GREEN DRAFT

OHIO CULTURAL FACILITIES COMMISSION

MINUTES OF NOVEMBER 29, 2007 MEETING

Tony (or Bernard)

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The National Underground Railroad Freedom Center (Cincinnatti) R-07-44

Mr. Wartel introduced the National Underground Railroad Freedom Center, which has been
before the Commission several times, previously receiving approximately $12.5 million in
state appropriations for construction of the facility in the form of general revenue funds and
bond funds. Construction was completed in 2004. The current appropriation is for $2
million. The construction budget was over $117 million, $32 million of which were pre-
opening expenses. There were $2 million in operating deficits incurred the first two years.

Initial funding included $50 million in local bonds. Part of the proceeds of fundraising was
invested in a consortium of banks with the intent of interest earned to fund Center
operations. Because the capital campaign fell short of final project cost, the project sponsor
is seeking approval to have the future interest earned be counted in the full funding
equation, and Commission staff has recommended this in the report.

Mr. Wartel noted that the unusual nature of this project, with changes and shortfalls to the
original plan, warrants significant additional analysis, and extra materials were included in
the notebook to this effect. He then introduced Project Manager Tony Capaci.

Mr. Capaci pointed out that post-depreciation deficits for 2004-2006 totaled $3.4 million.
Commission staff estimate the deficits for 2007 to be $3.2 million. Depreciation is
approximately 4.4% annually, so the pre-depreciation surplus for those four years is
approximately $8 million. This was achieved by a one-time ‘Bridge to the Future’ campaign
which raised $10 million. This infusion of funds has put NURFC in a position to meet the
bank covenants.

Mr. Capaci stated that Commission staff have several reservations about the sustainability
of NURFC. Wage and operating expenses must be reduced $890,000 in 2007. Costs must
be reduced an additional $1.25 million while maintaining existing revenues, if the Freedom
Center is to meet the targeted $500,000 pre-depreciation surplus in 2008, plus the market
must perform reasonably well. Additionally, assuming a 7-10 year useful life, the current
exhibits, which originally cost $18 million, would need to be replaced in 4-7 years at a cost
yet to be determined. Finally, staff are concerned that NURFC will encounter ‘donor
fatigue’, as it has recently conducted a capital campaign, Bridget to the Future campaign,
and annual fund campaigns in recent years.

Mr. Wartel informed the Commission that additional measures were added to the resolution
to address sustainability questions, including a leasehold interest through 2022. The State
already has a lease agreement for the first $12.5 million put in to the operation, which is set
to expire in 2011, so staff is recommending this be extended through the 15 year term of the
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cooaperative use agreement that would accompany this appropriation. The leasehold
interest will put the State in first liens position, should the bank need to take action against
the property. Additional existing liens must be cleared. Previously, a line of credit was
required to act as escrow in case there were a change in management under our lease and
management agreement in which the State needed to operate temporarily while seeking
new leadership. This was never solidified in the past, so the current resolution would
require the appropriate funds be deposited in an escrow account with the Treasurer of
State’s office. This is a common measure taken by the Commission with leasehold interest
projects.

Mr. Wartel welcomed Don Murphy, CEO of the National Underground Railroad Freedom
Center, and Gary Dowdell, CFO/COO.

Mr. Lehman asked the guests if they would be requesting an additional appropriation in the
next capital bill, to which they replied they would. Mr. Dowdell commented part of the
original funding for project assumed $15.5 million from the State of which approx 12 million
to date, about 2.9 million left, $800,000 is finalization of that from this next capital budget.

Chairman Pizzuti affirmed his support for the Center and asked how attendance figures are,
with the problems of insufficient funds to change exhibits. Mr. Murphy confirmed that budget
shortfalls have affected attendance. He noted several ways in which the Center has sought
to engage the public without changing exhibits, such as Freedom Saturday programs
engaging children in activities from puppet shows to doll making so that children are more
attracted to the Freedom Center. They have also invited local artists to suggest ways to
appeal to a wide variety of audiences. He said that there is an endowment campaign to
raise funds for changing exhibits. Mr. Dowdell added that 2006 was the first year of heavy
involvement in changing exhibits. Before this they had relied on being new.

Mr. Dowdell noted that a recent market analysis shows only about 10% of the local market
has been penetrated, leaving much room to grow. Chairman Pizzuti advised more
statewide promotion because Ohioans are largely unaware of the Center’s existence and it
is a unique museum.

