HomeMy WebLinkAboutFCS-14-138 - CITS and KWS Review (with App)Staff Report
rTC.�r R finance and Corporate Services Department www.kitchener.ca
REPORT TO: Committee of the Whole
DATE OF MEETING: August 25, 2014
SUBMITTED BY: Corina Tasker, Internal Auditor, 519 - 741 -2200, ext 7361
PREPARED BY: Corina Tasker, Internal Auditor, 519 - 741 -2200, ext 7361
WARD(S) INVOLVED: ALL
DATE OF REPORT: August 18, 2014
REPORT NO.: FCS -14 -138
SUBJECT: Centre in the Square and Kitchener Waterloo Symphony
Operational and Strategic Review
RECOMMENDATIONS:
That staff be directed to work with representatives of the Centre In The Square (CITS),
to:
(1) revisit the mission and mandate of CITS,
(2) identify the priorities and parameters for the City's funding relationship with CITS,
specifically as it relates to the City's arts and culture strategy,
(3) review existing plans for physical improvements to the CITS building, and make
recommendations to City of Kitchener on the final plans, and
(4) analyse the costs of any proposed physical improvements and make
recommendations to Council as to the funding of such improvements; and
That staff be directed to coordinate the selection of a facilitator to lead the mission /
mandate discussion and the subsequent facilitated sessions between the City, CITS
and the Kitchener Waterloo Symphony (KWS).
BACKGROUND:
The City of Kitchener, Centre in the Square (CITS) and the Kitchener Waterloo
Symphony (KWS) jointly engaged Webb Management Services Inc. to comprehensively
review the operations of both CITS and KWS in order to identify options for future
operating models and recommend the most financially sustainable operating model to
support both entities and their continued partnership. The assessment was to provide
an expert, objective review and specific recommendations to inform future decisions
surrounding the operating model for each organization and also the nature of the
business relationships, operating arrangements and financial commitments between the
City of Kitchener, CITS and KWS.
REPORT:
The consultant's final report is attached as Appendix A. In addition, the chairs of the
respective boards for CITS and KWS, and City staff have prepared a management
response to those recommendations, which is attached as Appendix B. The Council
recommendation noted above relates to the recommendations made by the consultant
which involve City of Kitchener staff or resources.
ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN:
The output of this review supports the community priority of "quality of life" within the
City's strategic plan. Specifically by supporting and participating in this review, the City
is helping to support CITS, KWS, and arts and culture in general. The strategic plan
states that we want to be a "community that invests in ... amenities such as ... theatres...
It also acknowledges that art and culture is an economic driver and central to a healthy
community.
FINANCIAL IMPLICATIONS:
The City will contribute 1/3 of the cost of a facilitator. However, the cost is unknown at
this point in time. If staff determines that a consultant is required in relation to the
identification of physical improvements, a report will be brought back to Council for
approval as required.
COMMUNITY ENGAGEMENT:
INFORM — This report has been posted to the City's website with the agenda in
advance of the council meeting.
CONSULT — The consulting team interviewed 60+ community members from various
arts organizations, including but not limited to CITS and KWS, as part of this review.
ACKNOWLEDGED BY: Dan Chapman, DCAO, Finance and Corporate Services
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Appendix B — Management Response
CITS, KWS and the City have prepared the following management responses and action plans
related to the specific recommendations relevant to their organizations. The organization which has
provided each response is noted in parentheses.
All three organizations agree that there are three top priority recommendations which must be
addressed first before the others are even considered. This is because the outcomes of these three
recommendations may end up changing or impacting the others. They include:
• Revisiting the mission and mandate for the CITS
• Facilitated discussions between all three organizations
• Identification and planning of physical improvements to CITS
Recommendation: The City, with the guidance of CITS leadership, should develop a new
mission statement for Centre in the Square, to express its goals for CITS — how the building
should serve and support Council's vision for the City's future.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[COK response] The City interprets this recommendation to mean that the City needs to determine,
with the input from stakeholders, what they want the CITS building to be. Why does it exist and who
does it serve? Should it be a profit oriented business or community resource or something in
between? Without this direction the CITS board and management have no guiding principles to
lead their decisions surrounding programming, operations, physical improvements and other facets
of their organization. The pressure to improve financial performance while still supporting community
groups such as KWS is a difficult dilemma for CITS. Providing specific direction around the overall
purpose of the CITS building will help with this.
