Overture Center for the Arts: Some Fiscal Issues

Overture deserves at least another $500,000 from the city of Madison

At one of our first meetings of the Ad Hoc Committee on Overture, I asked for data showing the trend of city support for the facility. Simply put, the city of Madison should provide an additional $500,000 in funding if it were to fund Overture at the same net rate as a percentage of the city budget (.75 of one percent*) as it was funding the Civic Center. That amount would be a reasonable contribution for a community of our size, and would restore city funding to a sum proportional to the city budget and be closer to a thirty year tendline than the current $1.4 milion contribution.

It means the city subsidy would rise from $1.8 million in 2010 to $2.3 million in 2011. Subtract the PILOT and the net is approximately $1.8 million.

Say "No" to Eliminating the PILOT and Segregating Parking Revenues for Overture

There are two gimmicky requests by the Overture operators. Both are matters related to issues larger than Overture and have nothing to do with the amounts. The first is to remove Overture's obligation to make a payment in lieu of taxes (PILOT) to the city of Madison. Overture, like the old Civic Center, and many other non-taxable city enterprises, makes these payments so we have acknowledgement of the value of city services to this tax-exempt property. This is a matter of fiscal responsibility and has nothing to do with lack of concern or respect for Overture.

Overture also requests that it be allowed to collect a parking surcharge on vehicles parked in the nearby city parking ramps on nights of major events. This is a horrid precedent and should be dead on arrival. Madison makes it a point of never segregating revenues unless they are tied to a specific service for which there is a charge.

If Overture needs more revenue from the public, then be up front. 

Most disturbing was the Overture consultant, AMS, portraying the parking revenue matter in a deceptive light which, for me, is just one more indicator that the study is not to be trusted. The report indicated there was a precedent in "Madison" for such a parking revenue dedication to a related event. It turns out they were not referring to a city of Madison practice but the University of Wisconsin - Madison using parking revenues generated by athletic events for the UW athletic program.

Maybe Overture Should Receive an Additional $500,000 from the city.

A validated study, one with public confidence, might justify an additional $500,000 from the city of Madison, bringing the total of additional subsidy to $1 million. That number, parenthetically, would give Overture more than the net amount it is asking from the city in additional revenues, capital budget commitments for the next 15 years, and cuts in payments to the city. End the gimmickry and provide Overture with a reasonable amount of support.

If the city subsidy for Overture was calculated as a percentage of the actual revenues for the facility, increased support is warranted.

The positive attribute of this view is that it reflects greater city commitment based on the public buying tickets and private contributions for performances. The negative attribute is that while the city signed on for a facility the size of the old Civic Center, it never agreed to support a structure as opulent and costly as Overture.

In the last two years of the Civic Center and the first two years of Overture, 1999-2002, the percentage of public support for the facilities averageded about 22% of actual revenues. If the city were to continue that level of support for Overture the net contribution would be about $2.64 million, a gross subsidy of $3 million.

Additional City Funding Comes With Strings

Before signing off on the additional funding, there are three significant conditions required of the owners and operators of Overture.

First, 201 State will own the facility. The city of Madison cannot take title to the building because, absent validated numbers about the capital costs and operating costs of the facility, the risk is too great. After all, if the AMS study is accurate, 201 State should have no problem accepting its own report.

Secondly, the board of directors of the operating entity must reflect the public commitment. That means public appointees from the mayor, confirmed by the city council, and recognition that the board cannot be self-perpetuating. This means Overture remains a union house.

Thirdly, the new managing entity must commit to transparency and recognize the rules and statues governing open meeting laws in Wisconsin.

In subsequent posts, I will go into more detail about the significant structural problems that plagued Overture since its inception, as well as how that convoluted arrangement adversely impacted both public access to the arts and public support of the arts.

In addition, I will also detail under what circumstances I would support city ownership of the facility, a recommendation I made over ten years ago and subscribed to until last month, when I realized the enormous costs and liability of owning this iceberg.

Conclusion:

The PILOT stays. The net city subsidy should range from $1.8 to $2.6 million, probably somewhere about $2.3 million.

