To appropriately carry out its assignment, the Committee formed two Subcommittees – the Design Subcommittee led by Wallace Stettinius and the Finance Subcommittee led by Thomas Farrell.

The Subcommittees gained an in-depth understanding of the needs and aspirations of our performing arts community.  Equally important, the Subcommittees considered the financial funds available to renovate the CCPA and to construct new facilities adjacent to the CCPA.  Currently, these resources include “City of the Future” funds, cash and pledges on hand and estimated historic tax credits.  In making its recommendations, the Committee considered the best use of the collective resources available both to support the CCPA and the Landmark and to meet the needs of the arts organizations and the Greater Richmond community.

On May 1, 2006, the Committee delivered its initial Interim Report to Mayor Wilder and recommended two alternatives for the CCPA:

1.     A $45 Million “Base Plan” that is supported by the funding currently available to meet many of the needs of the public, arts organizations and patrons.  The Base Plan includes major renovation and improvements to the CCPA, bringing its total size to over 75,000 square feet.

2.     A $65 Million “Enhanced Plan” that would meet most of the needs and aspirations of Richmond’s growing and diverse arts community.  This plan includes additional improvements to the CCPA, beyond the Base Plan, and provides several new adjacent performing venues and other facilities for the public and arts groups, forming a 155,000+ square foot Performing Arts Center (“Center”)

The Committee concluded its recommendations in this area by stating that:      “If the community can demonstrate its ability and commitment to raise an additional $20 Million by the end of the year, the Committee would support the recommendation to pursue the Enhanced Plan.” 

The first Interim Report listed “Key Phases and Timetables” covering action steps to be taken by the Foundation and the arts community between May 1^st and September 1^st, the date of this second Interim Report.  Accordingly, the following sections summarize the Committee’s report and recommendations which are based on the Committee’s understanding and assessment of the progress made on each of the key phases, as of September 1^st, covering fundraising for the Enhanced Plan, design and construction plans, facilities management, pro forma financial projections, governance and organizational structures - as well as landscaping the construction site at Broad and 6^th Streets.  The last section of this Interim Report includes the Committee’s recommendations for certain improvements at the Landmark.

Fundraising Assessment for the Enhanced Plan

During May and June, the Foundation engaged a fundraising consulting firm to independently test the feasibility of raising $20 Million by December 31, 2006, the deadline for reaching the $20 Million Enhanced Plan goal.  The firm interviewed 56 business and community leaders who collectively said that raising the $20 Million would be a challenge, due to the short time frame, but that it was clearly doable in light of the compelling case for the Enhanced Plan.  The study’s participants also believed that the Enhanced Plan was an essential component of Richmond’s quality of life experiences, our arts and culture and downtown revitalization.  They indicated that our community would be willing to make significant investments in both time and money toward the Enhanced Plan.

Fundraising.  The Foundation reports that, based on the findings and recommendations of the feasibility study, the Foundation established a Campaign Cabinet, organized into two fundraising teams and set monetary goals and timetables to raise the $20 Million.  The Campaign Cabinet currently has 18 members made up of the Foundation’s Board, Executive Committee, business leaders and supporters of the performing arts.  Led by Sue Fitz-Hugh and Jim Ukrop, this team is focusing on individuals and private foundations.  Two or more members of that team personally meet with each potential investor, present details of the Enhanced Plan, discuss key issues and opportunities and ask for his or her support.  Led by Tom Farrell, the Campaign’s corporate team is presenting investment opportunities to the CEOs of Richmond’s corporate community.

The Foundation reports that its efforts are aimed to involve over 250 individual contributors, corporate executives, foundations, as well as the help of elected officials to ensure completion of the Enhanced Plan.  In summary, the Foundation reports that the $20 Million campaign is moving forward strategically and that it will publicly announce key milestones as they are reached.

Cash and Existing Pledges.  In May’s Interim Report, the Foundation reported that it had $10 Million in cash and pledges on hand.  Since about one-half of this amount is previous pledges being paid over time, the Campaign Cabinet has been meeting privately with these key supporters to share with them the Enhanced Plan and reconfirm their commitment to honor their pledges.

Recommendation Regarding Enhanced Plan

Consistent with the fundraising goals to achieve the Enhanced Plan is the need to advance design and construction plans.  Accordingly:

·        The Foundation will report to the Committee fundraising milestones as they are reached in the weeks and months ahead,

·        The key planning, design and construction phases of the project have appropriate “Go / No Go” decision points, and

·        The construction plans call for September 2009 as the completion date and for the grand opening of the Performing Arts Center.

Copies of the latest plans for floors 1 and 2 of the Enhanced Plan are enclosed.

The Foundation and its architects and contractors have prepared detailed project plans and timelines.  The enclosed chart highlights key program, design and construction steps, major deliverables, decision dates and an opening night in September 2009.  The Committee recommends that, as the Enhanced Plan is carried out, the Foundation report the results to the Committee and to the City, as requested, when milestones and key decision points are reached.

