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Missoula Performing Arts Center Feasibility Study

PHASE TWO:BusinessPlanPresentationApril 2004

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Project to Date

Webb Management Services was hired to conduct a feasibility study for new performing arts facilities in Missoula.

The first phase of the study, the needs assessment, suggested the feasibility of the following: A 1,400 to 1,800 seat multi-purpose hall. Additional small spaces for performance, rehearsal,

teaching and special events.

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The School District is committed to the project. That means:

Use of the big hall Use of smaller rooms Locating programs in the Center The sponsorship of educational programs in the

Center, including artists heading out and students coming in.

The location of administrative services in the Center

The Role of the School District

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A number of local organizations have come forward to express their interest in joining up with this project.

That could mean in the building, around the building or simply using the building.

Groups include: Children’s Museum Art Museum Natural History Center

All having something to add to the project. The question is how to move forward with one

or more of them.

Other Partners

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Criteria for Evaluating Potential Partners: Will they use components of the PAC? Can they bring capital and/or operating funds? Does their presence animate a building or district? Is their program/activity complimentary to the

PAC? Does their inclusion strengthen the PAC project?Issues for each: Do they need to be in or near the PAC? Does the PAC timing and location affect their

interest?

Other Partners

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Here we investigate the operating and financial implications of new facilities.

How should the Center be owned and operated, and how will it perform in financial terms?

We have once again spoken with arts and cultural groups, regional presenters, educators, and civic, community and business leaders in Missoula.

We have also advanced our research on comparable facilities and communities.

Business Plan Scope

Comparable Projects

Facilty Name City STMain

ComponentOther

ComponentsEvent Days

Pre-senting Days

Owner Operator Operating

Budget Earned Income

% Earned Income

Eisemann Center Richardson TX 1,563230-450; mtg

space175 6 City City $ 1,900,000 $ 1,000,000 53%

Flynn Performing Arts Center

Burlington VT 1,453 110-200 280 60 Non-profit Non-profit $ 3,976,360 $ 2,680,138 67%

Garde Arts CenterNew London

CT 1,500200; mtg space

120 55 Non-profit Non-profit $ 2,231,237 $ 1,111,227 50%

Alberta Bair Theater Billings MT 1,416 none 100 50 City Non-profit $ 1,462,424 $ 1,027,020 70%

Great Falls Civic Center Great Falls MT 1,776meeting space

104 15 City City $ 456,597 $ 304,097 67%

Clemens Performing Arts Center

Elmira NY 1,608 200 100 80 County Non-profit $ 2,073,677 $ 1,184,209 57%

Union Colony Civic Center Greeley CO 1,665222; lobby

space491 24 City City $ 1,455,000 $ 800,000 55%

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Note the following lessons from the operation of these facilities:

There is tremendous variability in the financial scale of facilities and their performance, affected mostly by presenting and the level of activity.

More than anything else, the way the building and its operation are funded drives how the building is owned and operated.

Performing arts centers succeed for many reasons, but a common thread is that they are all professionally managed and are programmed and promoted effectively for their community.

Comparable Projects

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Ownership

If the project proceeds on the Riverfront Triangle site, the land would be owned by the City of Missoula.

Ownership for the building should be worked out according to what form of entity is best positioned to raise funds to build and sustain facilities.

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Operating Goals

Given our research here and our experience with comparable projects, we would propose the following operating goals for the Center:

As busy as possible. Accessible and affordable for local and regional

arts groups, educational institutions and presenters.

Annual funding requirements should be kept to a level sustainable with identified financial support.

Opportunity for educational and artistic collaborations and partnerships within the region.

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A scheduling charrette was held as a part of our planning process. A number of community organizations participated. Our objective was to inform operating and financial decisions with community input.

Important issues for users: Availability Balancing community and touring demands Scheduling priorities Cost of access Residency and capacity building

There are limited resources to pay for use of facilities.

The Scheduling Charrette

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There are a number of options for the operation of the Center:

Private Sector: New or existing arts group (e.g., the Symphony) A school or college Commercial operator

Public Sector: The City Quasi-public State or County

Operating Options

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We recommend the formation of a new 501c3 organization to operate the Center with a contractual relationship with the City

A non-profit has the ability to fundraise as well as accept ongoing support from the City.

A new non-profit can be formed to represent all of the key constituencies in the community.

Non-profits are transparent.

Operator Recommendations

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Presenting Events Presenting activity is critical – where the operator buys

and promotes events in the Center. This should consist of a combination of film and live

presentations such as speakers or concerts. The presented programming must complement

community users and be programmed for the area. Discussions with promoters:

Would prefer something larger than 1,500 seats, but are excited about any new facility in Missoula – there is a definite need

There is a strong audience for touring Broadway in Missoula – most past seasons have sold out

Seasons could expand from 4 shows to 8 shows per year for each presenter with the right venue

A high quality venue in Missoula would increase the possibility of bringing in more touring shows

Sponsorships revenues for presented are also important.

