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Hopkins Center for the Arts Update; Anderson/Hanna-Bibus Date: December 30, 2015 TO: Mayor Cummings and City Council From: Lynn Anderson and Susan Hanna-Bibus Subject: Hopkins Center for the Arts Thank you for the opportunity to share with you a few of the highlights of 2015 and plans for 2016 at the work session on January 12. The Hopkins Center for the Arts, as you know, faces some difficult challenges. But we also have some good news to share. After our annual report, we will be happy to also discuss any questions you have about the Center. In preparation for this meeting, attached are four documents for your review: PowerPoint annual report Special Report in response to submitted questions Final Report from Aurora Consulting Memorandum from Christine Harkess, Finance Director, on Center finances 2015-2016 2015 GOALS Increase fundraising capacity  Balance the budget and move  towards financial sustainability Enhance the identity and  reputation of the Center Strengthen our own arts  programs and increase participation Remain in the forefront  of community arts Pen Pals (rental event) I do not want art for a few any more than education . for a few, or freedom for a few William Morris 2015 Initiatives – balancing the operating budget NEW: Maximized rentals and adjusted  pricing for 2016 Restructured concert ticket pricing  Piloted Art from the Attic fundraiser  Rental income remains strong Program income (ticket/art sales) up 54% over 2014 Friends transfers up 3% over 2014 2015 Initiatives –Addressing Capital Needs/Expenses Members’ Show Exhibition Opening TAKE A SEAT NEW: –raising money for new theater seats 24 donors -$9,000 raised to date 2015 Initiatives –Increasing Participation Concert attendees  increased from 6,019 in 2014 to 6,459 in 2015 (8%) Number of events at  the Center increased from 2,500 to 2,700 Through rentals, the  Center reflects the diversity of our community Off-site events take  arts to the community 2015 Initiatives –Preparing for Change Created a Community  Advisory Council to seek ideas and provide a forum for community discussion and input on major issues Grew volunteer base,  including obtaining regular office support Pints & Paints Sought outside perspective  on staff focus and structure from Aurora Consulting Arts Social Club R2014 When you’re finished changing, you’re finished. Benjamin Franklin 2016 –A Time of Opportunity Renewed focus on: Increasing contributed support  Exploring creative alternatives  for delivering arts programs Maximizing rental income  Enhancing the Center’s  reputation Engaging the community and  building relationships Tea & Treasures Donors don’t give to institutions. They invest in ideas and people in whom they believe. G. T. Smith (college president, master fundraiser) 2016 -Increasing Capacity Refocusing staff energy and improving  efficiency Improving software/technical support  Exploring off-site options  Maximizing volunteer contributions and  expanding Friends Board of Directors Seeking community partnerships  You cannot expect to achieve new goals or move beyond your present circumstances unless you change. Les Brown 2015-2016 SPECIAL REPORT TO THE CITY COUNCIL Hopkins Center for the Arts Operations January 5, 2015 Submitted by Lynn Anderson and Susan Hanna-Bibus Thank you to those that sent us questions regarding Hopkins Center for the Arts operations. We hope to address these in at least broad strokes through this memo prior to our attendance at the work session in January. Many questions seem to relate to the rather complicated relationships between the Center/City, tenants and occasional users all of whom contribute to making the Center a vibrant venue and economic driver for the City. In January we plan on providing a brief overview of 2015 and goals for 2016. Of course, we are also more than happy to discuss any of the following or additional questions at that meeting. ABOUT OUR TENANTS STAGES THEATRE COMPANY AND HOPKINS SCHOOL DISTRICT 1.Lease agreements with Our Partners, Stages Theatre Company and the Hopkins School District Stages Theatre Company and the Hopkins School District hold long-term leases with the City of Hopkins for use of Center spaces. Stages lease, renewed in 2012, is a ten-year commitment which underlines their status as the primary tenant and user of the facility. Under this lease, Stages has exclusive use of their offices, the box office and the scene shop. In addition, Stages is guaranteed time and priority for various rooms as follows: At least one room for preliminary rehearsals every Monday through Friday from 3-10pm and every Saturday from 8am-5pm The theater for final rehearsals and performances as needed through its 36-week season (they release time for Center concerts and major rentals but they control the theater) Jaycee