Your building may be destroying your organization. (Roanoke, VA pop. 98,865)
In Episode 10 of the podcast we take dive into the difficulties of keeping up with the depreciation of an arts facility in a smaller market. As many of us know maintaining a balanced budget is difficult enough when just focused on delivering the mission in a small market with limited funding resources. Now add the need to keep up with a building’s depreciation. How in the world can this be done?
To begin, I want to tell the story of the Lynchburg Fine Arts Center. My organization, the Academy Center of the Arts, is the product of a merger between the Lynchburg Fine Arts Center and the Academy of Music. The Lynchburg Fine Arts Center opened in 1962 after a private fundraising campaign raised the necessary funds to build a facility that included a 500 seat theatre, art galleries, a pottery studio, dance studios, and art studio space. After the completion of the center, the Honorable Richard F. Poff spoke to the US Congress about the success of facility. In the Congressman’s remarks (on the Congressional record) he boasted how the building was constructed with no government funds. The Lynchburg Fine Arts Center as an organization operated out of the this building for four decades but by the turn of the 21st century the depreciation of the building caught up to the organization. Without a large endowment or local government support, the weight of both delivering the mission of the organization and maintaining the building was too much to carry. In 2003, the board of the LFAC merged with the Academy of Music that was in the midst of trying to renovate a historic theatre on Main Street (now our flagship theatre). The site of the original Lynchburg Fine Arts Center is now a parking lot near one of our hospitals.
To tackle this subject of beating back depreciation, I spoke with Cyrus Pace at the Jefferson Center in Roanoke, VA (pop.98,865). I am particularly excited to share this conversation because during the darkest days of COVID Cyrus and I formed a bond. We began a bi-weekly Zoom call to strategize and to supply each other emotional and psychological support. Even post COVID, we continue these meetings because of their utility to our ongoing work.
The way Cyrus and I see it there are the barriers to paying for the depreciation and there are the solutions. Let’s start with the barriers.
The perception that an organization and its leaders can overcome the limited financial return of arts delivery in a small market community. I mean, it just takes “business savvy,” correct? Why is this perception flawed? The simple answer is supply and demand. There is a limited population in a small community. This means that there is a smaller pool of ticket buyers, art buyers, and students. Organizations delivering the arts in small town America must be non-profits and they must subsidize the work they present through individual donors, sponsorships, and grants. This is in turn is a limited pool of charitable funding. A small community only has so many donors, so many corporate entities, and so many grant giving entities. This means operational budgets will always be tight.
Small market communities create a fragile revenue landscape for arts organizations. In other words, the other shoe is always about to drop. As Cyrus says in the podcast, donors will always find a reason not to give. Perhaps they are not interested in your programming any longer. Perhaps the leadership of the town’s corporate entities work remotely since COVID and are disconnected from your organization’s value and the impact your organization makes. Perhaps one year you receive a large grant from a national grant giving agency but they won’t give again because they want to turn to other communities in future giving cycles. Cyrus and I also discussed the risk in ticket sales. Ticket buyers are fickle. Sometimes you hit the right note with your community but sometimes you present something they have no interest in. Every offering is a roll of the dice and an expensive roll of the dice.
The kick the can mentality. Often organizational leaders know they are sitting on facility ticking bombs but their personal incentives outweigh the organizational needs. A leader can keep a balanced general operating budget while navigating facility needs like a minefield for a number of years. They can develop strong programs, make positive impact on a community and jump to another job or another market before the depreciation catches up to the bottom line. With each change in leadership the time on the clock gets shorter and shorter and eventually the organization crumbles under the financial needs of the building/s.
Next, let’s talk solutions.
Local government subsidy. The Jefferson Center is owned by the City of Roanoke but before Cyrus’ time an arrangement was made that included no public funds for maintenance and upkeep. This falls on the Jefferson Center as an organization. Likely it was envisioned that some wealthy benefactors would help them manage the inevitable depreciation but because the building is owned by the city it has not been an attractive fundraising cause. Cyrus teaches graduate courses in arts management at Virginia Tech. One of his student’s Liz Gray did research on the business models of historic theatres owned by counties or cities. All successful theatres are run by non-profit entities but receive significant public funding to maintain the buildings the occupy and program. In some cases they also receive funding to support programing as well which helps navigate the risk in presenting expensive national touring artists.
Large endowment. My organization, the Academy Center of the Arts, owns its building and the City of Lynchburg lacks the political will to subsidize our organization. It is critical in the coming years that we have an endowment that is about 10 to 15 million dollars to support our ongoing facility needs while also allowing the organization to maintain strong mission delivery in our community. This is done through a 3 to 5% draw on the principle of the endowment annually. With out this, our organization will not survive under the financial weight of maintaining the buildings.
A public/private collaboration. This would be a combination of the above with local government supplying some of the support while the remainder is supported through an annual draw on a smaller but healthy endowment.
So… if you are in the midst of launching a building campaign in a small market take the long term health of the organization and building seriously. If you are in a building, know that additional revenue resources either through your local government or through an endowment are critical to your long term health. Ethically, leaders of such organizations need to shine a light on the impacts of on going depreciation and maintenance of their facilities to the long term health of arts delivery in their communities.