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Non-arts rentals are a critical source of earned income and a means to broaden participation in the facility. We have projected corporate, civic and community uses of the facility based on: The limited inventory of event spaces now available Positive feedback from community caterers and other

event planners. The assumption that the Center can physically

accommodate more events. The addition of sales staff to aggressively promote the

facility to potential renters.

Event Rentals

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One challenge of operating cultural facilities is that they require highly specialized staff who are deeply committed to this work and are skilled at working in a non-profit, volunteer environment.

The critical hiring decision is the General Manager. Though there might be good candidates in Missoula, we would encourage a broader search for the individual who will fit the job and the community.

Also critical to the operation of the Center will be volunteer and internships efforts, supporting house and technical functions. Volunteer opportunities for citizens should be pursued and promoted aggressively, especially through the many local colleges and schools.

Staffing Plan

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Organization Chart

Executive Director

Admin Assistant

Director of Operations Financial Director Development Director Prog/Mark Director

Technical Director

House Manager

Maintenance

Cleaning/Security

Technical Staff

House Staff

Ticket Office Manager

Ticket Office Staff

Corporate Sales Dir.

This is a provisional organizational chart for the hall that shows the relationship between the senior management and staff. The timing of hires will be largely a function of fundraising success.

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We have developed pro-forma operating forecasts for new facilities for a base year of operations, typically the 2nd year after the opening when operations have stabilized.

We have constructed these estimates on the theory that activity (renting and presenting in the spaces) drives revenues and expenses.

The pro-forma is intended to answer the basic question of “what will it take to sustain operations of the Center?” It is also offered as a live tool that will allow the Client to test the financial implications of various operating scenarios.

All estimates are in 2004 dollars.

Pro-forma Operating Budget

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Activity

Activity and Attendance Performances Use Days Attendance1,400-Seat Multi-Use Theater 154 195 70,818 200-Seat Blackbox 62 123 8,184

Total 216 318 79,002

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56%

17%

7%

4%11%

5%

Presenting Revenues

Rental Income

Sponsorhip Income

Hospitality Income

User Fees

Sur-charge

Earned revenues include rental activity, box office proceeds from presenting & rentals, income from food, beverage and special events, user fees such as cleaning, and a surcharge to ticket buyers.

Earned Revenues

REVENUESPresenting Revenues $669,900Rental Income $202,853Sponsorhip Income $80,000Hospitality Income $50,373User Fees $128,619Sur-charge $61,819Total $1,193,564

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34%

28%

9%

11%

18%

Presenting

Administration

Ticket Office

Operations

Building Services

Operating expenses include presenting (the direct costs of bringing shows to the building), building services, facility operations, administration and the ticket office.

Operating Expenses

EXPENSESPresenting $569,415Administration $473,000Ticket Office $147,811Operations $191,443Building Services $310,100Total $1,691,769

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With operating revenues of $1.193M and operating expenses of $1.69M, the Center covers 71% of operating costs with earned revenues, leaving an annual funding requirement of around $498,000.

Result of Operations

$1,193,564

$(1,691,769)

$498,205

$(2,000,000)

$(1,500,000)

$(1,000,000)

$(500,000)

$-

$500,000

$1,000,000

$1,500,000

Earned Revenues Operating Expenses Funding Requirement

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Funding ScenariosFunding Scenarios1. Total Pay-out via Endowment Pay-out Rate Endowment Required

5% $9,964,095

2. All Through Private Sector Fundraising ReferenceA. Cost/ Dollar Raised Formula $0.15B. Funding Required Interpolated $587,000C. Expenses before Fundraising From Top Section $1,691,769D. Fundraising Costs (A*B) $88,050E. Total Expenses (C+D) $1,779,819F. Total Revenues From Top Section $1,193,564G. Annual Fundraising (D) $587,000H. Final Result (F+G-E) $745

3. Public Private Partnership ScenarioTotal Funding Requirement $498,205

Part A- Annual Public Sector Investment of Funds and Services $100,000

Part B - Operating EndowmentEndowment Target $5,000,000

Pay-out Rate 5%Annual Income $250,000

Part C - Annual FundraisingBalance To Raise $148,205

Cost/ Dollar Raised $0.15Fundraising Cost $22,231 $171,000Net Requirement $170,435

Annual Fundraising $171,000Final Result $565

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One of the keys to success for this project will be how local organizations prepare for the challenge and opportunity that new facilities represent.

This must involve program development, audience development, staff development, and board development.

We believe that our Client, together with groups like the Cultural Council,should take a leadership role in helping organizations prepare for new facilities.

Institutional Preparation

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A very important initiative in the short-term. Potential leadership by the Cultural Council. Growing and developing festivals. Summer residencies for national performing arts

organizations.