No parking revenues for Overture. The staff remains public employees.

The facility is not owned by the city of Madison; the city takes no responsibility for the capital costs of the building.

 

* for 2011:  $247,000,000*.0075= $1,852,000

author's note: I was corrected on my last post that the correct name for the facility is the Overture Center for the Arts, not the Overture Center for the Performing Arts which I carefully researched and found at, among other sites, the UW School of Music. Don't believe everything you find on the world wide web.

 

Comments

[Bob D'Angelo]

I believe that the Private/Private model suggested by Paul, keyed to a formula for continuing support at a higher lever is a model has great merit. It will get more support from the Government side of the equation when it comes to a vote and is probably the most viable way to go for this particular center in this particular city.
For the City of Madison the future risk is known, and for Overture support will be at a more equitable level for the services it provides for the community.

Hopefully there would be a formula for support from Dane County. Overture is not an attraction and educational supplement for Madisonians. A significant percentage of the audience comes from residents in the County but outside the City.

On the question of union representation there are certain systemic problems with the current arrangement. The union contracts are negotiated for all City of Madison workers and in no way reflect the special needs of an entertainment industry business. Overture is a largely season business, which much less activity in the summer. A disproportionate percentage of Overture's need for workers is nights, weekend and holiday's. This is very different the needs the City has for its workforce... The concept of providing shift differential for workers working nights and holidays may be a slight problem for the City, it is a major problem for Overture.

The pay scales for some jobs at Overture and the working conditions fly in the face of industry norms for the entertainment industry. If Overture is to have unions, they should be separate from municipal works unions, and agreements should be negotiated that are consistent with the working agreements of competing facilities in the region. At present Overture is costing more to operate that other facilities in the region, in part because of wages and working condition, and some shows simply pass up on the facility because of non-competitive rental rates and charge backs.

[John H]

I'm concerned about the city taking on responsibility for this facility. As Mr Soglin described it, this is an opulent facility. When I read of the process of selecting the materials for the facility, and the maintenance costs associate with some of those materials, I could not help thinking of the vast majority of citizens in Madison who are struggling to recover from the biggest shock to our financial security since the great depression. Who doesn't know a family who has lost the income of a primary wage earner, who's home is now worth less than they paid for it years ago. Who doesn't know someone who's retirement savings are worth less than they were 3 years ago, despite having taken care to diversify and follow all the rules. Who doesn't know a public sector employee who lost a promised pay increase, and has been placed on furlough, from a job that pays less than it's private sector counterpart.

This is the Madison that you need to consider when bandying about the hundreds of thousands and millions of dollars in liability for the city under various proposals.

Mr. Soglin connected one of his recommendations for continued funding to what the city would have paid for the civic center. I think that is a fair place to end. My initial negotiating position would be to not fund this at all until our citizens are back to financial health. Even then I'd be pretty wary of a proposal that sends this kind of money to the arts community while our poor people sleep on benches in the cold.

[Emily M.]

Count me in the wary camp on the issue of the city taking over financial responsibility for the Overture Center - but I have a point of contention with John's last sentence:

I fully support a more concerted effort to eradicate homelessness and get the basic needs of our citizens met. But I don't think arts funding is mutually exclusive to that. In fact, arts centers and related jobs tend to have a monetary ripple effect that benefits entire communities. People coming to see a show tend to patronize local restaurants, shops, hotels, etc. - a whole lot more than they would if there were no shows to attract them to the area in the first place.

All of that helps create and sustain more jobs and healthier communities - which, in turn, are more able to support their more vulnerable members.

That said, the Overture saga is a fascinating one and I wanted to thank Paul for his input and insight into the matter. I intend to do a lot more digging myself.

[Davin Pickell]

Bob D'Angelo: "The concept of providing shift differential for workers working nights and holidays may be a slight problem for the City, it is a major problem for Overture."

Bob, the shift differentials for nights and Sundays for Theater Technicians last year--2009 (and our schedules are all over the place, varying week to week, as you likely remember) amounted to an additional 0.81% of compensation (over our base earnings listed in the Wisconsin State Journal database).

