HomeMy WebLinkAbout2025-07-15; City Council; 05; Loan Agreement and Lease Amendment with New Village ArtsCA Review AZ
Meeting Date: July 15, 2025
To: Mayor and City Council
From: Geoff Patnoe, City Manager
Staff Contact: Curtis M. Jackson, Real Estate Manager
curtis.jackson@carlsbadca.gov, 442-339-2836
Subject: Loan Agreement and Lease Amendment with New Village Arts
District: 1
Recommended Action
Adopt a resolution approving a loan agreement in the amount of $500,000 and a first
amendment to the lease agreement with New Village Arts, Inc. for the city-owned property at
2787 State Street, authorizing the City Manager to execute the loan agreement and first
amendment to the lease agreement, and appropriating $500,000 from the General Fund
Reserve.
Executive Summary
New Village Arts (NVA), a nonprofit cultural arts organization and long-time tenant of the city-
owned building at 2787 State St., has requested a $500,000 loan from the City of Carlsbad to
pay off an outstanding loan with Endeavor Bank.
The city previously supported building renovations completed by NVA through a capped
reimbursement funding program of up to $573,000 (Resolution No. 2021-182). NVA
subsequently constructed and financed additional renovation costs with a $893,259
commercial loan with Endeavor Bank, which after NVA’s planned repayment of $393,259
toward the Endeavor Bank loan by July 31, 2025, will have a remaining loan balance of
$500,000.
Under the proposed terms of the loan agreement and the first amendment to the lease
agreement:
•The city would provide a $500,000 loan to NVA at 3% interest, with interest-only
payments through Jan. 31, 2026.
•The $500,000 loan will be disbursed directly to Endeavor Bank to completely pay down
NVA’s remaining loan balance with Endeavor Bank.
•Any unpaid principal balance on the city’s loan amount to NVA after Jan. 31, 2026,
would convert into long-term lease payments over 5 or 12 years at 4%–5% interest,
subject to the amount of outstanding debt remaining on the city’s loan to NVA.
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Additionally, the proposed first amendment to the lease agreement also revises the lease so
that NVA will now have the sole responsibility for all maintenance costs for the property for the
remaining balance of the lease term, with approximately 16 years remaining on the lease.
Staff are recommending that the City Council approve the loan agreement and first amendment
to the lease agreement, authorize the City Manager to execute the loan agreement and first
amendment to the lease agreement, and appropriate $500,000 from the City’s General Fund
Reserve.
Explanation & Analysis
Background
NVA has been the tenant of the city-owned former Bauer Lumber Building at 2787 State St.
since 2006. In 2021, the city entered into a new 10-year lease agreement, with two five-year
options, and a separate construction and reimbursement agreement providing up to $573,000
in city funds for specific building renovations (Resolution No. 2021-182). NVA completed those
renovations at a total cost exceeding $3 million, funded in part by a $893,259 commercial loan
from Endeavor Bank.
• In October 2024, NVA was awarded a matching grant of up to $625,000 from the Prebys
Foundation, which was contingent upon NVA completing a capital fundraising campaign
to raise an equivalent amount by Dec. 31, 2025. If that campaign was successful, the
$1,250,000 raised from the capital fundraising campaign and grant match would be used
to fully retire NVA’s building renovation debt, including NVA’s $839,259 loan from
Endeavor Bank (Exhibit 2).
• On Oct. 30, 2024, NVA formally requested a loan from the city to assist in retiring the
remaining balance of its loan with Endeavor Bank (Exhibit 3).
• On Jan. 28, 2025, the City Council considered NVA’s $893,259 loan request and adopted
a resolution appointing the City Manager, or designee, as the city’s real estate
negotiator to negotiate a loan agreement and modified lease terms with NVA
representatives (Resolution No. 2025-028).
NVA initially requested a city loan of $893,259 to be repaid by Dec. 31, 2025. After negotiations
with city staff and NVA’s planned repayment of $393,259 toward the Endeavor Bank loan, NVA
is now requesting a $500,000 loan from the city to be utilized to fully retire the remaining
$500,000 balance on its Endeavor Bank loan.
