With its domed ceiling and 18-foot crystal chandelier, the newly restored Genesee Theatre was designed to be the crown jewel in a sweeping revitalization of Waukegan's moribund downtown.

But despite a gala opening last month with two sold-out shows by comedian Bill Cosby, some residents are howling about decisions that nearly doubled the project's price while halving the number of shows initially promised.

Originally envisioned as a moneymaker that would cost $14 million, pay off the city's bonds and draw 500,000 people annually, the Waukegan-owned theater is now expected to operate in the red for years. Just a handful of shows have been announced so far.

As money woes piled up--the costs ballooned to $24 million--so did controversy. Ray Shepardson, a nationally known theater restoration expert hired to run the project and book a packed year of shows, was fired months before the opening.

Project critics, citing the cost overruns and construction delays that plagued the theater restoration, now question the city's ability to handle an overhaul of its lakefront and downtown that would cost hundreds of millions of public and private dollars.

"It's almost mind-boggling," said Newton Finn, legal counsel for the local watchdog group, Taskforce on Waukegan Neighborhoods. "If that project is run the same way, that project is doomed to fail."

Pointing to, among other issues, a $13.2 million no-bid contract the city awarded to a company run by sons of a project insider, the task force has called for an independent audit of the Genesee finances.

From Chicago to Elgin to Hinsdale, city officials and preservationists have attempted to revive similar old theaters, often with limited success as money remains scarce and developers seek to turn them--and their usually central locations--into condos, stores and office space.

These relics of the past are almost never preserved because turning a profit can prove difficult and restoring them can be tricky, experts say.

Waukegan officials and board members of the non-profit Friends of the Historic Genesee Theatre, which raised money for the restoration, acknowledge their project ran into trouble. But they also point to the stunning result--a lavishly renovated theater that in October sold out Cosby's two shows in about three hours.

"It couldn't be better," said Waukegan Mayor Richard Hyde.

The easy thing, said Waukegan director of governmental services Ray Vukovich, would have been to allow the 77-year-old theater to decay and eventually face a wrecking ball.

"Looking back, there are a lot of things I would recommend we would have done differently, after you have been through this mess," said Vukovich, who oversaw the project for the city.

Waukegan officials blame the cost overruns on GSI Architects, a Cleveland-based company the city hired to design the renovation, but then fired as problems piled up. They also say the price tag grew as the seating capacity was expanded.

Costs underestimated

Things went awry almost immediately. GSI underestimated how much the project would cost, saying it could get the job done for $14 million.

"We found out how wrong" they were, said Hyde, who said he felt like he was "gullible" in accepting GSI's original estimates.

Many line items in GSI's original budget wound up costing two or even three times more than estimated. For example, GSI originally tagged the stage and seating area expansion at $1.26 million. The work actually cost about $3 million.

Representatives of GSI did not return calls.

For much of the project, Waukegan didn't have a construction manager, a situation that can lead to trouble, said Bruce D'Agostino, executive director of the McLean, Va.-based Construction Management Association of America, a national trade organization with 2,300 members.

A construction manager keeps tabs on costs, schedules and change orders while working independently of architects and contractors, D'Agostino said.

The fact the theater would cost $10 million more than initially estimated took Vukovich by surprise when he first found out around April 2003, two years after the project began.

One problem in determining what happened is the lack of change orders--written authorizations of changes, which can significantly add to the cost or deadline of a project. Vukovich said there are "none whatsoever."

Change orders were not used because contractors managed to stay within their budgets and didn't go back to the City Council for more money, said architect Steve Kolber, who was hired by the city in 2003 to act as a construction manager.

The problem, Kolber said, was that those budgets were larger than GSI originally estimated.

Kolber, who admitted that the frequent delays that pushed back the theater opening a year or more "technically" should have required change orders, said there still is a paper trail --files of receipts and payouts. "You can document exactly where all the monies went," he said.

A few months after learning the project was over budget and behind, the city fired GSI in the summer of 2003. Desperate to complete the work, officials turned to local Pickus Companies, already a contractor on the job.

Conflicts of interest seen

Waiving its bidding procedures in November 2003, the City Council voted to enter into a contract of up to $13.2 million with Pickus Companies run by sons of Friends board secretary Allan Pickus, even though another company, St. Louis-based Clayco Construction, was preparing to submit a proposal for $570,000 less. Calls to Allan Pickus were not returned. Pickus companies officials would not comment.

City attorney Brian Grach said the City Council is allowed to waive bid procedures with a two-thirds vote of the aldermen.

As Pickus Companies readied to finish the theater, they awarded a $1.9 million contract to install air conditioning and heating to low-bidder Air-Con, a company run by Fred Abdula, a member of the Friends board and board chairman until November 2003.

Those moves, and the no-bid contract, caused some residents to question how board members so intimately involved with the project could benefit from it financially.

"I am a little surprised that people who hold contracts for major projects are allowed to be on the board," said Cheryl Ptasienski, co-chair of the Taskforce on Waukegan Neighborhoods. "To the general public, it looks like a pretty big conflict of interest."

As the city poured more money into the project, the Friends struggled to raise $4 million to fund Shepardson's plan to open with a debut season of hundreds of shows. So far, the board has raised about $1.5 million.

With the theater's opening looming, the Friends ousted Shepardson, who says he is still owed $97,000 in back pay, and replaced him with SMG, a Philadelphia-based company hired to run the venue.

In a management plan presented to the city in July, the company announced it would start with 86 shows in the first year, with a deficit of about $900,000 over the first four years. In the fifth year, SMG's plan shows a $17,000 profit for the city, with about 124 shows.

Meanwhile, the task force is calling for a public hearing to discuss the cost overruns, Ptasienski said.

"The whole thing is that it is 200 percent over budget," she said. "Two hundred percent over budget is unrealistic without getting any answers."

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