STAFF REPORT

Operations Committee, October 2, 2008

Koka Booth Amphitheatre at Regency Park – Management Plan and Budget (PR09-14)

Consideration of approval of the management plan and budget for the 2009 season as prepared by SMG to manage Booth Amphitheatre

Speaker:  Mr. Lyman Collins

From:  Mary G Henderson, Director, PRCR
Prepared by:  Lyman Collins, Cultural Arts Manager
Approved by:  William B. Coleman, Jr., Town Manager
Approved by:  Benjamin T. Shivar, Assistant Town Manager

Introduction

Attached please find SMG’s proposed Management Plan and Budget for the 2009 season at the Koka Booth Amphitheatre at Regency Park.  Although the budget year for the Town is July 1–June 30, the Amphitheatre budget year is November 1–October 31 to more closely coincide with the performance season.  The plan includes SMG’s analysis of the 2008 season as well as proposed plans for the upcoming 2009 season.  It addresses each of the Council adopted goals for the facility.  Staff has highlighted some of the more significant areas of the report below.

2008 Overview

Over the past several years SMG has made a concerted effort to reduce the operating deficit for the facility. Amphitheatre staff has met or exceeded budget expectations, continued to narrow the budget deficit for the Amphitheatre and continued to improve on its budgeted losses.  Since 2004 the deficit steadily shrunk to its lowest level last season (2007) to $178,247 (the approved budget anticipated a loss of $201,148).  Unfortunately this trend is not forecast to continue for this season. The 2008 management plan anticipated a loss of $198,830 and the current projection ($201,810) places the loss about 1.5% beyond the approved budget. The attached chart illustrates these financial trends.

Several factors have contributed to this changing trend, although during the 2008 season the facility continued to present a varied program of concerts and events.

·        This year marked the second and final year of Live Nation’s contract to serve as the venue’s preferred promoter (Live Nation bought House of Blues in 2006).  Promoters assume all the financial risk associated with the concert and receive all ticket revenue to cover cost.  The Amphitheatre receives ancillary revenue (concessions, parking, facility fees, ticket rebates) and, as explained in SMG’s Management Report, these revenues are split with our preferred promoter.  As preferred promoter, Live Nation also has first the opportunity to co-promote with other promoters which may seek dates at the amphitheatre.  That happened with two very successful concerts—Avett Brothers and Wilco—which resulted in revenues being split three ways and thus reducing revenue to the amphitheatre.  For example, on Duran Duran (which was solely promoted by Live Nation) the amphitheatre received $35,365 in revenue, while on the Avett Brothers, which had double the attendance, the amphitheatre only received $20,073 actually performing under budget, but the revenue had to be split three ways thus reducing the amphitheatre’s share.  Unlike last season when all of the House of Blues promoted shows exceeded budget expectations, this season 6 of those shows have under performed.  Our current preferred promoter contract also calls for the amphitheatre to provide funds to Live Nations on shows that it can demonstrate a documented loss (without the amphitheatre going into the red for a particular show – this is called downside protection for the promoter).  This year $33,800 was provided in downside protection for four shows.

·        Tinsel Town’s outdoor ice skating rink returned for a second season.  While the overall number of people attending during the season remained the same at approximately 17,000, fewer people chose to skate; there was no charge to attend, but a fee was charged to skate.  As a result the event continued to be a significant drain on the overall budget, losing $30,000.  As an amenity it significantly expanded the use of the facility and provided an innovative alternative to Cary citizens for winter activity, but it does take a significant subsidy to produce in its current form.  For the upcoming season Tinsel Town will be suspended due to the planned renovation to the Crescent which will allow staff the opportunity to re-assess its viability.

·        Sponsorship revenue continued to increase incrementally, growing by 4% over 2007, but it missed its budget projection by just under $25,000.  This was primarily attributed to the loss of an automotive sponsor.  SMG reports that it believes it will be successful in signing an automotive sponsor next season.

