A few days after the official opening of Shakertown, Earl Wallace received a memo from the maintenance department. Headed, portentously, PRIORITIES, this document contained a list of tasks to be performed, “broken down into categories and arranged in the order of their importance.”
LANDSCAPING
1. Distribute and lay sod when cut from garden plots.
2. Clean up, grade and seed around north end of East Family House.
CARPENTRY
1. Complete installation of blinds on Trustees’ Office.
1. Prepare 1st floor of Farm Deacon’s Shop for snack bar.
2. Trash Yard back of Trustees’ Office.
2. Linen Room shelving.
3. Complete exterior deck—East Family House.
4. Post and rail fence—Farm Deacon’s Shop, east to drive past E. Family Sisters’ Shop.
PAINTING
1. Complete North Porch—East Family House.
2. Snack Bar—Farm Deacon’s Shop.
2. Whitewash Linen Room.
2. Louver over doors—East side Trustees’ Office.
3. Fences and trash yard.
Such operational details were primarily the concern of Jim Cogar and Jim Thomas, while Wallace chiefly dwelt in the realm of high finance (almost all of it relating to Shakertown, since he had ended his connection with Dillon Read in 1967). The chairman, however, also concerned himself with all aspects of the operation having to do with expenditures, from the largest to the most minute—the best buys in water coolers, the best deals in detergents. At this time he was pushing the Department of Highways to provide numerous signs on all the roads leading to Pleasant Hill, an effort that elicited from the director of the Division of Traffic an agreement to have five signs put up on Highways 68 and 33 and the possibly weary observation that, even though Wallace had asked for many more, “we do believe that the guidance needs of strange motorists seeking Shakertown will be adequately served.” During these same days, Thomas was also dealing with the Progress Paint Manufacturing Company, which was producing a line of “Shakertown paints”—in Trustees’ Office Brown, East Family Blue, Centre Family Blue, West Family Blue, Brethren’s Shop Red, and, for exteriors, Pleasant Hill Shutter Green and Pleasant Hill Yellow—for general sale and for the Pleasant Hill gift shop; Shakertown, Inc., would receive a 5 percent royalty on the distributors’ price.
The government loan had saved the Pleasant Hill project, as everyone knew, making possible the Phase One restoration; but “beyond that,” Wallace said, “it was just a continual grind.” Fortunately, “we were able to interest some people that had a certain spirit that I’d never come into contact with before. You don’t work for the Standard Oil Company and Wall Street firms and meet anybody except those who are chasing the almighty dollar.” With Shakertown, however, he had come to know people “that had a different slant on life” from what he had known.
Now that he had something to show such potential donors, his method of approaching them involved inviting them to Pleasant Hill to see for themselves the quality of the craftsmanship and the taste shown in the appointments and furnishings. At the executive committee meeting of May 12, Wallace reported that some of these donors had given funds to carry out Phase Two restoration of four buildings—the Water House, the West Family Sisters’ Shop, the Meeting House, and the West Family Wash House. The Water House had a special claim to fame as the reputed first waterworks west of the Allegheny Mountains, but the building now seemed to be leaning toward collapse. As Wallace was walking by this wreck one day with one of his philanthropic friends, Pansy Poe, she had turned to him, saying, “I’m tired of looking at it, so you go ahead and have Mr. Cogar restore it before it falls down, and I’ll give you the money.”
Work on the Meeting House and the West Family Wash House, Wallace told the trustees, could begin as soon as the needed scaffolding arrived; meanwhile, the plans for heating, air-conditioning, and plumbing would have to be worked out. Now free of the constraints of the Davis-Bacon Act, the chairman recommended that Cogar assign to Taylor a force of carpenters, helpers, and laborers who would work exclusively on this program and that Shakertown make local contracts for the mechanical and electrical installations. Pointing out that the organization had “most of the roofing on hand and certain air handling equipment,” he expressed his intention to arrange with suppliers more liberal discounts on materials. (Cogar did succeed in creating a cost-cutting team from workers already on the payroll, men who were local and thus nonunion—two carpenters and two helpers, and a stonemason and helper; electrical work was carried out by the maintenance staff with the help of a local electrician and plumber. “We took the crew that I had trained to be furniture makers,” Thomas said, “and made them millworkers and carpenters.”)