NVA’s Prebys Foundation matching grant established specific fundraising goals around the raising
and receipt of donor funds over the 2025 calendar year. Those specific goals were as follows:
Target date Donation goal Prebys match Total
Dec. 31, 2024 $125,000 $125,000 $250,000
June 30, 2025 $250,000 $250,000 $500,000
Dec. 31, 2025 $250,000 $250,000 $500,000
TOTAL $625,000 $625,000 $1,250,000
NVA successfully met its $125,000 Dec. 31, 2024, and $250,000 June 30, 2024, goal, and has
received a $375,000 match from the Prebys Foundation for a total of $750,000. All of the
$750,000 raised and matched by the Prebys Foundation has been or will be used to pay
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individual vendors and to pay down the Endeavor Bank loan, which will have an outstanding
balance of $500,000, after NVA’s planned repayment of $393,259 toward the Endeavor Bank
loan.
Proposed loan agreement
The key terms of the proposed loan agreement are:
• The city will provide a $500,000 loan to NVA at 3% annual interest, with interest-only
payments of approximately $1,250 per month, from July 1, 2025, through Jan. 31, 2026.
• The $500,000 in city loan funds are to be used solely to retire the Endeavor Bank loan.
Payment of the $500,000 in city loan funds will be made directly from the city to
Endeavor Bank.
• Through its capital fundraising campaign NVA intends to raise an additional $250,000 by
Dec. 31, 2025, to be matched with a $250,000 grant from the Prebys Foundation by Jan.
31, 2026, for a total of $500,000. The $500,000 in raised funds are to be used by NVA to
repay the city’s $500,000 loan.
• Any remaining unpaid principal balance on the city’s $500,000 loan to NVA as of Jan. 31,
2026, shall be converted into a lease payment obligation amortized over the applicable
term according to the schedule below:
Remaining principal
balance Payment term Interest rate Estimated monthly
rent
Up to $250,0000 5 years 4% Up to $4,604.13
$250,001 - $500,000 12 years 5% Up to $4,624.45
• NVA may prepay all or part of the balance at any time without penalty.
• NVA shall be required to submit monthly and financial reports to the city to ensure
transparency around capital fundraising efforts and the financial condition of NVA.
Additionally, the original lease agreement is being amended to, among other items, revise
sections related to maintenance and operating costs to shift responsibility for all maintenance
and repair costs to NVA, except for the fire alarm and sprinkler system as well as sidewalks and
parkways, for the remaining balance of the lease term, with approximately 16 years remaining
on the lease.
Approval of the loan agreement and the first amendment to the lease agreement will support
the long-term sustainability of an established cultural arts tenant while protecting the city’s
financial and property interests through clear repayment terms, the transfer of all maintenance
and repair obligations to NVA and robust reporting requirements.
City staff recommend the City Council adopt the resolution approving a loan agreement in the
amount of $500,000 and the first amendment to the lease agreement with New Village Arts for
the City-owned property at 2787 State Street, authorizing the City Manager to execute the loan
agreement and the first amendment to the lease agreement and appropriating $500,000 from
the General Fund Reserve.
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Fiscal Analysis
Under the terms of the loan agreement, the City will provide NVA with a $500,000 loan to retire
the outstanding Endeavor Bank loan. Under the loan agreement, NVA will make monthly
interest-only payments of $1,250 from July 1, 2025, through Jan. 31, 2026.
Through its capital campaign, NVA intends to raise $250,000 by Dec. 31, 2025, to be matched
by Jan. 31, 2026, with $250,000 from the Prebys Foundation grant, for a total of $500,000. The
$500,000 in raised funds are to be used by NVA to repay the city’s $500,000 loan. Any
remaining unpaid principal balance on the city’s $500,000 loan to NVA as of Jan. 31, 2026, will
convert into a long-term lease payment obligation amortized over either five years at 4%
interest or 12 years at 5% interest, depending on the outstanding loan balance.