·        The Movies by Moonlight series continued to be a popular offering averaging over 500 people each movie.  Nonetheless, attendance and revenue was down about 10% from last year and, while the series still paid for itself, its revenue over expenses had been budgeted at $2,000 more than actually came in.

There were also several positive factors that counteracted the losses, thus assuring that the facility year end will indicate that it operated very close to its approved budgeted loss.

·        Overall, weather did not have a tremendous impact on the programming.  Several extremely hot days and two rather rainy days did appear to depress symphony attendance which was down this year by 12%.  For a couple of other shows weather appeared to be threatening, which again may have had an impact on walk-up attendees, but overall weather was not a major factor.  Also for the first time the 2008 budget recognized that symphony event revenue would not cover all expenses but would require a subsidy.  Including all symphony events at the amphitheatre (Summerfest, July 4, Pops in the Park, Play with the Pros) last year’s management plan recognized an overall subsidy of $10,309 and the actual subsidy was $9,515.

·        Food and beverage revenue represents a significant portion of most amphitheatres’ operation and Booth Amphitheatre is no exception.  As authorized in last year’s management plan, SMG solicited proposals from a variety of concessionaires recognizing that there were new growth opportunities in this area.  As a result, the concessionaire changed from Premier Events Management based in Atlanta to Classic Sports Catering based here in Cary.  The improvement in both quality of service and in revenue has been notable.  Concession revenue is up 25% over this time last year and per caps (the average dollar amount calculated to be spent by each patron) has dramatically increased.  For example, last year’s management plan forecast outside promoter events per caps to be $8.00 and they are $13.47 to date.  July 4 per caps (where patrons can bring in food) was projected to be $1.70 and they actually were $1.92. (Note the disparity in concession revenue when patrons are allowed to bring in their own food and beverages.)  Last year’s capital construction project to upgrade the Concession building was postponed due to the already planned event schedule.  With that project taking place prior to the 2009 season, there is good reason to believe that concession revenue will continue to increase and SMG has forecast approximately a 20% increase in per caps over this season.

·        Non-event revenue has also continued to improve.  Rental revenue continues to increase, growing by 23% in revenue over 2007 and almost $25,000 over budgeted revenue.  Preferred parking and lawn chair rentals continued to provide additional revenue streams ($32,962), although 4% under budget projections.  The main sources of ancillary revenue (Ticket Master rebates, ATM service charges and merchandise and Facility Maintenance fees) produced revenue more then $100,000 higher than had been budgeted, but, as explained in the Management Plan, the preferred promoter contract required those revenues be shared, so the end result was 20% (almost $35,000) below budget.

·        SMG worked throughout the year to reduce indirect operating expenses (personnel, facility marketing, insurance, office operations, uniforms, signage, etc).  Those expenses had been budgeted at $760,709 and are projected to end the fiscal year at $647,093, a savings of $113,616.

Other Issues

·        Preferred promoter.  SMG’s contract with Live Nation ends October 31 and SMG has recommended soliciting proposals from other promoters.  An RFP has been issued to a wide variety of promoters including Live Nation.  SMG and Town staff will review these responses and weigh all the issues surrounding preferred promoter relationships.  These issues include guaranteeing a certain number of acts each season, guaranteeing a certain number of ticket sales, and the practice of sharing ancillary revenue.  SMG believes, and staff supports, the potential that there is no contracted preferred promoter status for the 2009, but that SMG works with a number of different promoters.  SMG has also requested that the seasonal production manager position be made a regular year round position at the facility.  Pending resolution of the promoter status, this change will allow the general manager relief from dealing with concert details.  If a significant change in promoter relationships takes place staff recommends this change in the facility’s staffing plan. Staff seeks authorization from Council to work with SMG to determine the best approach to promoters, including the option of not having a preferred promoter or self-promoting more shows.  Self-promotion increases the direct risk to the Town but provides the opportunity to increase revenue by eliminating the need for sharing in ancillary revenue.

