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Item 5.1 - Visual slideshow presented by Staff at MeetingPCPA WORKSHOP TO DISCUSS OPERATING MODELS NOVEMBER 5, 2019 •Purpose of the Workshop •Brief History of the PCPA •Current Operating Model •Alternative Operating Models •Staff’s Recommendation Agenda •Status of the General Fund •Expenditure growth is outpacing revenue growth •The FY 2019-20 budget is barely balanced and early projections for FY 2020-21 show expenditures exceeding revenues •Council will likely need to prioritize what is funded and at what level •PCPA Funding •Operating costs exceed revenues, the General Fund subsidizes operations •Several large capital maintenance projects are looming, these too would be funded by the General Fund •Workshop •Staff and Budget Review Committee recommended Council hold a workshop •In recent discussions between the City Manager’s Office and PUSD, PUSD expressed interest in acquiring the PCPA Purpose of the Workshop •Community Survey •Initial Funding •Collaboration with PUSD •Located on PUSD property at Poway High School •City leases land and operates PCPA through a joint use agreement •Operating Model •General Fund Subsidy •Evolution of the Foundation (dba Poway OnStage) •Use Policy –Three Primary User Groups Ranked in Order of Priority Access to Available Dates 1) Poway OnStage 2) PUSD 3) Community Rental Groups Brief History of the PCPA •Under the current model ALL user groups are subsidized •Strong concerns about the General Fund’s ability to sustain this •Poway OnStage –Agreement •Direct General Fund annual contribution of $113,500 (decreasing incrementally) •Does not pay rental fees for theater or office space •Does not pay for all staff support received to support operations •Data available on individual ticket purchasers indicates only 20% were from Poway in 2018-19 Challenges with the Current Operating Model •PUSD –Joint Use Agreement Based on usage of facility, pays 35% of operating costs. Cost share is not inclusive of all operating costs and excludes capital projects •Community Rental Groups •Limited dates available for rentals (rental income) •Only two rental rate categories, non-profit and for profit (no Poway specific rate) •Majority of rental groups are not located in Poway, but may draw Poway audiences and/or have Poway participants •In 2016 Council approved rate increases in FY 2017-18, FY 2019-20, and FY 2021-22 •Cost Recovery will eventually be 55% for non-profit and 65% for for profit rentals (based on old cost allocation study data) Challenges with the Current Operating Model Alternative Operating Models Fiscal Impact ◦$667k subsidy escalates ◦$4-$5M capital costs remain Pros ◦Operational continuity for users Cons ◦Fiscal concerns not addressed ◦No long-term revenue solution ◦Limits PUSD access Fiscal Impact ◦$667k subsidy reduced ◦$4-$5M capital costs remain Pros ◦Operational continuity for users Cons ◦Unlikely to generate capital funding ◦Agreement and programming challenges Option 1aNo Change to Operations Option 1bOption 1a & New Use Agreements, Fees Alternative Operating Models Fiscal Impact ◦$667k subsidy saved ◦$4-$5M capital costs deferred Pros ◦Greatest long-term savings ◦PUSD relationship maintained Cons ◦PUSD and community rentals lose performance space ◦Eliminates professional performances and art offerings ◦Vacant building Fiscal Impact ◦$667k subsidy saved ◦May save $4 -$5M in capital costs Pros ◦Greatest long-term savings ◦Increased PUSD access ◦May retain community use Cons ◦Community rentals may lose performance space ◦May eliminate professional performances and art offerings Option 2aEnd Operations –Limit PUSD Access Option 2bOption 2a & Negotiate w/PUSD to Acquire Facility Alternative Operating Models Fiscal Impact ◦Operational contract cost unknown ◦$93k savings from POS & personnel savings ◦Ticket sales revenue sharing ◦May save $4-$5M in capital cost Pros ◦Retains diverse arts programming for community ◦Maintains PUSD relationship ◦Relieves City of operations Cons ◦Operational contract interest and cost unknown ◦Capital cost responsibility uncertain ◦Limited long-term revenue solution Fiscal Impact ◦Booking agent may be less than $93k ◦City determines professional performance expense and receives ticket sales revenue ◦Foundation assumes donation/expense responsibilities ◦$32k-$65k revenue increase from rentals Pros ◦Long-term revenue solution ◦City ownership/oversight of programming ◦Active fundraising Foundation ◦Increased community access and classes Cons ◦POS may not restructure to benefit PCPA ◦City incurs liability for performances Option 3Terminate POS Agreement,Issue Operational RFP, PUSD 35% Use Option 4Terminate POS, Create Foundation,Issue Booking Agent RFP, PUSD 35% Use •Staff recommends that the City Council provide direction for City staff to enter into more detailed discussions with PUSD about their interest in taking over the PCPA and its operations and maintenance and pursue Option 2b as described in the report. •Staff recommends a temporary pause on accepting new facility reservations for the 2020-21 performance season. •Questions? City Council Workshop Action