SUPPORTS ITEM NO. 3 CS&B COMMITTEE AGENDA JULY 20, 1995 POLICY REPORT FINANCE Date: June 27, 1995 TO: Standing Committee on City Services and Budgets FROM: Director of Civic Theatres SUBJECT: Theatre Rental Rates - September 1, 1995 to August 31, 1996. RECOMMENDATION THAT Council approve the Schedule of Rental Rates and Conditions for Civic Theatres, as detailed in Appendix A, effective September 1, 1995. CITY MANAGER'S COMMENTS The City Manager RECOMMENDS approval of the foregoing. COUNCIL POLICY Council annually approves the Schedule of Rental Rates for the three civic theatres. Included is a special rate for secondary school graduations and an administrative adjustment benefitting back-to-back pairs of school concerts by the Vancouver Symphony Orchestra and the necessary adjustment to grants in lieu of rent to accommodate the changes in Rental Rates. SUMMARY The report recommends an increase in the rental rates for the Queen Elizabeth Theatre (QET), Vancouver Playhouse and Orpheum. The rental increase for the Playhouse is from $1,850 for an evening event to $1,875, or 1 percent. The recommended increase for the QET and Orpheum is from $6,500 to $6,800 for an evening event, or 4.6 percent. The body of the report goes into some detail to explain the increases in terms of the anticipated impacts on ticket prices, costs to presenters and the effect on the grants equal to rent programme. PURPOSE This report seeks approval of the Schedule of Rental Rates, Appendix A, for uses of the Queen Elizabeth Theatre (QET), Vancouver Playhouse and Orpheum for the period September 1, 1995 to August 31, 1996. BACKGROUND Rental rates, summarized in Appendix A, are reviewed during preparation of the annual operating budget and any adjustments are made effective September 1 of each year, in alignment with the traditional performing arts season. The rental rates are periodically reviewed in relation to those of other comparable facilities in other cities to ensure that Vancouver's rates are correctly placed in relation to the local, national and international markets. Rate changes also reflect changes in the costs of operation as affected by the City's collective agreements and various purchased services (e.g., heating, lighting). A special rate for secondary school graduations was originally instituted to attract theatre uses at a time of year when the theatres were generally under-utilized. The number of graduations held at Civic Theatres has grown from 5 in 1986 to 23 during the 1994/95 season. The Vancouver Symphony Orchestra (VSO) stimulates the develop-ment of new audiences by scheduling special back-to-back one-hour concerts for school audiences at a ticket price of $5.00. For the convenience of the schools, these concerts are held at 10:30 a.m. and 12:30 p.m., spanning the lunch hour. The number of these concerts has grown from 4 (in 2 days) in 1988-89 to 12 (in 6 days) in 1994-95, attesting to their popularity. DISCUSSION Base Rates The proposed increase for the Vancouver Playhouse this year from $1,850 to $1,875 for an evening event is equal to 1 percent. In 1994- 95 there was no increase in the Playhouse rental rate. The base rent for the Playhouse is already high enough to discourage unsubsidized uses so we are proposing to deliberately keep the increase at a minimal level. The proposed increase for the Queen Elizabeth Theatre and the Orpheum from $6,500 to $6,800 for an evening event is equal to 4.6 percent. (The rental rate increase for 1994-95 was 4 percent.) We believe this is the maximum increase the market will bear. It is also the minimum increase needed to meet the objective of the 1995 operating budget based on the estimated number of events that will occur after September 1, 1995. This increase in the QET and Orpheum rent may cause some of the presenters a certain amount of stress as they try to balance an increase in cost of presentation with the ticket buyers' price resistance. If a presenter holds the line on ticket price increases, for a ticket priced at $30, a presenter will have to sell 10 more tickets or forego revenue on 10 more tickets than last season. On a per-ticket basis, the rent increase would add $0.11 to the price of a ticket based on a capacity audience. If a presenter is budgeting for break-even at 50 percent of capacity, the increase in the ticket price would have to be $0.22. This increase translates to a rental rate of approximately $2.43 per seat for events at the QET and Orpheum, up from $2.32. The Playhouse rate translates to $2.80 per seat. For the sake of comparison the Ticketmaster handling charge ranges from $2.00 to $4.50 per ticket for single ticket sales, $0.50 for subscription sales. A $30 ticket, which costs the ticket buyer $35.10 ($30, plus $2.10 GST, plus $2.00 handling, plus $1.00 Civic Theatres Capital Surcharge), will return $27.57 to the presenter as compared with $27.68 last year, again based on a capacity audience. Grants Equal to