·        Theatre program.  It has been a goal of the amphitheatre to develop a summer theatre program.  There is no regular outdoor theatre in the Triangle and the original plans for the amphitheatre always envisioned some theatre programming.  Amphitheatre and Town staff have had initial conversations with both representatives from the North Carolina Theatre and from the Theatre Department of the University of North Carolina at Chapel Hill about the possibilities of theatrical productions at the amphitheatre.  As reported in the management plan, SMG had planned to work with a theatrical consultant this past year but in lieu of that is proposing carrying forward in its operating budget funds to conduct surveys regarding residents’ attitudes about attending outdoor theatre.  Staff seeks authorization from Council to continue working with SMG and local theatrical organizations to make a final determination about the feasibility for summer theatre.  If additional financial requirements become apparent any new requests would come before Council.

·        Sound issues. Appropriate sound levels became a matter of neighborhood concern again this season.  Several shows including Duran Duran, Live/Collective Soul/Blues Traveler and Slightly Stoopid all exceeded the sound regulations and were fined.  Neighbors again questioned the basis for the sound policies which were accepted by Council in 2003 as a result of sound consultant WJHW, Inc.’s report.  The major recommendations included:

- Eliminate performances by the loudest and potentially most annoying acts, such as heavy metal bands.

- Limit “rock” type (this could include the more electric country and jazz performers) acts to no more than 12 in a season.

- Limit sound levels for all performances to 95 dBA, 1 minute average at the console, if a baffled House speaker system is employed or 92 dBA if an unbaffled system is used.

- Install a noise level monitoring system at the console to allow real-time feedback as to sound levels and document the levels for the duration of each concert. Make this data available to citizen’s groups.

- Construct a wall on the lake side of the pavilion. If this is not possible and a house system is deemed to be acceptable by promoters, install a sound baffled house sound system.

- Continue support of the existing Management Advisory Board, with representatives of all interested neighborhood associations acting as a single body with which the Town and SMG interact in regards to amphitheater issues.  Use this board as the conduit for distribution of season schedules, access to the facility, distribution of passes and consultation on noise monitoring reports.

- Continue providing and publicizing a “hotline” for amphitheater noise complaints which would be monitored by the Town or SMG to answer calls during a show. A standard form would be developed which indicated time of day, complainant’s address (or nearby if they won’t offer this information), along with weather data from that day. This process allows better real time access during a performance, leading to checking on the console sound levels, and enforcement measures, if necessary and correlation with performers and weather conditions which elicit complaints.

The Council accepted all of these recommendations with the exception of the “sound wall” and amphitheatre staff used this as the basis for sound policies that have been in use since the 2004 season.  In 2005 in the adopted management plan SMG changed from a 1 minute average monitoring level to a 10 minute average feeling that that gave bands more time to adjust their sound levels. Neighbors continue to question whether the 92 dBA limit is appropriate for the facility.  At the same time, SMG reports that acts continue to push against the 92 level and, in fact, in last year’s management plan SMG requested increasing the limit to 95, a recommendation that staff did not support and which was not approved.  It remains clear that there needs to be increased study of sound and its effects on the surrounding neighborhoods and the types of musical performances that will play at the amphitheatre.  The recent Rock & Roll Hall of Fame benefit concert further illustrated the difficulties in maintaining lower sound levels with certain types of music and also brought forward questions regarding the venue’s curfew and how that is managed.  Staff recommends that Council conduct a public hearing to provide the opportunity for neighbors and other citizens throughout Cary to express their points of view.  In addition, staff will work with SMG to gather the most up-to-date information about how other facilities manage sound and curfew issues. Other areas that could be considered include the types of music and other events offered at the Amphitheatre. Staff seeks authorization from Council to plan for such a forum in the near future.

Capital Equipment

In the 2008 approved Management Plan and Budget $55,900 was budgeted for capital equipment.  Of that amount, $51,633 was spent.  For 2009 SMG is requesting $40,000 for capital equipment as detailed below:

·     Glass Front Coolers: The increased business from Picnic in the Park has required additional cooler space to house patron orders. The current operations include the use of several small coolers for storage. Two glass front coolers will afford the caterer the opportunity to have all the orders in one temperature controlled area. This is a carry over request from last year.  Cost: $5,000.