Holiday pay is a separate matter, but the WSJ database doesn't have a listing for that specifically. Frankly, there isn't a whole lot of work scheduled at Overture on holidays, so I think that's a non-issue as well.

Given how wildly variant the schedules in our department are, and the long nights and early weekends we put in, you might surmise that there is a whole lot of OT being earned, and perhaps a few WRS pensions being padded. The WSJ database indicates that the four Theater Technicians at Overture earned zero dollars in OT in 2009. That's Nada. Zilch.

We take our OT as comp time, and use it primarily during the "much less activity in the summer" months. It allows us to recharge our batteries, and spend time with our families. Summer also allows us to catch up on maintenance and various improvement projects. Usually there's too much work, and not enough time to burn up all the comp. That's why two employees in my department received partial Comp payouts last year.

That's a consequence of losing a full-time employee to layoff in December 2008. Too much work, not enough people. Yet still no Overtime, despite that City contract that "in no way reflect(s) the special needs of an entertainment industry business."

Reality, unfortunately, really shoots a big hole in your argument, methinks.

Also, keep in mind that in a privatized world, there is no such thing as comp time, so OT is paid at time and one half, with no options or alternative. So in that respect, wages must, in fact, increase in the privatized scenario due to these legal requirements, and employees are not allowed the down-time to recover from an exhausting theater season. This isn't an awful thing, I guess, if high turnover is viewed as acceptable, or even the norm. Restaurants work this way, but Performing Arts Centers, with their complicated equipment, and constant variation, are not restaurants, and shouldn't be run as such.

Oddly, I can only think of nine out of 300 or so Overture employees who would regularly receive shift differentials of consequence (we're four of the nine, so I use the phrase 'of consequence' very very loosely). The vast majority of Overture employees (250 or so) are hourly employees who receive no such differential. The bulk of the remaining fifty are nine to fivers, who would not get any differential. As such, shift differential doesn't strike me as being a significantly "major problem for Overture."

A good many assumptions held by many of the players involved, including the former President of Overture, just don't hold water, when you analyze the actual numbers. Sort of like the Focus Model.

[Davin Pickell]

Bob D'Angelo: "The pay scales for some jobs at Overture and the working conditions fly in the face of industry norms for the entertainment industry. If Overture is to have unions, they should be separate from municipal works unions, and agreements should be negotiated that are consistent with the working agreements of competing facilities..."

Bob, I presume here you're focused on the IATSE contract, recently signed, after having worked for thirty years for the City of Madison. While we appreciate your having spoken out in defense of the IATSE stagehands in this case, we want it to be clear that we specifically negotiated a contract that was respectful to the building and the City. If Overture is not successful, IATSE Local 251 will not be as successful. We're aware of this.

Given this, we did accept wages and benefits that "fly in the face of industry norms for the entertainment industry." We're aware of that. What we accepted was lower than what many stagehands get for wages and benefits elsewhere. We weren't duped. We accepted less than what other IATSE stagehands earn in other cities, such as Milwaukee or Chicago, because this was a first ever contract (and because there are many other factors one must consider on a macroeconomic and micro-economic level when negotiating with a city).

We're aware that the average stagehand working for the City of Madison only earned around $5,000 last year, and that nobody in their Right mind would try to squeeze more out of an employee who only makes $5,000. IATSE represented stagehands didn't receive any 'fringe' benefits from the City in 2009, even though some other hourly employees in other unions were entitled to sick leave. Finally, in the new contract, eight years in the making, we were able to negotiate not comparable benefits, but at least a benefits contribution. It's a start.

Parity can't be achieved overnight, as much as the IATSE represented employees would like that result. We've been disparate from other IATSE locals, and also from fellow City employees, in terms of wages and benefits, for decades. We hope to slowly narrow that gap over time, respectfully, and responsibly. To do so otherwise would be short-sighted folly.

Thank you, though, for taking a stand on our behalf. We do appreciate the spirit of your message, even thought we might quibble over details.

[Bob D'Angelo]

Davin...

