Overture Center advisory group recommends significant change in operation

The letter reads:

Ms. Linda Baldwin, Chair
Madison Cultural Arts District
Overture Center for the Arts
201 State Street
Madison, Wisconsin 53703

Dear Ms. Baldwin:

In February 2008, I was asked to lead an independent group of community leaders to examine the operation of the Overture Center for the Arts. We were asked to identify possible alternative resources as well as develop strategies to help ensure the Madison Cultural Arts District's (MCAD) long-term financial health and well being. It is clear to everyone that the Overture Center for the Arts is an extraordinary asset for the region. The facility not only attracts diverse performance and presentation offerings, but also contributes substantially to the reputation of our area as a quality place to live, work and play. With that in mind, our group convened in a series of meetings beginning in May to explore and debate alternatives and solutions. The group was highly motivated and very excited to add value to the current public debate concerning the Overture Center for the Arts. The membership of our citizen group consisted of the following: Ms.Fran Taylor, Mr.Paul Reilly, Ms.Joan Gillman, Ms.Deb Archer, Mr.George Nelson, Mr.Donald Nichols, Ms.Londa Dewey, Mr.George Lightbourn, Ms.Ann Casey, and Mr.Joe Sensenbrenner.

Madison Cultural Arts District asked us to become familiar with the operational structure and financial situation of the Overture Center for the Arts. Our group received orientation on the structure and operation of Overture along with a comprehensive operating and capital budget briefing. We met with bankers that currently hold the debt securing Overture. We discussed and explored alternative organizational and governance models as well as marketing and fundraising strategies. Our group recognizes that the operation of the Overture Center for the Arts requires a long-term strategy, and thus avoided simplistic recommendations that may work temporarily but are not in the best interest of the future of the operation. It is clear to our group, through no fault of either the primary funder of the Overture Center or the City of Madison, the Overture Center is facing a budget shortfall within two years. While it is likely that additional funding will be required to continue prudent operation of the center, there are a series of actions contained in this report that should be taken before consideration is given to adding any funding to the budget of the center.

In light of the most recent stock and credit market turmoil and action by lenders liquidating the Series A financing on Overture, the discussion group focused on three general themes: an accurate and comprehensive budget, an aggressive budget management strategy, and an aggressive capital campaign.

The Overture Center has been remarkably successful in providing cultural performances to Madison area audiences. The capacity of the Center and the volume of its programming compare favorably to Centers in cities twice our size. The implicit subsidy it provides to local and visiting cultural performers permits ticket prices to be held at levels that attract broad audiences. We believe that any effort to secure additional funding should be based on the record.

We believe as part of an overall strategy that MCAD should make the case for the economic and cultural advantages of Overture, and demonstrate what it has delivered to the greater Madison area. This includes an analysis of the "civic input" of Overture and its role in providing a quality of life in our community that we all enjoy. The case statement could take the form of an independent review which would measure whether Overture is successful in helping draw young entrepreneurs to our community. We suggest polling businesses in the greater Madison area to determine if our business leaders believe that Overture contributes to their ability to recruit talent to their companies. Also, the review should provide data on performances and children's programs, the number of visitors who attend events, and the use of the facility for gatherings and weddings.

Our citizen group spent a significant amount of time discussing the importance of an accurate and comprehensive budget, particularly in light of the recent refinancing changes. We believe it is important to cash flow remaining debt and to re-establish a maintenance reserve to fund long-term repairs, replacement of equipment, and other depreciating items. Under the current projected budget, it is clear that expenses will soon outstrip revenues and, based on projections provided to our group, the gap could exceed $3.0 million by the year 2012. As part of the development of an accurate and realistic budget, our committee recommends a significant change in the operation of Overture and its affiliated organizations. In our view, the current organizational structure leads to confusion as to duties, roles, and revenue and expense control. We suggest merging the current Madison Cultural Arts District, Overture Development Corp., 201 State Foundation and Support Organization of Madison Cultural Arts District into two distinct operating entities; one that operates the enterprise and engages in fundraising campaigns, and one that owns the building and manages the fundraising revenue and other monies that are accumulated. Part of any budget management discussion should be Overture's relationship with the resident companies, and if any, the level of subsidy Overture is providing for resident companies to use the facility. Our group was not prepared to recommend revisiting charges to resident companies, but suggested that if there is a subsidy in exchange for the use of the facility, the amount be fully documented and publicly acknowledged to help build awareness and support for Overture.

