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CITY OF SIMI VALLEY
MEMORANDUM
May 9, 2022
TO: City Council
FROM: Office of the City Manager
SUBJECT: CONSIDERATION OF THE ARTS COMMISSION’S PROPOSAL TO
MODIFY THE SIMI VALLEY CULTURAL ARTS CENTER FINANCIAL
OPERATING STRUCTURE FOR A FIVE-YEAR TERM
STAFF RECOMMENDATION
The Simi Valley Arts Commission recommends that the City Council consider modifying the proposed Simi Valley Cultural Arts Center (CAC) Financial Operating Structure for a five-year term.
BACKGROUND AND OVERVIEW
At its February 16, 2022 meeting, the Simi Valley Arts Commission requested that staff provide an alternate finance structure for the Commission’s consideration that would further the goals of the CAC’s Strategic Plan and provide a grace period for the CAC to rebuild and recover from the impacts of COVID-19. With continuing COVID variants and the ongoing concern of COVID exposure among patron attendees and performers, the CAC continues to struggle with gaining full attendance at theatrical and musical performances. Over two years into the COVID- 19 pandemic, performing arts organizations nationally are still struggling to make a comeback. Considering the challenges facing the CAC, t he Arts Commission reviewed a staff proposal at the April 13, 2022, meeting and recommended that the City Council consider a modification to the Simi Valley Cultural Arts Center Financial Operating Structure for a five-year period (FY 2022-23 – FY 2026-27).
The CAC is presently operating under a financial structure approved by City Council at the March 4, 2002, meeting. It is a hybrid financial model that encompasses revenue and subsidy through the City of Simi Valley, CAC programming, the Simi Vall ey Cultural Arts Center Foundation, grants, fundraisers, and other contributions.
The current CAC staffing model consists of:
One Community Services Manager (CAC General Manager); One Assistant Community Services Manager (CAC Assistant Manager); One Office Assistant II (CAC Office Manager);
One Office Assistant II (CAC Box Office Manager); and One Technical Coordinator position
AGENDA ITEM NO.
9A
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The City’s General Fund provides for the salary and benefits for all 5.0 Full-Time Employee (“FTE”) positions and is responsible for the building’s physical plant, including custodial services and supplies, utilities, capital projects, and some office expenses.
Currently, the CAC Operations Fund is responsible for reimbursing the General Fund for approximately 1.5 FTE positions: the salary and benefits of one Office Assistant II (CAC Box Office Manager) and approximately .5 of the Technical Coordinator position, up to a maximum of $35,000 annually . The CAC Operations Fund is also responsible for reimbursing the City 10% of Earned Income each fiscal year, minus any Non-Profit rental subsidies. Earned Income budget categories include Box Office, Advertising, Rentals, and Concessions. The Simi Valley Cultural Arts Center Foundation supports the Operations Fund with quarterly contributions of approximately $8,500 (increasing annually based on the cost of living index formula).
FINDINGS AND ALTERNATIVES
The original operating structure established with the opening of the CAC in 1995 required the CAC to pay for the day-to-day operations of the Center and reimburse the City for the cost of their salaries from ticket sales, grants, and donations. The City was required to provide the maintenance and upkeep of the facility. Ambitious financial goals wer e established for the Cultural Arts Center Foundation in 1995, which included the creation of a $2 million endowment to help subsidize the ongoing operations of the CAC. Although the annual support from the Foundation has grown from $20,500 in FY 2000-2001 to over $30,000 in subsequent years, progress in reaching the $2 million endowment goal has been challenging. Due to limited operational capital under the original model, the CAC had to frequently request that the City Council approve Budgetary Policy Items such as speakers, microphones, spotlights, and funds for marketing and advertising.
To create a more simplified financial structure, the City Council approved a revised proposal in March 2002, allowing the CAC to retain 90% of all earned income, with the City paying for all salaries and benefits and requiring that the CAC forward 10% of earned income annually to the City. This arrangement was similar to the Senior Center where salaries and benefits were paid b y the City and rental revenues , which averaged in the range of $34,000 to $40,000 annually prior to the pandemic, offset facility maintenance cost. Per the approved 2002 financial operating structure, the CAC operating fund is responsible for all producti on, including production-related capital equipment expenses, and operating costs.
The CAC shifted away from using contract labor to perform technical services for the Center in 2006 and hired part-time staff members to ensure staffing was available during performances. Subsequently, with a ramping up of increased performances, the City Council approved a Policy I tem that allowed the CAC to hire a full time Technical Coordinator and a second Office Assistant II (Box Office Manager) with the CAC required to reimburse the General Fund as follows: Full salary and benefit reimbursement of Office Assistant II (Box Office Manager) and (.5) of the Technical Coordinator, up to a maximum of $35,000 annually, to the General Fund.