Studio for performances for 8 weeks during January-March and 8 weeks June- August Conference Room for monthly board meetings and staff meetings Center use for annual fundraiser Stages is also entitled to additional hours as follows which enable them to run an extensive educational program for youth at the Center: Jaycee Studio 40 hours Community Room 800 hours Dance Studio 500 hours Classroom 400 hours Conference Room 400 hours The schedule for these activities is given to the Hopkins Center for the Arts and reviewed through a for August 2016 through July 2017.) In exchange, Stages makes monthly rent payments to the Center according to the following schedule: Payment Schedule-Stages Theatre Company Exhibit H (lease for period 11/1/2012 - 12/31/2022) Year of City Calendar Year Annual Rent Monthly Rent Lease Nov & December $24,976.10 $12,488.05 2012 2013 153,550.08 $12,795.84 1 2014 158,156.52 13,179.71 2 2015 162,901.20 13,575.10 3 2016 167,788.20 13,982.35 4 2017 172,821.84 14,401.82 5 2018 178,006.44 14,833.87 6 2019 183,346.68 15,278.89 7 2020 188,847.12 15,737.26 8 2021 194,512.56 16,209.38 9 2022 200,347.92 16,695.66 10 Lease term ends 12/31/2022 2023 206,358.36 17,196.53 11 Renewal option term commences 1/01/23 2024 212,549.16 17,712.43 12 2025 218,925.60 18,243.80 13 2026 225,493.32 18,791.11 14 Renewal option term 2027 135,483.88 19,354.84 15 ends July 31, 2027 Hopkins School District 270 also holds a ten-year lease which next comes up for renegotiating in 2017. Under this agreement they have exclusive use of the Art Classroom which means they have priority for scheduling activities in this space. In addition, the school district is entitled to the use of other space as follows: 2 Redepenning Gallery 1,344 hours (they actually only run 2-3 shows/year and release the rest of the time in the Gallery to the Center) Rehearsal room 1,344 hours Dance Studio 2,900 hours Jaycee Studio 1,000 hours Theater 1,344 hours Conference Room 312 hours However, they must schedule these additional spaces after Stages has scheduled its exclusive use times and the Center has scheduled its hours up to: Theater 146 hours Community Room 206 hours Jaycee Studio 380 hours Dance Studio 254 hours Representatives from the school district (both K-12 and community education) participate in Meet and Confer. For their time, they pay an annual sum of $100,000.00 at a monthly rate of $8,333.33. This rate remains constant through the length of the lease. Lease payments are a significant source of income for the Center. Ad Valorum Taxes Cable Fund Leases Rentals Programs State Grants Facility Fees Contributed Support 2016 BUDGET (lease income equals 39% revenues) 2.Non-competition Agreements with Tenant Partners As part of the lease agreements, the City of Hopkins has agreed that the Center will not present programs in competition with those of the tenants. In the case of Stages Theatre Company, the focus of tenant hours is on programs for youth and families with children. The Center, therefore, concentrates on serving adults through its own programs and major rentals. From the lease agreement with Stages Theatre Company: 9–/\[…{L9 …{9͵ With the exception only of District 270, Landlord shall not, without Tenant's prior written consent, lease space in the Building to or allow the use of such space by, any Other User (including Landlord) who would use such space for the purpose of presenting a theatrical production for children or offering theater education programs for children. Notwithstanding the foregoing, 3 upon the termination of Tenant's right of possession of the Leased Premises pursuant to the provisions of Section 23 of this Lease, this Section 34 becomes null and void and will be of no further force or effect. programming in the theater by the Center that is specifically geared towards children and families with young children. This division of audience has been reinforced by past City Councils who stressed the importance of the Center providing programs for adults in order to ensure that the Center goes well beyond being a child The School District holds programs for both children (ex. band festival, wax museum event) and adults (community education arts and wellness classes) at the Center. The Center has taken a similar position with this tenant. Therefore, while the school district is the primary provider of adult classes at the Center, HCA has offered educational workshops geared towards working artists or intermediate/advanced hobbyists, thus complementing rather than competing with the offerings of HSD Adult Community Education which are primarily introductory classes. With the three primary users of the Center operating in complementary modes, the Center is able to serve the broadest segment of the community possible. One of the challenges now facing the primary users is that the building is reaching capacity. 