HomeMy WebLinkAbout06/15/2000, 1 - FORTHCOMING PARTNERS MEETING/PERFORMING ARTS CENTER FINANCIAL ISSUES-BACKGROUND DISCUSSION PAPER memoizanbum
October 29, 1999
TO: The Partners of the Performing Arts Center
FROM: Ron Regier and John Dunn
SUBJECT: Forthcoming Partners Meeting/Performing Arts Center Financial Issues --
Background Discussion Paper
There are perhaps two fundamental facts about the Performing Arts Center. One, from the
perspective of the local performing arts groups and the audience members, is that we now have a
beautiful and functional venue for the presentation of the performing arts in our community.
Secondly,in order to accomplish this special amenity for the community, it was necessary to
create a unique partnership. Designated representatives of the three partners comprise the
Performing Arts Center Commission.
As Warren Sinsheimer pointed out in his talk to us at our recent retreat,this has been an
extraordinary partnership and each of the partners has been there and has made a special
contribution at a critical juncture. It was stated that the blessings of any relationship don't just
happen but have to be nurtured and sustained. That is the task before us.
Over the past three years, the Commission has given much thought to the financial situation of
the Performing Arts Center and, more recently,has reflected on the realities of our current and
projected situation. There appear to be three basic tasks before the partners. They are:
In the shorter to intermediate term:
1. The City and the Foundation(FPAC)could consider increasing their commitment to
providing up-front annual operational support to the Center.
2. Cal Poly should consider continuing their annual operating support beyond the initial five-
year period.
These measures may need to be in effect until we accomplish our longer-term goal which is for:
3. The Foundation for the Performing Arts Center to raise a substantial endowment of$8 - 10
million,well beyond the earlier idea that a$4 million endowment would be sufficient.
Corresponding changes in the Operating Agreement would need to be made to reflect:
4. Greater City and FPAC annual operating support and that is in up-front rather than after-the-
fact support.
5. The commitment of the University for annual operating support; and
6. Other changes needed to reflect the actual way we now operate rather than what was
contemplated years before opening the facility.
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There are a number of assumptions behind the recommendations above, as follows:
1. After three years of operation and preparing and attempting to live within our adopted
budgets, it is now obvious that we have a problem of chronic underfunding. As the latest
example,if a truly adequate budget rather than a more bare bones budget were adopted this
year, it would have been at least$30,000 higher than was possible given an honest estimate
of our revenue.
2. Ticket revenue, charges to user groups and other fees and charges are at the upper end of
acceptability, and further increases could result in harm to our sponsoring organizations and
to a diminishment of our audience. We have consistently reviewed and raised our fees when
justified, and when deemed not to have a harmful effect. It is now obvious that this type of
direct user revenue is not and cannot be adequate to sustain the Center, which is simply the
same conclusion that other comparable centers have reached(sometimes rather disastrously).
3. Under the present Operating Agreement, the City and FPAC have the legal responsibility to
make up any operating deficient, and have in fact done this,though in a different way than
originally anticipated. Obviously,without the initial five-year commitment of Cal Poly to
provide annual operational support,the effect on the Center's operation and/or the resultant
need for additional contributions by the City and FPAC would have been negative.
4. The requirement for the City and FPAC to make up the annual operating deficient was earlier
viewed as an offset to the University's requirement to provide building maintenance,
custodial and utility service to the Center.
5. As a matter of financial necessity up to this point,the annual operating budget has not
included a reserve, a fund for equipment acquisition, a fiord for equipment
maintenance/repair/replacement,or one for small capital projects. The forthcoming budget,
for the first time and based upon contributions by the City and FPAC,will have an account
for equipment maintenance/repair/replacement. The equipment acquisition to date has come
from the Heritage Oaks Bank loan,which is now fully expended, and from a special
contribution from the three partners.
6. The creation of a substantial endowment in the future is necessary in order to respond to the
above issues, and this matter is under consideration by FPAC. However,until that goal is
obtained, it will be necessary to have annual financial support from the three partners.
Other points of discussion:
7. It is time for the partners to achieve our earlier commitment to the acoustical excellence of
the Center, by supporting the consultant study and by taking subsequent actions, as indicated
by the study, to fabricate and install the acoustical clouds. The City has made a commitment
to paying 1/6 of the costs of the clouds and FPAC has this idea under consideration.
8. There has been some belief and some discussion within parts of the University Community
that the Center does not sufficiently serve the University. We believe this is not a correct
assumption.
A. The Performing Arts Center already serves the University in the following ways:
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1) provides students, faculty and staff access to performances and pre-concert lectures
otherwise not available in area.
2) gives students performance opportunities on a world-class stage.
3) serves as a special event facility for work shops, receptions,meetings and banquets
for students,departments and colleges.
4) provides volunteer, internship, employment and work-study opportunities for
students.
5) is a demonstration site for facility architecture, construction, operations/management
classes, labs and tours.
6) provides teacher education through YOPAC.
7) aids the campus in recruiting efforts.
B. There are other ideas under discussion as to how the PAC can further serve the University
community, and these will continue to be worked on,with the goal being to increase the
use of the Center by the faculty, staff and students of the University.
9. The idea was previously discussed that a portion of the new parking facility's revenue might
be turned over to the Performing Arts Center.
10.As an alternative to the City and FPAC increasing annual operating support, as set forth
above,they could assume responsibility for:
A. Equipment maintenance/repair/replacement(as of now,this is being done) and/or
B. Replacement for carpeting and seat coverings"above the normal Cal Poly replacement
schedule" and/or
C. Minor capital projects.
These ideas are intended only as"food for thought" as we address our agenda.
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Performing Arts Center
Heritage Oaks Bank
Loan Amortization Schedule
Beginning Ending Cash
Dafe Balance Interest Principal Balance Flow
96/97 1,000,000 55,000 - 1,000,000 55,000
97/98 1,000,000 55,000 - 1,000,000 55,000
11/20/1998 1,000,000 13,750 15,000 985,000 85,632
2/20/1999 13,544 15,000 970,000
5/20/1999 13,338 15,000 955,000
8/20/1999 13,131 15,000 940,000 126,081
11/20/1999 12,925 20,000 920,000
2/20/2000 12,650 20,000 900,000
5/20/2000 12,375 20,000 880,000
8/20/2000 12,100 20,000 860,000 141,544
11/20/2000 11,825 25,000 835,000
2/20/2001 11,481 25,000 810,000
5/20/2001 11,138 25,000 785,000
8/20/2001 10,794 25,000 760,000 155,907
11/20/2001 10,450 30,000 730,000
2/20/2002 10,038 30,000 700,000
5/20/2002 9,625 30,000 670,000
8/20/2002 9,213 30,000 640,000 169,170
11/20/2002 8,800 35,000 605,000
2/20/2003 8,319 35,000 570,000
5/20/2003 7,838 35,000 535,000
8/20/2003 7,356 35,000 500,000 181,331
11/20/2003 6,875 40,000 460,000
2/20/2004 6,325 40,000 420,000
5/20/2004 5,775 40,000 380,000
8/20/2004 5,225 40,000 340,000 177,600
11/20/2004 4,675 40,000 300,000
2/20/2005 4,125 40,000 260,000
5/20/2005 3,575 40,000 220,000
8/20/2005 3,025 40,000 180,000 183,594
11/20/2005 2,475 45,00.0 135,000
2/20/2006 1,856 45,000 90,000
5/20/2006 1,238 45,000 45,000
8/20/2006 619 45,000 - 45,619
76.47$ 1.37-6.4
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