I support representation for the stage hands at Overture, but feel there should be a differentiation between the workers who are on most of the calls and those who only work very occasionally for the very largest of shows. This may in fact be in the agreement.

My comments were largely directed at the costs for building cleaners, ushers and part time box office employees, not the stage hands that I am more than willing to grant have been a good value for the Civic Center and now the Civic Center compared to many peer situations, nor was I referring to the House Techs... Ushers at many peer organizations are all or mostly volunteer. At Overture there a significant percentage are paid and at a rate inconsistent with industry rates. The rate differential also places Overture on the high end of the scale for building cleaners and cashiers when compared to many other venues. All of the costs are in one way or another passed on to the not for profit renters and commercial promoters who use Overture.

My hope is that Overture can become more competitive in these areas and more attractive for potential users, thus generating greater earned revenues and raising its earned income Vs contributed income ratio.

[Davin Pickell]

Bob,

I hope you don't take any offense to anything I've said. I just like to analyze the numbers behind the assertions--yours or otherwise. For the record, I told the Mayor that you are missed, earlier this year when we were chatting about Overture.

Currently ushers at Overture are mostly volunteer, as you suggest they should be. The lead ushers are paid, I believe, but they're unrepresented, for the most part. Some of that detail is confusing even to me. I don't think their compensation amounts to a hill of beans, financially, though. Despite the lack of financial impact, the ushers (paid or volunteer) help make the bigger Overture engine run, and they are all part of providing the magical experiences that our customers have come to expect.

I don't know the numbers & dollars for the Front of House staff as well as I should, and as I say, part of that is due to the confusing nature of what kind of hourly employee one valued team member is, compared with what kind of hourly employee another one is. Ultimately, I don't think it is fair to blame budget deficits on your least expensive employees, and I don't think it is a very accurate representation of reality.

Could ushers be compensated in some fashion that minimized dollars spent, but still helped ensure that they felt valued for the investment of time they put into Overture's success? Certainly. I've got some ideas on that front, too, but the Overture suggestion box was shut down several years ago, and when you e-mail your suggestions, they don't go anywhere.

For the record, I'm open to anyone who can provide numbers to back up the assertion, with respect to ushers, that "a significant percentage are paid and at a rate inconsistent with industry rates." Again, I think this depends on what your comparables are. After someone can provide that actual (not purported) percentage, let's try to remember that lots of cities have IATSE represented Front of House staff. I'm guessing our unrepresented ushers don't look too expensive compared to those markets.

Ticket office cashiers...we have approximately 2.75 Ticket Office 'managers' and approximately 2.75 permanent Ticket Office cashiers. Many folks focus on the 2.75 cashiers and beat their chests about the compensation they receive. I prefer to scratch my head about the 1:1 ratio of managers to employees, but that's the union guy in me, I guess.

Most of the ticket office cashiers are hourly employees who don't get the publicized wages. The average hourly wage, and the average annual wage for ticket office cashiers are much, much lower than the headline rates. Unfortunately, boring low wage figures don't sell newspapers, and don't inspire indignant conversation. Hence, the media and privateers focus on the tabloid fodder and ignore the complete set of real numbers (it's almost sounding like a trend, isn't it?).

Did I mention the relative absence of benefits? Did I mention that they'll work their favored hourlies all the way up to the threshold (above which they become permanent employees), but refuse to allow them to pass that threshold, so they can maximize the contribution of the employee to the building, but minimize the contribution of the building to the employee? My understanding is that Wal*Mart utilizes the same employment strategies.

I once asked if a cost-benefit analysis had been done to see if maybe more employees in the ticket office would yield higher returns on investment than fewer. A superficially silly question, perhaps, until you factor in the reality that when Overture's ticket office is under-staffed, they pay fees to an out-of-state contractor to handle the excess call volume. No such analysis had been done when I asked several years ago, and I'm going to speculate that no such analysis has been done since.

Building cleaners...essentially the whole same discussion could be had all over again. I know that well paid people tend to think that people who clean up poo shouldn't be paid well. I disagree. Poo happens. It needs to be cleaned up.

