The business
plan and the pro-forma operating budget should be considered a tool to help the
Town of Cary move forward with the development of new facilities in a district,
knowing that these plans can be adjusted based on changing circumstances and
assumptions.
A. Old
The Concept
The
recommendation put forward in the Needs Assessment was that Old Cary Elementary
should be renovated and upgraded as a community arts center able to support a
wide range of teaching programs, rehearsals, performances and other elements of
the creative process with the following spaces:
- A
professional-quality, 350-seat performance space with a full fly tower, great
acoustics and sufficient flexibility to accommodate theatre, music, dance,
opera, film, speakers and other events.
- Rehearsal
rooms suitable for music, theater and dance.
- Classrooms
and practice rooms suitable for both the visual and performing arts.
- Informal
visual arts exhibit space.
- Other
support and storage space.
Operating Goals
The following
operating goals are proposed for Old Cary Elementary as a
- Provide
accessible and affordable performance, exhibition, rehearsal, education and
work spaces to support the growth of local and regional arts organizations and
cultural groups, as well as Town-sponsored programs.
- Provide a
broad spectrum of activity that will encourage community participation as well
as stimulate increased activity and interest in Downtown.
- Encourage
education programs, partnerships and activities for regional school children.
- Operate on
a sound financial basis to ensure a sustainable annual funding requirement.
The Operation of
Comparable Projects
Before
examining the issue of how Old Cary Elementary should be operated, here is a
brief summary of what was learned about the operation of comparable community
arts centers. Complete descriptions of which are attached as Appendix B.
There is not
one single way to operate a community arts center. There are different and
successful models for the operation of community arts centers by local
government, local arts agencies and private nonprofit groups.
The scale of
organizations, and thus the budget and earned revenue streams, also vary
greatly. It’s not that some buildings are more expensive to operate, but that
the nature and mix of programs, rental activity and presenting leads to
different sizes and types of organizations.
Community
arts centers are usually professionally staffed, but receive crucial
administrative support from community volunteers. These volunteers often serve
as docents, ushers, and committee members helping with mailings, front desk
reception, event coordination and more.
Many
community arts centers serve as an important resource for local arts
organizations by recognizing ‘resident organizations,’ and providing them with
reduced rental rates, office or administrative space, and professional
development opportunities to local artists in the form of grant-writing
workshops or networking events.
Ownership
The question
of who should own the project is fairly straightforward: the Town already does.
Note that this is separate from the question of who should operate the
community arts center.
Selecting an Operator
There are
many types of facility operators for community arts centers, per the review of
comparable facilities. Again, here the choice is self-evident. The Town of
Elements of Operating Policy
Utilization and Access: The key to success for Old
Cary Elementary as a
1. Space rental by local arts and cultural organizations: There
are a number of groups seeking access to the recommended performance, rehearsal
and support space that should be accommodated by the building.
2. Town of
3. Other community rentals: Old Cary Elementary has a number
of spaces that will be appropriate for other types of community meetings and
gatherings, adding to its role as community center and bringing additional
income to the facility.
The greatest
challenge for the building will be balancing these different types of demand
and managing the needs and expectations of so many different users and use
types. Thus the following is stressed:
All three of
the types of activity listed above must be recognized as important for the
building. The facility management team must do their best to balance access and
demand among these groups.
Explicit
policies must be in place on how facilities are booked, including booking
horizons, rental rates, scheduling priority, cancellation fees and other
charges.
Rental rates
should be scaled to favor some combination of local groups and nonprofit arts
organizations.
For the
theater, user fees should be charged for the use of box office, technical labor
and the rent of equipment.
User fees
should be separated from the base rent of the building and provisions made for
emerging organizations to incur only essential additional charges.
Resident Organizations: It is recommended that a
series of community based organizations from the visual and performing arts have
the opportunity to seek classification as a resident organization, particularly
for the renovated theater in Old Cary Elementary. Resident groups gain preferred
status for booking and rental rates in exchange for bringing a certain amount
of activity and benefit to the venue. These groups can:
- Guarantee a
relatively consistent level of daytime and nighttime activity to attract
participants, audiences and tourists.
- Ensure
greater stability in facility operations, including earned revenue potential
and levels of necessary contributed support.
- Build an
image of the facility through ongoing use, supporting ongoing marketing and
fundraising efforts.
