SUPPORTS ITEM NO. 3
CS&B COMMITTEE AGENDA
OCTOBER 10, 1996
ADMINISTRATIVE REPORT
Date: September 30, 1996
TO: Standing Committee on City Services and Budgets
FROM: Director, Office of Cultural Affairs
SUBJECT: Emergency Grant to Vancouver East Cultural Centre
RECOMMENDATION
A. THAT Council approve an emergency grant of $17,085 to the
Vancouver East Cultural Centre; source of funds to be the
Operating Grants category of the 1996 Cultural Grants
budget.
Approval of this recommendation would leave no unallocated
balance in the Operating Grants category.
B. THAT Council approve, in principle, the provision of an
advance instalment on the Vancouver East Cultural Centre's
1997 Operating grant early next year, after the 1997
Cultural Grants budget ceiling is established, and subject
to a satisfactory review of the Centre's financial status at
that time.
GENERAL MANAGER'S COMMENTS
The General Manager of Community Services submits A and B for
CONSIDERATION.
COUNCIL POLICY
On February 1, 1996, City Council approved a total of $1,361,885 in
the Operating Grants category of the 1996 Cultural Grants budget. The
unallocated balance in this category is $17,085.
Once Council has approved annual grants, appeals by individual
organizations will only be considered when "additional funds are
required to prevent unforseen circumstances affecting staff layoffs or
the survival of the organization." (Approved February 1987).
Approval of grant recommendations requires eight affirmative votes.
PURPOSE
The purpose of this report is to respond to an appeal by the Vancouver
East Cultural Centre (VECC) for a one-time emergency grant to ensure
that the Society is able to continue to operate and implement a plan
to achieve financial stability in its operations (see VECC letter and
Financial Recovery Plan, attached as Appendix A; detailed cash-flow
projections on file with City Clerk's).
BACKGROUND
Background on Request for Assistance
Since its opening in 1973, the 350-seat Vancouver East Cultural Centre
has played a valuable role in the cultural life of Vancouver. It has
been a producer and supportive rental house for the work of local
artists and innovative touring shows, as well as a unique heritage
facility located in a vibrant eastside community. The City-owned
theatre, located at 1896 Venables Street, is operated by the Vancouver
East Cultural Centre Society.
In July of this year, after the VECC's new executive director took on
his responsibilities, it became apparent that a combination of
optimistic financial projections for 1995/96, inadequate accounting
systems, the loss of accounting information in a computer "crash", and
very poor box office revenues from the previous season had left the
VECC Society in a financially debilitating situation. With a
projected net operating loss of $98,918 for the year ending May 31,
1996, the accumulated deficit is now $188,457 (on an annual operating
budget of $700,000).
Over the past two months, the VECC's new director and its Board of
Directors have undertaken a number of short-term measures and
developed a long-term strategy to address the significant operating
deficit and cash flow problems that are threatening the Centre's
continued operation. As part of these efforts, the Society is asking
City Council to provide a one-time emergency grant of $20,000 towards
maintaining current operations. It has also requested approval in
principle of an advance instalment on its 1997 Operating grant early
next year (see Appendix A). Approval of the advance grant in
principle would enable the Centre to develop its cash flow projections
with greater certainty.
Current City Support for the VECC
Council will note that for 1996 the VECC has received an Operating
grant of $62,000. In addition, the City leases the Centre property to
the VECC Society for $1 per year, which represents a saving to the
Society of an estimated $30,700.
In addition, the City has assisted the VECC with a capital improvement
project through the Canada/British Columbia Infrastructure Program.
The City, as the building owner, made the application for the
improvements but passed on all of the obligations under the program
to the VECC, including the administration of the project and funding
of the 1/3 local share. The City did not provide a capital grant.
Council did approve $97,656 in bridge financing for this project (of
which $70,499 has been or will be repaid directly by the Province by
mid-October, 1996). The remaining $27,157 will be repaid to the City
when the VECC completes the capital project by September 1997.
The project, which includes the replacement of the seats, sound,
lighting, phone and box office systems, is approxi-mately 50%
complete. Prior to commencing the project in September 1995, the VECC
confirmed its 1/3 share ($70,000) was in place. Since that time,
however, they have exhausted their capital reserve to offset operating
shortfalls.