A well compensated, and well respected, and well managed maintenance and custodial department is essential to a gleaming, shiny gift such as Overture. Our current staff is over-worked, due to layoffs, and are not respected as they should be. As a result, there are oodles of hourly building cleaners to supplement the permanent staff (hmmm, another theme, perhaps).

I disagree with some of your assertions, Bob, but I'm open to discussing them at length, in this forum or any other. I am incredibly curious about the truth behind the numbers behind the assumptions. Unfortunately, the proposal on the table is designed to eliminate any such discussion, and is a take-it-or-leave-it ultimatum disguised as a gift. The disrespect of the human beings who make the magic happen at Overture overfloweth beyond the 45 pages of the AMS Focus Model. Take away the faux numbers, take away the disrespect, and there's not much left to the proposal. Just the city tax dollars flowing in the wrong direction.

With respect to your closing comment, about raising the ratio of earned income to contributed income, I might suggest that increasing usage of the building, by lowering rents (which the City could do if they owned it), would facilitate the raising of that ratio, albeit with the side effect of increasing operational costs. Those increased costs are incremental, though, and eventually, with more usage there is less pressure on rents, which drives increased usage, which puts less pressure on rents...

That's my twenty two cents.

[Marc Eisen]

When I've talked to people in the business, I've often been told that the Overture venues are just too pricey for promoters and other arts presenters to regularly use for their shows. This includes smaller arts groups feeling they're priced out of the building. Higher set-up costs, including union stagehands, are sometimes cited as part of the problem. We know that Overture venues are distinguished by higher-than-normal vacancy rates, and these costs are supposedly one of the reasons. Could Mr. Pickell address this claim?

[Davin Pickell]

The Overture Usher Answer (provided to me by the insiders who know better than do I):

Overture has approximately 550 Volunteer Ushers available to schedule.

Overture has about 40 Lead Usher(LU) employees available to schedule.

There are roughly ten House Manager (HM) type employees available to schedule. (The HMs are NOT responsible for the hiring or firing, so are not managers in that sense.)

The House Manager supervises the Lead Ushers and Volunteers for any given show.

For a sold out Overture Hall show we use 11 paid Lead Ushers and 3 paid HM (one fills the 'House Manager' position, the other two fill 'Floor Captain' positions). Add to that a minimum of 49 volunteers.

For the Capital Theater we use 8 paid staff. One to two HM, and 6-7 Lead Ushers. Add to that a minimum of 22 volunteers.

(For shows that are not sold-out we attempt to reduce the amount of paid staff accordingly.)

The number of paid Lead Ushers is set by the number of doors that need to be watched. There are a lot more doors in Overture Hall than there were in the Oscar Mayer Theater. There are also MORE doors that need to be watched in the Capitol Theater than there were in the Oscar Mayer Theater.

This staffing is an operational expense, but it is dictated by the architect's vision for the facility--lots of doors.

After the show has started, and late-comers are seated, volunteer ushers are allowed to go home. We can't expect volunteers to stand at a door for 3 hours. Nor can we expect volunteers to deal with the occasional sick & vomiting customers or drunk & hostile patrons.

Paid Lead Ushers earn $11.50 per hour. Lead Ushers are unrepresented employees.

HM make about $3.50 more. HM employees are represented by AFSCME Local 60.

The only benefit Lead Ushers currently have is paid sick leave. This is only the second year of this benefit. This amounted to 8-12 hours for the average Lead Usher last year. No overtime. They do get holiday pay. However, generally there aren't shows on holidays.

So...even if we reduced usher pay to $9.00 per hour, that is only saving $27.50 an hour, or about $100 per Sold-Out 'Overture Presents' show in Overture Hall. There are 10 Overture Presents shows in Overture Hall this year.

Is losing the quality Lead Ushers (you get what you pay for) worth saving $100 per show? Is $100 per show the cause of the hundreds of thousands of dollars of deficits?

It is my understanding that for Promoter shows costs for HM and Lead Usher hours are billed to the promoter. It is also my understanding that there is a different formula for Broadway shows, but we are likewise compensated, and then some, by BAA for those expenses.