- Generally a
process where organizations qualify as residents through an open application
process is favored. In such a process, the criteria by which these
organizations qualify should be published, and might include some of the
following:
Level of programming: the organization agrees to
bring a significant portion of their annual (or seasonal) activity to the
facility.
Location: the organization is located
in or near
Quality: the organization creates work of quality (however that is
defined) that would enhance the image and reputation of the facility.
Ticketing: It is recommended that a
community box office based out of Old Cary Elementary be developed to benefit
residents and visitors. This would be a clearing house for all arts and
cultural activities in
Food Service: Old Cary
Elementary should have expanded food service capabilities, including:
- Concessions
in conjunction with performances in the theater.
- Vending to
provide basic food and drinks for those in various classes and programs.
- Catering
capabilities to support meetings and special events in the building.
Staffing: Old Cary
Elementary will require professional staff trained in the management of
community arts centers. Key is the Executive Director position, a person able
to animate the building through diverse programming, balance all of the various
demands on spaces, run a staff with many different skills and financially
sustain the facility on an ongoing basis.
Volunteer Opportunities: As with comparable facilities,
community arts centers are often supported by the efforts of local volunteers.
Staff should identify opportunities in such areas as ushers for performances
and tours of the facility and recruit local support. This particular task should
be closely coordinated and perhaps integrated with volunteer operations at the
Cultural Arts Committee Role: It is recommended that the
Cultural Arts Committee now active on behalf of the Town be engaged to play a
critical role in the redevelopment and operation of the
Pro-forma Operating
Budget
Appendix G is
a pro-forma operating budget for Old Cary Elementary as a
Format and Structure
Operating
projections are presented on ten spreadsheets, as follows:
1. Summary
Charts and Graphs
2. Earned
Revenues
3. Operating
Expenses and Results
4. Visual
Arts Programs
5. Theatre
Programs
6. Music and
Other Programs
7. Room
Utilization by Programs
8. Rental
Activity
9. Staffing Requirements
10. Funding
Scenarios
The second
and third pages are key, as they total earned revenues
and operating expenses, which then allows one to estimate annual funding
requirements.
Programs
The most
complicated part of the exercise has been the forecasting of program demand for
spaces in the renovated school. Here the consultant team has worked closely
with Town of
Room Utilization
This
spreadsheet takes all of the program demand noted above and assigns it to various
spaces in Old Cary Elementary. This is done to ensure that there is space
available to support all of these programs and also to leave space and time for
community use of the building.
Rental Activity
This
spreadsheet estimates rental activity in Old Cary Elementary, starting with the
350-seat theater and then multi-purpose spaces and/or
classrooms. These forecasts of activity are based first
on the work that was done in the Needs Assessment with various local and
regional groups. The Scheduling Charrette then
provided an additional opportunity to update demand forecasts for specific organizations.
Also included
on this page are rental rates for key spaces. These were developed in
consultation with the Town and local groups, scaling them to favor both local
and non-profit organizations. It is thus
possible to project rental income associated with each of these spaces, as well
as the box office income to be earned by those renters.
Presenting
income is also projected on this page. There are four lines in the Theater
section which show the presentation of various events, including the Marvelous
Music Festival, live, family and film programs. Ticket sales from these events
are revenues for the facility. There is no rental income, as the presumption is
that the facility itself is the presenter.
Earned Income
This key page
summarizes all sources of earned income to sustain operations. Program revenue
totals are taken from the three-spreadsheet analysis of programs and their
growth. Rental and presenting income come directly from the rental activity
schedule referenced above. Modest sponsorship revenues are projected for presented
events based on a per-performance charge.
Hospitality
income includes some catered receptions; performance-based concessions income
and a modest level of vending income. All are presented as a net income
estimate.
User fees are
those necessary charges to facility renters for use of key services such as box
office and security. Rates are set at a reasonable level, with all labor
charges based on a pass-through rate: the charge is paid directly to contract
staff with no mark-up by the facility. Frequency percentages are used here to
suggest how often these charges would apply.
Finally,
there is a 3% ticket surcharge applied to 50% of gross income, an effective
user tax paid by ticket buyers to help sustain operations.
Operating Expenses
Expense
budgets are broken down by Programs, Presenting, Administration, Ticket Office, Theater Operations, and Building Services.