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Although the CAC has been successf ul in making the required reimbursement to the General Fund for the past several years , meeting this requirement will be increasingly difficult with the anticipated lingering effects of COVID and the goals established in the Strategic Plan.
Below is a chart outlining the past f our years of performance of the CAC’s Operations Fund showing the Gross Profit before City reimbursements and the Net Income after reimbursements. Looking at pre -pandemic data belo w, reimbursement to the General Fund has averaged around $117,591 for staffing. Additionally, the CAC has also provided on average $27,801 annually to the General Fund for reimbursement of the earned income requirement.
4-Year Operations Fund
Performance FY 2020-21 FY 2019-20 FY 2018-19 FY 2017-18 Income $32,862 $432,190 $526,565 $500,023
Expense (Before
Reimbursement to City) $37,816 $283,121 $364,407 $360,880 Gross Profit ($4,954) $140,069 $162,158 $139,143
Staff Reimbursement to
General Fund * $31,579 $128,495 $119,123 $105,156
10% Reimbursement to
General Fund $0 $28,972 $30,933 $23,499
Net Income to CAC ($36,533) ($8,398) $12,102 $10,488
*In FY 2020 -21, the CAC reimbursed the City $31,579 for the 4 th Quarter of FY 2019-20 for approximately 1.5 FTE positions (one Office Assistant II/ Box Office Manager and approximately .5 of the Technical Coordinator). Because of the pandemic and the closure of the CAC, all but one staff member was temporarily reassigned to other City departme nts; therefore, no salary reimbursement payment was due to the City.
Financial Operating Structure of other city Operated Arts Venues
CAC staff conducted a review of the financial operating structures of other city -operated arts venues in California and has found the surveyed venues are completely funded by their respective cities without a required reimbursement of staff salaries and benefits.
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Name of Venue/
City of Operation Staffing Information City Budget Information Curtis Theatre
Brea, CA
1 Full Time (FT)
2 Part Time (PT)
Plus 18 PT as needed
All City Employees
FY 21-22 Budget: $901,922
FY 21-22 Staffing Cost:
$358,293
Oxnard Performing Arts
Center
Managed by Sterling
Venue Ventures
No City Employees
FY 22 -23 Budget: $242,857
(operations and repairs)
La Mirada Theatre for
the Performing Arts
La Mirada, CA
7 FT, plus additional PT
as needed.
All City Employees.
FY 21-22 Budget: $3,798,362.
FY 21-22 Staffing Cost:
$1,721,618
High Street Arts Center
(HSAC)
Moorpark, CA
Managed by the MCFA
No City Employees FY 21-22 Budget: $11,170
MAIN Theatre
Santa Clarita, CA
1 FT, 5 PT
All City Employees.
FY 21-22 Budget: $303,412
FY 21-22 Staffing Cost:
$197,712
Bank of America
Performing Arts Center
(BAPAC)
Thousand Oaks, CA
15 total (FT & PT)
All City Employees.
FY 21-22 Budget: $4.6M
FY 21-22 Staffing Cost:
$2.3M
Poway Center for the
Performing Arts
Poway (San Diego
County), CA
5 (FT & PT)
All City Employees
FY 21-22 Budget: $1,006,956
FY 21-22 Staffing Cost:
$486,092
The BAPAC operates through a public-private partnership between the City of Thousand Oaks and TOARTS, a non-profit that resulted from a merger between the Thousand Oaks Alliance for the Arts and the Thousand Oaks Civic Arts Plaza Foundation. The Center operates two theat ers, Fred Kavli (1,800 seats) and Scherr Forum (394 seats) . The complex and the adjacent p arking structure are owned by the City of Thousand Oaks, and the theaters are operated by the City’s Cultural Affairs Department. In 2016, the City of Thousand Oaks General Fund contributed $4,000,000 into a restricted endowment fund to create a sustainable revenue stream to subsidize the enterprise Theat ers Fund.
Theater costs, including City staff, are drawn from the Theater Fund. The annual combined City endowment ($300,000) contribution and TOARTS funding ($510,000) help support theater operations. In FY 2019-20, the theaters fund received a transfer from the General Fund of $1,074,986 in pandemic relief to offset losses from canceled 5 23/04-22
performances. This was repaid to the City from Shuttered Venue Operators Grant funding received in FY 2021-22.
