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Birmingham--It's been several weeks since City Stages announced it was taking its final curtain call. The non-profit music festival had struggled for many years with a deficit. And now, local businesses who provided services for this year's festival say they're scrambling to make ends meet because they weren't paid for their work. WBHM's Varun Krishnan prepared this report.

It's lunch time at Birmingham's Bottletree Cafe. The atmosphere is friendly, and the owner, Merrilee Challis moves from table to table, talking to the customers. Despite the lunchtime crowd, the cafe and music venue is hurting financially from its recent experience with City Stages. Bottletree was one of the many vendors that provided services for the music festival.

"Bottletree provided backstage hospitality and catering for all of the bands and the stagehands and the crews. It was about around 850 meals we served over the 3 day weekend."

And that's not all.

"We also provided extra services for the headlining bands and we stocked their dressing rooms with brighter items and towels and kind of took care of them throughout the day."

All told, Bottletree spent around $25,000 on City Stages. They got half of the money up front, but when the musical festival announced 3 weeks ago it was insolvent Bottletree was left holding the rest of the bill. And the cafe isn't alone. Many vendors say they haven't been paid or the checks they did receive bounced.

It's a messy situation, not only for the lawyers who must now figure out the City Stages finances... but also for Birmingham City Council members, who made a $250,000 emergency appropriation for the festival and now find themselves answering the question: why didn't they just let City Stages fold on its own before local businesses invested time and money?

"It's hard to gauge how events like this will be impacted."

That's Birmingham city councilman Johnathan Austin, who supported giving City Stages additional money. He believes City Stages' cultural impact outweighed the economic cost. He says he's sorry vendors have been left holding the bill, but stresses that's not the city's responsibility.

"The burden of the vendors and what they've invested is not something that the city has to bear or has borne, that is the festival organizer's, their responsibility."

Right now, City Stages has only declared insolvency, which is an economic term meaning that it can't pay off its debts.

"The people that are still waiting for payments from city stages, they need some legal way to get their money."

Andreas Rauterkus is a finance professor at UAB. He says unpaid vendors can file for bankruptcy on behalf of City Stages, in effect forcing the festival's hand.

"They might file for bankruptcy themselves, it's maybe they're trying to work out something outside the courts. I just work with my creditors outside court, that way I'm still engaging in an economic process whereas bankruptcy is a legal process so everything that happens has to be Okayed by a judge."

Rauterkus says short of bankruptcy, he sees no other way the debts could be repaid. If City Stages does declare bankruptcy, it would declare chapter 7 which involves liquidation of assets and distributing money to creditors. There's no public record of how much the non-profit that runs City Stages has in assets. Calls to lawyers representing the festival were not returned.

In the mean time, Bottletree Cafe is using its support network to stay afloat. Again, Merrilee Challis.

"I just told them look, it's gonna be okay, we'll get through this, just call everyone you know tell them to come eat and drink. 'Cause all we can do now is try to get business."

They also had rummage sales and a silent auction, with proceeds going to pay the staff.

~ Varun Krishnan, July 16, 2009.