With Council's direction, the CITS and COK will create a new ad -hoc committee to re -visit the
direction as described above. Members of the community or advisory committees could be included
for wider community consultation. The committee could also include representation from KWS as
well as CITS and COK staff, board members / Councillors.
It is recommended that a facilitator lead the discussion to clarify the direction for CITS. This could be
the same facilitator hired for the discussions between the organizations, with this being the first topic
of discussion. The terms of reference for this ad -hoc group would be time limited and developed
with staff. It is important that this process be done expediently in order for the other
recommendations to be addressed in a timely manner. For this reason wide - spread community
consultation is not recommended at this time.
[CITS RESPONSE] We agree that the City and CITS need to re- engage each other about the CITS
mission (along with more practical matters). But we do not automatically assume that CITS requires
a new mission. It may be that the old CITS mission and mandate simply needs to be renewed and
reaffirmed, with clarified relationships between CITS and the City and a formal agreement put in
place to set the parameters and terms of the City's annual operating grant to CITS.
It's true that the existing CITS mission statement ( "to create memorable experiences ") has not been
reviewed for several years and does not provide much guidance. However, a clearer mission and
mandate was spelled out in the 1981 CITS legislation, which empowered CITS to be an active
presenter of the performing arts, operating at arms' length from the City. Our recent strategic plan
was aligned with this mandate.
We are concerned that a mission statement process will not be helpful -- or come to realistic
conclusions -- if it is too open- ended. We suggest that the first step is for CITS staff to meet with
City staff for the purpose of developing greater understanding of (1) the financial and industry
realities under which CITS operates, (2) the existing mission and mandate (3) the City's arts and
culture policy and framework and how the City's priorities apply to the City's funding of CITS and (4)
the need for a funding agreement between CITS and the City to provide transparent terms and
conditions to CITS annual funding and indicators against which CITS can be measured.
We think it's important that CITS staff be actively involved (from the beginning) in establishing the
terms of reference and direction of this process.
[KWS response] The KWS would welcome the opportunity to participate in the ad -hoc committee to
provide input as one of the main tenants of the building. The KWS acknowledges the importance of
a well- defined direction and mission for CITS, as it fulfills its role as a multi -use performing arts
facility.
Recommendation: CITS, KWS and the City must come together for a facilitated discussion on
how to resolve differences and lingering tensions between the two organizations. Then there
must be agreement on management of the calendar, likely requiring some concessions on
the art of both rou s, but also the search for other options and solutions.
[CITS RESPONSE] CITS supports this recommendation and hope that we can develop a mutually
agreed set of financial facts to guide the discussion.
We also suggest that samples of "best practice" agreements between venues and resident
companies in Canada could be a helpful guide for these discussions.
We appreciate the acknowledgement that the status quo approach to calendar management might
have to change. We also greatly appreciate the benchmarking data which suggests that other
venues and resident symphonies across the country have successfully implemented changes to
their performance schedules.
[KWS response] The KWS is committed to further facilitated discussions with CITS on how to
manage the calendar to support the health and growth of both organizations and continue to develop
a dynamic relationship. The KWS is willing to share the cost of a facilitator with other participants.
[COK Response] The City is willing to participate if requested by CITS and KWS. The City is also
willing to pay 1/3 of the cost of the facilitator if participating.
