Salt Lake City serves The Leonardo museum with notice of default over hundreds of thousands in unpaid debts

(Francisco Kjolseth | The Salt Lake Tribune) Salt Lake City Mayor Jackie Biskupski’s office served The Leonardo, a nonprofit science and technology museum on Library Square, a formal notice of default last month — marking an uncertain future for an organization that has had a rocky financial past.

Salt Lake City Mayor Jackie Biskupski’s office served The Leonardo, a nonprofit science and technology museum on Library Square, a formal notice of default last month — marking an uncertain future for an organization that has had a rocky financial past.

The nonprofit owes around $600,000 in unpaid loan and utility service bills to Salt Lake City, which owns its building, according to the default letter. The letter, which the city shared with The Salt Lake Tribune on Monday afternoon, also states that The Leonardo has failed to maintain the building under its lease agreement.

“The City remains ready to discuss an equitable resolution of Leonardo’s defaults and will work with the Leonardo to schedule a mutually agreed upon time to meet before the expiration of the default period,” the letter concludes, but notes that the organization should not "construe our willingness to meet as a waiver of this notice, or any default.”

Under what the city says is the worst-case scenario for both it and The Leonardo, the museum could be forced out of Library Square and replaced by a new tenant with a similar focus on arts, culture and science, according to Kristian Anderson, senior adviser for arts and culture in Biskupski’s office.

“That is a possibility,” he said, “but we hope it doesn’t get to that.”

If it does, the matter would likely be resolved in court, said Matthew Rojas, a spokesman in the mayor’s office, noting that this is just the beginning of what could be a lengthy legal process.

“This is that first step," he said.

The Leonardo said in a statement Tuesday that it is has proposed a repayment plan, “answered every question” officials have asked and even submitted a check that the city never cashed. Rojas said he wasn’t aware of any uncashed checks but added that the city was looking into it.

The nonprofit also accuses the city administration of “actively” undermining its ability to operate by leaking selective information to the press in “a last-ditch effort to distract from mismanagement and malfeasance of [Biskupski’s] administration.”

“In selling their false story to the media, the mayor and her team are actively damaging our ability to fulfill our obligations to taxpayers and deliver on our mission, and they should be held accountable,” the statement reads.

The Tribune submitted a records request to Salt Lake City for information relating to The Leonardo in September and received the notice of default letter Monday after inquiring about the state of the negotiations.

The city’s letter outlines 13 maintenance issues “creating life-safety hazards” and six repair and maintenance defaults. Some of these issues — including broken and cracked windows, inoperable thermostats, broken escalators that are still in use and exhibit walls blocking the fire sprinkler — present hazards that “have significantly increased the insurance risk” on the building, the city states.

The museum blames the maintenance backlog on the city, arguing that it “has not satisfied its obligations” to keep up the building. After receiving the notice of default, The Leonardo said it filed its own notice of default to Salt Lake City “with claims more than doubling the amount claimed by the city” in unmet responsibilities.

The Leonardo, which pays $1 per month in rent to the city, is responsible for maintenance and utility payments. But the nonprofit says day-to-day maintenance doesn’t extend to structural issues, like the broken escalators and leaking roof.

The city in its letter notes that it has taken on “extensive roof repairs” that The Leonardo “has unreasonably and indefinitely delayed,” resulting in cost increases for the project, which is now behind schedule.

The Leonardo’s current financial state isn’t a surprise. The nonprofit has struggled with debt since its inception in 2011. When the museum opened — six months late — revenue from traveling exhibits was unpredictable and made long-term financial planning difficult, officials have explained. That, coupled with startup costs, led to the organization’s current financial struggles.

Last year, a third of The Leonardo’s creditors forgave about 20% of its total debt outright, and it had negotiated long-term payment plans for the remaining $2.9 million. Museum leaders at the time said they were moving away from traveling exhibits and planned to grow a reserve fund that would help them invest in growth and manage debt.

The Leonardo entered into a payment plan for its unpaid debts with the city in 2017, promising to keep current on its utility costs and pay the city $1,000 in past-due amounts. The city says it has not received those payments in over six months.

The Leonardo’s most recent tax filing shows outstanding loans it had taken from employees and members of the board of directors in an amount of $632,103 to pay for operating expenses. It also listed a $498,000 loan from Zions Bank.

Overall, the organization reported $1.96 million more in liabilities than assets as of June 30, 2018, the close of its most recent fiscal year.

But the organization says its days of operating in the red are in the past.

“In spite of the unconscionable state of the building, and this administration’s attempts to actively undermine its ability to operate, The Leonardo has succeeded in turning around its finances, and is now operating in the black,” the museum said.

That may not make a difference for the museum’s future, though, worried Leonardo Board Chairwoman Lisa Davis, who’s convinced the city wants the nonprofit out of the building or at the least to see its footprint significantly reduced.

“This isn’t really about just paying back utilities,” she said. "If it were, I’m absolutely confident we’d have an agreement.”