The Zeitgeist Arts complex will celebrate its fifth year as part of the arts scene in downtown Duluth this week, but the arrival of any future birthday cakes can hardly be taken for granted.

Broader community support will be the key to the nonprofit organization’s survival, said Tony Cuneo, executive director of the organization that operates Zeitgeist Arts, now that the primary benefactor of the downtown arts hub and the namesake of the A.H. Zeppa Foundation no longer has the financial wherewithal to fund it single-handedly.

“One of the reasons why they won’t be relying on my generosity any more is because they can’t rely on it any more, because I don’t have any more to give,” Alan Zeppa told the News Tribune. “The downturn affected the foundation and me equally. We both came across some very rough patches. There was very little cash and lots of toxic assets.”

As the financial role of its benefactor has waned, Cuneo said the Zeppa Foundation has started to operate under a new name: the Zeitgeist Center for Arts and Community.

“The major organizational changes have been about building an infrastructure that is run by, supported by and truly representative of the community,” he said.

Born of a windfall

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Alan Zeppa launched the Zeppa Foundation in 2004 soon after inheriting a multi-million dollar estate primarily derived from company stock his late father had acquired as the West Coast district manager for United Parcel Service.

Frank Zeppa died in 1953 when his son, Alan, was just 5 years old. Alan Zeppa’s mother remarried, and the stock holdings were unknown to him until the death of his stepfather in 2003.

With his inheritance of well over $50 million came a commitment that 45 percent of the estate would go to charity.

Making a difference

Although he grew up in California, Zeppa was living in Duluth when he came into the family fortune. With a Ph.D. in family environment from Iowa State, Zeppa moved to the area in the late 1980s and taught at the University of Minnesota Duluth and the University of Wisconsin-Superior.

Zeppa said he always intended to retire to California, but he decided to funnel much of his charitable spending into the Twin Ports, where he had raised two daughters.

“There are all kinds of people with all kinds of money giving all kinds of gifts to everybody out here,” said the 66-year-old philanthropist from his home in Carmel, Calif. “What would have been a drop in the bucket here made a difference in Duluth. That’s the thing I’m most proud of. I think we did make a difference. I think we really have helped the artistic community there.”

From 2005 to 2010, the foundation provided more than $18 million of support to various social justice, environmental, public health and arts organizations through a series of grants and low-interest loans.

A gift

In 2008, Zeppa began construction of the Zeitgeist Arts center - including the two-screen Zinema independent film cinema, a 125-seat black box theater and a restaurant - largely for personal reasons.

“I like foreign and art-house movies, and I wanted to have a theater like that in Duluth,” he said, noting that the project at 222 E. Superior St. also promised to attract additional investment to redevelop Duluth’s then-struggling Old  Downtown neighborhood.

“The Zeitgeist was never set up to be self-sufficient,” Zeppa said. “We were always going to underwrite both the Zinema and the black box theater.”

But Zeppa launched the capital-intensive project just as an economic recession was about to strike.

“Initially I thought there was so much money that the movie theater was going to be my personal gift to the city of Duluth, and when the downturn came, all I had was toxic assets left, and that’s all the foundation had. And now, there’s this huge hole.”

Hard times

At the very moment when Zeitgeist Arts was going up, the Zeppa Foundation’s finances were crashing down.

“We were a week into the build-out when the financial guy came to us and said: ‘There’s no money,’ ” Zeppa said, recalling that his whole body sagged with the news.

To see the project through, Zeppa personally guaranteed a $2.5 million loan to cover the cost of the build-out. In retrospect, Zeppa said, he probably wouldn’t have agreed to take on the debt had he realized how much his personal wealth had been depleted as a result of unfavorable investments.

Zeppa had placed his faith and finances in the hands of others.

“I don’t have the capacity to run a foundation. I never did. I never deluded myself into thinking I could run one by myself,” Zeppa said. “That was one of the problems. With the assets, I placed a lot of trust in the financial adviser that we had at the time. Almost total trust. … And I was not as concerned as I should have been with the reporting.”

As a result, Zeppa had little time to take corrective action when his finances and those of the foundation began to crumble.

“Accurate information was very difficult to get, especially after the downturn. So we never really had a sense of where we were until it was almost too late,” he said.

Sensing trouble, the Zeppa Foundation, with Cuneo now at the helm, contacted Matthew Weatherley-White of the Caprock Group in 2009.

 “We were brought in when Alan started to develop a sense that the investment strategy that had been pursued by the previous money manager was not working as it had been expected to work. But the situation was really opaque and mercurial. It was right in the immediate aftermath of the break of the financial crisis in late 2008/early 2009, and I think they were really trying to get their arms around what they actually had,” Weatherley-White said.

“They asked us to come in basically (to) triage the situation,” he said, describing a portfolio that was “in crisis.”

Cuneo estimated that the value of the Zeppa Foundation’s endowment has fallen by about 80 percent since its inception because of investments that did not pan out as hoped.

Of the foundation assets that do remain, most are locked up in non-liquid holdings with no clear exit strategy yet evident.

Quest for stability

Cuneo said Zeitgeist Arts is now a more efficient operation than it was initially.

“It did take us some time to learn how to run a restaurant and a movie theater and a performance theater and gallery space and commercial lease space. The building wasn’t designed to cover all our fixed costs, but we’ve gotten much better. We know a lot more about how to run those venues at industry standards,” he said.