3.SCHEDULING THEATER USE One of the challenges of sharing a venue is to apportion the use of various rooms and the theater probably has the most potential for issues. Time in the theater is determined according to the following order of priority: Stages Theatre School District recurring events Major recurring rentals Concerts Occasional users ABOUT THE FRIENDS OF HOPKINS CENTER FOR THE ARTS 1.The Role of the Friends of Hopkins Center for the Arts our Other Partner At the time the Center was built in 1997, there were three primary tenants Stages Theatre Company, the Hopkins School District, and HAAA (Hopkins Area Artists Association). This last group morphed into Hopkins Center for the Arts, Inc. in 2000 a 501(c)(3) corporation that was charged with fundraising for s. This group struggled over the years to balance their budget and, even more difficult, to cash flow expensive activities such as concerts. In 2008 the nonprofit arm of the Center was renamed the Friends of the Hopkins Center for the Arts and its mission redefined as fundraising and community outreach. Programming was moved to As a 501(c)(3) corporation, the Friends are an independent entity with their own By-Laws and Articles of Incorporation. They annually file their own 990 4 They are governed by their own board of directors. (Center staff serve as ex officio members of this board.) Currently, there are 8 community members on the Board of Directors. Membership in the Friends is currently at 247. (Members are those who make annual membership gifts.) The Friends strive to deepen the engagement of members through activities such as the Hopkins Arts Social Club. The Friends are also the volunteer arm of the Center, recruiting, training and recognizing volunteers who make much of what happens at the Center possible. In addition to this, the Friends of the Hopkins Center for the Arts promote the Center in the community. But their primary focus is on fundraising , The Friends raise funds through memberships, sponsorships, grants and events such as Tea & Treasures and Art from the Attic. In 2014 (the most recent year for which we have final figures) they raised $35,732. They had operating expenses in the amount of $12,195. They were able to transfer $20,500 to the Hopkins Center for the Arts to support Center activities in 2014 and in 2015 transferred $21,000. The Friends operate within a modest budget, the 2015 budget just over $30,000 and the 2016 budget being $40,000, and end each fiscal year with a small net reserve to cash flow planned activities. The current balance sheet follows, showing their assets as well as the restricted funds they currently manage: Friends of Hopkins Center for the Arts BALANCE SHEET Dec 10, 15 ASSETS Checking/Savings Checking account 32,269.49 Petty cash 100.00 Savings (Friends do not have a savings account) Total Checking/Savings 32,369.49 TOTAL ASSETS 32,369.49 LIABILITIES & EQUITY Equity Unrestricted assets (retained earnings) 10,255.71 Restricted assets - ArtStreet 2,019.36 Restricted assets - Albert Pike Lodge donation 4,500.00 Restricted assets - Theatre Seat donations 7,103.49 Net Income 8,490.93 Total Equity 32,369.49 TOTAL LIABILITIES & EQUITY 32,369.49 5 FUNDRAISING Fundraising enough revenue to meet operating expenses ,grow programs and address capital needs is the most important challenge at this time. 1.Recommendation of Aurora Consulting When Aurora Consulting was hired last summer to review and evaluate operations at the Center, their primary recommendation was to create the position of Director of Development to increase the capacity of staff and the Friends to raise funds. Until we have someone working fulltime to lead development efforts, we will continue to struggle to grow contributed support, strengthen the Friend build relationships in the community. Their proposal, in short, was to put more human resources towards financial development and less towards programming at this time. (Their perspective was really on the annual operating budget and their recommendations did not deal with the accumulated deficit or capital expenses.) 2.Name A Seat Campaign Capital expenses will be significant in 2016. One of these expenses is to replace the failing seats in the theater. The original estimate cost (from 2010) for doing this was $138,510. However, we were able to locate a vendor who will replace the seat and back cushion areas while keeping the existing frames in place. This significantly shortens the time frame for this project as well as the cost. The new estimate is $121,000. In order to reduce the cost more, we undertook a down and dirty mini-capital campaign to raise funds for the project. To date, we have raised $9,000. This initial effort targeted members and concert goers. We plan on renewing this campaign in February, 2016, taking the campaign beyond the inner circle to the general public. (We expect to get significant support from Hopkins residents but plan on taking the ask to a wider audience.) 