[Davin Pickell]

Marc Eisen,

I'll take a crack at your question, but likely tomorrow when I wake up. The question you ask is a complicated one, and I could try to give a quick and dirty answer, but I don't think it would do it justice.

It's complicated. Tomorrow morning's coffee will help.

[Davin Pickell]

Marc et al.,

I spoke with a colleague this morning who is working on a detailed response to the question of relative costs of using the facility. As an employee, this is not my area of expertise, although I've got lots of thoughts.

I think your question is attempting to encompass the overall costs of usage to a potential user of the facility. I'm hoping that the forthcoming post from said colleague will be able to address that question, en masse, from a user's perspective.

I can certainly break the broader question of costs down into the individual components as best I can given the limit of hours in a day, and the patience of the reader.

I'll give a crack at the rental rate question first.

Having owned residential income property, I know that you typically charge rents somewhere between break-even on your expenses (on the low-end), or what the market will bear (on the high-end). Initially, you might have to undercut your expenses in the first few years if the market bearing number is initially lower than the expenses number.

The tax implications of said losses make it more acceptable to suffer them, as they're paper losses, achieved via depreciation, and hopefully you don't have to take losses for long, unless those tax losses are intentionally off-setting some other gains (which I guess raises the question of the tax returns of Overture Development Corporation, but that's a whole other can of worms).

I don't know how much of this applies to a Performing Arts Center, but if we look at a Hotel as a comparable business model (although I am reluctant to business-ify the arts, as I think this is part of the problem here, not the solution), then obviously our 'Occupancy Rate' is much lower than what it could be, or should be. I just Googled that concept, with respect to Hotels, and I'll throw out a target rate of 75%. (the first three numbers I saw listed were 58.5%, 84%, and 78.6% which average 73.7%, so I'm comfortable using 75% for the sake of this conversation).

Looking at the Utilization Rates on page 16 of the 45 page AMS Document (and I really do not like referring to such an unscientific document, but it will have to do for now), the projected Gross Utilization Summary for Year 1 projects 'Occupancy Rates' of approximately... much lower than that.

I'm now looking at the time and realize that I need to get to work at Overture. I've got a spreadsheet started with some calculations to insert into the discussion, but it will have to wait until later.

My apologies. I'll be back.

[Brian Haas]

I'm not sure I agree with Paul's calculation for determining the support the city should provide. Specifically the .75% of the city budget calculation. If you were to hold each budget item to the same percent as the previous year then all departments would have to gain the same increase/decrease each year and you'd never be able to add a new budget item without removing something of equal or greater value. I don't like the idea that adding to the police budget more than inflation would likewise require adding to the Overture subsidy. Seems foolish to me.

That said, I agree the subsidy for the Overture may be low. We need to determine what it should be in dollars not as a percent of budgets (neither the Overture budget nor the city). Obviously it will need to be adjusted every few years (if not annually). Of course that's just my opinion.

[paul soglin]

Brian is correct that the number is not to be cast in concrete, otherwise there is no opportunity to add new programs or to reduce funding of programs where new efficiences are reached or the program requirements are reduced.

However, it is critical to establish a reference point so one can determine a sense of proportion and to establish a trend line.

[Davin Pickell]

Brian,

As Mr. Soglin says, the .75% of city budget is one useful starting point. I could think of several others that one could use. In trying to scientifically or mathematically justify any starting point, we could use any number of related variables, all of which could easily be justified, and are not mutually exclusive.

The .75% of city budget is nice and clean and easy. We don't need to make it any more complicated than that for the sake of conversation. We can certainly do so, and likely should do so, and use multiple varied attempts to derive a reference point, and see how the reference point changes, or stays the same, using those various methods and criteria.

The big picture problem, from my perspective, is that the City isn't being given time in this situation to do the analytical work that is necessary for the scale of this particular public funding request tied to this particular public policy question.

Regardless of how we derive the starting point (or reference point), we must assume it is subject to change. If private philanthropy blows the roof of the place, city funding could go down. Any number of variables could change it down the road, but I think it is a fair point that Mr. Soglin makes about the current number being rather arbitrary and unjustifiable from any reasonable economic perspective.