KCTS looks to cut debt by selling headquarters

By Pamela Sitt and Kay McFadden
Seattle Times staff reporters

	Bill Mohler
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The head of KCTS-TV said yesterday that the Seattle public television station's mountainous debt could be resolved by the end of this month if it sells its Seattle Center headquarters.

Three potential buyers have expressed interest in a deal for the building — appraised at $13.2 million — and one could make a move as soon as three weeks from now, according to Bill Mohler, CEO and president.

"I think it's the most realistic option we have," he said. "We would be able to honor the debt we have and also end up with some cash reserves, even though we'd be strapped with a lease payment."

A lease-back purchase agreement would allow KCTS to remain in the building and manage its $7.2 million in debt, which has mounted over a decade of operating losses.

The news would be especially welcome at Public Broadcasting Service headquarters in Alexandria, Va. KCTS' single biggest obligation is an installment plan for back dues owed to PBS. However, KCTS hasn't made payments on the plan since May 2003 and PBS last month sent a letter asking the station to reconcile $3.6 million in back dues.

"The letter that was written did not demand an immediate payment," said Jan McNamara, director of corporate communications for PBS. "It did say, 'You are not in compliance and we need to take a look at that.' "

Last May, PBS implemented a new accounting policy with timelines and consequences for negligent debtors.

A few other member stations have fallen behind in dues payments from time to time, according to PBS Chief Operating Officer Wayne Godwin. Still, he characterized KCTS as "unique in terms of the size of their debt and the length of time over which the debt has grown."

Under its policy, PBS has the option to halt local programming at an affiliate or sever ties completely, which would deny the station access to national PBS shows such as "Nova," "Frontline" and "Antiques Roadshow."
 
In the case of KCTS, however, such a move would be extraordinary, given that it is among PBS' most-watched stations and is in the nation's No. 12 television market.

"It is the goal of both PBS and KCTS to work collaboratively in order to resolve this matter in a way that causes the least amount of disruption to the people in KCTS' viewing area," Godwin said.

Since KCTS cannot pay its back dues in full — and will shortly owe another $1.5 million for 2004 — it has opted to restructure its payment plan. The original plan was crafted by previous CEO Burnhill Clark, who resigned in April.

KCTS submitted a new proposal Friday and is waiting to hear from PBS, whose board meets March 22. Godwin said the letter is "under review."

He added that, "The current management of KCTS has taken positive steps to find a solution, which we greatly appreciate."

In any event, a successful building sale would render the issue of past dues moot. Mohler has said he would use the money to pay off the $3.6 million cited by PBS in order to bring KCTS to policy compliance. The property on which the station's building stands at 401 Mercer St. is leased by Seattle Center but would have no bearing on a potential sale, Mohler added. The lease runs through 2024, with an option to renew at that time.

Meanwhile, PBS spokesperson McNamara reassured viewers. "KCTS' national programming is not in immediate peril," she said, " 'Antiques Roadshow' will not be off the air next week."

Pamela Sitt: 206-464-2376 or psitt@seattletimes.com

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