Scenario points to need to fill every seat in the house every day of the year with paying customers to cover what could be $125-million city revenue bond
Just how high would a surcharge on tickets at the Van Wezel Performing Arts Hall — and, later, a new Sarasota Performing Arts Center — have to be to pay back a revenue bond for part of the cost of that new venue?
That is a question that City Commissioner Jen Ahearn-Koch posed to her colleagues during their regular meeting on April 18. It is a question that community residents have been asking her, she said. (See the related article in this issue.)
This week, Ron Kashden, a Certified Public Accountant with more than 30 years of experience — including five years as chief financial officer of a multi-billion-dollar hedge fund and several years of service as the auditor of the Shubert Theatre on Broadway in New York City — provided The Sarasota News Leader details of an analysis that he has undertaken, based on available information.
The Van Wezel, he determined, averages 145,000 attendees a year. A Connecticut company that undertook a 2015 analysis of the Van Wezel and a new performing arts center — AMS Planning & Research Corp. — discussed in its report a larger facility with a longer season, which could result in the sale of 198,000 tickets a year, Kashden pointed out.
Using the Van Wezel’s historical averages and the AMS projections, Kashden calculated that a $79.56 surcharge per ticket would be necessary to pay back a revenue bond of the size the City Commission has discussed.
That would be on top of what Kashden has predicted would be an average ticket price of $74.54.
He did note that he used the attendance forecast by AMS for a 2,100-seat venue. Representatives of the Van Wezel Foundation have told the City Commission that the new facility would have a main hall that would seat 2,250 people.
Those representatives also have estimated that that venue — dubbed the Sarasota Performing Arts Center (SPAC) for now — is expected to cost between $300 million and $350 million. In voting 3-2 on April 4, the City Commission committed the city to covering half of the expense, whatever it ends up being
However, City Attorney Robert Fournier did point out that the commissioners would have the right to tell the Foundation leaders to scale back the venue if the commissioners believe the city’s expense would be an undue burden.
During two discussions of the funding issue — on March 21 and April 4 — City Manager Marlon Brown told the commissioners that the city could issue a revenue bond to make up any difference between the amount of money it would be able to utilize from various other sources and the amount it will need for its share of the SPAC’s cost. He included the revenue bond scenario as a major option, as he made clear the uncertainty about whether the city could get grant funds to support the project.
City Finance Director Kelly Strickland added that though the general life of a bond is 30 years, the city’s financial adviser had reported that he has seen bonds extend up to 40 years, but those are “rare instances.”
During the board’s April 4 meeting, Brown indicated that city staff hopes the revenue bond would have a 50-year life, based on an assumption that the SPAC would be in operation that long.
Strickland also has pointed out to the commissioners that, with a revenue bond, the city could not tap its General Fund to plug any gaps in funding needed for the SPAC. The General Fund largely is made up of the city’s annual property tax revenue. Instead, she said, staff would have to pull from other revenue sources and make cuts in staffing and services.
Brown has noted that 50% of the money the city will realize from a tax-increment financing (TIF) district created for The Bay Park will be dedicated to the SPAC. The city also could try to prevail upon the Sarasota County Commission to allocate Tourist Development Tax — or “bed tax” — revenue to the project, especially if — as expected — the County Commission next week approves a sixth Tourist Development Tax penny that would be imposed starting on Oct. 1, as the 2023 fiscal year gets underway.
Another option, a general obligation bond, would put the cost burden on city residents, as noted during the commission’s discussions. First, city voters would have to approve such a bond. Second, the debt service on a general obligation bond would have to be paid by city taxpayers. Commissioner Hagen Brody, especially, has stressed that the SPAC would be a regional facility. Therefore, he said, it would be unfair to make city property owners shoulder the financial burden for a facility that draws many of its patrons from outside the city.
Public concerns, fears and dismay
During the April 4 discussion, as the Sarasota city commissioners were contemplating a partnership agreement with the Van Wezel Foundation, members of the public implored the board members to be wary of the city’s potential financial liability for the SPAC.
“I’m not very comfortable with the partnership,” Larry Grossman said, “and I think the city needs to be in control, because it’s going to own the property, and it has an obligation to the citizens to be in control.”
Given the structure of the agreement, he added, “I think the city is taking not a driver’s seat but a passenger seat, if not the back seat, in this process.”
The morning after the commission vote in support of the agreement, another city resident Cathy Antunes, wrote a post on a community Facebook page, Citizens for Sarasota County.
“Yesterday’s City Commission meeting was an experience!,” she began. “I watched the writhing by some commissioners,” she continued, when they addressed a $10-million management agreement for the renovations at the Bobby Jones Golf Club. The debt on that will “sting,” Antunes quoted Commissioner Brody. “Really? It will ‘sting?’” Antunes wrote.
“This compared to the carefree attitude regarding $200 million+ funding for the proposed performing arts center was mind boggling. Mind-boggling.
“I support the arts. I don’t support crazy spending,” she added.
John Wesley White, who served as the Sarasota County administrator from 1987 to 1997 and as acting executive director of the Van Wezel Performing Arts Hall for about 10 months — from late 2006 until late August 2007 — sent an op-ed essay on the topic to the Sarasota Herald-Tribune that had not been published as of the deadline for this issue of the News Leader. White shared it with the News Leader.
“I am concerned about the City of Sarasota’s decision on development of a new performing arts center, including concerns about loose accountability for design and construction, its unknown financial impact, and the ‘To Be Determined’ nature of an operating agreement which could restrict the City Commission’s ability to address problems,” he wrote.
“It’s inappropriate to leave until later major questions like shuttling patrons from remote parking, how to deal with the competitive environment, and the future of the Van Wezel Performing Arts Hall, rather than considering those factors as integral to the success of the new center. This begs a strategic plan, not the hurried way the new arrangement was approved.”
He continued, “The 3-2 vote of the City Commission is a precursor to the divisions that will haunt the community because of a lack of leadership and strategic planning specifically for the new performing arts center. Preconceiving the bayfront location, ignoring known operational difficulties, and facing competition from numerous sources that could affect feasibility of the new center, without addressing those issues in a strategic plan, is tantamount to civic misfeasance. Once constructed, the new center could very well be an irreversible millstone around the neck of the community. Such major issues should be thoroughly elaborated and addressed before proceeding with such a massive undertaking,” he added.
“It appears the City has made its decision based on a divided (both on the commission and in the community) perspective, unsupported by the kind of hard evidence that a formal strategic plan could provide, leaving too many unanswered questions,” White added. “Absent that rigor, the decisions might very well turn out to be erroneous, which could be a huge financial and community development mistake that will burden future taxpayers and residents.”