·     Production Equipment: As the Amphitheatre enters its 9^th year of operation, it is necessary to upgrade and replace various light and speaker fixtures throughout the venue. The need for these repairs is due to the normal wear and tear caused by weather at an outdoor facility.  Cost: $20,000

·     Cable Trays: Equipment is needed to protect cabling used from the stage to the mix position. Cable Trays also prevent trip hazards to patrons during events. When possible, SMG currently borrows cable trays from other area venues in order to cover cables and prevent trip hazards. When there are scheduling conflicts with other venues, SMG rents these items for $200 a tray. It is more efficient and economical to have an inventory of these items at the facility.  Cost: $10,000

·     Stanchions/Bike Rack: Materials are needed to create boundaries for certain areas of the venue. Example, stanchions are used to block off areas on the lawn for private party groups and bike racks are used to block backstage access and/or create chutes for lines of people entering the facility at the main gate. The Amphitheatre currently does not have enough of either item and has to rely on staff personnel to serve as “security” for specific areas. The purchase of this equipment will reduce staffing costs in the long run.  Cost: $5,000

Total equipment request for 2009:  $40,000

Maintenance and Repair

Beginning with the 2003 season, the Town’s Public Works Department has provided all maintenance and repair work for the facility.  Support for specific events is typically contracted by SMG to stagehands, cleaning contractors, etc., but ongoing routine service is incorporated within the Public Works budget.  Because the facility is operated as a park during non-event days, a level of service comparable with other park facilities is included in the overall Public Works costs.

In preparation for the upcoming fiscal year, Pubic Works Facilities Management has reviewed the BFY 08 (Booth Fiscal Year Nov 1-Oct 31) expenses for Booth Amphitheater.  A total of $192,287 has been spent from November 2007 through August 2008.  It is anticipated that an additional $13,917 will be spent in  September and October for routine maintenance and events support; this number excludes items not anticipated but occurring during September and October, such as heavy rains requiring replacing pine straw in natural areas within the complex (approximately $1200) and the resealing of pavers (approximately $4500).

Facilities Management anticipates the current BFY 2008 projected expenditures of $206,204 ($192,287 to date, plus $13,917 through September and October) with a budget of $221,862.  In the past, trash hauling fees have not been included in the monthly updates.  The projected trash hauling fee cost for the current fiscal year is $8,000 which brings Facilities Maintenance BFY 2008 projected expenditures to $214,204.  This total of $214,204 includes $6,182 of completed projects.  Three projects approved in last year’s budget were not completed.  Plans to upgrade power (two separate requests) were pushed to this winter to coincide with the Crescent Concession renovation and plans to adjust the sound mix position were adjusted likewise.

An estimate of total BFY 09 expense is $181,559 for routine maintenance.  This decrease over BFY 2008 is primarily due to the lack of the Tinsel Town event.  Tinsel Town costs from BFY 2008 were approximately $33,000.

Projects and Costs:

Partial re-decking of the Amphitheatre stage                                                     $20,000

Since original construction, the Amphitheater stage has undergone minor repairs to correct for wear and tear of events.  In an effort to avoid any future safety concerns, a partial re-decking of the stage area to include the under support is needed.

Carpet replacement                                                                                            $6,000

The three dressing rooms behind the stage are in need of carpet replacement due to usage.  Carpet is part of the original construction.  It has aged out and needs replacement.

Re-sodding of lawn                                                                                             $140,000

Current lawn conditions continue to deteriorate.  Agronomists have reported poor soil conditions which will not support healthy growth. Recommend re-sodding the lawn surface. The process would include stripping the current sod, adjusting and repairing irrigation to meet new sod heights, adjusting drainage, adding appropriate soil amendments and re-sodding. Because of the need to add new soil amendments and the type of grass used (Zoysia) this sod replacement is more expensive than a typical ball field project.  It is possible that this project could be postponed for one more year, but staff feels it is preferable to coordinate this project with the Crescent upgrade so that the impacts for citizen use on the area as a park will only be impacted once.  In addition, costs are only likely to increase over time.