Wallace then led the committee through a discussion of operating problems that had already arisen. Parking, the plague of almost every enterprise that caters to the public, seemed to rank Number One, particularly with guests who came for lunch and found themselves required to walk some three hundred yards from the parking lot to the inn, since Cogar wanted to keep cars off the village street. (The possibility of parking on this street would disappear within three months. With Highway 68 now bypassing Shakertown, the asphalt surface of the street would be torn up and replaced with dirt and gravel, with turf lining both sides, thus bringing it back to its nineteenth-century look as a stagecoach road, as shown in Lewis Collins’s famous Historical Sketches of Kentucky, published in 1847.) Cogar had proposed a compromise plan whereby drivers would drop off their passengers at the inn and then return their cars to the parking lot. Wallace wished to move carefully in this realm in order to avoid creating word-of-mouth complaints and loss of luncheon business. “The question is,” he said, “should we risk it or should we tolerate cars on the street until we can build a parking lot for Inn guests?”
Much attention went to promotion and advertising. Revenue from guest rooms was suffering because Wallace and others felt that these accommodations should not be advertised until “bugs” could be eliminated in the heating and air-conditioning controls, in which piping had been improperly installed. These problems seemed likely to linger until the contractor, who was proving to be uncooperative, could be induced to correct the mistakes. The shortage of overnight guests, in turn, was affecting sales of dinner and breakfast. “Only the most complimentary response has been heard of the quality of the food,” Wallace said, with the result that the luncheon business had surpassed all expectations, with many customers returning accompanied by members of their various clubs and groups. Wallace also reported a particular piece of good promotional news: the August issue of Woman’s Day, a magazine with a very large circulation, would carry a Shakertown story by Michael Frome, a leading travel writer of the time. The village had already received fine notices in a number of newspapers, including, of course, the faithful Courier-Journal.
After discussing a number of other matters, Wallace presented a new organizational chart, the most important aspect of which was the delineation of the functional responsibilities of Jim Cogar and Betty Morris. Subject to the approval of the executive committee, Cogar, the executive director (in 1969 he would assume the title of president), would have charge of village operations and restoration. Mrs. Morris, meanwhile, would function in a double role: she would supervise rooms, housekeeping, reservations, and the staffing of the front desk, reporting to Cogar, and as assistant secretary and assistant treasurer, she would have charge of financial controls and reports and all business-office personnel and functions, reporting in this role to the chairman and the executive committee. In the former role, Mrs. Morris functioned much like the manager of a hotel, and she took a serious view of her responsibilities, being known for never putting a newly decorated and furnished room into service until she had slept in it herself. Once, she recalled, when she and her husband spent the night in one of the smaller rooms in the West Family House, they discovered that the floor had such a pronounced slope that the head of the bed was lower than the foot. The problem was solved with blocks.
The new organizational chart listed Jim Thomas as staff assistant for operations, but in September he received the new title of curator, with responsibility for interpretation and expansion of the exhibits, improvements on the village grounds, and management of the craft sales shop. As he would discover, getting the buildings into full service was the first step; after that, somebody would have to administer the restoration, and much of that administration fell to him as curator: “We had to develop programs and uses for these buildings.”
In spite of the varied problems associated with launching the full-fledged operation, Pleasant Hill in reality had gotten off to a solid start. By August a reporter could note that since early May the dining rooms had attracted about three hundred customers a day, two or three times as many as had been expected, with 250 once being served at lunch “on a Tuesday, of all days.” The management now urged guests to make reservations for all meals on weekends and for lunch every day, and this success led to the decision to keep Pleasant Hill open all winter. Several reasons lay behind this popularity, including Shakertown’s proximity to Louisville and, even more, to Lexington, and the high good taste that characterized the restoration. “Finally,” noted the reporter, sounding like an echo of his Cincinnati counterpart who had dined at Pleasant Hill more than a century earlier, “the meals are delicious,” with all the vegetables served being grown in gardens adjacent to the inn. This comment went straight to the point, since one of Mrs. Kremer’s concerns on reentering the restaurant world had been the great increase in the use of packaged foods. That was most emphatically not her style, even though she had to train some of the employees in the use of fresh vegetables.