Presenting
expenses are based on estimated profit margins
for each type of presented event, meaning that direct expenses area percentage
of direct revenues from presenting. These estimates have been made very
conservatively with these margins, which range from -10% to +20%.
Each
department budget includes the salary and benefits of full- and part-time
staff. These positions are summarized on spreadsheet nine of the pro-forma.
Projected staff includes eleven full-time employees plus part-time and contract
staff. Benefit levels are set at 10% for part-time staff and 25% for full-time
staff. Compensation, staffing and benefit
levels have been reviewed with Town staff.
Administrative
Services expenses include personnel, professional services, insurance, travel
and entertainment, telephone, and other supplies and services. This category
also includes staff training and institutional promotion.
Ticket Office
expenses will cover full-time and part-time staff as well as a series of hard
costs, from ticket printing to maintenance of the ticket office computer
system. This assumes the involvement of an outside ticketing service.
Facility
Operations expenses cover full-time operating and technical staff, as well as
stage hands, house staff and cleaners. Building Services includes site and
building maintenance, security, and utilities, estimated on a cost per square
foot basis given occupancy costs of other facilities in the region.
Operations Funding
The last
component of the pro-forma is a review of possible funding sources to sustain
operations of the
The
B.
The Concept
The second
key recommendation in the Needs Assessment was that the community should develop
a new
§
A professional quality,
1,200-seat performance space with a full fly tower, great acoustics and
sufficient flexibility to accommodate theatre, music, dance, opera, film,
speakers and other events.
§
A secure, climate-controlled
exhibit space for the exhibition of visual arts.
§
A multi-purpose room that can
accommodate small, informal performances for up to 100 people, rehearsals and
special events.
Operating Goals
We would
propose the following operating goals for the
§
Provide access to a
combination of local, regional and touring performing arts groups that attract
local and regional audiences to downtown
§
Support the work of local and
regional visual artists through the active programming of dedicated exhibition
space.
§
Support the educational
programs of both visual and performing arts users, as well as the arts programs
of local schools.
§
Operate on a sound financial basis to ensure a sustainable annual
funding requirement.
The Operation of
Comparable Projects
A significant amount of research has been conducted on
the operation of comparable visual and performing arts facilities around the
country, presented as Appendix C. Following are some observations about the
operation of these facilities as it relates to the choices faced in
There is
great variability in how performing arts centers are owned and operated. The
owner of a building and the operator of the building do not have to be the
same. Generally, the ownership of the building is a function of funding and how
the project was developed. Often, cities or municipalities serve as the owner
and enter into a long-term lease agreement with a non-profit
to operate the building. Other times, the cities themselves will operate the building.
The budgets
of performing arts centers also vary greatly. This variability is usually due
to choices in programming: a building with a large presenting series has a
substantially
The funding
of buildings is rarely from one single source (although it can be, such as the
All of these
buildings are operated by professional and skilled staff. The success of a
building often depends on the Executive Director and his or her ability to lead
the organization and the community. Staffs are generally large for these
buildings, and volunteers are crucial.
Some sort of
presenting – done by the operator or an outside organization – is good for
developing an image and is often the “bread and butter” of performing arts
center.
Visual arts
compliment the performing arts very well, serving to draw in patrons and to
give local and regional artists the ability to showcase. The operation of
visual arts galleries within performing arts center can be separated, but is
usually given to a staff person who specializes in visual arts.
Ownership
Ownership of
the
§
If significant State funding
is possible and if that funding is contingent upon State ownership, then so be
it.
§
If the Town is the principal
founder of the building, its interests are best protected if it takes the title
on the project.
§
If the private sector is to
play a significant role in funding some
combination of the development and operation of the Center, it may be easier to
fundraise if ownership is placed with a separate 501c3 tax-exempt organization.
Note also
that ownership of the land may be different than that of the building, and that
these decisions should be based on how the site is assembled.
Selecting an Operator
There are
also many types of facility operators for visual and performing arts centers.
There are several key options for the
The Town is
in a relatively strong position to extend their facility management skills and
portfolio to a new, larger facility. The Town has significant
skills in the areas of facility management and booking, and there would
certainly be some operating efficiencies with the Town managing a set of
facilities. The downsides of this option are about politics (the problems
public reactions and political interference with programming) and fundraising
(the perception that a Town-operated facility needs no private-sector support).
A new
non-profit organization could be established to operate the facility. From a
fundraising perspective, this is a good option; it allows the community to
build a transparent organization that represents key constituencies and is mission-driven.