Rent Local non-profit performing arts presenters may receive support in the form of Category II or Baxter Fund grants equal to rent. Category II grants are awarded to established non-profit presenters, including: Vancouver Symphony Society, Vancouver Opera Association, Vancouver Playhouse Theatre Company, Ballet B.C., Vancouver Chamber Choir, Vancouver Bach Choir, Festival Concerts Society, Friends of Chamber Music, Vancouver Recital Society, and others. Baxter Fund grants are awarded to newly formed performing arts groups or to special programmes or to organizations who present infrequently. Licensees who have benefitted include: Early Music Vancouver, Music in the Morning, Vancouver Youth Symphony Orchestra, Vancouver Professional Theatre Alliance, and others. Provided Council approves the usual equivalent increase in the grants budget, the local, City supported non-profits are insulated from financial impacts for those uses of the theatres which are covered by the grant programme (which will be the subject of an upcoming council report). However there are direct and indirect impacts on some of these groups. Based on the 1994-95 season, the impacts would be as follows. Vancouver Opera Association (VOA) did not receive grants for seven performances of "The Pearl Fishers" and three recitals. On the basis of last season, the proposed rental increase would cost the VOA an additional $3,000 plus GST. Ballet B.C.'s own programme is covered by grants except for some time used on an hourly basis. The proposed increase in rent would cost them an additional $1800 based on 1994-95. Ballet B.C. also present the Dance Alive series of visiting dance companies whose performances are not covered by grants. The Dance Alive series is important to Ballet B.C. for cultivating and developing a dance audience in Vancouver. Ballet B.C. may be concerned about the impact of this increase on its ability to attract the touring dance companies. There were a total of 12 performances presented by 4 visiting dance companies not covered by grants. The increased cost for these performances would be $3,600, plus GST. In addition, the Vancouver Recital Society presented one performance of Cecilia Bartoli without a grant. Special Rates Supporting high school graduations with a special afternoon and evening rate serves the community by providing a safe and suitable venue when the schools' own facilities are inadequate for one reason or another. Upwards of 30,000 people attend these graduation exercises. We feel that, in addition to fulfilling a community need, attending a graduation exercise in the QET or Orpheum increases the image of accessibility to Civic Theatres for other events. The VSO began hosting the mid-day school concerts in 1988. Each pair of school concerts is attended by approximately 2,700 students. In 1994-95 there were 12 school concerts in 6 days with a total attendance of approximately 30,000 students. In recent years theatre staff have been reporting increasing numbers of "younger faces" attending regular series VSO concerts. The VSO student concert rental rate is a simple administrative adjustment to deal with the irregularity of scheduling two back-to- back one-hour concerts which span two separate rental periods. For the convenience of the schools, these concerts are scheduled at 10:30 a.m. and 12:30 p.m. Standard policy is to charge 150 percent of base rental for two back-to-back performances occurring in the same rental period. This report requests approval to charge 150 percent of base morning rental foreach pair ofthese concerts during the1995-96 season. FINANCIAL IMPLICATIONS While theatre rental revenue is by far the major source of Civic Theatres revenue at a budgeted $3,280,800 for 1995, the rate increases only affect the last four months of the current year. This increase will generate an additional amount of approximately $45,000 in 1995. The major benefit to the operating budget will occur in 1996. The basic rental increases recommended in this report are the maximum we believe the market can bear. The increases are also the minimum needed to achieve the objective of the 1995 operating budget at the time the budget was tabled. The special rates for high school graduations and the VSO's back-to- back school concerts generate revenue above the incremental costs of operation and contribute to the operating overhead. We estimate that this rental rate increase will add $19,120 to the remaining grants budget of $522,900, for the period September 1 to December 31, 1995. IMPLICATIONS FOR CHILDREN AND FAMILIES The special rates for graduations and student symphony concerts facilitate access for children and families. COMMUNICATIONS PLAN The proposed increased rental rates have been verbally communicated to Licensees booking dates after September 1, 1995 during the course of normal business. The proposed increases have also been recently circulated to Licensees in a News-letter. * * * * *