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ISC looks to sever ties with National Storytelling Network

In an effort to solve its financial crisis, the International Storytelling Center will begin by attempting to sever its ties with the National Storytelling Network.
During a Jan. 31 meeting of creditors in the United States Trustee’s Office of the James H. Quillen United States Courthouse in Greeneville, ISC Attorney Mark Dessauer said he plans to file a motion to reject the three agreements with NSN that were formed when the organizations split from what was once named the National Storytelling Association.
The first agreement involves restructuring to form the ISC and the NSN. The second describes operation of the International Storytelling Festival, which is to be produced and run by the ISC. The third agreement is a settlement as a result of mediation in 2004.
Dessauer said the agreements can be considered independently or collectively, but the bottom line is 18 percent of the total gross revenue from the festival goes to the NSN.
“The contract says NSN is co-owner of the festival,” said Bob Johnson, corporate treasurer for the NSN.
Johnson expressed concern regarding Dessauer’s statement about filing a motion rejecting the agreements, and asked ISC President Jimmy Neil Smith to confirm that NSN is considered a co-owner of the festival. Dessauer advised Smith not to answer.
Johnson immediately petitioned to be added as a member of the Unsecured Creditors Committee that was appointed by the court on Jan. 26. The committee includes the following members: Jane Hillhouse, president of Hillhouse Graphic Design in Kingsport, chair; Mike Holland, vice president of operations for Chattanooga Tent Co. in Chattanooga; Richard McClain, president of McClain Information Technology in Johnson City; Hannah Paramore, president of Paramore/Redd Online Marketing in Nashville; and Charles Spears, president of Spears Services, Inc. in Johnson City.
Patricia C. Foster, Attorney for the U.S. Trustee, swore in Smith and ISC Financial Director Sandy Reaves for testimony at the beginning of the meeting saying, “This is your opportunity to testify under oath about your debtor-in-possession status.”
In providing history of the organizations, Smith said a parting of ways came when there was a disagreement over the future of NSA.
Smith said one side wanted to serve the members, and one side wanted to promote and grow storytelling.
The organization split into the ISC, which assumed the corporate charter, and the NSN, which is dedicated to members.
Smith said when NSA restructured, both organizations needed money to operate. ISC runs and produces the festival, and NSN receives 18 percent of gross revenues.
When asked what other causes led to the filing for bankruptcy, Smith listed the 16 percent decline in income over the last three years, which has resulted in a loss of $400,000 since 2007.
The second obstacle was the construction of a storytelling building that was originally supposed to be covered with a $980,000 loan from Rural Development USA, but resulted in overruns due to soil problems that required an additional $1.6 million be borrowed.
“This is what got us behind in our payments to Rural Development USA,” Smith said.
The third challenge to ISC’s prosperity is the required payments to NSN, which Smith said has received $1.9 million.
Foster asked if the agreement with NSN has contributed to the ISC’s financial problems.
“Absolutely,” Smith answered.
Sandy Reaves, ISC financial director, estimated an additional $300,000 above festival revenue is needed each year to balance the budget.
Smith said belt-tightening has already begun in the area of staff.
Two full-time positions and one part-time were eliminated during January. Salaries of remaining staff have been cut, with Smith reducing his own annual salary from $85,000 to $65,000.
Foster expressed concern about the construction cost and subsequent debt for a building that is valued at only $500,000.
Smith said the mayor of Jonesborough recommended putting it up at that value because the building has a limited purpose in that it was designed for performances.
“Our hope is that we can re-negotiate a new among and loan from Rural Development USA,” Smith said, adding the Town of Jonesborough has also expressed interest in acquiring the building and leasing it to the ISC.
Hillhouse, representing the Unsecured Creditors Committee, asked the timetable to have a plan in place for recovery.
Dessauer said he hoped within 120 days, but an extension may be required.
Hillhouse also asked whether the ISC’s Board of Governors had been aware of the dire financial situation.
According to Smith, the ISC’s Board of Governors had full knowledge of the organization’s financial situation.
Hillhouse also inquired about the use of restricted grants, and Smith admitted $22,000 of a grant from the ARC that was designated for the website was used for operations.