Another writer spoke highly of the service, with food being brought by “demure-looking” waitresses in yellow or brown fine-check ankle-length dresses, with white aprons and kerchiefs and Shaker caps made of net. Like the plan to furnish the rooms in Shaker style to give guests something of the atmosphere in which the builders of the village had lived, the idea of dressing waitresses, busboys, and other employees in costumes was the brainchild of Jim Cogar. Seeing all these people moving around in their Shaker uniforms would, he believed, constantly remind the visiting public of the Shaker story. At dinnertime the dining rooms and the halls were lighted entirely by candles, and each table bore a card, reproduced from a handwritten original: “We make you kindly welcome to Pleasant Hill.” But one of the writers also commented on how much space was available for those who wanted to spend the night, though he proffered an analysis far simpler than any conclusions reached by management: it proved that “more people like to eat than sleep.”
Aside from praises in the press, Shakertown built goodwill by its responsiveness to requests of all kinds. A very young man from Maysville, for instance, wrote to say that on a recent family visit his father had bought one of the glasses used in the “restrorount” but that “the other day, it broke and he was very mad.” Implicitly, at least, acknowledging some culpability in this mysterious mishap, the boy enclosed a dollar with the request that Shakertown send him the replacement glass before Christmas. The staff readily complied, with somebody making a marginal notation, before filing the letter, that the postage came to 65 cents.
By the end of 1968, Shakertown had played host to some 50,000 guests, and the management looked forward to receiving perhaps 90,000 in the coming year and ultimately 150,000, a total that had figured in the early forecasts of advisers from Williamsburg. Organizations of all kinds also were beginning to hold meetings at Pleasant Hill. In February 1969, Wallace listed a number of forthcoming events—the Kentucky League of Sportsmen in that same month; in March, area businessmen, officers of the Civil War Round Table, and travel editors; in April, editors of metropolitan newspapers and, perhaps, judges of the Court of Appeals; and in May wives of Republican governors, whose husbands would be holding their national meeting in Lexington. These occasions had their high points, as occurred when the governors’ ladies came to Pleasant Hill. As Jim Cogar squired the first ladies around the grounds, he described certain key beliefs held by the Shakers, and, turning to Nancy Reagan, wife of the governor of California, asked whether she might be converted. “To being a Kentuckian?” she asked. “No,” he replied, “a Shaker.” “No,” responded Mrs. Reagan, “I don’t like those ground rules.”
Improvements would continue to be made and more buildings to be restored under Phase Two plans—the West Family House, the Old Ministry’s Shop, the Tanyard House, the Farm Deacon’s Shop, the Post Office (which years before had been moved several hundred feet from its original site and used as a tenant house, and now would be returned to its original foundation near the Trustees’ House and turned into a second craft shop—with the Carpenters’ Shop remaining the principal craft store), the East Family Wash House, the Cooper’s Shop, and the Centre Family House. The last-named building, the large stone structure that sat imposingly in the middle of the village, had been reasonably well restored inside but needed a thorough makeover on the outside. The windows were missing their green shutters, the roof balustrade was gone, the roof leaked, the bell tower was rotting away, and the cellar had been stripped down to the clay.
During the next few years, the chief fund-raiser and his colleagues would have to find money to carry out all of these purposes; the Phase Two work would continue until 1974. Meanwhile, in 1970 the Society of American Travel Writers gave Pleasant Hill its imprimatur with one of its “Connie” awards, and Holiday magazine presented its “Holiday Award for a Beautiful America,” calling the village “a museum of the highest quality which preserves, for the citizens of Kentucky and for the nation, a portion of our pasts.” In 1971 the National Register of Historic Places added Shakertown to its listing with this enthusiastic and genuinely insightful citation: “The large number and type of original Shaker buildings at Pleasant Hill and the fact that they still exist in their virtually unaltered rural setting make Shakertown at Pleasant Hill an architectural and spiritual experience unsurpassed in the United States.” In September 1972, Secretary of the Interior Rogers C. B. Morton presented a certificate and plaque declaring Shakertown at Pleasant Hill a National Historic Landmark. Wallace had sought the help of Morton’s older brother, Senator Thruston B. Morton of Louisville, in getting the secretary to come from Washington to make the presentation in person; the trustees held a “private” luncheon for the secretary, Governor Wendell Ford, and members of the Kentucky Heritage Commission.
