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HomeMy WebLinkAbout10/19/1999, C5 - ADDITIONAL FUNDING FOR CITY'S SHARE OF 1998-99 PERFORMING ARTS CENTER OPERATING DEFICIT council 16-I j acEnaa izEpoat c5".Aw CITY O F SAN LUIS O B I S P O FROM: John Dunn, City Administrative Officer Prepared By: Wendy George,Assistant to the City Administrative Officer SUBJECT: ADDITIONAL FUNDING FOR CITY'S SHARE OF 1998-99 PERFORMING ARTS CENTER OPERATING DEFICIT CAO RECOMMENDATION Appropriation $9,643.96 from the General Fund unappropriated balance to fund the remaining portion of the City's share of the 1998-99 Performing Arts Center operating deficit. DISCUSSION Under the terms of the Operating Agreement between the City, Cal Poly and the Foundation for the Performing Arts.Center(FPAC),the City and FPAC are responsible,on a 50-50 basis, to share any operating subsidies that become needed when expenditures of the Performing Arts Center (PAC) exceed revenues. Although the PAC has been in operation for several years, it has yet to reach a point where revenues and current level partner contributions can fully support the cost of operations. This operational shortfall is compounded by the fact that FPAC was forced to use funds previously set aside for an operating endowment to complete the original construction, and an equipment replacement fund has yet to be established. For the past several years, in order to assist with cash flow, the PAC has estimated its year end deficit and requested that the City and FPAC pay their shares up front, at the beginning of the fiscal year. Accordingly, in July, 1998, the City paid $65,000 to the PAC. As we neared the end of the 1998-99 fiscal year, staff was notified by the PAC's Managing Director that the actual deficit would be somewhat greater than originally estimated and that the City and FPAC would likely need to provide additional funding. At that time,the City had funds budgeted for a PAC equipment reserve fund which had not yet been set up.. Staff asked the PAC to estimate the additional funding that would be needed so that the City could pay its share out of this unspent reserve fund budget. Based on the new estimate,the City paid an additional$11,500 in June, 1999. Now that the fiscal year for the PAC is complete,the actual deficit numbers have been forwarded to the City (see attached letter). The remaining operating deficit for the year ending June 30, 1999, is $42,287.93. Under the terms of the Operating Agreement, the City's 50% share is $21,143.96. Since we have already made an estimated payment toward this ending deficit of $11,500, the amount remaining to be paid by the City is $9,643.96. Unfortunately,with the 1998-99 fiscal year having ended,there is no longer any funding budgeted which could be used to cover this remaining amount. As a result, staff is requesting that the Council appropriate the needed funds from the unappropriated balance of the General Fund. A forthcoming meeting of the three partners will discuss the issue of the longer-range financial health of the PAC. Overall, the operation of the PAC has gone very well, but the budget has C5-1 Council Agenda Report-PAC Operating Deficit Page 2 always been closer to "bare bones" than fully adequate. Much of the problem is due to the PAC's history: the project coming in over bid; the partners having to come up with additional money; the equipment fund being sacrificed to the construction needs; and the Foundation (FPAC), of necessity,using the accumulated endowment for construction funding. As a consequence of these actions, the constant effort has been to accumulate equipment purchase funds and, more recently, the development of an equipment repair and replacement fiord. The operational budget for the first three years has been minimally funded and, therefore, under strain. While this fact has not been obvious to the users of the PAC, it has resulted in an annual operating deficit, despite the up-front operational support by all three partners, in two out of the first three years of operation. As has been reported in the past,this situation is not unusual for the initial years of such a center, and,in this respect,the PAC has been far more fortunate than many other centers. FISCAL EMPACT Total City share of 1998-99 PAC operating deficit $86,143.93 Paid in July, 1998 (65,000.00) Paid in June, 1999 (11.500.00) Remaining amount to be paid $9,643.93 This amount must be appropriated from the unappropriated balance of the General Fund. Based on interim results for 1998-99,adequate reserves are available for this additional appropriation and still retain the General Fund balance at policy levels. ALTERNATIVES If the Council should choose not to pay the City's remaining share of the operating deficit, the City would be in violation of the terms of the PAC Operating Agreement. Attachment Letter from the PAC dated 9/20/99 . C5-2 PERFORMING ARTS CENTER S a n L u i s 0 b i s p 0 Date: September 20, 1999 To: John Dunn Chief Administrative Officer City of San Luis Obispo From: Ron Regier Managing Director Re: City of SLO Support for `98-99 Operating Deficit As stipulated in the Operating Agreement, FPAC and the City of San Luis Obispo are responsible for sharing the cost of annual operating deficits for the performing arts center. Regretfully, I am obliged to inform you that the cumulative net operating deficit for the year ending June 30, 1999 was $42,287.93. I would appreciate it if the City of San Luis Obispo could prepare a check, at your earliest convenience, for its 50% share in the amount of$9,643.96, which takes into account a previous payment received from the city for$11,500. Please make the check payable to the Cal Poly Foundation. Thanks once again for your continuing support for the center on behalf of its clients, artists and patrons. Sin ly, R egie g g D 'Nirector R e i e d SEP 2 8 1999 City Qf S.L.O. Administration Grand Avenue San Luis Obispo,California 93407 Y _ (805)7 LO-PACQ 756-6088