The 2006 San Jose City Council unanimously approved a $2 million loan to the San Jose Repertory Theater, fondly known as The Rep. On Tuesday, the 2011 City Council will consider modifying this loan.

The Rep has made progress in getting out of the red and into the black by reducing staff, designing less expensive sets, shorter show runs and using San Jose State University (SJSU) students in the most recent play to reduce costs. In addition, The Rep welcomed independent traveling shows for short runs that are quite popular, as well as renting out the venue for private events. These cost reductions have allowed The Rep to make all of the interest payments totaling over $200,000. However, like some homeowners, The Rep was only paying interest and nothing on principal.

As a result of the The Rep not being able to keep its 2006 financial commitment, the council will consider modifying the terms of the loan to collect the debt over 25 years. The Rep knows there is no additional money available from the city. It also realize that it needs to make do with what it has while simultaneously making progress on the debt.

The Rep has been a trailblazer for San Jose’s downtown. The Rep is responsible for bringing people to downtown to enjoy theater. As a consequence, a portion of The Rep’s 75,000 attendees spend money before and after shows downtown. This activity has a $9.1 million dollar economic benefit, according to an independent economic impact assessment by Delloite. The Rep is a piece of the jigsaw puzzle that makes downtown similar to how ACT makes the theater district in San Francisco.

This summer I attended a fundraiser for The Rep, where I spoke with people from Hillsborough and Atherton. These affluent peninsula folks would not visit San Jose had it not been for The Rep, and they would possibly not be donating five-figure amounts to another San Jose organization. (By the way, your San Jose Museum of Art, Children’s Discovery Museum and Tech Museum also leverage donations from many people who reside outside of San Jose. These museums’ current buildings and The Rep were built with RDA funds.)

However, let’s look at this from a different perspective. Let’s say you were sick and tired of funding the arts and just wanted to call in the loan. Well, for starters, you may only be able to get $100,000 out of the $2 million that is owed, as The Rep would file for bankruptcy. You then might be able to liquidate some set props and some costumes for pennies on the dollar. You could not rip out the seats and sell them since the city already owns the physical seats. Oh, okay, perhaps you could roll up the curtain and sell that along with the golf nets purchased for $2.26 million.

What you would be left with is an empty Phil and Susan Hammer Theater without the theater company providing programming. Many of the attendees that came to shows and spent money downtown would be gone, and that piece of the downtown jigsaw puzzle would be missing. In addition, the city of San Jose would then have to pay to maintain the building but with no benefit of theater patrons and commerce Downtown.

So will it be the final curtain?

Finally, if you look at your recent property tax bill, you will notice your PERS levy tax or county pension tax. This tax has been collected since 1945 and goes towards paying a portion of the pensions for County employees. Santa Clara County is the only County in California that has this tax. In fiscal year 2010-2011, this tax raised $109 million for pensions alone.