By April 1972, just four years after its opening, Pleasant Hill had achieved some remarkable results. It had reached the goal of 150,000 visitors a year (614,000 people had come between April 1968 and April 1972, and 330,000 of them had eaten at least one meal; 36,000 had spent the night, and 250,000 had visited the exhibits that told the Shaker story). The figures demonstrated the economic impact of Pleasant Hill on the area: the project had paid out $1.4 million to its employees, it had purchased $321,000 worth of goods and supplies in Mercer and neighboring Boyle counties and $297,000 worth in Lexington, and it had bought $96,000 worth of items from Appalachian craftspersons for sale in the gift shops. Most striking, perhaps, it had clearly justified the projections contained in the original application to the Area Redevelopment Administration by becoming the second-largest taxpayer in Mercer County. Three years later, despite the general tightening of auto travel imposed by the gasoline shortages of 1974–1975, Shakertown produced further impressive figures: the village fed 130,000 people and drew 26,000 overnight guests; the payroll for the year amounted to $600,000.
Always concerned with increasing net income, Wallace, though pleased about the play Pleasant Hill received in national magazines and metropolitan newspapers, complained that the writers of these articles concentrated on the food and the accommodations and seldom made “any reference to the exhibits or what visitors might see in the buildings.” Examining the stories with a close eye, he cited an example from Southern Living, “9 column inches with pictures, with only ¾ths of an inch on the exhibits.” Similarly, a newspaper travel section gave Pleasant Hill 45 column inches and pictures with only “a 1¼ inch reference to the exhibits.” What particularly frustrated Wallace was the failure of a promotional campaign, which he had induced Cordelia Scaife May to finance to the tune of $25,000 a year for two years, to rectify this situation. Although the promotional director, a young woman named Marcia Axtmann, waged a vigorous campaign—with news releases, television and radio tapes, feature stories, and promotional kits and folders—ticket sales to the exhibits stayed flat; writers stubbornly stuck to praising the food and the rooms and the general atmosphere. (A capable person highly esteemed by Wallace, Miss Axtmann left Shakertown to take a job with the National Trust in Washington, a move that upset the chairman, who believed that she had been hijacked by the Trust; most likely, however, Miss Axtmann, a native of Zanesville, Ohio, had decided that she had put in enough time in small towns and wanted to move to a city. Carl Humelsine, president of the Trust and of Colonial Williamsburg, phoned Jim Thomas to ask him to assure Wallace that Miss Axtmann had applied for the job and had not been stolen away.)
Speaking with a writer from the Ford Times (the most renowned of automobile company magazines, with a circulation of 2 million), Wallace “noted her interest primarily in the village as a place to spend the night and enjoy good food. She mentioned the quality of the merchandise in the craft shops but made a remark that museums turn her off.” What could you do with somebody like that?
As a gratifying by-product of everybody’s labors, the work at Pleasant Hill exerted a consciousness-raising effect across the state of Kentucky. Thousands of people saw what was happening, and “as restoration progressed,” Wallace said, “many began to think of restoring historic buildings in their own community. We know this because we were asked by many groups for advice on how to proceed with their local projects. There is every indication that Pleasant Hill has been a major factor in arousing local interest that has now emerged as a burgeoning movement of historic preservation in Kentucky.”
Despite all of the praise and all of the achievements, Shakertown proved a continuingly expensive operation to maintain. In the fall of 1969, with outgo exceeding income—and capital funds unavailable for operational use because they were dedicated to restoration—it became clear that the project would not have enough cash on hand to meet the December payroll, and for the succeeding months the outlook seemed even worse. Unless Wallace or somebody else could tap a donor for a quick transfusion, it seemed, the trustees might actually have to close the village. For help in this emergency, Wallace, feeling that by now the Shakertown trustees had been milked almost dry, ruled these friends out and turned instead to the couple who belonged to the top four or five of Pleasant Hill’s most faithful admirers, the Lillys, who ever since their first visit had driven down for a stay every April and October. Talking with Eli Lilly, Wallace asked him “if he could get us through the winter.” Lilly did not hesitate; he said that “he would arrange to get us through two winters, which he did”—by means, perhaps, of another dip into the family’s grocery money, this one amounting to $200,000.