The downside is the challenge of building a new organization from scratch in a
community that might not have a deep pool of volunteer leadership and the
prospect of this new organization competing for funding with user groups.
Finally, a
commercial organization might be contracted to operate the facility on behalf
of the Town. There is already the precedent with
Each of these
options might work, but the choice of how to proceed should depend on the
following:
§
A sense of the political will
within the Town to take on the operation of the project.
§
Some determination of the
private sector’s interest in providing the leadership necessary to build a new
non-profit operator.
§
An articulation of the Town’s
goals for the project and priorities for the building which would affect the
kind of operator chosen. Specifically, a relative interest in attracting
touring product might suggest the value of a commercial operator, whereas a
strong interest in supporting the advancement of local and regional culture would
favor the Town or a new non-profit as operator.
Given the
above and considerable thought, the recommendation is that the Town operates
the building. The Town has the skills and experience already in place and a
tremendous opportunity to create operating economies and efficiencies with
multiple facilities.
Section 3.7
explains the pro-forma operating budget created for the building as a
stand-alone facility by an independent non-profit,
and then attempts to express the efficiencies possible with the Town as
Operator.
Elements of Operating Policy
Utilization and Access: Once again, the key to success
is a building that is as busy as possible with a range of programs and
activities that serve artists, organizations, audiences, local businesses and the
broad goals of the Town. The following types of activity are important:
§
Space rental by local arts and
cultural organizations: There are a number of groups seeking access to a
mid-size performance space, rehearsal space and exhibit space.
§
Touring programs (both visual
and performing arts) that attract regional audiences to the facility.
§
Other community rentals for
corporate events, community events and private events (e.g. weddings) that
bring pride to the community and earned income to the facility.
As with Old
Cary Elementary, the balancing of these activities will require explicit
policies and the expression of a building mission that speaks to the importance
of programming. Rental rates should be scaled in a manner consistent with
building goals. User fees should also be kept separate for the use of box
office, technical labor and the rent of equipment.
Resident Organizations: A series of regional and
community based organizations from the visual and performing arts should have
the opportunity to seek classification as a resident organization for the
theater. The process whereby organizations qualify as residents should be
through an open application process with explicit criteria agreed by the
facility owner and operator.
Ticketing: A professional ticketing
system and facility will be critical for this building to benefit
users and audiences. This should employ state-of-the-art technologies and
relate closely to other ticketing initiatives in the Town.
Food Service: Professional
food service capabilities will also be very important to the successful
operation of the facility, including concessions related to performances,
vending for backstage and catering capabilities for meetings and special
events. The system should be one whereby local and regional caterers are
qualified to work in the building, providing a high level of service but also
some flexibility for users.
Staffing: The new
Center most certainly requires professional staff trained in the management of
visual and performing arts centers. The Executive Director, the Development
Director, the Marketing Director and Programming Director are all critical
positions that will require a national search.
Community Voice in Operations: Depending on the choice of
operating structure, there should be some way for the community to have an
ongoing voice in the operation of facilities. If the Town is the Operator, that
might be the Cultural Arts Committee. Other options should also lead to ways in
which artists, organizations and audiences can have their interests
represented.
Pro-forma Operating Budget
Appendix H is
a pro-forma operating budget for the new
Format and Structure
Operating
projections for proposed facilities are presented on six spreadsheets. The
first summarizes activity and financial results
with a series of charts and graphs. The second shows key assumptions about
rental activity and presenting in the two performance spaces. The third
identifies earned income. The fourth details operating expenses and results.
The fifth page details staffing requirements. And the sixth reviews funding
scenarios.
Activity
Rental rates
for the theater, 100-seat multi-purpose room and gallery have been established
for resident groups, other non-profits and commercial users. Preparation day
rents are 50 percent of the event day fee.
Types and
levels of use of recommended facilities are based on previous discussions with
users and surveys of needs. The level of use represented by non-specific users is conservative. Presenting activity
has been projected, here an important part of the facility’s calendar. As with
the Old Cary Elementary pro-forma, it is projected that 67% of available seats
will be occupied at all events. Projected ticket prices are based on current pricing
levels for the identified users with slight escalations in some cases to
account for the jump in facility size. The gross revenue figure is used to
compute other income categories, such as a proposed ticket surcharge.