With the City Council adoption of the recommended resolution, the $500,000 city loan to NVA
will be funded from the city’s General Fund Reserves.
In addition, with the approval of the first amendment to the lease agreement, NVA will be fully
responsible for all maintenance and operating costs for the property, except for the fire alarm
and sprinkler system as well as sidewalks and parkways, which is anticipated to save the city
approximately $5,000 to $10,000 annually in maintenance expenses.
Next Steps
Staff will proceed with carrying out the terms of the loan agreement and the first amendment
to the lease agreement with NVA. Accordingly, staff will disburse $500,000 in funds directly to
Endeavor Bank upon receiving receipt of NVA’s payment to Endeavor Bank in the amount of
$393,259.
Staff will monitor compliance with repayment and reporting requirements and return to the
City Council as needed.
Environmental Evaluation
The proposed action is categorically exempt from environmental review under California
Environmental Quality Act Guidelines Section 15301 because it involves the leasing, operation,
maintenance and minor alteration of existing facilities with negligible or no expansion of the
existing or former use. No exceptions to the categorical exemption as set forth in CEQA
Guidelines Section 15300.2 or Carlsbad Municipal Code Section 19.04.070(C) apply.
Exhibits
1. City Council resolution
2. Conrad Prebys grant letter, dated Oct. 7, 2024
3. New Village Arts loan request letter, dated Oct. 30, 2024
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Exhibit 1
RESOLUTION NO. 2025-162
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, APPROVING A LOAN AGREEMENT IN THE AMOUNT OF
$500,000 AND A FIRST AMENDMENT TO THE LEASE AGREEMENT WITH NEW
VILLAGE ARTS, INC. FOR THE CITY-OWNED PROPERTY AT 2787 STATE
STREET, AUTHORIZING THE CITY MANAGER TO EXECUTE THE LOAN
AGREEMENT AND FIRST AMENDMENT TO THE LEASE AGREEMENT, AND
APPROPRIATING $500,000 FROM THE GENERAL FUND RESERVE
WHEREAS, the City is the owner of that real property situated at 2787 State Street, Carlsbad,
California, consisting of approximately 9,400 square feet of commercial building space, designated as
Assessor Parcel Number 203-295-01 and 02 (“Premises”); and
WHEREAS, since 2006, New Village Arts (NVA) has operated a performing arts theater at the
Premises under successive lease agreements approved by the City Council; and
WHEREAS, on July 27, 2021, the City Council approved a new ten-year lease agreement with
NVA, with two five-year extension options authorized by Resolution No. 2021-182, as well as a
construction and reimbursement agreement under which the city agreed to reimburse NVA up to
$573,000 for certain tenant improvements, including $103,000 toward solar installation and $470,000
for exterior improvements; and
WHEREAS, NVA subsequently completed extensive renovations to the Premises at a total cost
exceeding $3 million, funded in part by a $893,259 commercial loan with Endeavor Bank; and
WHEREAS, on Oct. 7, 2024, NVA was awarded a $625,000 matching grant from the Prebys
Foundation, contingent upon successfully raising an equivalent amount by Dec. 31, 2025, with the
combined funds intended to fully retire the building renovation debt; and
WHEREAS, on Oct. 30, 2024, NVA formally requested city assistance in the form of a loan to
retire its remaining building renovation debt; and
WHEREAS, on Jan. 28, 2025, the City Council adopted Resolution No. 2025-028, appointing the
City Manager, or designee, as real estate negotiator to negotiate a loan agreement and modified
lease terms; and
WHEREAS, NVA will tender payment in the amount of $393,259 to Endeavor Bank by July 31,
2025, which will reduce the remaining loan balance to $500,000; and
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WHEREAS, city staff have negotiated a Loan Agreement with NVA that includes the following
key terms:
•The City will provide a $500,00 loan to NVA at 3% annual interest, with interest-only
payments of approximately $1,250 per month from July 1, 2025, through Jan. 31, 2026;
•Upon receiving proof of NVA’s payment to Endeavor Bank in the amount of $393,259,
which is due by July 31, 2025, the City will disburse the $500,000 loan proceeds directly to
Endeavor Bank to retire NVA’s building renovation debt.