After undergoing painful cuts to operations, Weatherley-White said the Zeitgeist has made great strides toward stability.

 “Watching Tony evolve from a programmatic director to a savvy business manager has been amazing,” he said.

New model

Cuneo said the Zeitgeist has made a major shift.

“Now most of the contributions we’re able to make to the community are not coming from our endowment. We’re leveraging our structure, our space and our human capital to win new money,” Cuneo said. He said Zeitgeist aims to define Duluth as a “collaborative, creative, problem-solving community.”

Cuneo said staff members have risen to the challenge.

“Over the last couple years, we’ve brought close to $1.5 million in new money into our community, and most of that money would not have otherwise been coming to Duluth, had we not won it,” he said.

Cuneo said strong partnerships with other community organizations have helped the Zeitgeist obtain grants.

Sheamus Johnson, a field crew leader with Community Action Duluth, said the Zeitgeist has provided critical support to Fair Food Access Initiative, which is focused on bringing healthy, fresh food to underserved neighborhoods.

“From our experience, they are true facilitators who are making things happen. They have the skill set we needed to secure the funding for valuable community initiatives,” Johnson said. “They have been a totally indispensable partner in our work to alleviate poverty in Lincoln Park.”

Restructuring

While Cuneo remains thankful for Zeppa’s support, he said the organization is evolving and with its founder’s blessing, it restructured in May and took its new name.

“Alan has historically been the sole trustee of the organization. Alan and his family can still be involved. There is a mechanism for their continued involvement in the organization, but the large majority of the board is made up of local community members now,” he said.

The Zeppa family retains two of 13 possible votes on the Zeitgeist Center’s board of trustees.

Zeppa said he no longer considers himself rich.

“Personally, being rich is not all it’s cracked up to be. Right now I’m stable. I don’t owe anybody any money. I own my own house, and I have an income adequate to (sustain) me for the rest of my life. And that’s really about it,” he said.

Zeppa said he supports the changes being made in what had been his foundation.

“I think Tony has done a wonderful job of moving the foundation from the point where it started to the point where it’s actually doing some good on a shoestring budget. I think he has done a marvelous job of that. But it’s not really my foundation anymore,” he said.

Artistic thrust

Zeppa said he initially hoped to direct most of his philanthropic spending into efforts to build community, protect the environment and support progressive initiatives. But his personal interest in theater and the arts got the better of him.

“The artistic stuff, which the theater and the restaurant represent, was always supposed to be the smallest part of the foundation. But you know how actors are. So that quickly became a focal point,” he said.

Bill Payne, dean of fine arts at the University of Minnesota Duluth and a member of Zeitgeist Center’s board, views Zeppa’s investment in the arts and Duluth’s Old Downtown as a catalyst.

“The presence of that kind of a restaurant and an independent movie theater and a live stage and office space and rehearsal space upstairs - you can’t underestimate how profound that is in changing the landscape,” he said.

Payne said he believes the Zeitgeist Arts Initiative gave people in the business community more of an appreciation of the role that creativity could play in stimulating Duluth’s economy.

Geiger Yount, another member of the Zeitgeist’s board of trustees, said she believes the arts and community health missions of the organization fit together well.

“It’s seamless in my eyes,” she said. “People need food for their bodies and their spirits.”

Duluth artist Ann Klefstad said the Zeitgeist has emerged as a critical component of the local arts scene.

“The Zeitgeist has provided the basis for the development of a cross-disciplinary arts community that was kind of lacking before,” Klefstad said. She said center provides a venue for local visual artists, musicians, filmmakers and others.

“It has provided a place for all art forms to gather and form a much larger art world,” she said.

Community support

Cuneo said community support will be required to sustain the Zeitgeist Center for Arts and Community.

“We have about $2 million left on the mortgage for this building. That’s about $150,000 a year. And that’s really what we’re focused on building the support around,” he said. “That’s the component of the model that we assumed the foundation would be able to support, and it has supported it and will continue to - but in terms of a long-term sustainable model, we’ll need to shift that support toward the community.”

Zeppa remains hopeful Duluth will step up.

“The question was always: Will Duluth support this? Nobody had any faith in that because Duluth hadn’t supported the arts. I think they needed a spark, and that’s what we were trying to do, to provide the spark that would change Duluth’s perception of itself. Has that worked? Well, I think some of the communities in Duluth that we supported, notably the theatrical community, the arts community (are) stronger and more cohesive than it was then. So in that sense, it has worked,” he said.

Weatherley-White said that if the organization can garner community support, he believes its chances of survival remain strong.

“I think there’s a really, really good chance that with some community involvement and getting one or two breaks in the portfolio, I think we’re there. The door is right there. We have not yet stepped through it, but the door is right there,” he said.

Anniversary kickoff and silent auction

What: Enjoy half-price wine and free appetizers from the Zeitgeist Arts Cafe while perusing silent auction items and packages from local businesses. Duluth Mayor Don Ness and Zeitgeist’s Executive Director Tony Cuneo will be on hand to talk about the history of Zeitgeist Arts, the vision for the future and how you can help.

When: Monday, October 20, from 6-7pm / Zeitgeist atrium