Mr. Lehman asked how donor support was faring. Mr. Murphy replied that support remains
solid. They have raised over $100,000 on each of three separate occasions by taking the
Freedom Center’s programs on the road across the nation to corporate fundraisers. More
are planned in the year ahead. He believes this model is working well because the Center
has a national significance and has a national board.

There was discussion regarding marketing. The Bengals have posted NURFC ads on
scoreboards and donated players for community events. Phil Castellini, Senior Vice
President of Operations for the Reds, is on the NURFC board of directors. Oprah has in the
past donated funds for her very popular exhibit, but has been difficult to reach of late due to
her focus on philanthropy in South Africa.

Member Barbara Robinson expressed her reservations on donor fatigue and finances to
which Mr. Murphy replied that they made some mistakes early on, but are changing their
business model. They have significantly reduced salaries and overhead. They are looking
for new sources of funding and new ways to innovate. Bruce Gordon, former head of
Verizon and the NAACP, recently joined the board of directors. Celebrities such as Susan
Taylor are being recruited to promote the Center.
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Representative Shawn Webster asked for detail of the aforementioned $15 million from the
legislature.

Mr. Dowdell replied that this commitment dates to before construction, at least 8 to 10 years
to before he joined the Center in 2004, and the commitment is nearly completed.
Representative Webster noted that general assemblies cannot make commitments for future
funding, and with term limits if this commitment was made 8 or 10 years ago, the people
who made the commitment are likely no longer in the legislature. Mr. Dowdell that he
believes they have been good stewards in the region by not asking too often so that other
projects can get funding as well.

Mr. Webster inquired as to what their region was. Mr. Dowdell listed Hamilton and Butler
Counties, as well as northern Kentucky. Representative Webster stated that he represents
Butler County, but has never been consulted on this project. Mr. Murphy then committed to
personally work with Representative Webster.

Commission Member Thompson asked Mr. Muphy and Mr. Dowdell how long they’d been
with the Freedom Center and stressed the importance of continuity of leadership. Mr.
Murphy stated that he came on board during a transition in February, then took over as CEO
in May 2007. Mr. Dowdell has been there since 2004.

Mr. Murphy emphasized that upon his retirement from the National Parks Service, he and
his wife committed to work on certain issues, such as modern day slavery. He said he felt
this work was his calling in life and he feels this position is an opportunity to respond to that
calling.

Commission Member Budig testified that the addition of Mr. Murphy to NURFC has
bolstered public perception to a new level of energy and sustainability.

Mr. Wartel then introduced resolution R-07-44, which confirms findings made in previous
resolutions for the project, and approves the additional expenditure of $2 million, subject to
the conditions outlined. These include the leasehold interest, clearing of liens, and the
establishment of an escrow account. The resolution also confirms the previous
authorization to execute legal agreements, which in this case will be a lease extension, a
cooperative use agreement, and the termination of the existing management agreement in
favor of the cooperative use agreement. He presented the resolution for discussion.

Mr. Pizzuti asked the men if they were comfortable with the conditions of the resolution.
Both agreed that they were.

Don Muphy- “we are comfortable with them and we had a great deal of discussion with the
staff on this, and the staff has been very helpful in getting us where we are. This has been a
partnership with the staff and as someone else made a comment about how good the staff
has been to work with, they have been tremendous in being able to work with us and work
through this and we have gotten more and more comfortable with this as we’ve gone on and
worked with our banks on this as well.”

Mr. Dowdell cautioned that banks are currently looking over the requirements and he
believes that the extension of the lease timetable is a concern for them. He believes it will
probably be approved, but may increase bond pricing. Currently NURFC pays about 1.25%
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for the bank’s letter of credit, but with the new leasehold the bank may decide there is
additional risk and increase this rate.

Mr. Pizzuti asked if a mistake was made in the resolution by mentioning Bank One North
America, which has since changed to Chase Bank.

Mr. Wartel and Ms. Fox indicated that this was due to the resolution referencing the original
agreement and other previous documents, which were entered into when the bank was
called Bank One.

Ms. Fox added that the decision to extend the leasehold interest was arrived at through
extensive communication between Commission staff and NURFC leadership. The staff
recommendation is contingent upon this condition because of the considerable risk involved
in the project. Staff understands that the bank must approve this condition, as referenced in
requirements 9 and 10 of the resolution, for the release of funds from the State, and
believes this is the best way to protect the State’s investment.

Chairman Pizzuti asked for a motion. Barbara Robinson moved to approve resolution R-07-
44 and this was seconded by Cynthia Thompson. The motion carried with no opposition
and one recusal from Otto Budig.

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