Over the past two months the Board and new executive director have
made significant progress in replacing their capital reserve and
completing the project. They have raised more than $40,000 in pledges
and have developed a program to complete the project by September of
1997. The City has secured an agree-ment in principle from the
Canada/British Columbia Infra-structure Program to this revised
schedule.
DISCUSSION
Basis for Request
As indicated earlier, the VECC's executive director, in conjunction
with its Board, has taken a number of immediate actions and developed
a Financial Recovery Plan to stabilize the Centre's financial
operations, to lower operating expenditures and to manage current
debts. As a first step, Board members have personally guaranteed the
director's salary.
Furthermore, the staffing structure has been reorganized, reducing
costs by an estimated $70,970, while maintaining the Centre's ability
to serve its audience, renters and artists. Additional reductions in
the budget have been achieved by renegotiating agreements and
cancelling proposed co-productions or presentations representing high
risk.
Looking to the longer term, the VECC has introduced a Resident Company
Program, entering into arrangements with Touchstone Theatre, Holy Body
Tattoo dance company, and the Modern Baroque Opera Company. These
partnerships ensure a firm 12-week block of "pre-booked' rentals every
year. Recognizing that declining audience have contributed to the
Centre's financial difficulties, the Society will be working with the
resident companies to develop joint marketing strategies. It will
also be holding a series of consultations with the local community to
assess how the Centre can better serve audiences, artists and its own
neighbourhood.
As part of its strategy for recovery, the Society is also seeking
financial assistance from the public and private sector, including its
request to the City. To date, the Vancouver Foundation has provided
an emergency grant of $5,000, the Province of B.C. has approved an
advance of $21,000 on the Centre's next operating grant, and the Board
and executive director have secured pledges of more than $40,000
towards retiring their capital obligation.
Staff Recommendations
After many discussions with the executive director and a review of the
new Financial Recovery Plan, staff believe that the plan is workable.
It is designed to enable the Centre to continue operating and earning
revenues, to ensure that no new "accounts payable" are created, and to
pay existing ones by May 31, 1998. It aims to eliminate the
accumulated deficit by May 31, 1999 and to complete the Capital
Program by September 1997. At the same time, the plan begins to
address the key issues of audiences and the Centre's role in the
community. The City's contribution would be used to maintain the
Society's operations, not to pay off the accumulated deficit.
There is currently a balance of $17,085 in the Operating Grant
category of the Cultural Grant budget, which would be the appropriate
source of funds for an emergency grant to the VECC. Staff recommend
that Council approve a one-time emergency grant of $17,085 to the
VECC, to be used towards current operations. Staff will continue to
monitor the Society's progress in resolving its financial problems
over the next year.
Regarding the request for approval in principle of an advance
instalment, staff note that under normal circumstances, the Centre
would be eligible for an advance instalment of $24,800 early in 1997,
after the Cultural Grants budget ceiling is approved. However, the
guidelines for receipt of advance instalments include the condition
that "an initial review of an organizations's current application
indicates that no critical concerns about the applicant's finances,
organizational stability or overall performance have arisen in the
past year". This criterion was designed to ensure that City funds not
be provided to organizations that may not be able to deliver proposed
programming because of financial difficulties.
In the case of the VECC, staff believe that the Centre's new recovery
plan can effectively address it present problems and that it will be
able to continue operating. Moreover, Council support now for the
principle of providing an advance instalment in 1997 will help the
VECC deliver on its financial plan. Staff recommend that Council
approve in principle the provision of an advance instalment to the
VECC in early 1997, subject to a satisfactory review of the Society's
progress at that time.
CONCLUSION
In recommending an emergency grant to the Vancouver East Cultural
Centre, staff have kept in mind that the continued operation of this
City-owned facility Centre will benefit more that just the VECC
Society. The Centre plays a key role in supporting and presenting
Vancouver's established and emerging artists. It is also one of the
few Vancouver facilities with a track record of presenting innovative
performing artists from across Canada. Staff believe that, under its
new leadership, the Centre will be able to address its financial
problems, and has the potential to serve its neighbourhood, its
audience, the arts community and the community at large better than
ever.
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