Governance and Organizational Structures

The Federal and Virginia Historic Tax Credit Programs help organizations and developers finance important rehabilitation projects.  Most groups rehabilitating historic theaters, including the Virginia Performing Arts Foundation (“Foundation”), are not-for-profit groups that cannot use historic tax credits themselves.  The Committee recognizes that there are different ways to approach the issue of using historical tax credits.  After carefully considering several, the Committee recommends creating a for-profit entity to undertake the renovation and construction of the Enhanced Plan.  The for-profit entity would include one or more investors who, as limited partners, would use the tax credits generated by the renovation and, in return, contribute equity to the project and would be a valuable source of funds to complete the Enhanced Plan.

Since a significant investment is being proposed for the renovation and expansion of the CCPA, the Committee understands that syndicating both Federal and Virginia historic tax credits would generate approximately $12 Million of cash.  These funds are critical to financing CCPA’s renovation and expansion and are a key financial component of the $45 Million Base Plan and the overall $65 Million Enhanced Plan. 

Similar renovations that have successfully earned both Federal and state historic tax credits have used a for-profit Limited Liability Partnership (“LLP”) as the for-profit entity.  In this case, the Performing Art Center Limited Liability Partnership (“PAC LLP”) would serve as the for-profit entity to earn tax credits and convert them into cash.   It would then partner with a bank or other large established Company that would like to reduce its tax liability by obtaining the historic tax credits.  The Company serves as the “equity investor” and is the “Limited Partner” in PAC LLP.

Under this plan, the General Partner of the Limited Liability Partnership would be a newly formed, for-profit Corporation, called the Grace Street Center Corporation (“GSCC”). The newly formed for-profit Corporation that serves as the “General Partner” would have voting control over the Partnership and its Board of Directors would make key renovation and construction decisions.  The Board of Directors of GSCC would consist of the following seven Members:

• The Foundation, on behalf of the arts groups, will appoint three Members.

• The City of Richmond, on behalf of the public, will appoint three Members.

• The above six Board Members will nominate and elect the seventh Member who will serve as Chair of the Board.

If this plan is followed, the Committee recommends that the seven Members of GSCC’s Board should collectively have appropriate experience in community leadership, design and construction management, historic renovation, historic tax credits and project finance.

Since, under this plan, PAC LLP would be responsible for carrying out the Enhanced Plan, the General Partner would have specific roles and responsibilities to ensure that the CCPA is renovated and expanded and that the new, adjacent performing arts facilities are constructed – as planned and specified by the Foundation and agreed to by the Committee and as required for the project for the historic tax credit applications to receive final certification.  As discussed in the following section, the Committee recommends that the Center be managed by a separate management entity.  Accordingly, while PAC LLP would be a party to the facilities management agreement, it would not have day-to-day responsibilities for the Center’s management and operations.

Management Entity Consideration and RFP

In its initial report, the Committee stated: “To realize the greatest potential for efficiencies in operations, effectiveness in marketing and fairness in access, the Committee recommends that “management” of the Center and the Landmark should be performed by a separate entity with public and private Board appointees who represent our constituents and have subject-matter knowledge and expertise.”

The Committee recommends that leaders of the Foundation and City of Richmond work together to form a separate management entity, appoint the Board and formalize the facilities management agreement by spring of 2007.  The Committee recommends that the facilities management entity would:

• Represent the City of Richmond, the Foundation and the numerous and diverse arts organizations and other users of the facilities.

• Direct the ongoing management and operations of both the Landmark and the Center and operate the facilities to meet financial goals.

• Be responsible for procuring and overseeing any management services provided by one or more specialist companies that might be selected as subcontractors through a “Request for Proposal” process.

• Work closely with the Foundation and arts organizations in annual fundraising and endowment development activities.

The Committee will work with the City and the Foundation representatives to discuss the composition of the Board, type of management entity, financial goals, terms and conditions of management agreements and proposed RFP.

Operating Pro Forma and Financial Projections

At the Committee’s request, the Foundation has been working with the leading performing arts groups to develop “pro forma” operating statements that model and project the combined financial operations of the Landmark Theater (“Landmark”) and the Center.  The pro forma financial projections are based on historical information as well as effective “business models” that arts organizations in other cities use to coordinate and manage operations.

The Committee and the Foundation recognize that the key assumptions used to produce the pro forma financial projections need to be agreed to by the Foundation, the City of Richmond, the facilities management organization and the arts groups that use the facilities.  The pro forma financial projections being prepared by the Foundation and to be reviewed by the City and the Committee will be based on the following assumptions:

Revenues

• Projected usage days within the Landmark and CCPA would be based on:

  • Discussions with Symphony, Opera, Ballet, etc. requested usage

  • Based on prior years’ community events, holiday scheduling, etc.
     

• Projections would be based on the event booking, assuming that:

  • Almost all major Broadway Promoter (“BP”) events would be at the Landmark.   Since “blockbuster shows” would want access to most seats possible, Landmark would be the venue for the big BP shows, with smaller Broadway and other commercial productions at CCPA.