As for the government loan, it had achieved its purpose, but it had not then quietly faded into history. Instead, it remained a daily nagging presence, demanding the accumulation of funds for the regular interest payments; Wallace’s drive to increase ticket sales was fueled by the need to get net income to the level that would meet these payments. For the first two years after opening—1968 and 1969—Shakertown paid the interest mostly out of small, unrestricted contributions. But in February 1969 Wallace was already asking the trustees to approve a request to the EDA to add that year’s interest payment to the loan and also to defer the interest to November 1970 and put off for two years the date when payments of principal would have to begin. He would justify the request by pointing out that the village had opened a year later than planned, that the cost of materials had risen greatly because of inflation during the period of the restoration, and that the corporation needed a year’s grace in order to begin accumulating funds.
What happened was that in the next two years, without an accumulation of cash and with the sizable capital funds not available, Shakertown, Inc., could make no payment, and it technically went into default in November 1970. “With a dim prospect of meeting the payments in the next two years,” Wallace said with commendable understatement, “I could see four years in default, probably enough to embarrass our relations with the EDA officials.” In fact, the financial situation he had foreseen and probably had expected at the time of making the original application had now arrived. Telling the board that he expected a lean winter (and taking time to recommend that Jim Thomas and Betty Morris be elected vice presidents), he went off to Washington carrying an ingeniously simple if audacious proposal: the EDA should agree to amend the original contract, waiving loan payments for the next four years; Wallace wanted to amend the old agreement rather than execute a new one in order to preserve the 3⅝ percent interest; otherwise the rate would now have become 6 percent.
As EDA officials chewed over the proposition, Wallace made return trips to Washington to push the plan along. Early in the game, shrewdly, he asked Governor Louie B. Nunn to accompany him on one visit, on the presumption that, as Kentucky’s first Republican governor since the mid-1940s, Nunn could exert a benign influence on officials of the Nixon administration, which had come to office the preceding year. Wallace’s analysis proved to be quite correct—”he was better than a new hand,” Nunn said in admiring recollection. Having previously developed a strong relationship with Nixon, Nunn made an advance call to the White House and went on to make quick and effective use of the administration’s network.
“When Nixon was president,” Nunn explained, “they had in every department a political person who, if the White House wanted something to be done, would get the message from the administration. I had the names and telephone numbers of those people in every department. If I wanted something done, I could call [John] Ehrlichman or [Bob] Haldeman and ask them to please contact their man in the department and see what they could do to help us. There was a little politics involved in it, and, you know, some people frown on that. But we saved Shakertown, let’s put it that way—however it was done—and absolutely nothing wrong occurred. They had the money there, and they were trying to help people who were trying to help themselves.” At the offices of the EDA, the governor made a most emphatic affirmation of the significance of Pleasant Hill and, as Wallace put it, “urged the EDA officials to assist the organization in every way possible.”
Still, it was only after a year and a half of negotiations that the EDA agreed to amendments to the contract, but when these changes came they were sweeping. The unpaid interest for the years from 1970 through 1973, totaling $290,000, was rolled together in a new note at 3⅝ percent and then consolidated with the old note, giving a new total for the loan of $2,290,000. Payments—of interest only—would begin in 1974 and continue through 1979; each of these would be for $83,012. Payments of principal and interest together would not begin until 1980, and they would continue for thirty-five years, until 2014. Wallace was “a great analyzer,” said one associate; “he could analyze situations and just tear them apart,” and now he had succeeded in producing an agreement in which the debt was increased, the time to pay was extended, the pre–Vietnam War interest rate was retained, and nothing at all had to be paid for four years. Louie Nunn remained impressed that Wallace came away with more money than had been awarded in the original loan.
In staging this remarkable coup, Wallace had fully confirmed his view of the difference between the government and an array of private investors as the creditor. While the EDA officials had dealt very carefully with the situation—”and there was a little politics involved,” as Nunn said—the market would have taken a much different course. “If bonds had been issued against this project, as the government originally intended, and sold to private investors,” Wallace observed, “it would have been impossible to have renegotiated this loan with all the bondholders [even presuming that any would have been willing to do it], any one of whom could have foreclosed the mortgage after the first default in 1970.”
