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A gutted theater’s a depressing sight.

October 25, 2008: painters apply a foundation coat to the Old Town Theatre’s interior walls. A heat wave forced them to open the tall stage doors to catch the slightest breeze. Not happening. Swarms of dust motes flicker unperturbed.

The space looks as if someone roofed an amphitheater: no seats, just concrete tiers with armrests angling up the aisles. On stage: piles of wooden scraps, drills, cords, and, behind a tall aluminum ladder, an intertwined rainbow of wires — the new lighting system, someday. From a radio blaring in the lobby, talk-show callers panic about the economy.

Cygnet Theatre will open here in a month? From the looks of things, that’s a pipe dream. Two hundred forty-eight seats still have to go in, plus carpeting and paint, not to mention fine-tuning the lobby and newly expanded bathrooms. Amid the renovations, Cygnet must also construct a Victorian set with wooden pillars, a staircase, and soot-smudged brick walls for its inaugural production of A Christmas Carol.

“It’ll happen,” says Bill Schmidt, executive director of Cygnet, with soft-spoken assurance. “It’ll get done.”

“Bill can see farther down the road than most,” says Sean Murray, artistic director. “Where the rest of us see problems, he imagines potentials. He’s the brains behind Cygnet, not me.”

The team started the theater six years ago. Murray, who had been artistic director of North Coast Repertory, was leaving that company and wondered what to do next. Teaching? Freelance directing?

“Why not start a theater,” said Schmidt, who worked as a software engineer for Peregrine.

Murray: “Are you…? Do you have any IDEA what that takes?”

He didn’t reply, says Murray, “He just went and did it.”

They leased a small space in a strip mall in Rolando. Against the advice of many, who said no one would attend a theater on El Cajon Boulevard, Schmidt and Murray built one of San Diego’s most successful companies. Along with winning numerous Craig Noel Awards from the San Diego Critics Circle, Cygnet developed such a large following that, after four years, they began to consider expansion — but way down the road, maybe around 2011. Then the Old Town Theatre, owned by the state, became available.

Just off the intersection of I-5 and I-8, the theater has one of the best locations in San Diego. Not only that, the playhouse has the intimate feel they wanted, even the same number of rows — eight — as the Rolando space. That the theater was bigger, but not much bigger, made it the natural next step.

“The space became available like NOW,” says Murray, “a lot sooner in our growth than we thought.”

Murray and Schmidt repeated a previous conversation.

Schmidt: “We’re doing it.”

Murray: “You crazy?”

Schmidt: “Guess so.”

The space came with restrictions. Old Town is a state park, and the building must have an “Early American Period” look: 1846 to 1872. Also Cygnet had to comply with the Americans with Disabilities Act (ADA) and provide a new lighting system, since the original 18 dimmers were 30 years old. If Cygnet won the bid, they’d have one year to complete the changes.

“That compressed time-period was a big issue,” says Schmidt, “but it wasn’t like we were building a new theater. That’d cost $25 million. Instead, we wanted to renovate one.”

Along with the state’s requirements, they envisioned new seats, a more updated feel, and, says Schmidt, “countless details you don’t know exist until you complete other details first. When you make a choice, you must think at least four steps in advance.”

The process, Murray admits today, “has been the most nerve-racking, stressful, and exciting you can imagine.” Although they almost abandoned the project twice during the early stages, Murray always had a feeling it would work. “I could picture it happening.”

San Diego theater has precedents for this move. In 1986, the San Diego Rep went from the Sixth Avenue Playhouse to the new Lyceum Theatre; Lamb’s Players, in 1994, from a small National City space to its Coronado home. Schmidt and Murray studied these changes. They also read Lisa Mulcahy’s sobering yet positive Building the Successful Theater Company, which became their bible. The book, which talks about the growth of the La Jolla Playhouse among others, begins: “That any theater company comes together at all, ever, is a miracle.”

Extensive research gave them an estimate of $975,000 for the project. After renovating Rolando, says Schmidt, they knew that “things will always cost twice what you think.” They hired Ann Laddon, a campaign consultant, to interview potential donors. Based on their confidential responses, she wrote a feasibility study to determine what they were capable of raising.

“Should we go ahead?” Schmidt and Murray asked. When Laddon said yes, the question became how much money they could generate. They wanted to go far beyond the minimum requirements. The extent of improvements would depend on revenue.

As negotiations with the state continued, Schmidt and Murray met potential donors, one or two at a time, in the lobby, and walked them through the building, showing the changes they wanted to make. “That was one of the best parts of the process,” says Murray. “We shared our plans, and they became a part of them. They and our board were truly inspiring.”

“They’re the wind at our backs,” says Schmidt.

Most arts fundraising uses the model of a pyramid. At the top, a massive gift from a single donor — $5 million, say, for a new theater — then a scaling down from there. Since they had no “top gift” donors, Schmidt and Murray “may have invented a new model, of necessity”: a diamond. They encouraged donors to participate “at the level they can.” This gave them a wider span of “middle” contributors and broader base of support.

They signed the contract on December 31, 2007. In effect, a starter’s gun went off: a one-year deadline, not just to raise the money and become ADA compliant, but to make their own renovations.

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