Friday, February 3, 2012

More Money or Better Management??


Asking For Another $90,000 Annually

Recently the manager of the Port Theatre made a presentation/appeal to city council for approval to use some capital funds to finance an operating deficit, and also wants council to approve an ongoing increase of the city subsidy by $90,000 per year.

It is claimed the extra funding is needed if the Theatre is going to be able to keep supporting the arts community as they originally intended. That raises the issue of whether it is a lack of funding or management skills that have led to the current desire for more city funds.

An examination of the financial statements of the Theatre Society for the years 2006 - 2010 would indicate that before amortization and capital expenditures the theatre has shown an operating surplus of nearly $1.7 million. You might think that with proper management of these funds, the current 'crisis' could be avoided.

There is also the matter of the 'Presents Series" which basically are events the Theatre Society brings to town where the society is exposed to all the downside risk if they don't sell enough tickets to support the cost of bringing the event to the theatre. It should be noted that neither Vancouver nor Victoria or other theatres have such series as the potential risk is just too risky! These events are different from events put on whereby an outside interest will simply rent the theatre for a rental fee and they assume all upside and downside risk associated with the event.

The Presents Series also seems to have undergone some mis-management issues over the recent years with 2010 showing the first year a loss was actually incurred with the Theatre losing a whopping $48,091 on their Presents Series of shows. This compares with surpluses of as much as $41,919 during the four years preceding 2010. Clearly management has some explaining to do as to why 2010 was so poorly handled.

Another fact revealed by the financials is the fact that in 2007 the cost of phone, utilities and building maintenance was $161,281 and only rose to $162,981 in 2010. I say 'only' because theatre management is explaining their need for more funding because of increases in these areas, which hardly seem to be running out of control.

A decline in rental income is also another reason given for needing an increase in funding when in fact income from rentals and recovery income was at an all time high of $467,883 for the year of 2010 up sharply from $347,495 in 2006.

Wages and benefits have also increased by $155,186 from 2006 - 2010 with no obvious reason such as increased business to support the increases given. An examination of managements contribution to this wage increase would be appropriate. In other words it would be interesting to determine if the % increase in wages is evenly spread over all employees, or if the management sector accounts for a larger percentage of the increase in wages and benefits.

The application from the theatre is asking for "an increase in management fee to reflect rising costs of facility management". It should be noted that for the five year period the city grant to the theatre has risen from $408,000 in '06 to $445,247 in 2010. I presume the grant for the year 2011 is even higher. This indicates that the current agreement has in fact allowed for increased management fees on a regular basis.

These are just some of the questions an examination of the Port Theatre financials raise, and it should be noted that city council will be asked to consider the city staff recommendation to allow for the transfer of funds from the capital fund to the operating fund to offset last years deficit. This is really just a smoke and mirrors move which looks like the city isn't providing extra 'operating' funds when in fact that is exactly what they are doing.

According to the Theatre's records there should be a contingency fund in place designed to handle a crisis such as the Theatre is presently experiencing.

This matter will be addressed at the FPCOW meeting this coming Monday and it will be interesting to see Council's response to the city staff recommendation.

A matter of market forces or a matter of management? An issue YOUR City Council needs to determine before they spend YOUR tax dollars at the Port Theatre.

This is NOT a matter of whether you support the arts community in Canada, but rather whether you support the way the current management is managing YOUR $550,000 every year.

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