the condition they raise $50K first with $25K coming from the community, and AIF would match them for the remaining $25K.
The team had to reduce their scope and raise $25K, which seemed impossible, given the economic climate of the time. Then they realized they no longer had to follow federal spending guidelines. “I remember that exact moment when that clicked for me. We figured out that less unrestricted money is worth double that of restricted money. If we didn’t use federal money, we could do the project for much cheaper,” said Bailey.
“Back to the drawing board,” Tim explained, “Bailey has unconventional ways to make things happen and decided we weren’t going to spend another $40K to get an architect, so she, another board member, and I came in with a measuring tape and reimagined it ourselves.” They scaled everything down to the basics. The black box theater became a roofless open-air theatre. The downstairs became the hub for lessons, offices, and a catering kitchen. Other areas could be renovated later, so they started fundraising based on what they had already opened. They used a traditional capital campaign with mailers, presentations to local social clubs like Rotary and Kiwanis, and leveraged social media to gain donations. They offered naming opportunities for rooms in the Art Station which convinced local businesses to offer promotions or donate a percentage of revenue. Kids even sold “lemonade for the arts” on street corners. Together, the community raised $25K to unlock AIF’s investment. And then COVID hit.
Undaunted, they viewed this as an opportunity to focus on the project and did the work themselves. “We learned drywall and plumbing.” Tim recounted, “We shoveled 400K pounds of coal slag out of the building and then cleaned every inch by hand with vinegar solution.” Their efforts proved victorious, and The Art Station proudly opened its doors to the public on July 11, 2020.
“Don’t sacrifice the good for the perfect. That’s what stalled the project for so long. They wanted to get a big expensive architect making everything the most modern, and it stalled out a million times for this. Good can be good enough while we work towards perfect. ”
The Return on Investment:
Financial
The Art Station now generates enough revenue to pay staff and loan and mortgage payments by providing lessons to 140+ paying students, renting space for parties like weddings and baby showers, and hosting fundraisers like the annual Derby Party.
Social
The Art Station also played a major role enticing new businesses to open downtown, including a new coffee shop and bookstore. Mandi Sheffel, owner of Read Spotted Newt, said “I knew the Art Station was coming and an arts community was important, so it seemed like the right time to do it.” Local government is also earning tax revenue from these new businesses. Tim believes “things are happening now because of the Art Station being here and bringing more traffic and commerce into downtown.”
What’s Next?
“Part of the incredible thing about Tim is that he has been able to raise the money to not only pay for himself, but the building, and two other employees,” said Bailey. Tim has made the Art Station sustainable, and they are now seeking funding to expand community programs and renovate the top floor to create a “Downtown Development Think Tank,” making the Art Station a central hub for downtown innovation.
Key Takeaways
Persistence is key. Don’t give up. Pivot when issues arise.
Start now. Make it perfect later. Remember that sometimes you have to start smaller than you wanted, and that you can always improve later.
Community support boosts sustainability. AIF’s investment of $250k was far more impactful than if they had invested the full $300k. Neighbors who saw kids on their block selling “lemonade for the arts” know what the Art Station is and want to help it thrive. By requiring Arts Alliance to raise the first $50K, local community members gained a sense of ownership and pride in its development and will be more likely to support it in the future.
Key Investments in the Capital Stack
Equity: unknown
Mortgage
Senior Debt: $0
Subordinated debt: $250,000
$250K AIF Conversion Loan ($150K loan + $100K grant if paid on time)
Patient Loan bank loan (later converted to a traditional mortgage)
Credit Enhancement: $0
Grants or Subsidy: $100,000+
$50K Capital Campaign
$50K FAKY - Annual Operational Funding