1998 Operating Budgets - North York Performing Arts Centre

Corporation (NYPACC)

The Strategic Policies and Priorities Committee recommends the adoption of the recommendation in the following transmittal letter (June 26, 1998) from the Budget Committee:

Recommendations:

The Budget Committee on June 25, 1998, recommended to the Strategic Policies and Priorities Committee, and Council, the adoption of the recommendations of the Board of Directors for the North York Performing Arts Centre Corporation embodied in the report (June 16, 1998) from the City Clerk.

The Budget Committee reports having requested the Chief Administrative Officer to provide a report:

(i)on the future of the North York Art Gallery, the Market Gallery and any other galleries operated by the former municipalities and on the possible consolidation of operations and/or galleries; and

(ii)on the number of visitors attending the North York Art Gallery who are theatre-goers and non-theatre goers, as well as the number of visitors attending the Market Gallery and any other gallery owned by one of the former municipalities.

Background:

The Budget Committee on June 25, 1998, had before it a report (June 16, 1998) from the City Clerk, forwarding the recommendations of the Board of Directors for the North York Performing Arts Centre Corporation held on June 16, 1998 regarding the 1998 Operating Budgets.

The following persons appeared before the Budget Committee in connection with the foregoing matter:

-Mr. G. Garwood, Executive Manager, NYPACC; and

-Mr. K. Colley, Finance Department, North York Civic Centre.

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(Report dated June 16, 1998, addressed to theBudget Committee from the Board of Directors for theNorth York Performing Arts Centre Corporation)

The Board of Directors for the North York Performing Arts Centre Corporation on June 16, 1998, recommended as follows:

(1)that the 1998 Operating Budget for the North York Performing Arts Centre Corporation be approved;

(2)that the Operating Reserve be renamed as the Operating Stabilization Reserve; and

(3)that immediate spending approval be provided for artwork purchases up to $160,000.00. Given the current uncertainty on operations, spending approval for the remaining $90,000.00, is recommended for deferral pending a joint report from the Treasurer and the Executive Manager on the financial condition of the Corporation after September 30, 1998.

(The Board of Directors of the NYPACC would like to bring to the attention of the Members of the Budget Committee that the budget for the purchase of artwork is the funding level initially proposed for the purchase of artwork as previously adopted by the Board of Directors for NYPACC for the operation of the Art Gallery.

Background:

The Board of Directors for the North York Performing Arts Centre Corporation on June 16, 1998, had before it the following:

(a)Extract from the Minutes of the Meeting of the Finance and Operations Committee, North York Performing Arts Centre Corporation, held on April 23, 1998 regarding the 1998 Operating Budget for the North York Performing Arts Centre Corporation; and

(b)Report (April 21, 1998) from the Treasurer. North York Performing Arts Centre Corporation, forwarding the 1998 Operating Budget for the North York Performing Arts Centre Corporation for approval.

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(Extract from the Minutes of the Meeting of the Finance and Operations Committee held onApril 23, 1998)

In considering this matter, the Committee had before it a Report (April 21, 1998) from the Treasurer.

It was moved by Mr. Wells, that this item be forwarded to the next meeting of the Board of Directors for approval.

Motion carried.

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(Report dated April 21, 1998, addressed to theChairman and Members, Finance and Operations CommitteeNorth York Performing Arts Centre Corporation from theChief Financial Officer and Treasurer)

The 1998 Budget is attached for the consideration and approval of the Board.

The Budget reflects a net revenue position of $199,00.00 of which $175,000.00 relates to donated artwork. The balance of $24,800.00 is the budgeted cash surplus for 1998 and may be required to offset against shortfalls in revenue projections or unanticipated expenditure requirements.

The absence of a strong programming commitment by Livent for the Apotex Theatre in 1998 introduces significant uncertainty with respect to revenues from ticket surcharges. As a result, these revenues are budgeted at historically low levels and impact the levels of expenditure that are budgeted. Revenues are reduced by $194,300.00 and expenditures are reduced by $133,400.00 from 1997 budgeted levels. The Budget continues to reflect the position of the Board that the Ford Centre be operated without public subsidy.

Significant items included in this Budget are as follows:

(1)revenue projections for ticket surcharges are based on estimates of the number of performances and tickets sold in both the Apotex Theatre and the George Weston Recital Hall. Terms of the 1996 Minutes of Settlement with Livent provided for an increase in the ticket surcharge amount to $1.60, effective July 1, 1997. The increase of ten cents per ticket is allocated only to the Art Gallery program. Revenue projections for the George Weston Recital Hall are based on historical averages for the number of performances and the estimated capacities. Estimates for ticket surcharge revenue from the Apotex Theatre are based on Livent's programming plans and represent significant reductions in both number of performances and capacities from historical patterns;

(2)the Management Agreement with Livent provides for an increase in base revenue to $1,500,000.00 per annum effective November 1, 1998. The budget reflects two months of increased revenue;

(3)the 1996 Minutes of Settlement between the Corporation and Livent provided for the relocation of the gift shop at a cost to the Corporation not to exceed $385,000.00. The gift shop was relocated and costs were fully funded in 1997 and as a result, no additional transfers to capital are required in 1998;

(4)funding for the purchase of artwork is established at $250,000.00. This is the funding level initially proposed for the purchase of artwork by the Robert Swain report previously adapted by the Board for the operation of the Art Gallery. This represents an increase of $167,300.00 over the 1997 budgeted level; and

(5)the Corporation is required to provide annual funding to a Capital Maintenance Reserve Fund. This fund was used in prior years to cover wall corrosion costs and was replenished upon settlement of our claim and recovery of most of the costs. Funding of the Capital Maintenance Reserve Fund is based on a Reserve Fund Study commissioned for the Corporation's use in January 1995. The 1998 allocation of $575,000.00 assumes interest of $60,000.00 will also be allocated during the year in order to meet the minimum funding level.

The Operating Reserve amounted to $1,545,000.00 at the end of 1997. No allocation was made to this reserve in 1997 and none is provided for in the 1998 budget. The purpose of this reserve was to cushion the Corporation from a significant contingent liability, which 1996 Minutes of Settlement suggest has been removed. It is appropriate to now consider this reserve similar to a stabilization reserve from which shortfalls in budgeted ticket surcharge levels could be funded. This would allow the Corporation to stabilize operations and levels of expenditure without absorbing the full impact of weak programming in the theatres in any given year. Similarly, in years of strong programming excesses in budgeted ticket surcharge levels would be used to fund this reserve.

Recommendations:

(1)approve the 1998 Operating Budget;

(2)rename the Operating Reserve as the Operating Stabilization Reserve; and

(3)provide immediate spending approval for artwork purchases up to $160,000.00. Given the current uncertainty on operations, spending approval for the remaining $90,000.00 is recommended for deferral pending a joint report from the Treasurer and Executive Manager on the financial condition of the Corporation after September 30, 1998.

(A copy of background information appended to the report dated April 21, 1998, from the Treasurer was forwarded to all Members of Council with the agenda of the Strategic Policies and Priorities Committee for its meeting on June 30, 1998, and a copy thereof is on file in the office of the City Clerk.)