3. Fundraising Events While fundraising events are the purview of the Friends of HCA, all Center staff and many volunteers are involved in generating ideas and executing the events. Historically, we have struggled with fundraising events. Our most successful ones were Pets & Picasso in 2005 which netted $4,657 (the event netted $9,314 but this was divided between the Center and its partner on the event, the Animal Humane Society) and the Hopkins Arts Festival of 2012 which netted $6,508. Right now the three annual fundraising events are Tea & Treasures in February, May Day silent auction in May, and Art from the Attic in July. Tea & Treasures is a popular event but is limited by the number of people who can be served and the number of vendor booths that fit into the Center. Unless the format is changed, it probably will never generate more than $3,000. The May Day silent auction raises about $2,000 ($2,135 in 2015). This silent auction could certainly be expanded and rolled into a larger fundraiser. Art from the Attic was piloted last summer and netted $2,453. This has the potential to generate more revenue. (The beauty of this event is that there are almost no expenses.) With the exception of Pets & Picasso, the gala format has not worked well for us nor has the special concert format. The challenges are to choose the right event for an audience willing to pay for it. 6 MISCELLANEOUS QUESTIONS 1.Policy on Alcohol Use Part of being in a multi-tenant facility is developing guidelines that keep everyone existing in harmony. This includes having sensitivity to the perspectives of partners. For example, Stages moved their autograph lines from along the theater wall in the lobby to next to the west staircase to keep the activity away from the artwork being displayed in the lobby. In turn, the Center places artwork featuring nudity or adult themes in the enclosed gallery rather than the lobby. Similarly, when we serve alcohol at our concerts, we tuck the bar inside the gallery so that children s do not have to pass through the bar area. The Friends also have alcoholic beverages at fundraisers and other special events, following the same guidelines. It is not that we cannot serve alcohol, we just need to be sensitive as to where and when we do so. Another factor influencing when alcoholic beverages are served is that alcohol must be served by a licensed bartender at public events. This raises the question: When it is not only appropriate but cost- effective to serve alcoholic beverages? It makes sense to have a cash bar at our ticketed concerts as Big Ten provides bar service and social hour catering at no cost to us in exchange for retaining 100% bar income. Big Ten employees take the responsibility for serving only people age 21 and older and not overserving anyone. On the other hand, it does not make sense for us to serve wine at no charge at gallery exhibition openings as artists often do. In this case, we cannot self-pour because our openings recouping the cost of a licensed provider. In all cases where alcoholic beverages are served, an additional staff person is assigned to monitor the event. 2. Gift from Albert Pike Lodge #237 The Hopkins Albert Pike Lodge has been an ongoing supporter of the Center and of Stages Theatre Company. We were pleased to be one of the local organizations to whom they made a final gift to when they sold their property on Mainstreet. Our gift was for $40,000. Of this, $4,500 was retained by the Friends of Hopkins Center for the Arts to use as a match for a grant they applied for to help fund development software and training. Unfortunately, they did not get that grant. We are holding the $4,500 to use as a match for another grant application or to help offset the cost of needed software. The only thing the Lodge asked for in return was to have naming rights to the community room on second floor which were granted in an agreement executed May 28, 2015. 3.About Our Concerts Concerts are among the most visible of our activities and are important in bringing new people to the Center. They are also the financially riskiest activity that we do. Scheduling concerts: Stages Theatre Company releases Saturday evenings for our concerts. Generally, we request 9 Saturday concert dates (we have done more in the past but find it difficult to support more than 8-9 financially). Once these dates are on the facility schedule, they do not change and we work within that schedule. We rarely can add a new event as the theater is booked fairly solidly. In addition, 7 we program 4-5 Tuesday evening concerts which are less problematic as the theater is almost always dark on Mondays and Tuesdays. At one time we were