Attendance at convention, corporate, and private events contributes concession and
facility rental revenues only.
Earned Income
Revenues for
each project component start with gross presenting revenues that are based on
presenting activity estimates on page one. Sponsorship income is projected on a
per performance basis. Fees are scaled according to the room and type of
performance. Rental income from the performance spaces is again taken directly from
the activity summary.
Hospitality
income in the facility could be significant,
including both performance-based concessions and additional catered events. The
question of who will actually operate concessions is still to be determined. By
using a net per capita calculation, we can account for different options.
A series of
assumptions about the establishment of educational programs in the new building
have been made. The hall is to present performances for K-12 audiences, host
after-school and summer programs, facilitate teacher-training, and develop a
program that sends artists into schools. There is some earned income generated by
program fees. There is also fundraising for education programs that are
minimally competitive with overall fundraising for the facility. These income
sources are grouped together on spreadsheet three of the pro-forma. There are
also direct expenses associated with the programs, including staff and program
costs grouped together on spreadsheet four. This grouping makes clear the fact
that these programs operate on a near break-even basis, with staff and program
costs matched by program fees and fundraising.
Overall,
these programs will play an important role in helping the facilities fulfill
the educational component of their mission, introduce the arts to the audiences
of tomorrow, and impact the quality of life for all who live in and around
Ticket office
operations are critical for the operation of all new facilities. Our key
assumption is that there is a professional box office staff at the theater,
probably connected to the one at Old Cary Elementary. A per-ticket charge to
users for box office operations is based on charges at comparable facilities.
User fees are also applied for the use of stagehands, the rent of technical
equipment, custodial services, security services and front of house services. Rates
have been set at reasonable levels to ensure that local groups are not priced
out of the building. As with Old Cary Elementary, labor charges are
pass-through, not marked up by the facility.
A 3 percent
ticket surcharge is again proposed to offset operating expenses, in effect on
90 percent of ticketed events.
Operating Expenses
Expense
budgets are broken down by Presenting, Education Programs, Administration,
Ticket Office, Facility Operations, and Building Services. Presenting expenses
are based on small estimated profit margins (gross revenues less direct cost)
for each type of event.
Projected
staff includes 12 full-time employees at the new hall, plus part-time and
contract staff. Benefit levels are again set at
10 percent for part-time staff and 25 percent for full-time staff.
Compensation, staffing and benefit levels have been reviewed with town staff.
Administrative
expenses include the same set of basic overheads seen in performing and visual
arts centers, at a higher level than Old Cary Elementary. Ticket Office
expenses will cover full-time and part-time staff as well as a series of hard
costs, from ticket printing to maintenance of the ticket office computer
system. This assumes the involvement of an outside ticketing service.
Facility
Operations costs cover full-time and contract staff and basic occupancy costs
estimated on a cost per square foot basis given occupancy costs at regional and
comparable facilities. A rental allowance fund has also been added that would
allow the operator to subsidize the rent of groups who do not charge for
attendance at their events or others for whom the rent is a significant
burden.
Funding Requirements
The last
portion of the budget is a series of funding scenarios, starting with the size
of endowment required to cover the entire funding requirement, the annual
funding requirement if fundraising is the sole source, and then the most likely
scenario, a combination of sources including endowment income, government
services, grants and an annual campaign in the private sector.
Potential Operating Efficiencies
As mentioned
earlier, the pro-forma for the new
Such improvements
should occur in the following areas:
§
The ability to share full-time
staff and other resources across multiple resources.
§
The increased profile of the Town as a facility operator allowing
for cost reductions through bulk purchasing and negotiations covering multiple
sites.
§
Joint promotion and
advertising for multiple venues and events.
In total, it
is projected that these improvements would reduce the annual funding
requirement for the new visual and performing arts center and other facilities
in the base year of operations by some$200,000 to $300,000.
C. The
The third key
recommendation in the Needs Assessment was that the community should develop a
new
Some key
issues with the development of Digital Media Arts Centers:
The most
important component of a
Partnering
with a public radio or television station is often the start to a community
media center and offers creative funding streams.
Partnering
with high-tech companies for financial or technological support can also be key.
There are
many, many artists who are exploring the world of technology and art. These
artists are often the best source for teachers and staff.
There are
also specific physical requirements for media art centers. The
Computer lab(s) that have specialized equipment for animation, graphic design, and film and sound editing.