Compactor                                                                                                          $25,000

While recycling is always our preference, trash is still accumulated during events.  In an effort to handle trash generated in an efficient manner, a compactor is recommended.  Adding the compactor would end the need to bring additional roll off containers for larger events as well as decreasing the number of hauls to the landfill.

Total Special Project Costs: $191,000

Summary

SMG’s 2008 Management Plan and Budget forecasts an operating deficit of $222,437.  This represents a conservative approach given the potential for a changed promoter plan, for weather impacts, the nature of next year’s touring market and other variables inherent in operating an outdoor performing arts facility. 

Fiscal Impact

SMG continues to provide the majority of staffing and other resources necessary to program and operate the Koka Booth Amphitheatre.  The “SMG Projected Deficit” itemized herein reflects the amount that SMG costs are expected to exceed Amphitheatre revenues as outlined in the line item SMG budget included below.

Maintenance for the facility continues to be provided by the Town of Cary’s Public Works Division and has been factored into their overall staffing levels.

The 2008 season officially ends on October 31, 2008.  Following all related accounting activity, the net amount remaining of the $500,000 cash flow allowance balance and other budgeted accounts will be returned to General Fund fund balance.  Currently this balance is expected to be $508,945 as outlined in the table above. The return of this balance will help offset the new appropriation being requested for the 2009 season as outlined below.

Note that since the $222,437 SMG operating deficit is after revenues, the total cost being appropriated to operate, program and maintain the Amphitheatre for the 2009 season is $634,996 which includes the $1,134,996 referenced in the table to the left, less the $500,000 allowance to manage cash flow.

While $1,134,996 in total is being requested for to fund the 2008 season, the anticipated transfer from General Fund fund balance needed for the 2008 season is currently expected to be $626,051 as itemized in the table above.

Staff Recommendations:  Staff recommends the following:

1.      Approval of SMG’s Management Plan and Budget for the 2009 season.

2.      Authorization of a public hearing on sound and curfew issues and an analysis from SMG regarding impacts of various options and alternatives as the basis for Council to establish a policy for the 2009 season.

3.      Authorization for staff to make the final decision regarding preferred promoter status, including no preferred promoter and/or self/co-promoting, based on SMG’s analysis and recommendation of promoter proposals received.

4.      Authorization for staff to work with SMG on developing final recommendations for summer theatre, including the option to remove the theater goal from the amphitheatre management plan.

5.      Approval of reducing the Amphitheatre special revenue fund budget at October 31, 2008 for the first four months of the Town’s fiscal year 2008 to equal expenses for the same time period and returning the remaining cash flow balance to the Amphitheatre Fund fund balance, which is currently expected to be $508,945.

6.      Appropriation of the $508,945 from the Amphitheatre Fund fund balance and the remaining amount of $626,051 from General Fund fund balance to the respective Amphitheatre Fund accounts necessary to execute the 2008 season as outlined in the table above totaling $1,134,996.  Since these numbers reflect estimates to complete the year, it is understood that these respective amounts can be adjusted to correspond with the actual amounts remaining at the end of October 2008.

7.      Recognition of a reimbursement of $347,559 from the Amphitheatre Fund to the General Fund’s Facilities Management division for the 2008 season support ($181,559 support plus $166,000 special projects).

8.      As a result of the Council Work Session on October 28, 2998 the following recommendations were added:  Revise the Amphitheatre’s sound operations policy to keep the audio volume for all events at the current maximum 92 dba level as measured 80 feet from the stage but to reduce the minutes of sound level averaging from 10 minutes to 5 minutes; authorize staff to contact the Grozier Technical Systems, Inc to return to the Amphitheatre to review its current installation of sound monitoring equipment and recommend updates or other adjustments; direct SMG staff to maintain complete records regarding performers who may have not been contracted to perform at the Amphitheatre as a result of sound level restrictions.