limited in how many larger acts we could do because Stages had a maximum on how many times they would move the set to back of mid-curtain. However, in recent years they have been much more flexible and give us mid-stage for all our concerts. This provides enough room for most acts, the exceptions being very large ensembles such as full orchestras and dance companies. Attendance: Our theater has a maximum seating capacity of 714 in concert configuration. This number includes the wheelchair spaces. Average attendance at concerts has been trending upwards over the years. Season Average Attend 2000-2001 (baseline) 337 47% capacity 2013-2014 558 79% capacity 2015-2016 (to date) 678 95% capacity Average price of concert tickets: We adjusted ticket pricing in 2015 and full price adult tickets this season range from $20-$54. Ticket prices are a function of performance fees and other expenses (such as tech and hospitality), and market rates. Market rate consists of two factors: what similar venues charge for the artist, and what our local market will bear. We research ticket pricing for each artist This is comparable to other community art centers in the area. Ticket prices for Bloomington Art Center range from $17-$30; for Paramount Arts Center, St. Cloud (closest to us in mission and size) $8 (community arts groups)-$65; for Ames Center, Burnsville $30-$50. We do offer a number of discounts on single event tickets. Our membership discount is $5/ticket. People age 60 and over receive a $3 discount as do residents and business owners in Hopkins. Students pay a flat $12. In addition, we offer season flex packages that are built around the concept of buying tickets to 2 events and getting comp tickets to a third of equal or lower cost. We also have a policy of providing a limited number of free tickets to area food banks so that music lovers who cannot afford to ple experiencing temporary or unusual economic hardships. In addition, we begin using GoldStar in 2015 to promote sales to events that need a little nudge to get to the sold-out point and to get new patrons into the venue. Concert Income : (recorded in the Admissions line item of the Programming & Promotions budget) Ticket Average Fiscal Year Sales* # concerts Sales/Event 2011 $110,607 17 $6,506 2012 $115,319 13 $8,870 2013 $141,917 13 $10,916 2014 $82,657 12 $6,888 est. 2015 $123,263 11 $11,207 * adjusted for Facility Fees ($2/ticket subtracted) 8 While average sales are trending upwards, we still are not consistently breaking even on concerts. While we will net an estimated $3,000+ on the three concerts held in fall of 2015, we lost over $30,000 on the 8 concerts in spring of 2015. Two factors play into this ticket sales are up for our 2015-16 season and concerts are adequately underwritten this fall which was not the case in the spring. This second is key concerts require some form of underwriting. Selling out a concert does not guarantee financial success. We had three concerts sell out in spring of 2015 and another one almost sell out. Yet, none of these four netted a profit. Concerts, therefore, end up drawing upon rental income. Resources used to find concert artists: The main sources for concert ideas are: (1) from musicians who contact the Center about performing (often referred by artists who have appeared on our stage), (2) a network of national booking agents who submit their rosters for consideration or can be contacted by our staff to see who might be available during a particular time frame and price range, (3) audience members who are periodically surveyed and (4) community members. Community members submitted 53 acts for consideration in the past year. We also keep an eye peeled on who is appearing at other venues in the metro area or at venues of a similar size. Of course, we track who does well and who does not at our venue. The challenge is matching artists with our budget and available dates. Increasing national touring acts: While it is our belief that as a community arts center, we need to showcase local talent as well as national touring acts, it would be wonderful to increase the number of national acts we present. National acts bring us recognition as well as new audience members --and we have a pretty good return rate from first-time attendees. In looking at a tiny, random sampling of our database (151 records), 22 people had attended a concert and 11 were first-time attendees. Of these 11 new people, 6 returned for another concert and 2 purchased flex packages. The simple answer on how to bring in more national acts and bigger names is to increase our programming and marketing budget. National acts tend to have higher performance fees, greater technical needs, additional hospitality costs (hotel, food, limo) and are more demanding on staff than local acts. Covering these costs, of course, requires more