Even after making this highly advantageous deal, Wallace saw more clouds on Pleasant Hill’s fiscal horizon. From 1974 through 1979, Shakertown, Inc., would have to produce a total of $498,072 in interest payments; but as inflation and new legislation pushed up the cost of operating the village from year to year—utility bills, social security contributions, unemployment taxes, postage, and wages were all going up—it hardly seemed likely that this sum could come out of profits from village operations. This time Wallace proposed that the board establish an endowment fund, with a target of $1 million; the income would be dedicated to the annual payments on the loan. The board agreed, and within less than three years the fund had taken in about $800,000. The income, together with profits from village operations, amounted to enough to meet the payments that began in 1974.
But Wallace saw this improvement as only temporary, as the so-called stagflation of the Carter administration years and two of the most brutal winters of the twentieth century took their toll on Pleasant Hill. In 1977, for the first time since 1970, the village operated at a loss. In mid-March 1978, the funds built up from village operations had declined to $35,000, a sum in itself little more than enough to meet the next two-week payroll. Happily, this situation did not affect the work of restoration, because in 1975 the ever dependable Lilly Endowment had agreed to supply $360,000 to carry out the entire Phase Three program over the three years to 1978, beginning with the North Lot Dwelling, the West Family Dwelling, and an archaeological survey of the mill area on Shaker Creek. Lilly grants never came with restrictions, which meant that the money could be used not only for restoring major buildings but also for unglamorous details such as improving service roads and parking lots. Jim Cogar retired as president at the beginning of 1974, being succeeded by Jim Thomas, who had now held his curatorial post for six years and had been executive vice president since 1971; Betty Morris became executive vice president and treasurer. From now on, Thomas would preside over Phase Three and all subsequent restoration work.
Ultimately, Mr. and Mrs. Lilly personally, together with the Lilly Endowment, proved to be the largest donors to Shakertown. An uncounted number of these dollars flowed into Pleasant Hill because of the extraordinary level Wallace’s persistence could reach. One Monday morning in 1972 the chairman had chattily informed Betty Morris that he had seen the Lillys during the weekend. “Oh,” she said, never surprised at anything Wallace did, “you went to Indianapolis?” No, that wasn’t the case, Wallace said. He had gone up to the Lillys’ weekend and summer retreat, in far northeastern Indiana on Lake Wawasee. After driving a long stretch down an obscure country road, he had found the Lillys’ cottage; he was just passing by, he told them, and thought it would be nice to drop in for a few minutes. Mrs. Morris had a good laugh at the story, but Wallace later asserted that he never mentioned Shakertown’s need for more money. Regardless of that, his surprised hosts seemed to get the message.
Though business in the 1980s would turn out to be better than the prospect seemed from the vantage point of the late 1970s, crisis appeared to have become the permanent characteristic of Pleasant Hill’s fiscal operations. But those who had admired Wallace’s handling of the original loan application and had been dazzled by his renegotiation of the agreement would now have the opportunity to see what a master dealmeister could really do when pressed. Looking ahead toward 2014, Wallace saw Shakertown, Inc., having to make thirty-five loan payments, at $116,515 each, for a total of more than $4 million; endowment income might supply about $2.2 million of that, leaving a balance to be made up from village net income of about $1.8 million. The late 1970s did not produce much optimism in economic observers anywhere, and Wallace’s outlook no doubt took some of its tone from the prevailing gloom. But beyond that, he saw that Pleasant Hill could build up the income balance it needed only by raising prices beyond those the public was willing to pay. (Just to take one factor among many affecting costs, congressional action on Social Security and the minimum wage meant bumps of 65 percent and 45 percent, respectively, resulting in more than double-digit percentage increases in payrolls.)