Recommendation: The City should initiate a planning process to identify and plan physical
improvements to CITS, partly to catch -up on existing capital maintenance, but more
importantly to consider how the building should be renovated and upgraded to be attractive
for audiences and users for the next 30 years. This also includes consideration of how the
KW Symphony can be brought back into the building towards a more aggressive integration
of operations with that group.
[COK Response] This recommendation speaks to the need for a master plan for the CITS and KWS
operations. As part of that master planning process, roles and responsibilities for operating and
capital decision making can be defined in relation to the CITS and City. The master plan will
influence capital priorities moving forward.
This recommendation also speaks to the need for a comprehensive audit and an asset management
plan for the facility. The asset management plan will also need to include the vision /direction from
the master plan. Capital investment plans will need to be developed in relation to the physical asset
and those which support its intended use (i.e. arts and program related capital investments). The
City can support the comprehensive audit process and the development of asset management
plans.
[CITS Response] We are glad to see that capital improvements and upgrades have been identified
as a priority area for CITS. We note the following:
1. CITS has for some time identified and prioritized capital and maintenance requirements. We
have technical audits that include capital work already completed and prioritized work for three years
and beyond. There is a wealth of expertise among our staff and crew, and recommend that the
initial planning be conducted with CITS staff
2. Capital planning was thoroughly considered in a 2010 report by Ketchum Canada Inc.
3. CITS is responsible for the facilities occupied by KW Art Gallery, which occupies over 20,000
square feet of the building. The capital requirements for a contemporary art gallery are entirely
different than that of a performing arts venue. For this reason, we believe that KW Art Gallery
should be considered a major stakeholder and participate in discussions around future
improvements to the facility.
[KWS response] The KWS's administration offices and a small performance space are at the
Conrad Centre, a location that has supported our growing operations well over the past 5 years.
The KWS is open to exploring the idea of moving operations back to the CITS but extensive
research is necessary to determine the viability of such a move and ensure that the needs of the
orchestra would continue to be met.
The following are additional recommendations contained within the consultant's report for which
management responses have been provided. Please note that not all recommendations are listed, as
mentioned above, because some are dependent on the outcome of the top 3 priority
recommendations before any of the organizations wish to comment on them.
Recommendation: Once governance issues have been addressed, CITS should develop a
programming plan that recognizes the various options and alternatives available to
performing arts facilities. All of these choices depend on partners and relationships,
whether with local arts groups, event planners and educators or with other facilities or
promoters. Some of them will help to drive earned
income, but others will have a greater impact on contributed income.
Strategic options include:
At -risk oresentina
Education
Meeting and events
Sector service provider — perhaps in partnership with the Creative Enterprises Initiative
[CITS Response] CITS undertook a review of all options when developing the current Strategic
Plan, and all of the above routes were considered. Some have also been attempted in the past.
The focus of the Strategic Plan was to build our rental business. This direction provides the highest
level of financial income and least amount of financial risk to CITS. As previously noted, we believe
that we need new access to the performance calendar in order to build this business.
The challenge is to substantiate how the other options which are proposed above would generate
new revenue or enhance the performance of CITS.
We greatly appreciate the consultant's observation that CITS staffing and management overheads
are low relative to its peers. We think that expansion into new areas will require further investments
in personnel and capital. Such investments may not provide an immediate return, or any return.
We offer the following specific comments on each of the above:
1. At -Risk Presenting.
We think it is important for stakeholders to understand the difference between rentals and
presenting.
When CITS "rents" the hall to a performer, we simply collect a rental fee and the artist or promoter
accepts the financial risk. Whether or not the show does well, CITS gets paid. Renters typically
want weekend dates in order to minimize their own risk.
When CITS "presents" a performance, we hire the artist and we bear the financial risk. If the show
does not do well, we lose money. This is "at risk presenting."
CITS has started to produce content across all art forms introducing audiences to contemporary
dance and circus but these new content streams require risk programming funds to support them.