sponsorships and other monetary support. An additional consideration is that we occupy a special niche in the live entertainment market in the metro. Basically, our best match is with artists who sell 600-800 seats. When choosing where to perform, it seems like artists (and their agents) look at three things: (1) how much money they will net, (2) how large an audience they will perform for, and (3) how well they like the venue. We are too small for many prominent musicians. For example, Cloud Cult is a group that several people have requested. In checking them out, their fee is way above what we can afford and they are looking for a larger venue and, indeed, booked into the State Theatre which seats 2,176 and priced tickets in the $62-$236 range. Moving to the Next Level In our PowerPoint presentation later this month we will address challenges for 2016. The bottom line is that we must increase our capacity to meet our mission through adequate and appropriate staffing, improving efficiency, raising more funds and growing our budget. Attachments: Final Recommendations from Aurora Consulting Report from Christine Harkess, Finance Director 9 Report and Recommendations for Hopkins Center for the Arts August 2015 Julia Classen, Principal Consultant Al Onkka, Senior Consultant 1 INTRODUCTION Hopkins Center for the Arts (HCA) contracted with Aurora Consulting to provide recommendations for the structure and functions of the HCA staffing model in light of the retirement of one of the current co-directors and challenges that HCA faces. Aurora Consulting met with co-directors Susan Hanna-Bibus and Lynn Anderson to discuss HCAÈs current situation and needs. In order to hear more perspectives on the situation and needs of HCA, Aurora interviewed two additional HCA staff members and two Friends board members; and received received written reflections from Susan, Lynn, and a city council member. The following summarizes the themes of the interviews and reflections. INTERVIEW THEMES HCA has high value HCA is a very valuable asset to Hopkins in particular and more generally the western Twin Cities communities and artists. HCA is known for doing things really well and very professionally. Their practice of hospitality is a unique and valued asset. HCAÈs overall directions are strong. Create more revenue Even though HCA is a valuable asset, it has a need to create more revenue in order to be sustainable. The following strategies may help increase revenue and allow the center to sustain and grow. Broaden and deepen connections to the community While HCA is valuable to the community, there is a need to broaden the community being served and deepen connections to its members. This community includes audiences, artists, and organizations. HCA can reach out to a broader population within Hopkins and beyond à specific age, cultural and racial groups. HCA should continue to segment its audiences, creating different engagement and HCA should be explicit in underscoring the link between the arts and community development, which leads to the next theme. While creating these new and deeper connections, HCA should examine where additional revenue could come from increasing fees and where additional revenue could come from broadening audience. Throughout this work, HCAÈs brand identity may need to be strengthened or even introduced to audience members. 2 Create effective partnerships HCA has opportunities to grow though effective partnerships. In line with HCAÈs origins, HCA should continue to tie the existing downtown business community to the center and the center to the community. Programming HCA can develop other artistic opportunities beyond exhibitions and concerts and look beyond the center to hold events. Currently one vary large tenant dominates space usage. This does not allow for smaller or emerging artists to utilize space as freely and limits the number of artists and organizations that can create connections with the center. HCA should consider where to increase revenue through increasing rent at the HCA (which is currently at capacity), and where HCA should increase revenue through external events and sponsorship. Artists HCA should continue to focus and expand in supporting local and regional artists, potentially assisting them in their development and promotion. In this effort, including artists from different socio-economic communities can increase audience and community connections. Community Organizations HCA may wish to take advantage of its suburban location by partnering with city-based organizations that are trying to develop their suburban audiences. Another strategy may be to see where other local community organizations have been successful with attracting audiences and partner or learn from them (for example the nearby public library). Revenue may be increased through a sponsorship