DeAnna Duncan presides over a junk sale inside the black box of the Source Theatre, negotiating the price of a pay phone with a customer. “We’d love to keep it,” she tells the patron, “But we’re not sure whether we’ll have space for it in the new theater.” Duncan, Source’s managing director since December 1996, is selling off an array of theater bric-a-brac—plastic foods, ’50s-style saucers and cups, fake restaurant condiments, wigs, Civil War costumes. The sale will generate barely $1,200, but any extra cash is helpful; Source is pouring hundreds of thousands of dollars into a full-scale renovation of its 14th Street NW building. But the sale is more than a fundraiser: It is a purge.

Source has produced plays at this same location for 21 years. While most theater watchers would stop short of describing its history as “consistent,” a glimpse of its office space suggests that little has changed since the 1970s, right down to the ancient Mr. Coffee machine. But by the beginning of next year, theater officials promise, nearly everything about the place will change.

With the help of a $500,000 grant from the D.C. Department of Housing and Community Development, Source plans to renovate in two phases. The first phase, to take place over the next several weeks, will add 49 seats; subtract interior columns; and bring in modular seating (to accommodate both in-the-round and proscenium configurations), a new front façade, wheelchair ramps, and a new lobby. The second phase, which involves installing an elevator, will begin early next year.

“We are doing whatever it takes to reinvigorate Source,” says Duncan with unrestrained optimism. “Change is afoot.” The change she speaks of, however, is institutional as well as physical; the theater is just starting to untangle itself from a “financial snag,” as Duncan concedes diplomatically. One year ago, Duncan and Source’s board of trustees projected a major budget shortfall: The theater would be unable to pay its employees, suppliers, or utility bills. As the books close on the 1997-98 season, Source has recovered most of its losses from the previous season and gotten back in the black.

Since Duncan arrived at Source 19 months ago, she’s tried to put a cheerful spin on the theater’s near-death experience. She is determined to show that Source is once again a contender among Washington theater companies. Its widely rumored internal troubles amount to an “ebb and flow in energy.” Recent financial woes represent “bumps along the way.” At any rate, the theater has survived a rough transition. Duncan says its second life will combine good bookkeeping with the company’s tradition for promoting lesser-known playwrights and directors. But it may take years for Source to recover entirely from its bad times.

Source’s troubles go back more than a decade to the resignation (or “sacking,” depending on who’s talking) of company founder Bart Whiteman in 1987. Joe Banno, Source’s artistic director (and Washington City Paper’s opera critic), recalls Whiteman’s tenure as a time when bills didn’t get paid; the concept of paying playwright royalties was, well, only a concept. Whiteman was less concerned with finances, Banno says, than with churning out as many productions as possible. In its early years, the theater sometimes seemed an assembly-line operation—”the McDonald’s of Washington theater” as one person described those days—with three 14th Street venues, and as many as four or five plays staged per evening. The theater’s production quality varied widely.

When Whiteman left in 1987, Pat Murphy Sheehy took the reins as producing artistic director. She put Source on a more secure financial footing and earned a reputation as a tough, intellectually exacting boss. “Source was the strongest it had been in a decade” under Sheehy, says local director Rick Fiori. But she also alienated some Source regulars—directors, performers, and designers who took issue with her “unilateral” artistic decisions and found the company’s pared-down operations rigid and unsupportive.

“I vowed I would never return,” one local director says of the Sheehy years.

“What Pat chose during the season was not bringing in the audiences,” says a local actor who worked at Source.

But Sheehy had to cut back her commitment to Source in 1994, when her daughter was seriously hurt in a swimming accident. “When you have an event like that, it drastically impacts your family,” Sheehy says. “It changes the way you look at things.”

By the time Sheehy took a full leave of absence in the spring of last year, it looked to many inside and outside the theater as if Source might fold. The crisis had mounted gradually: In 1995, Sheehy had split her job in two; she handled artistic matters, and Duncan managed finances. Some of Sheehy’s artistic choices didn’t pan out at the box office during the 1996-97 season, notably the disastrous musical The Harvey Milk Show, which cost $50,000 to produce and didn’t come close to breaking even. The theater sank deeper into debt.

Rumors of Source’s imminent closure ran rampant last fall, when Sheehy turned over the rest of her duties to Banno, who had been acting artistic director since Sheehy’s sabbatical. Sudden resignations and layoffs cut the theater’s five-person staff to two: Banno and Duncan. “We wouldn’t [have been] able to meet our payroll, so we had to let some people go,” says Howie Schaffer, a Source trustee.

During Source’s depression, it didn’t help much that theaters nearby on 14th Street were all thriving. The Studio Theatre, for example, which operates in a $4.5 million building and boasts a 3,000-person subscription list, has had a string of recent hits; The Old Settler closed last week after being extended three times.

Banno insists that Source’s troubled period was not an aberration. “A lot of small theaters in town have gone through it,” he says. “They all hit the skids in one way or another.”

Source’s imminent renovations, Schaffer says, will help a lot financially by increasing the number of seats by one-half. “We were subsidizing a facility that was breaking our back,” he says. “Even if we sold out 101 seats every night, we could barely make a profit.”

After Source’s annual Washington Theatre Festival last summer, Duncan and Banno considered postponing the season by a few months so they could restructure operations. They decided, instead, to rebuild as they went. They opened the season on schedule with Psychopathia Sexualis, which proved hugely popular; it generated more than $30,000 in ticket sales and was remounted later in the season. They also recruited two seasoned new managers—breaking Source’s habit of hiring younger, less experienced staffers. The 1997-98 season produced nine events (including a co-production with the Folger Shakespeare Library as well as the Washington Theatre Festival) and a boom at the box office. The door generated more than $160,000 in revenue, says Duncan. The previous season, by comparison, sold less than $60,000 in tickets.

Banno’s artistic leadership of the theater has been widely applauded, but some observers worry about his showcasing better-known playwrights over lesser-knowns, as he has done for the upcoming season. “Local writers are being ghettoized into the [summer] festival this year,” argues Paul Donnelly, who was a festival coordinator. “In 1997, work by local writers [featured in the festival] stood a chance of having a place in the Source season. I don’t have that sense anymore.”

Banno admits that, at least for now, the theater will focus on well-known playwrights such as David Mamet, August Wilson, and Steven Dietz. And although Banno and Duncan maintain that Source remains committed to its mission of producing lesser-known works, the production calendar for next season leaves little doubt that Source is taking the safe road and hoping that, as the construction crews complete work on the new theater, the dreadful buzz of last fall will die down. CP

Source Theater will hold a pre-renovation party this Saturday evening at 8 p.m. “Rock in the Rubble” will feature beer, a live band, and cans of spray paint for anyone wishing to trash the theater. The cost is $10.