Lawmaker puts hold on $2 million in state funds intended for CapRadio’s new downtown facility

Updated 4:30 p.m.

A Sacramento lawmaker has placed a hold on $2 million in state funds that were intended to help pay for CapRadio’s new downtown headquarters, citing concerns over the station’s financial mismanagement. 

Assembly member Kevin McCarty, D-Sacramento, said he secured the $2 million state grant in June with the goal of supporting a project that could help revitalize the city’s downtown. 

But McCarty said in an interview on Wednesday he froze the money after a September audit found numerous instances of financial mismanagement at the NPR member station. The audit also questioned whether the station can afford its downtown facilities, which include the new headquarters and a separate live event space. 

McCarty said he can’t hand the money over while so many questions remain. He said it will remain in a city of Sacramento fund that distributes state money to community projects. 

“We like the idea for the project, [but] we also have a responsibility to the taxpayers. This is a publicly funded grant,” said McCarty, who is running for Sacramento mayor along with three other candidates. “With some of these unanswered issues, I recommended that we put the $2 million on hold. So, we’re pausing that until further notice.”

The $2 million represents nearly 10% of CapRadio’s projected $21 million in revenue for the 2023-24 fiscal year. 

Tom Karlo, CapRadio’s interim general manager, was not available for an interview this week. He said in a written statement the funding pause “will not have an impact” on the station’s current news and music programming and won’t directly impact staff. 

“We are implementing a comprehensive revenue strategy to help us stabilize our finances and put us on better footing,” Karlo added. “These activities include our membership program, corporate development, vehicle donations, grants and more.”

In addition, Karlo said the pause would not affect CapRadio’s costly and long-delayed downtown projects “because the investments have already been made in the projects, including related equipment.

“The biggest challenge with our downtown projects relates to the ongoing costs, including rent, security, custodial services and parking,” he said. 

Karlo said the station’s move to the downtown headquarters remains delayed “as we work to stabilize our finances.” 

Of the $2 million, Karlo added CapRadio “is working to satisfy the deliverables required to receive the funding.”

In late August, CapRadio laid off 12% of its staff and canceled four music shows because of ongoing financial issues. Nine of the employees were based in Sacramento and three worked in Chico at North State Public Radio, which CapRadio operates. 

CapRadio is an auxiliary of Sacramento State, which holds the station’s license. Days after the audit was released, Sacramento State President Luke Wood appointed the university’s chief financial officer Jonathan Bowman to oversee CapRadio’s finances and operations. 

Brian Blomster, a spokesperson for Sacramento State, said Karlo’s responses are consistent with the university’s position and had been reviewed by school officials. Blomster did not respond to a request to speak with Sacramento State leadership, including Wood.

McCarty said he met with Wood and CapRadio management before making his decision to pause the funding. He said he made the decision on his own.

“There wasn’t great push back” from university leadership, McCarty added. “The university understood our decision.”

Uncertain future downtown

CapRadio’s downtown projects include a new headquarters at 730 I Street and a separate live event space at 1010 8th Street. But as of this fall, CapRadio was behind payment by $1.8 million plus interest on an $8 million loan Sac State took out to help the station pay for tenant improvements at the new headquarters, according to the audit by the California State University Chancellor's office. 

The audit found CapRadio has also failed to pay rent to Sacramento State since September 2022 for its current Folsom Boulevard office, which it had expected to vacate two years ago with the planned move downtown. The audit said Sac State is creating a new rental agreement to cover the period of non-payment. 

“Based on our review of CPR’s financial statements and CPR management’s acknowledgment of prior cash‐flow issues, it is unclear whether CPR will be able to make payment on its obligations to the campus, or even continue to make payments on the new downtown locations and associated leased equipment and furniture, which equal a total payment of $218,245 per month,” auditors wrote. “These issues and others described in this report raise both financial and going‐concern issues for CPR.”

Sacramento State has commissioned a “forensic examination to determine the origins and causes” of CapRadio’s operational and financial problems. 

Disclosure: This story was reported and written by Homelessness and Housing Affordability Reporter Chris Nichols and edited by News Editor Chris Hagan, with additional reporting by Insight Host Vicki Gonzalez. Following NPR’s protocol for reporting on itself, no CapRadio corporate official or news executive reviewed this story before it was posted publicly.