or partnership model. City Council There is a differing understanding about the relationship between the HCA and the city. The city council sees a need for HCA to increase revenue in order to be more sustainable. HCA has expressed a need for the city be more supportive both through greater participation at the Center and funding. In our opinion, both are true. Build staff capacity If HCA expands their audience or programs, they will need to work to develop internal capacity to handle this change. There will be a need for stronger business acumen internally à specifically about earned revenue and merchandising approaches that will help diversify and sustain the center. Utilizing interns and volunteers more effectively may be another way to capitalize on more opportunities for expansion. However, volunteer and intern management takes precious time and resources. Finally, HCA should work to define internal roles for staff. HCA staff have been confused by the co-director model and moving away from that will be helpful. Develop the Friends Board The Friends board is an underutilized asset. By clarifying and increasing the role of the Friends board, this asset can be better utilized. Currently, the Friends board is still forming and has difficulty 3 recruiting people to serve on the board. This may be in part because the purpose of the Friends board seems to be unclear. Is it a fundraising board, a promotion board, or an advisory board? Furthermore, the complexity of HCA makes it difficult for board members to understand their role in time to be effective during a two-year term. By defining the Friends board as a fundraising board and increasing its ability to be effective in this goal, HCA may be able to raise additional funds. As with building staff capacity, developing the Friends board will take some investment of time and resources by HCA. RECOMMENDATIONS Given the information received from the directors, staff, and board members, we recommend that HCA explore the following staffing structure and functions. Discontinue co-director model While the co-director model served the organizationÈs needs well in the short term, it was confusing for staff and external stakeholders and is not a long-term model. Create one executive director position (full time) There is a need to create a leadership position (the director) that is strategic and externally focused. This director is tasked primarily with relationship building in the community, the friends board, the city council, and businesses with the goal of broadening and deepening relationships, creating strategic partnerships, and raising revenue. The goal of this position is to be so busy driving the community to HCA and HCA to the community, that the director does not have time to do the tactical implementation. Create an operations director position (full time) The operations director shoulders the tactical load of the HCAÈs operations, such as booking, scheduling, the building, and merchandising so that the director can focus on HCA strategy and relationship building. Consider other options for the role of artistic director At this moment, the need for Hopkins to develop organizational sustainability trumps the need for an artistic director in the traditional sense. That being said, HCA must maintain and communicate an artistic vision in order to retain and build its identity as an arts organization. Consider using an ad hoc artistic director, contracting with a gallery manager and/or concert manager, or creating an artistic vision advisory committee. 4 Develop a development/communications position (full time) HCA has a need to effectively build and communicate its brand. As the director builds relationships and partnerships, she or he will need support in effectively communicating with these new stakeholders. Commonly in small organizations, this position plays roles in communication, marketing, and development. This would be appropriate for HCA needs. Initially, this position may be responsible for a branding campaign to help solidify who HCA is (externally and internally), but as more partnerships are created, the position will likely shift towards supporting the director in those relationships including fundraising efforts. Consider ways to support volunteers and interns (part time) Volunteers and interns are of high value to an organization, but take time and resources to manage. Explore the options to use more volunteers at HCA in new and expanded roles. If more volunteers are accepted, dedicate staff time to managing them. 5 CITY OF HOPKINS FINANCE DEPARTMENT MEMORANDUM Date: December 30, 2015 To: Mayor & City Council From: Christine Harkess, Finance Director Subject: Hopkins Center for the Arts In preparation for the upcoming Arts Center discussion at the January 2016 council work session I wanted to provide some