Both the High Street Arts Center (HSAC) in Moorpark and the Oxnard Performing Arts Center (OPAC) have similar operating structures to the BAPAC. The cities own the facilities and cover capital improvements and repair but the venues are operated by entities independent of the City.
Ownership of the High Street Arts Center was transferred to the City of Moorpark by the City’s former redevelopment agency in 2011. In 2012, the City leased the facility to the Moorpark Community Foundation for the A rts (MCFA), a non -profit, at the rate of $1.00 per year. In this agreement, the MCFA assumed responsibility for all operations, programming, and day -to-day maintenance of the facility. The City provided General Fund subsidies ($25,000 per year) to the HSAC via the MFCA until 2015. For FY 2021- 22 the City budgeted $11,170 for maintenance of the HSAC.
The Oxnard Performing Arts Center is owned by the City of Oxnard and operated by Sterling Venue Ventures. It functions primarily as a rental and presentat ion house. City budget for FY 2022-23 lists $242,857 for operational and repair of OPAC with no staffing costs listed.
Proposal
The CAC facility features a 180-seat professional main stage and an 80-seat black box theater/multi-purpose room. Although productions have been booked on the main stage, rentals of the multi -purpose room have been severely impacted by the pandemic with rental income at an all -time low. With the ongoing concern of COVID exposure among patron attendees and performers , the CAC continues to struggle with gaining full attendance, as demonstrated in the chart below:
Month (Number of Performances) Percentage of Capacity Sold November, 2021 (5 Performances) 14% Capacity Sold
(average of 25 seats per performance)
December, 2021 (13 Performances) 34% Capacity Sold
(average of 60 seats per performance)
January, 2022 (0 Performances, 9 canceled) 0% Capacity Sold February, 2022 (7 Performances) 39% Capacity Sold
(average of 68 seats per performance)
March, 2022 (13 Performances) 45% Capacity Sold
(average of 79 seats per performance)
As the Arts Commission expressed concern about the Center’s ability to reimburse the General Fund while meeting the goals of the Strategic Plan given the pandemic’s impact on the arts, staff was requested to provide alternate financial structures for the Commission to consider.
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In response to the Commission’s request, staff proposed that the City modify the current financial operating structure to allow the CAC to retain 100% of its revenues and discontinue the current reimbursement structure for a five-year period. During this time, the CAC will implement measures such as expanding diversity in programming, increasing Tuesday through Thursday facility use, and utilizing the Performing Arts Recovery Grant program to help the CAC achieve full recovery from the COVID -19 shutdown and meet Strategic Plan sustainability goal s of restoring revenue and facility use figures to at least 2019-20 projections by June 30, 2023.
As identified in the table above, COVID-19 has had a devastating effect on both audience and volunteer return rate to the CAC. Additionally, it has drastically strained the resources of local arts organizations who are not currently in a position to access the CAC without some form of subsidy. The additional funding made available by this new financial structure would provide the Center with approximately $135,000 to $14 5,000 annually and would allow the CAC to invest in these arts partners and non-profits. The CAC would be able to expand outreach efforts to attract new artists and arts organizations and build new relationships for expanding programming opportunities at the CAC in the future.
Building these relationships and introducing new programming is a multi-year investment as the CAC seeks to create an audience for these new programs.
Introducing new programming often requir es co -production from the CAC or artist guarantees as well as additional marketing efforts to promote it. Artist fees, marketing and production costs are likely to outweigh box office revenue for these events in the initial years. Even new rental events will requi re additional marketing efforts to build attendance such as print and social media advertising and printing of fliers, etc. Also, if a rental event is targeted to a more specific audience (for example an Indian dance troupe), additional funds will be used to market in specific publications and websites that caters to the anticipated audience. Additionally, with increased facility use comes increased staffing and contract labor costs. All of these efforts will strengthen the breadth of programming and community facility use in 2022 /2023, and beyond which helps leverage the impact of the arts to enhance the quality of life for all Simi Valley residents as outlined in the Quality of Life goals in the CAC’s Strategic Plan.
Under this proposal, the City would continue to provide the CAC salaries and benefits for all employees (5 FTE) and the building’s physical plant, including custodial services and supplies, utilities, capital projects, and some office expenses without reimbursement .
Additionally, the CAC would no longer reimburse 10% of Earned Income from the CAC Operations Account for a five-year period. The CAC Operations Fund would continue to support all programming expenses, including all contract workers such as production personnel and artistic staffing.
After considering the staff proposal, the Arts Commission approved the proposal and directed staff to bring the revised financial structure to the City Council for consideration.