•Through a capital fundraising campaign, NVA intends to raise $250,000 by Dec. 31, 2025,
to be matched with the Prebys Foundation grant by Jan. 31, 2026. The $500,000 in raised
and matched funds are to be used by NVA to repay the City’s $500,000 loan.
•Any remaining unpaid principal balance on the city’s $500,000 loan to NVA as of Jan. 31,
2026, shall be converted into a monthly lease payment obligation amortized over the
applicable term according to the schedule below:
Remaining Principal Balance Payment Term Interest Rate Estimated Monthly Rent
Up to $250,0000 5 Years 4% Up to $4,604.13
$250,001 - $500,000 12 Years 5% Up to $4,624.45
•NVA may prepay all or part of the balance at any time without penalty.
•NVA shall be required to submit monthly financial reports during the 2025 calendar year
to ensure transparency around NVA’s capital fundraising efforts and the financial
condition of NVA.
WHEREAS, the original lease agreement is being amended to, among other items, revise
sections related to maintenance and repair costs, such that NVA will now have the sole responsibility
for all maintenance and repair costs for the Premises, except for the fire alarm and sprinkler system
as well as sidewalks and parkways, for the remaining balance of the lease term; and
WHEREAS, city staff have determined that approval of the Loan Agreement and the First
Amendment to the Lease Agreement will protect the city’s long-term interests in the Premises,
ensure repayment of the loan principal and interest over time, and support the ongoing operation of
a valued cultural arts tenant in the Carlsbad Village; and
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WHEREAS, city staff is recommending that the City Council appropriate $500,000 from the
General Fund Reserve to fund the proposed loan.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as
follows:
1.That the above recitations are true and correct.
2.The proposed action is categorically exempt from environmental review under CEQA
Guidelines Section 15301 because it involves the leasing, operation, maintenance and
minor alteration of existing facilities with negligible or no expansion of the existing or
former use. No exceptions to the categorical exemption as set forth in CEQA
Guidelines Section 15300.2 or Carlsbad Municipal Code Section 19.04.070(C) apply.
3.That the City Council has determined that New Village Arts provides a significant public
benefit to the community by supporting arts and culture in the Carlsbad Village area,
offering an alternative evening activity that encourages positive pedestrian traffic and
public interaction, and enhancing the Village’s retail and dining environment with a
cultural venue that otherwise would not exist in the area. Further, NVA’s use of the
Property as a theater and arts center is consistent with the goals of the Carlsbad
Village and Barrio Master Plan, which calls for uses that activate the Village through
placemaking strategies supporting arts and culture, including visual, musical, and
theatrical arts, and other public performances.
4.That the City Council hereby approves the Loan Agreement and the First Amendment
to Lease Agreement with New Village Arts, attached hereto as Attachment A and B
respectively, and authorizes the City Manager, or designee, to execute these
agreements on behalf of the City of Carlsbad and to take all actions necessary to
implement them, including minor or clerical modifications as approved by the City
Attorney.
5.That the City Council hereby appropriates $500,000 from the General Fund Reserve to
fund the City’s loan to New Village Arts under the terms of the approved Loan
Agreement, to be used solely to retire the existing Endeavor Bank loan related to
tenant improvements at the Premises.
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6.That this Lease Amendment as well as the underlying Lease Agreement shall be
recorded in the Office of the Recorder of the County of San Diego pursuant to
California Government Code Section 37393.
7.That the City Manager, or designee, is authorized and directed to take all further
actions as necessary to carry out the purposes of this Resolution, including but not
limited to, ensuring NVA’s compliance with repayment, reporting, and maintenance
and repair obligations under the Loan Agreement and the First Amendment to the
Lease Agreement.
