Facing a debt totaling more than $900,000, the leader of the Southern Kentucky Performing Arts Center told the Daily News the organization is taking steps to pay it down.

“We’re on a positive track to start paying that down, and we have been paying it down for the last few years,” said Tom Carto, CEO of the SKyPAC Foundation, in a recent interview with the Daily News.

Carto described the debt as long-term debt accumulated from several loans local banks have granted to the SKyPAC Foundation.

The loans were taken out at SKyPAC’s inception and for other operating costs in the last six or seven years, Carto said, adding the loans were used primarily for operations, but also some capital expenses.

“Our current notes payable (long- and short-term debt) are a little more than $940,000,” Carto said in response to follow-up questions submitted via email. “That is about $120,000 less than last year. We budget to pay off about $100,000 a year.”

Warren County sold bonds worth a total of $26.15 million in 2010 and 2011 to raise money for the construction of SKyPAC, which opened in 2012.

Carto sits on both the SKyPAC Foundation’s board and the separate SKyPAC Inc. board, which acts as a conduit for receiving county government funds. Kirk Pierce, who chairs the SKyPAC Foundation board, did not respond to multiple phone calls seeking comment.

Under its partnership with SKyPAC, Warren County Judge-Executive Mike Buchanon said the county pays off the bonds for the building while also allocating about $300,000 a year to the SKyPAC Inc. board.

“We don’t dictate to them exactly how they use those funds,” Buchanon told the Daily News, adding the county’s annual allotment to SKyPAC goes to “contribute toward their operating budget, which could be used for their debt service.”

Asked if the county might potentially be liable for SKyPAC’s debt should it be unable to pay it, Buchanon said the county-owned building is not tied to the debt in question.

Responding by email, Carto said he has no knowledge “of any agreement or provision in our relationship to the County that they would be ‘on the hook’ for paying this debt.”

Speaking for SKyPAC’s leadership, he added that “our intention is to eventually pay down this debt completely.”

Asked to explain why ticket sales are not enough to cover all of the performing arts center’s costs, Carto said only about 60 percent of SKyPAC’s budget comes from ticket sales and other “earned” revenue. Fundraising is a key part of its business, he said.

“Performing Arts Centers across the country require at least 40 percent of their budget to come from fundraising, government sources and other tax-based revenue, as well as sponsorships and grants,” Carto wrote in the email.

“Even with a sellout show, our best net revenue is only around 8 percent (to) 10 percent of sales. Many other shows break even. Some have a net negative margin. In any one season, it would be considered successful if our combined net margin reaches 5 percent. Currently our earned ratio is about 75 percent earned, 25 percent ‘unearned.’ Being only about 7 years old, it typically takes about ten years to achieve a 60/40 ratio,” Carto wrote.

Buchanon said he’s confident the SKyPAC Foundation is taking the right steps to pay down its debt.

“I’m aware that the foundation board has incurred some debt and I’m certain they’ll work with their lenders to pay it off over time,” he said, adding that when it comes to borrowing money, “I know very few performing arts centers throughout the country that actually are able to do that.”

– Follow education reporter Aaron Mudd on Twitter @BGDN_edbeat or visit bgdailynews.com.

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Education reporter. Covers education and related issues, focusing primarily on the Bowling Green and Warren County public school districts and Western Kentucky University.

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