The Arts Commission is recommending the City Council approve the revised financial structure. In order to allow the CAC to use all its financial resources to return to a profitable arts venu e and to address the COVID created financial impacts to the arts community, staff supports the Arts Commission’s recommendation.
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Reallocation of Reimbursement Funds
In lieu of reimbursing the City, the CAC would reallocate these funds to achieving the goals and objectives of the Cultural Arts Center’s Strategic Plan. These include sustained funding of the Performing Arts Recovery Grant program to al low greater access to the CAC for local non-profit and arts organizations; the creation of a citywide cultural funding grant program; diversifying programming including expanding multicultural programming opportunities; enhancing marketing efforts; developing Arts Educational programs at the CAC; and increasing arts opportunities for Simi Valley residents. Th ese funds would allow the CAC to support our local arts partner organizations such as Actors’ Repertory Theatre of Simi, Dance Creations, Panic Productions, and Serendipity Dance Company – all of whom are currently seeking grant subsidy to rent the CAC in 2022. It would also allow the CAC to offer affordable Arts Education opportunities by launching an inaugural CAC sponsored Summer Arts Camp for local youth. The Arts Commission will monitor the development of these initiatives and would make recommendations to City Council as necessary.
In addition, the reallocation of these funds will further assist in the CAC’s recovery from the marked impact of COVID-19. The CAC was forced to close its doors in early March of 2020 due to the pandemic and remained clo sed for 20 months. When the CAC reopened in late November of 2021, the Omicron variant began to surge which negatively affected attendance. Since reopening, the CAC has had rentals cancel and lost three weekends of performances due to COVID -19 outbreaks among the cast of The Spitfire Grill despite rigorous health and safety protocols and bi -weekly COVID testing. The pandemic continues to dramatically impact the financial performance of the Cultural Arts Center with Fiscal Year (FY) 2020 -21 box offi ce revenues at approximately 8% of FY 2019-20 levels. Rental income, Reimbursed Technical Costs, and Concessions income were non-existent for FY 2020-21 for this same period. Rising costs of production related supplies as well as increased Artistic and Contract Labor costs will continue to affect the CAC operating budget.
Impact of the Arts on the Community
According to the most recent Arts & Economic Prosperity III Report published by the Americans for the Arts, the nonprofit arts and culture industry generates $166.2 billion in economic activity nationally every year, $63.1 billion in spending by organizations and an additional $103.1 billion in event -related spending by their audiences within affiliated communities. The impact of this activity is sig nificant, supporting 5.7 million U.S. jobs and generating $29.6 billion in government revenue.
This study shows the typical attendee spends $27.79 per event in addition to the cost of admission. When a community attracts cultural tourists, it harnesses even greater economic rewards.
Currently, CAC related expenditures from the City’s General Fund amount to less than
0.17% of the City Budget. As noted above, s taff estimates modifying the financial structure of the CAC would provide an additional $135,000 to $145,000 a year to the CAC 8 23/04-22
that could be dedicated to cultural funding, improving the quality of life of the Simi Valley community through expanded Arts programming, and supporting the recovery efforts of the CAC and local Arts and non -profit organizations. This change would not significant impact the City’s Annual Budget. During this five-year period (FY 2022-23 – FY 2026-27), staff will have an opportunity to make a full recovery from the COVID -19 pandemic and implement the goals of the Strategic Plan, which will result in a more vibrant Center for the Simi Valley community. Staff will return to the City Council prior to the end of the fifth year to provide a detailed analysis of the success of the revised financial structure at which time the City Council can determine the future level of reimbursement, if any. Staff will also provide the City Council updates of the CAC’s financial performance during consideration of the CAC’s annual budget.
The following alternatives are available to the City Council:
1. Approve the revised Simi Valley Cultural Arts Center Operating Structure as presented;
2. Modify and approve the Simi Valley Cultural Arts Center Operating Structure;
3. Provide staff with alternate direction.
The Simi Valley Arts Commission recommends Alternative No. 1.
SUGGESTED CITY COUNCIL MOTION
I move to approve th e revised Simi Valley Cultural Arts Center Operating Structure as presented.
SUMMARY
At the February 16, 2022, Arts Commission meeting, the Arts Commission requested that staff provide an alternate finance structure for the Commission’s consideration that would further the goals of the CAC’s Strategic Plan and provide a grace period for the CAC to rebuild and recover from the impacts of COVID -19. The Arts Commission reviewed the proposal at the April 13, 2022, meeting and recommended that the City Council consider a modification of the Simi Valley Cultural Arts Center Financial Operating Structure for a five-year period.
____________________________________
Linda Swan
Assistant City Manager
Prepared By: Anna M. Medina, Deputy Community Services Director