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City
of Carlsbad on the 15th day of July, 2025, by the following vote, to wit:
AYES: Blackburn, Bhat-Patel, Acosta, Burkholder, Shin.
NAYS: None.
ABSTAIN: None.
ABSENT: None.
______________________________________
KEITH BLACKBURN, Mayor
______________________________________
SHERRY FREISINGER, City Clerk
(SEAL)
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Attachment A
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Attachment B
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October 6, 2024
Kristianne Kumer
New Village Arts Inc 2787 State Street Carlsbad, CA 92008
RE: Agreement for Grant #1907
Dear Kristianne,
PREBYS FOUNDATION
The Conrad Prebys Foundation is pleased to inform you that New Village Arts Inc has been awarded a grant in the amount of $750,000.00 for a term of 15 months. The grant will be distributed in installments as seen in the payment schedule table, contingent on the successful
completion of project milestones as negotiated by Prebys and New Village Arts (as noted in Key
Activities/Timeline). The funding is for the project listed below.
Project Description Project Title: Building the Bridge at New Village Arts
Project Summary
With the support of the Prebys Foundation, New Village Arts (NVA) will embark on a capacitybuilding project to retire the debt incurred from the expansion of the Dea Hurston New Village Arts Center and increase sustained effectiveness of the board and funding partnerships. This $1.25 million debt resulted from unforeseen financial challenges during renovations. NV A will utilize the resources of Prebys to hire two consultants, one executive and one fundraising, who
will not only help NV A with the immediate campaign but also build the skills of the organization
to be able to fundraise at a higher level to match the unprecedented growth of the company.
Key Activities/Timeline •October 6, 2024: Quiet Announcement of Grant at NV A's Private Donor Dinner•October 2024: $125,000 payment received from Prebys; Negotiate and confirm 2
consultants and begin work•November-December 2024: Meet with NVA stakeholders to secure first part of thematch•December 2024-January 2025: First portion of match ($125,000) submitted to Prebys•January 2025 -June 2025: Fundraising campaign and staff training continue; Second
portion of match ($250,000) submitted to Prebys•June 2025 -December 2025: Fundraising campaign continues; NV A staff has receivedthe training necessary to continue the campaign on their own; Third portion of match($250,000) submitted to Prebys
Exhibit 2
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Mr. Scott Chadwick
City Manager
CITY OF CARLSBAD
1200 Carlsbad Village Drive
Carlsbad, CA 92008
October 30, 2024
RE: New Village Arts Theater Loan Request
Mr. Chadwick:
We appreciate your patience with us as we have been busy developing alternatives to
the proposal we made this past May 2024. At that time we were requesting a $1.3M
loan to pay back capital debts that were the result of inflationary cost overruns for the
building renovations we constructed in 2021-22. The advice we received from your
staff at the time was to pursue alternatives that might provide additional participants in
the relief from the debt. We are pleased to inform you that we have been successful in
that pursuit but we still need some assistance from the City.
The Prebys Foundation Board recently approved a $1:$1 matching grant to NVA for a
total of $625,000, meaning, if we are successful in our campaign to raise $625,000,
then a total of $1.25M will be used to retire our building renovation debts. The
Foundation also awarded an additional $125,000 in resources to help guide our capital
campaign over the term of the matching grant through December 31, 2025. We have
initiated that effort now with Prebys and have been successful in raising our first
$50,000 towards the match.
However, we are still respectfully requesting financial assistance from the City, the
owner of the building. We have a capital improvement loan with Endeavor Bank that
has a remaining principal balance of $893,259, which is past its original term and on
which we are making monthly interest-only payments. Those payments are currently
over $7,000 per month and New Village Arts needs to lower the interest rate/payments
over the next 12 months to be successful with the challenge grant from the Prebys
Foundation. Our request of the City is in the form of a $893,259 loan through
December 31, 2025 with interest-only payments to allow us to retire the Endeavor
Bank loan.