With a capacity of over 2000, the size of the main hall is large relative to our community's
population. We operate under a collective agreement which can make our production costs high.
It is challenging for CITS to present work that cannot sell in excess of 1300 seats, but content with
the potential to draw that size of audience is limited.
On the other hand, our secondary space, the Studio, is too small to make much money. Recently,
performances in this space have sold to capacity which is 150 -200 people. Studio performances do
not generate enough revenue to be a major income stream.
At risk presenting in the summer has proven has proven challenging but we would agree that
expansion into the summer months would recoup labour costs. The challenge will be to find a niche
within the local market which is heavily saturated in the areas of popular music festivals, theatre
and musical theatre during the summer months.
2. Educational
We agree that education and outreach is important, but we don't believe this is an area where
earned revenue can arow sianificantly. Therefore. CITS would need to generate revenue from
other activities or receive further funding to grow in this area.
We have recently initiated outreach activities, including talk back sessions and appreciative learning
workshops post show. New projects are underway to engage audience members in immersive and
interactive projects where they participate in rehearsals to live performances under the direction of
professional artists. All of these activities play a significant role in developing audiences which over
time will impact audience capacity and box office. However, there is no direct link between arts
education and revenue streams, especially in the short term.
3. Meeting and events
The facility is regularly used for events or conferences of a certain size and scale. However the
facility was not built to accommodate meeting rooms, significant food service, or adapt to various
event sizes and requirements. Fixed seating is another challenge.
Efforts to enter into the wedding or special events area have been made. Success has been limited
by the size of the physical space and labour costs.
We agree that expansion in the area of conferences, meetings and events could have growth
potential. But we also believe that additional capital investments would be required. In addition,
our current labour costs will likely make the business case more difficult.
4. Sector service provider
Management hubs were identified as a key opportunity in the in the early 90s. A successful model
is Performance Facilities Management (PFM) in Rhode Island.
CITS initiated the concept of a management hub in 2007 outsourcing financial, ticketing and
contract services to various arts and non -arts not - for - profit organizations. The intent was to
generate revenue or minimally cover a portion of CITS labour costs.
Recently, CITS conducted an analysis of services outsourced to various organizations from 2007.
It identified that the model was not financially viable and in fact, CITS was losing $18K annually.
CITS retains one client which helps to recoup a portion of labour costs without impacting the day -to-
day operations of CITS.
Ticketing services have been successful in offsetting license and operating costs. Ultimately, the
current ticketing system at CITS is built for large -scale events in order to service The Aud and its
activities. Small to medium sector users with lower capacities have found our system too costly.
CITS is currently under contract until 2016 with the current ticketing system limiting any further
short -term revenue, unless the City requires that all future ticketed events sponsored by the City
must be assigned to CITS.
CITS did provide office space, financial services, ticketing, and rehearsal space to the KWS until
2009.
KWS should develop a new five -year plan to regain financial stability. The focus of the plan
must be the further development of skills, resources, partnerships and marketing /earned
revenue strategy that delivers more value to the region. The key outcome must be a stronger
board that connects KWS to the region and to new private sector wealth. They should focus
on revenue generation, particularly regional municipalities and private contributed income,
.
as well as earned revenue enhancement strategies
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[KWS response] The KWS' current strategic and operating plans focus on the aforementioned
items. There is an opportunity and a need to refine and update these plans that reflects the current
environment and fiscal challenges. The Board is committed to realizing financial health.
There may be opportunities for KWS to explore earned revenue strategies, including:
• strategic pricing and schedule optimization, with increased programming on
Thursdays and less on Sundays
• add summer performances if contracts allow and ample resources are in place
• stage subscriber buying to reduce /remove early discount and enable / encourage
subscription sales before potential prices increases
• offer optional discounts, with the default being to donate same amount to KWS
[KWS response] With the support of an industry specialist, the KWS is continually exploring
earned revenue strategies including strategic pricing and maximizing subscription and single ticket
revenue.