Cultural Tourism Plan

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I

G

CULTURALINSTITUTION

BUSINESSES GOVERNMENT

EMPLOYEESJOBS-INCOME

PATRONS

JF

H

CE

B

A

D

Direct Economic Effects

Secondary Economic Effects

Third Order (Multiplier) Effects

New arts facilities can have a substantial economic impact on the community, including the impacts of construction and the impacts of the operation.

A critical element is the ancillary spending associated with the Center as attenders eat, drink and/or shop before or after a performance.

All of these impacts are then subject to a multiplier to reflect how those funds are spent and re-spent in the economy.

Economic Impact Analysis

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Construction Impacts

Construction Impacts: Estimates

Geography Missoula CountyIndustry Other ConstructionProject Costs $37,930,578

Final Demand Multipliers Project OutputsOutput 1.6159 $61,292,021Earnings 0.4267 $16,184,978Employment 17.8 675.16

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Operating ImpactsImpacts of Operation - Bill of Goods Approach

Final Demand Multipliers ImpactIncremental Purchases

Output (dollars)

Earnings (dollars)

Empl't (jobs)

Output ($000's)

Earnings ($000's)

Empl't (jobs)

Theatrical production $450,000 2.0066 0.6058 45.4 $902,970 $272,610 20.43 Advertising $100,000 1.7282 0.5400 28.3 $172,820 $54,000 2.83 Retail Trade (margins only) $22,500 1.7046 0.5375 30.2 $38,354 $12,094 0.68 Eating and Drinking $10,000 1.7245 0.5273 41.4 $17,245 $5,273 0.41 Computer and Data Processing $25,000 1.7130 0.5847 18.9 $42,825 $14,618 0.47 Management and Consulting Services $20,000 1.7282 0.5885 24.4 $34,564 $11,770 0.49 Legal Services $22,500 1.8782 0.8142 24.3 $42,260 $18,320 0.55 Accounting Services $12,500 1.9727 0.8351 50 $24,659 $10,439 0.63 Banking $12,500 1.5807 0.3837 15.5 $19,759 $4,796 0.19 Protective Services (Security) $16,000 1.6474 0.6810 35.7 $26,358 $10,896 0.57 Telephone and Communications $20,000 1.6840 0.3605 11.8 $33,680 $7,210 0.24 Electric Services $100,000 1.5485 0.3100 9 $154,850 $31,000 0.90 Water Supply and Sewage $35,000 1.8708 0.4780 21.4 $65,478 $16,730 0.75 Sanitary services, steam supply $25,000 1.7722 0.5361 18.3 $44,305 $13,403 0.46 Equipment Rental and Leasing $17,500 1.5651 0.4110 16.5 $27,389 $7,193 0.29 Other business services $30,000 1.5528 0.4261 22.4 $46,584 $12,783 0.67 Local and Suburban Transportation $22,500 1.5248 0.3984 23 $34,308 $8,964 0.52 Hotels $17,500 1.7532 0.5394 35.5 $30,681 $9,440 0.62 Insurance Carriers $50,000 2.2197 0.6709 24.9 $110,985 $33,545 1.25 Services to Building $17,500 1.6510 0.6180 46.5 $28,893 $10,815 0.81

$1,026,000 1,898,966$ 565,896$ 33.8

Missoula County

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Ancillary Spending ImpactsAncillary Spending Impacts Attendance Total

Total Incremental Attendance 39,500Missoula County Attendance 65% 25,675

Regional (non-County) Attendance 25% 9,875

Visiting Attendance 10% 3,950

Total Expenditure Estimate

Output Multiplier Total Output

Missoula County Attendees

Eating and Drinking $9.99 1.7155 $440,014Retail Trade $1.15 1.6972 $50,186Transportation $2.39 1.7799 $109,220Overnight Lodging $2.13 1.7418 $95,255Sub-total $694,676

Regional (Non-County) Attendees

Eating and Drinking $9.99 1.7155 $169,236Retail Trade $1.15 1.6972 $19,274Transportation $2.39 1.7799 $42,008Overnight Lodging $2.13 1.7418 $36,637Sub-total $267,154

Visiting Attendance

Eating and Drinking $15.12 1.7155 $102,457Retail Trade $1.32 1.6972 $8,871Transportation $5.74 1.7799 $40,356Overnight Lodging $7.80 1.7418 $53,665Sub-total $205,348

Total Impact of Ancillary Spending $1,167,179

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Fiscal Impacts

Inputs:2000 Missoula County Population 95,802 Organization's Total Expenses 1,691,769$ Total Attendance 79,002

Local Govn't Revenue

State Govn't Revenue

Impact of Organization 48,063$ 87,431$ Income of Audience 56,132$ 136,655$ Total Impact 104,195$ 224,086$

Americans for the Arts

Arts & Economic Prosperity CalculatorThe Economic Impact of Nonprofit Arts Organizations

and Their Audiences

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Conceptual design work Securing the site Consideration of the potential for commercial

space in the program The further development of a funding plan Build and broaden the leadership group

Next Steps