Our intent is to raise $625,000 in donor capital, together with the Prebys Foundation
$625,000 matching grant to payback the City Loan at the end of the term. We will also
set priorities around the receipt of capital campaign donor funds to repay the City Loan
over the next year.
The projected tranches of the Prebys Foundation grant match and goals for donor
capital raised are as follows:
Raise/Grant
Tranches By Date Donation Goal Prebys Match Total
December 31, 2024 $125,000 $125,000 $250,000
June 30, 2025 $250,000 $250,000 $500,000
December 31, 2025 $250,000 $250,000 $500,000
TOTAL $625,000 $625,000 $1,250,000
Kristianne Kurner
Founder and Executive
Artistic Director
BOARD OF
DIRECTORS
AJ Knox, PhD
President
Mary Kerr
Treasurer
Milena (Sellers)
Phillips
Secretary
Merryl Goldberg
Kristianne Kurner
Katie Keller
AJ Knox
Christy Rosa, M.D
Lou Storrow
Daniel Watts
DeMilo Young
Scott White,
Emeritus
NVA Advisory Board
Don Sciglimpaglia,
Chair
Mark Caruana
Kathy Deering
Haley DiDonato
Shawnta Fleming
Paul Hay
Chris Ing
Richard Kuranda
Cassie Langan
Monica Martin
Gina McBride
Julie Nygaard
Justin Peek
Shari Roberts
Jay Sarno
Becky Sciglimpaglia
NVA is a 501(c)(3)
Non-Profit Organization
Tax ID #52-2320930
Exhibit 3
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2
Our loan repayment commitment to the City is as we raise capital and receive matching grants on the Tranche
dates above, we will utilize 70% of the funds to repay the City Loan. To the extent there is any remaining
principal balance in the City Loan at the end of 2025, then we propose that the remaining balance would be
amortized over the remaining term of the lease with extensions (16 years) or converted to an equivalent lease
amount over the remaining 16-year term.
To be specific, the following is a summary of our request:
Loan Amount: $893,259
Use of Proceeds: To pay off short term capital cost debt in the remaining balance of the Endeavor Bank
Loan associated with the improvements to the NVA building owned by the City.
Term: Through December 31, 2025 with interest only payments;
Any remaining Principal Balance to be extended for 16 Years (Remaining
Term of the Lease plus Extensions)
Interest Rate: 3% per annum
Monthly Payments: Interest only payments of $2,233 per month or less as the Principal
Balance is reduced through the capital campaign with the Prebys
Foundation matching grant.
Any remaining Principal Balance at the end of the initial term is requested
to be amortized over the remain Lease Term of 16 years or converted into
an equivalent lease payment.
We realize this is still a substantial request and that the proposed interest rate of 3% per annum
is below conventional loan rates but we also believe the future of culture and entertainment in
Carlsbad merits the extension of a loan. The New Village Arts Theater has long been an
important social and cultural hub for the residents of the City of Carlsbad. In the past fiscal year,
the NVA has hosted over 360 events, including our outstanding, award-winning theatrical
content on the Ray Charles Stage and hundreds of community-facing events on our White
Family Next Stage fronting State Street in Carlsbad Village. We have been able to expand our
offerings this year to include Salsa Nights, Comedy Clubs, Silent Discos, Jazz Nights, Poetry
Readings and Opera Nights. The NVA has been an economic engine for Carlsbad
Village, driving more diners and shoppers onto State Street, and visitors have come from all
corners of Southern California and from out-of-state to enjoy our programming. We’ve also
attracted sponsors like the Ray Charles Foundation, the Prebys Foundation and hosted our
annual gala on-site for the first time with record financial success. Our operating business plan
is sustainable, and we are proud of what our small but mighty staff has accomplished this past
year.
We would appreciate a discussion of this request at your earliest convenience. We appreciate our
partnership with the City in continuing to bring culture and economic activity to the Village.
Sincerely,
Kristianne Kurner
Founder and Executive Artistic Director
July 15, 2025 Item #5 Page 35 of 35
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