Tucked away on Stillwater's Main Street, the Zephyr Theatre has been a welcome addition to the St. Croix Valley since it arrived in 2016, hosting live theater, music performances and one-of-a-kind events.
The audiences came and donors pitched in to help the theater make its home permanent in 2018 when it bought the former Zephyr train depot. After COVID-19 hit, the little theater punched back, creating an Ice Palace Maze that drew 47,000 people and earned $745,000 this year in ticket sales.
And then it derailed.
The trouble spilled into public view in October, when the Zephyr abruptly laid off most of its staff, canceled productions and saw its executive director, Calyssa Hall, resign. Hall's temporary replacement has since quit, as have the former board chair and treasurer.
Adriane Lepage, a Stillwater consultant hired in August to write the theater's strategic plan, cut her work short and urged the board to suspend Hall after discovering financial mismanagement, including a lapsed registration that made it illegal for the theater to solicit donations.
Lepage's report centered on Hall, citing a toxic work environment and evidence that Hall misled the board of directors about the nonprofit's finances. Former employees corroborated the findings, saying the theater had become increasingly chaotic as missteps added up.
The board released two statements in mid-October attributing the chaos to a lack of appropriate financial protocols, COVID-19 and an overworked staff. Attempts to reach former board members were unsuccessful.
The new chair, Nicole Bartelt, said the organization is still evaluating what happened and that no final judgments have been made about Hall's role. But former staff members described Hall's management as haphazard and controlling, a boss who asked at least two staff members for personal loans even as paychecks wouldn't clear.
Hall's talent was in directing a play, former employees said, not in day-to-day business operations. Checks could be written without recording them, so it's unknown which checks are still outstanding and uncashed, said former employee Bil MacLeslie — who took over temporarily after Hall resigned.
In an interview and statement, Hall said she made mistakes but disputed the consultant's report. The financial problems arose in the third quarter of this year, she said, when fundraising efforts and donor funds fell short.
"Theaters do have cash flow problems," Hall said. "It's hard to run an arts organization right now. That's why I resigned. I hope there is someone who can do it better."
Interviews, financial records and meeting minutes paint a picture of what led to the turmoil at the Zephyr.
Donor support and ticket sales have buoyed the theater, according to tax returns from the state Attorney General's office. Revenue reached $631,832 with a $236,997 surplus in 2018, the year the theater bought its building downtown.
Though revenue held steady in 2019, the theater had a $166,918 shortfall — a trend that continued in 2020, when revenue fell to $489,047 and losses totaled $114,344. Tax returns from 2021, the first year of the Ice Palace Maze, are not yet available.
The report from consultant Lepage said the board thought Hall was setting budgets. But financial information was never shared at staff meetings, former employees said, and they were not consulted on finances for upcoming shows.
"Nobody followed budgets," said Jennifer Stanek-Anderson, the Zephyr's former grant writer.
Hall acted as executive director, human resources director and chief financial officer, controlling so many aspects of the theater that it was difficult for anyone to know what was going on, former employees said.
A year ago, the Attorney General's office withdrew the nonprofit's registration — a legal requirement for accepting donations — notifying Hall in a letter that 2019 and 2020 annual reports were overdue. Still, the theater held its annual fundraising gala Sept. 25.
Minutes from a closed board meeting Sept. 23 show board members recognized the dire financial straits the organization was in. The fact that the board did not have a finance committee — standard for a nonprofit — drew "major concerns" from members. "If we are not doing this, then we are accountable and responsible for part of this situation," the minutes said.
It wasn't until Oct. 7, the day Hall resigned, that Zephyr treasurer Chris Lepage filed paperwork to restore the nonprofit registration, records show. (Lepage is married to consultant Adriane Lepage, and recused himself when the board hired her.)
Chris Lepage has since resigned. He declined to comment.
Hall didn't explain why the lapsed charitable solicitation form went unfixed for a year. She said Adriane Lepage's report contained "material misstatements," but did not specify which parts were incorrect.