In Wallace’s view, the path to transforming the situation did not lead through further postponements of payments or further extensions to the life of the loan. Clearly, the answer lay in getting rid of the debt entirely! A wonderfully desirable goal, no doubt, but how could it be accomplished? In March 1978, meeting with EDA officials in Washington, Wallace proposed, of all things, that the EDA sell the note to Shakertown, Inc. What he had in mind was that the sale be made at the current market value of the note, which he put at no more than $750,000, because of the 3⅝ percent interest rate and long maturity. No one recorded his facial expression as he pointed out to the officials that a high discount factor was obviously necessary to equate the yield with that produced by the rates of 10 percent and more currently prevailing in the money markets, and presumably he did not further point out to his EDA friends that it was his earlier renegotiation that had preserved the old 3⅝ percent rate so advantageous for Shakertown.
Without the burden of the annual payments of $116,515 that would begin in 1980 and go on until 2014, Wallace said—making the kind of argument that might come from the finance minister of a Third World country dealing with the World Bank—Shakertown, Inc., would have its financial problems solved and thus be able to achieve fully the objectives of the original EDA loan. Otherwise, “Shakertown would be struggling for years ahead to meet its obligations with marginal finances.”
In response to his proposition, the EDA officials declared that the agency had no precedent for selling an asset at less than par value, nor did they have any precedent for settling a debt at less than par with a borrower in good standing (as Shakertown, Inc., was at the time). As part of his proposal, Wallace also asked that the EDA grant Shakertown a reasonable length of time to raise the money for the payment. His plan called for his old friends at the First National Bank of Louisville to purchase the note from the EDA and then, in turn, lend Shakertown, Inc., $750,000, on a one-year note, to buy it from the bank. He and the other trustees would then seek large contributions from tried-and-true donors and other friends of Pleasant Hill to free Shakertown from the debt.
Numerous meetings followed, one of them at Pleasant Hill in August 1978, when George Karras, the director of the EDA, inexplicably turned up to spend two days of what was supposed to be his vacation. In one of their talks, Wallace calmly told him that Shakertown “would most likely become a chronic defaulter.” An old EDA hand who had followed the Shakertown loan from the beginning, Karras proved sympathetic to Wallace’s aims. He and other officials had agreed that the project had accomplished more than they had hoped in improving the local economy, and they also conceded that if Shakertown had filed its application in 1962 instead of 1963, a good portion of the money would have come to it as an outright grant instead of as a loan (and thus would not have required repayment). The EDA officials also had no quarrel with Wallace’s projections showing little improvement in the level of net income in the next years, and, he noted, “they see no sense in continually amending the contract with the prospect of the government’s holding a note which might never be paid in full.”
When Karras asked why Shakertown would try to raise $750,000 in a short time instead of putting on an annual fund drive to pay the interest on the note, Wallace gave him the facts of life on historic preservation, describing Shakertown as a “uniquely rural” institution with no public or civic constituency or support from the corporations and other enterprises that traditionally give to annual drives for the United Way, the Red Cross, hospitals, universities, and other institutions that chronically seek money. Besides, Wallace said, such a drive by Shakertown would signal distress at Pleasant Hill, and he had learned the general truth that large donors rarely wish to give money for expenses; that is, they much prefer building a building to helping pay the electric bill. Karras and his chief financial officer, Joe Hollister, another EDA veteran, also wondered why Wallace thought that Shakertown might succeed in raising the $750,000. “I told them,” Wallace said, “I felt that our constituency and others might respond generously to a ‘one-shot’ effort to ‘burn the mortgage.’”
After Hollister came to Louisville to meet with the bankers and Wallace made further visits to Washington, the deal appeared to be working out. For their part, the Shakertown trustees had voted Wallace the authority to do whatever “in his sole judgment may be necessary or desirable” to achieve the purpose. But then Hollister told Wallace that the EDA’s general counsel was now holding the deal up, for two reasons. He believed that Shakertown had valuable assets that could satisfy the EDA’s claims, and thus pay off the loan, if foreclosure should become necessary, and he had reservations about the EDA’s authority to sell the note at a discount when Shakertown, Inc., was not actually in any financial difficulty, even though it might have trouble in the future. A Michigan engineering firm appeared at Pleasant Hill to survey the property in order to establish what it might bring at a foreclosure auction.
