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Andy McKim has been appointed the new artistic director of Theatre Passe Muraille, The Globe and Mail has learned.

He succeeds Layne Coleman, who is a stepping aside at the end of the current season after 10 years, to focus on other pursuits.

McKim, 54, has been associate artistic director of Toronto's Tarragon Theatre for more than 20 years. He won the job in a competition that began last June; there were 25 applicants from across the country and a short list of six were interviewed and asked to submit vision statements.

Forty years old next year, Passe Muraille has been a seminal force in the development of Canadian theatre. The Toronto theatre was responsible for the original production of such landmark plays as The Farm Show, The Drawer Boy, The Drowsy Chaperone, Maggie and Pierre, and Da Kink in My Hair.

Coleman has already selected the plays that will constitute Passe Muraille's 40th-anniversary season. Among them is a remounting of The Drawer Boy.

Although he takes up his new post at the end of May, McKim's first season of programming will thus begin the following year.

The theatre's chairwoman, Shelley Black, said all of the six directors interviewed were incredibly talented and any one of them would have made an excellent choice. What sold the board on McKim, she said, was the depth of his artistic vision.

In recent months, there have been rumours in the local theatre community that TPM was in financial trouble and might have to close.

But in an interview this week, Black insisted that such rumours were groundless. Financial statements prepared last fall, she acknowledged, did report a substantial deficit, worth "a few hundred thousand dollars."

To save money, the current season was cut to three plays, the last of which, Noble Parasites, opens next month.

But "we are in no danger of folding," Black maintains.

That's because Passe Muraille has, for many years, owned outright the land and the historical building -- once the Nasmith Bakery and Stables -- building on Ryerson Avenue that houses the 200-seat mainspace theatre and the 80-seat backspace venue.

The board agreed to refinance the property to begin attacking the deficit. The 2007-08 season will have a full slate of plays.

More work remains to be done, Black concedes, and the board is drafting a debt-recovery plan that includes more aggressive fundraising.

"We have a three-to-five year plan," Black says. 'I think about it as financial sustainability."

McKim says he wants Passe Muraille to continue to be an incubator of new dramatic talent, collaborating with smaller, independent companies on new work and providing a stage for them.

Under his tenure, he hopes, Passe Muraille will put on more provocative, political theatre, provide a voice for marginalized communities, and push the boundaries of theatre.

Raised in Quebec, McKim studied liberal arts at Mount Allison University in Sackville, N.B. It was there in the early 1980s that he had a kind of epiphany. He had tried acting, but "I couldn't act. So I tried directing, and had an experience that I had never had in my life, like a calling. It fit so neatly. I was absolutely committed to it, right then."

He started as an intern dramaturge at Tarragon in 1984, working for the late Urjo Kareda, and was responsible for creating the theatre's popular annual spring arts fair. (He once directed Sandra Oh of Grey's Anatomy in a 10-minute play performed on someone's front porch.)

When his long-time mentor, Kareda, died in 2001, McKim considered applying for the job but ultimately chose not to, for "personal reasons." The Tarragon post was given to Richard Rose.

When he heard about the Passe Muraille job, McKim says he did a lot of thinking about whether to apply, consulted among friends and concluded that it would make a good fit.

"I have a great admiration for the history and mandate and am really attracted to the possibility of being a facilitator of new, independent artists. It's a seed theatre and I just love that role, in some ways even more than directing. And there are all kinds of small, talented companies that, because of limited funding, have not been able to realize their objectives."

Passe Muraille, he says, can help change that.

McKim is a passionate believer in Canadian playwriting. In 40 years, he says, "we have produced a prodigious amount of work. More than 70 per cent of the work mounted is Canadian. If it were not of merit, it would not rise to that percentage, especially given the challenge of overcoming the first hurdle -- 'oh, it's Canadian.'

"There's a healthy ecology. I think we're on the brink of the world taking notice of the excellence available here."

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