Agenda Index City of Vancouver

ADMINISTRATIVE REPORT

TO:

Standing Committee on City Services & Budgets

FROM:

Directors, Office of Cultural Affairs & Finance

SUBJECT:

Vancouver Art Gallery - Annual Report & 2001 Operating Grant Request

 

RECOMMENDATION

A. THAT a 2001 operating grant of $1,849,500 be approved to the Vancouver Art Gallery Association; source of funds to be the "Other" Grants budget;

B. THAT Council direct staff to work with the Vancouver Art Gallery in advance of their 2002 Operating Grant request to monitor financial progress and contingency plans in order to minimize risk associated with a projected deficit.

GENERAL MANAGERS' COMMENTS

COUNCIL POLICY

On March 31, 1992, City Council approved a change in the basis of the City's financial support to Vancouver Art Gallery Association from a grant to support specific items to a grant supporting general operations.

Approval of grants requires eight affirmative votes of Council.

PURPOSE

This report provides a review of the Vancouver Art Gallery's activities, their current operating and financial situation, and presents for Council's consideration their 2001 Operating Grant request.

BACKGROUND

Founded in 1931, the Vancouver Art Gallery (VAG) is an independent not-for-profit cultural organization which, as Canada's fourth largest public art museum, collects, preserves and exhibits the City of Vancouver's fine art collection under an operating lease and license agreement with the City. The collection comprises over 7,300 works of art with an estimated value of $95 million. The collection is owned by the City and is held in trust for the citizens of Vancouver by the Vancouver Art Gallery.

The VAG occupies a provincially-owned building which is leased to the City of Vancouver for a 99-year term. The City and VAG are negotiating a sub-lease from the City to the VAG.

1999/2000 Years In Review

Due to operational challenges at the VAG in 2000, which will be covered later in this report, and the civic labour dispute in the Fall of 2000, this report will review operations at the VAG in 1999 and 2000.

In 1999, the VAG enjoyed a number of successes. Annual visitations reached an unprecedented 248,000 visitors -- a 31% increase over 1998. In-house exhibitions, such as the popular Toulouse Lautrec, Stan Douglas and Face to Face, as well as the touring exhibitions, Stan Douglas and Down from the Shimmering Sky: Masks of the Northwest Coast all received good critical and audience response.

At their fiscal year ending December 31,1999, the Vancouver Art Gallery had an excess of revenue over expenses in the general operating fund of $6,605 on a total budget of $6.6 million. In general, earned revenues increased significantly and government grants remained stable. However, fundraising and sponsorship fell well below projected targets. The fundraising shortfall was counterbalanced by extraordinary admissions revenues. The VAG's 1999 financial statements are attached to this report as Appendix "A".

The year 2000 was a challenging one for the institution. On the positive side, the permanent collection was featured in several exhibitions and a significant grant was received from the Getty Grant Program of the J. Paul Getty Trust to conduct a conservation survey of the collection. New travelling exhibitions hosted by the VAG in 2000 included To The TotemForest: Emily Carr and Contemporaries, Between Two Worlds: The Art of Poland, and Impressionist Masterworks. Touring exhibitions continued to feature Down from the Shimmering Sky: Masks of the Northwest Coast, Stan Douglas and Komar and Melamid, as well as a new exhibit featuring Gathie Falk, whose works are currently on a national tour co-organised with the National Gallery of Canada.

However, early in 2000, a series of events took place which resulted in the departure of the Director, and the appointment of a Board Member to the position of Acting Director, which subsequently led to significant community concern as to the governance of the Gallery. Attendance fell 20% over the previous year, and fundraising and sponsorship revenues dropped 40%, well below the potential for an institution of this size. While expenditures were closely budgeted, there were also significant additional costs arising from replacing the Director. As of June 30, 2000, the VAG Board advised that they were projecting an operating deficit of $402,000.

Thus, in 2000, the focus of the administration and Board of Directors had been balancing the budget. Through a series of cost cutting measures and a successful fall art auction, the VAG concluded the year with an excess of revenue over expenses in the general operating fund of $16,519. The VAG's 2000 financial statements are attached to this report as Appendix "B".

2001 and Beyond

In 2001, the Board has sought to address the financial, artistic, governance and community credibility concerns as the VAG continues to go through a period of transition. In March of this year, following an extensive search, the VAG Board appointed a new Director. The selection process and subsequent appointment of a professional art museum director has begun to address several of these issues. Work is now underway to rebuild the VAG's relations with its various communities.

However, the financial implications of 2000 have carried over into 2001, necessitating continued expenditure reductions. This included cuts of 45% to the exhibition program to balance the budget. While the VAG has been resourceful in programming within these financial parameters, including the current Vancouver Collects exhibition series, reductions to exhibitions and programs will make the task of rebuilding audiences and revenues that much more difficult. Extraordinary revenue streams from touring exhibitions realised in 1998 and 1999 have been winding down, with only the Gathie Falk exhibition on tour after April 2001. These revenue streams will not pick up again until later in 2003, as cuts made to this area take time to recover and touring program planning begins again in 2002.

Subsequent to the new Director's arrival, Gallery staff and Board have developed a preliminary Strategic Plan which has identified the VAG's key weaknesses as being fundraising and marketing. The institution is planning to hire several senior staff to fill key vacancies in development and marketing, and also adds new positions to strengthen their fundraising and marketing efforts. However, in addition to refocusing the institution on its programming, fundraising and visitor services, the strategies propose significant "investment" on the part of the institution, with a $1.2 million or 22% increase in expenditures over the previous year. Though forecasting a surplus for 2001, the increased staffing and investment being proposed by VAG would result in a $320,000 deficit in 2002. The VAG projects that this deficit will be eliminated the following year.

DISCUSSION

At the time of writing this report, the VAG Board has yet to formally ratify this deficit budget. Staff have reviewed the preliminary Strategic Plan and budget forecasts through 2004 and have expressed concern about the level of risk associated with the plan. While staff recognize the validity of "reinvesting" in the institution to increase earned revenues, in light of the current economic climate, fundraising projections of 170% increase over the next three years are considered ambitious. VAG staff are currently in the process of developing contingency planning strategies but have not yet finalized them. The VAG's efforts to refocus on securing adequate resources to restore programming and exhibitions to pre-2000 levels are to be supported, but given the current economic situation, the timing and extent of this "reinvestment" is considered a high risk strategy.

FINANCIAL IMPLICATIONS

The VAG concluded 2000 with a small net operating surplus and have no accumulated deficit. Staff are recommending to Council a 2001 operating grant of $1,849,500 based on the 2000 grant funding level. The 2001 grant has been increased over the 2000 grant to cover inflation based on Council policy. The source of funds for the operating grant is the 2001 "Other" Grants allocation in the 2001 Operating Budget. Staff will work with VAG to minimize the financial risks of the strategies to be developed by the organization.

CONCLUSION

The VAG is going through a period of transition and while the institution has managed to keep from accumulating a deficit, previous strategies of cost cutting are not sustainable over the long term. Preliminary strategic plans propose an ambitious renewal of the institution and have identified fundraising and marketing as key priorities. While VAG staff acknowledge the risks, they have indicated that almost 60% of corporate sponsorships targets and 66% of donations and gifts revenues projected have already been committed for 2002.

Therefore, staff are recommending to Council a 2001 operating grant of $1,849,500 to the Vancouver Art Gallery Association and will report back to Council in advance of the 2002 Operating Grant request on the VAG's progress.

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cs011122.htm

Appendices A & B are not available electronically.

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