Wallace and Bob Houlihan then went off to Washington for a conference with the general counsel. At this meeting Houlihan dashed any expectations the EDA lawyer might have entertained about the possibility of seizing Shakertown’s assets through a “deficiency judgment” following a foreclosure by explaining the long, drawn-out legal problems such procedures faced in Kentucky. It also developed that an action to foreclose would bring on a bureaucratic nightmare for the EDA in Washington, because a National Historic Landmark could not be auctioned off without a series of hearings and, besides, the announcement of such a sale would tend to depress the value of the property. “I reminded the EDA officials of this situation,” Wallace said drily. Beyond that, if the government did take over the property, it would have to operate it until the auction had taken place and accounts were settled; that prospect pleased nobody. Thus Wallace held a better hand than an observer might have thought.
The EDA general counsel’s second point led to remarkable results. After explaining his doubts about the legality of “writing down” a loan asset from $2,290,000 to $750,000—especially on an asset valued at far more than the amount of the loan—the counsel responded to the very real pressure to solve the problem with a statement of his own: the government wanted to receive the whole amount of the loan plus the accrued simple interest, but it would be willing to wait for its money. Could Shakertown create a capital fund that would increase in value over time—it would have to equal $2,290,000 plus $83,012 a year for the interest—and thus settle the debt eventually. This suggestion amounted to a parallel route to the plan Wallace had proposed, since each called for the one-time raising of a fund that would, in effect and actually, eliminate the note from Shakertown’s books.
Wallace saw the possibilities immediately and accepted the plan to set up such a fund, with the vitally important—the key—proviso that at the same time the EDA would release the mortgage on the village; the EDA officials agreed. This meant that the establishment of the capital fund would cancel all future payments on the loan; the EDA’s money would come from this independent fund, not from Shakertown, Inc., and it would come all at once, decades in the future. For its part, the EDA thus chose to recover the entire principal and interest, even though it would not be forthcoming for many years, instead of now having to show on its books a loss of principal.
It was a paper victory for the EDA and a real-world triumph for Shakertown, and Wallace knew exactly how to achieve the goal. He and his financial assistant, Bill Walls, went to work to determine what size U.S. Treasury bond at what interest rate, compounded semiannually, would build up an amount sufficient to pay the interest and retire the loan in about twenty-five years. The bond would be put in a charitable trust to be administered by the First Kentucky Trust Company of Louisville.
It took numerous trips to Washington with spread sheets showing interest accumulations before the EDA would accept the proposal and the accompanying calculations as valid. As the lawyers drew up the various documents, Hollister asked where Shakertown would get the money for the original investment in the capital fund. No problem, Wallace replied in effect—they already had it, because they could borrow it from their endowment fund, which they could do legally as soon as the EDA released its mortgage on the village property. Of course, Wallace said, they would try to build up the endowment again. Who knew what adversities the future might hold?
There was one thing more: thanks to the wonders of compound interest, the amount required to produce the needed total, about $5 million, at 9⅛ percent was not $750,000 but only $420,000. For this sum, Shakertown, Inc., had now become free of a debt of more than $2 million. At one of the final meetings in Kentucky, one of the EDA representatives, watching Wallace’s maneuvers, turned to Dr. Thomas Clark with a question: “How the hell did he do that?” Clark could only shrug. (It was certainly altogether fitting that in 1981, to celebrate the twentieth anniversary of Shakertown as a corporation, Wallace would play host to the ARA godfathers of the original loan that had made all the subsequent events possible—W. R. Abell, W. E. Davis, Charlie Dixon, and Jack Ingram.)
Wallace had “rifle vision,” an associate said. “He would go straight to the completion of a project before you could talk to him about another project. When he would start a job, he never put it aside.” Charlie Sturgill once observed that the “persistence and tenacity” Wallace always displayed in dealings on behalf of Shakertown were “beyond comprehension”; George Karras and Joe Hollister could certainly have given full testimony on that point. At the next meeting of the Shakertown board of trustees after the settlement of the loan issue, Thomas Spragens, the president of Centre College, expressed great admiration for Wallace’s description of the transactions and dubbed him the “Pied Piper of Pleasant Hill.” At the same meeting, Wallace announced that Shakertown, Inc., had just received a legacy of $200,000 from a supporter in Connecticut. Things were indeed looking up.