'They were just winging it'
Hall founded the nonprofit Only a Dim Image Productions in 2013, doing business as The Zephyr Theatre. Her mother, father and sister all worked at the theater in salaried positions, out of 11 salaried staff members and about two dozen hourly employees.
In 2018, the company purchased the former Zephyr train depot in Stillwater for $2.5 million. The deal was made possible, Hall had said, with a mortgage from Lake Elmo Bank and $1 million in donations. The 2018 tax returns, however, show less than half a million dollars in donations. The depot deal was made possible by a $1.7 million mortgage and a $500,000 bridge loan from the bank, MacLeslie said.
The deal has strained the theater's budget — some $66,000 in interest payments alone this year from January to July — and stands out as one of two real estate moves that set the nonprofit up for tens of thousands of dollars in monthly payments.
In July, Hall signed a five-year lease costing more than $10,000 a month for a 15,000-square-foot rehearsal space in a warehouse along Highway 36, documents show.
Hall negotiated the lease without the help of a Realtor and got a deal in which the theater, not the landlord, must pay for renovations, according to MacLeslie. About three months later, just before she resigned, Hall was scrambling to undo the lease, hoping to work with the landlord to cancel it or "some other arrangement to defer payment," according to board notes.
While the pandemic devastated many arts organizations, federal government assistance helped tide some over. Only a Dim Image, doing business as Zephyr, got a $30,000 PPP loan that was forgiven.
Former social media manager Amanda Johnson said the Zephyr was bustling when she joined the staff last year, but Hall was overstretched. "Calyssa was in charge at all times," Johnson said. "I think that's another reason the Zephyr is where it is at — no person can do everything."
Johnson said it was hard to get Hall's attention and paychecks were often late. Johnson left in June; she had last been paid in April.
When Johnson texted Hall about her missing paychecks and relevant wage law, Hall responded that she was busy and would send them as soon as she could. Hall eventually sent less than what Johnson was owed, blaming missing records, Johnson said.
Former events manager Trish Sisson said she saw problems at the Zephyr immediately after starting work there in January.
"They were just winging it," she said.
Hall asked Sisson for a loan, Sisson said, promising she would repay the $9,000 in a couple of weeks. It took two months, Sisson said.
Hall also asked Stanek-Anderson for loans, taking $14,300 that was repaid within two months, Stanek-Anderson said. She said she later learned the board wasn't aware of the loans.
Staff members sought to meet with the board to alert them that "what we see on our side is that this theater is going to crash and burn," Stanek-Anderson said. The board declined, in part because Hall was the only person allowed to go between board and staff.
Meeting minutes show the board was unaware of the mounting debt. Former treasurer Lepage on Sept. 20 told the board he knew of two outstanding vendor bills worth about $810, and board minutes from Sept. 23 say Hall reported no outstanding vendor bills at the time. But MacLeslie said he received notice Wednesday from a vendor owed $78,000 for the theater's July "School of Rock" production.
Hall said she was "very, very direct" discussing the theater's debt with the board in August. Asked if she took personal loans from staff, Hall confirmed them but refused to say how big the loans were.
It's still not clear how much debt the theater is in. In a statement last month, board chair Bartelt said the organization owed at least $272,000 in back taxes, employee pay and credit card debt. In an interview Oct. 26, Bartelt said she didn't yet have access to some accounts and that it's unknown how much is owed to vendors.
For all its problems, the Zephyr met a need, serving students and drawing audiences. For former staff members, the theater's collapse has been both sad and unsurprising given the financial mismanagement they saw. It was as if the theater was being run like a play, not a business, with the director hoping to pull off a miracle on opening night.
"Theater is a place where all the misfits go," said MacLeslie, the theater veteran the board turned to after Hall resigned. "We are emotional people who live in a world where we 'make believe,' with the real world just outside the door. If you don't let the real world in every once in a while to give you fresh air, the real world will knock down the door and knock you on your ass. And that's what happened."