background on the financing and operations of the Arts Center from a financial perspective. April 1997 Construction begins on a 700+ seat theater, black box theater, gallery, dance studio, art classroom and general purpose room in addition to office and work space. Stages Theater has their offices on the first floor behind the box office and also a production office on the second floor. Funding: Total construction cost = $4.1 million $300,000 City in kind land donation $500,000 State of MN grant/loan $615,000 City Loan ($315,000 has been repaid - $300,000 outstanding to Econ Dev Fund) $985,000 Capital Campaign – donations $1.8 million in Economic Development Funds Donations: $100,000 Opus in kind donation $360,000 Stages Theater in kind equipment donation The arts center building is paid in full – there is no outstanding debt on the building itself. The Arts Center has the following leases as a regular stream of income: Stages Theater Company – 10 year lease (Nov 2012 – Dec 2022) with the option to renew for another 5 years (to 2027). Hopkins School District – 10 year lease Annual Operating Costs = $946,714 2016 Budget The Arts Center staff has worked very hard to come up with a business plan that will get people in the seats, some more successful than others. They continue to tweak the business plan working to reach a younger audience. For the first 18 years there were no direct tax levy dollars going into the Arts Center.. In 2014, as part of the Financial Management Plan (FMP) an annual levy was adopted to eliminate the fund deficit over the next 10 years. In 2015 the levy was budgeted at $85,000 and in 2016 at $140,000. The FMP has a levy scheduled from 2015 to 2025. Up until 2014 the city annually transferred $61,000 from the Economic Development Fund to help the Arts Center pay of the $315,000 loan to the General Fund. This was paid off in 2009, however the transfer continued until 2014 as the Arts Center depended on the funds to balance the budget. When we implemented the recommendations from the FMP one of those recommendations was to eliminate the transfer from the Economic Development Fund and replace it with the tax levy so that each funds finances stands alone. The Communication Fund (cable franchise fees) annually transfers $86,960 to support the Arts Center. This transfer continues and supports the programming portion of the Arts Center budget. There is minimal staffing at the Arts Center. They are currently authorized for 4 FT (Arts Center Director, Programming Director, Scheduling & Marketing Coordinator and Maintenance), and 1 regular PT (Volunteer Coordinator). They also rely on PT and lots of volunteers. Current staffing includes 3 full-time; Co-Directors (Lynn & Susan), and maintenance, 2 regular part-time staff and other miscellaneous PT staff. The Arts Center deficit did not accumulate overnight, rather the facility got off to a slow start as we worked to build up a following. The Arts Center had deficits from 1997-2001 then had a string of good years from 2002-2006 and in 2007-2011 had one good year and 4 years of losses. The total deficit of the Arts Center at December 29, 2015 is $1,152,489. The Arts Center staff continues to brainstorm for various donor ideas, however with the change in the economy those ideas did not bear fruit. To be clear, while the Arts Center has a negative fund balance there is no external debt. When a fund goes into a negative position it is using the reserves of other funds to operate. The funds we are currently levying for the Arts Center are going to make up the operating deficit, essentially paying ourselves back for expenditures that exceeded income at the Arts Center. The Arts Center debt is internal. The City Council, Arts Center staff, City Manager and Finance are well aware of the dilemma the Arts Center is in and we are working towards a solution. The Financial Management Plan is the tool we are using to accomplish the goal of eliminating the deficit and proving a sustainable income stream. Currently the only obligation remaining from the original construction financing package is the $300,000 loan to the Economic Development Fund. A suggestion to consider is to use some of the excess tax increment received from 2012-2015 totaling $700,660.26 to write-off this loan. The Economic Development Fund is currently in a position to absorb a $300,000 loan write-off without affecting the fund balance of the fund or plans for future development. The result of writing off the $300,000 owed by the Arts Center to the Economic Development Funds is that the Arts Center will recognize a donation (revenue) of $300,000 from the Economic Development Fund thus reducing their deficit to $852,489. The Economic Development Fund will recognize an expense of a donation to the Arts Center which will reduce this funds, fund balance by $300,000.