Looking into the future, our group recommends an aggressive budget management strategy that includes a variety of specific suggestions. We believe Overture needs to review the level of staffing at the facility, and how the staff is compensated. We feel that there is a need to align the Overture staffing and cost patterns which ebb and flow seasonally based on performances with the City of Madison's budget process, and the annual salary adjustments provided to City employees. Currently, wage and benefit increases are rising faster than current and projected revenues. This needs to be reviewed and perhaps a more flexible model adopted going forward that would allow Overture to manage the single largest component of its budget. This point raises the general issue of the relationship of Overture with the City of Madison. The City currently provides $1,720,185.00 in direct subsidy to Overture. The Madison Cultural Arts District pays the City $477,383.00 for a payment in lieu of property taxes to cover costs associated with police and fire protection. We believe the City of Madison should revisit this financial relationship, consider and compare its support to the former Madison Civic Center, and adjust the commitment to Overture to proportionally reflect the size and scope of the operation as well as the impact on the community. We also feel that the City should consider assisting Overture with personnel costs that exceed budgeted and planned amounts; the city should have oversight and review authority for new positions requested by Overture based on budget limitations. Since Overture is a regional arts performance facility, which is clearly documented by origin of visitors from outside of the city limits of Madison and with the representation on the MCAD board by representatives appointed by the Dane County Executive, we believe Dane County and possibly some municipalities adjacent to Madison ought to be investors in the annual operation of the Overture as well.

In light of recent events regarding the liquidation of the investment portfolio and retirement of SeriesA debt on Overture, the objection by bond counsel regarding the qualification of Overture for tax exempt borrowing status may now be moot. The absence of private gifted funds subsidizing the operation means the enterprise has to stand on its own and cash flow its operations. It is clearly a quasi-public, not-for-profit entity, and therefore, should qualify as tax exempt for borrowing purposes. MCAD should consider the appointment of an oversight committee to review the eligibility to issue tax exempt bonds, refinance the existing taxable debt, and develop strategies to retire that debt.

The committee feels that Overture should use this report and other supporting data to engage the community in an aggressive capital campaign designed to help with operations, build an endowment to support the operations of Overture and bring more profitable performances to the venue. Recently, the MCAD board has hired a development director, and after five years, there is a fundraising strategy evolving which should be accelerated. The director of development should work closely with the United Way of Dane County, the Madison Community Foundation, existing donors to Overture, and the Great Performance Fund to ensure that a campaign is successful and builds on past contributions.

Our committee feels that in order to improve financial operations at Overture, a regional or even statewide strategy needs to be deployed. Diligent efforts should be put forth to develop a plan and budget for consolidation and joint marketing opportunities with resident companies including other Dane County performing and cultural arts entities. The committee feels that there is an opportunity to attract Overture visitors to our City, but we currently fall short in our efforts to reach out to those prospective visitors. MCAD should engage professional marketing consultants to work on a coordinated plan to accomplish this goal. We also believe that the MCAD board needs to review the mix of performances at Overture to ensure maximum cash flow yet retaining the integrity of the facility as an arts venue.

The committee has reviewed and had extensive conversations over the creation of an entertainment district. The purpose of such a district would be to consolidate operations of some or perhaps all of the greater Madison area public performances and meeting facilities. The model that has been deployed in this and other states includes authority to levy a tax to support such an enterprise. An entertainment district in Wisconsin with taxing authority would need state legislative approval. Some models also include a broad array of cultural facilities like museums and zoos in a district. The committee reviewed the history of these types of structures in Wisconsin (examples include: Lambeau Field, Miller Park, and the Midwest Express Center). The committee also reviewed a similar arts organization in Denver, Colorado, which recently was visited by a delegation from Madison. The committee did not have consensus on the breadth of local facilities that ought to be included in a proposed district. The committee is well aware of the significant political challenges connected with receiving approval for this type of structure during difficult economic times, and especially with the discussion of a regional transportation authority also being debated locally. We believe the idea of an entertainment district has merit and ought to be considered and debated by local policymakers. The benefit of consolidating subsidized City and County facilities under one operational umbrella, and acknowledging the efficiencies that could be achieved by consolidating professional public assembly staffs, technicians, catering services, and marketing services, makes the entertainment district idea one worth considering. We propose the City and County jointly appoint a high-level group to add detail to the concept and engage the public in a dialog regarding this issue.

In conclusion, the Overture Center for the Arts is a promising asset for our region; in short, it is what makes a great place to live even better, but its fiscal future is clouded. The situation requires strategic attention to the organizational model, budget, fiscal analysis and future revenue streams. We urge quick action on our recommendations in order to restore public confidence in the facility and ensure that it continues to provide enjoyment to our citizens for years to come.

Best wishes,

Mark D. Bugher