  • Most Richmond Symphony, Virginia Opera and Richmond Ballet events would be held at CCPA, with priority scheduling.

  • Smaller community events, including those related to the educational program, would be held in the Community Playhouse.
     

• Daily rates projected at the Landmark and CCPA range as follows:

  • Commercial rehearsals and performances would be based on commercial rates, and

  • Not-for-profit community groups would be about half of commercial rates; no significant change in rental rates for local not-for-profit performing arts organizations
     

• Additional revenue from “at-risk presentations” and Broadway Promoter series that would be consistent with facilities management objectives.
   

• Corporate sponsorships of Broadway series and other performances that would be consistent with prior-year and other communities’ sponsorships.

Expenses

• Projected leadership and staff positions would be based on “best practice” guidelines and operating requirements of the facilities.
   

• Projections would include operating expenses for all utilities, maintenance, janitor and security, etc. at the Landmark and the Center.
   

• Pro forma would include all operating expenses for the Landmark and Center; but exclude capital maintenance/building repairs at Landmark and Center.

Capital Investment

While maintenance and repairs for the Center may be less in the early years, the Committee recommends that the:

• Center’s annual financial projections include sufficient amounts to plan for and provide funds for capital maintenance and major repairs. 

• City of Richmond plan for capital maintenance and major repairs for the Landmark.

The Committee recommends that the Foundation and participating arts organizations continue to study operating best practice and peer group data.  Additionally, the operating pro forma assumptions and management projections need to be continually refined, discussed and reviewed with the City of Richmond, the Foundation and the Board of the facilities management entity.  Finally, the Committee continues to encourage the raising of endowment funds over the long term to support facility operations, stabilize rental rates for arts groups, help fund major repairs and reduce the amounts of operating subsidy that the Foundation and the arts community would need to raise each year.

Landscaping of Construction Site – Broad and 6th Streets

The Committee understands that the Foundation is carrying out the necessary steps to fill in the hole and landscape the construction site at Broad and 6^th Streets, including the following:

• Develop site plans, including designs to fill the construction hole, landscape along Broad Street, rebuild sidewalk vaults, fence the construction area and enclose the SEQ structure for safety (completed).

• Meet with and receive approval from Community Development Authority (“CDA”) for site plan and CDA compliance (completed).

• Complete necessary documents and submit them to the City of Richmond for review and appropriate construction permits (completed).

• Engage construction manager to ensure that project is completed on time and within budget (completed).

• Advertise and solicit bids for contractor to fill hole, landscape and carry out other necessary work (September/October).

• Carry out construction plans – fill construction hole, landscape, install sidewalks, fence area and enclose SEQ structure by January 2007.

The Committee understands that funds necessary to complete this project are being provided by the Foundation and are not part of the $65 Million funds related to the Enhanced Plan.

Suggestions for Landmark Theater Improvements

The Landmark Theater was built in the late 1920s and, over the years, the 175,000 square foot facility has served both as a municipal auditorium for graduations, lectures, etc. and a performing arts venue for the Symphony, Ballet, Opera, touring Broadway productions, special headliner performer concerts and the Richmond Forum.  

The Landmark has a key ongoing role in Richmond’s performing arts, especially as the home of the Richmond Forum and the venue for touring Broadway shows and “blockbuster” music tours that need a large audience capacity to be economically successful.  Mayor Wilder recognizes the Landmark’s importance and his “City of the Future” initiatives include over $4 Million for improvements.

The Subcommittee reviewed the Landmark plans and had numerous discussions with arts groups and subject-matter experts.  The Committee recommends that the funds for Landmark improvements be allocated between “back of house” improvements to draw more commercial productions and “front of house” improvements to better serve Landmark patrons, including:

 ·        Loading Dock Facility, approximately $2 Million.  Loading in of Broadway road shows currently is a very inefficient and tedious process.  Major touring shows have many trucks and they must unload one-at-a-time onto a platform lift to the stage.  As a result, some shows either do not bother coming to Richmond or they come and do not unload all the scenery and staging because of loading dock problems.  To make the loading process more efficient and safer, a redesign would provide a new, two-bay loading facility at stage level with better stage support.

·        Acoustical Reflector, approximately $350,000.  Sound in the Landmark could be significantly improved by adding acoustical material and reflectors within the theater.

 ·        Expanded Restroom Facilities and ADA Compliance, approximately $2 Million.  The Landmark needs more and better restrooms; adding more restrooms and providing ADA accessibility would significantly enhance patron experiences.

 ·        Painting of Theater’s interior, approximately $100,000.  While much of the Landmark’s interior paint problems relate to air and moisture issues, fresh coats of paint in key theater and lobby areas would be another improvement noticed by all.

 Over the years, as additional capital resources become available, the Committee recommends additional long-term improvements could include further stage house improvements, additional dressing rooms and increased lobby spaces.

 Summary and Next Steps 

In closing, the Committee believes that the City of Richmond, the Foundation and the arts community have taken major steps together to enhance Richmond’s quality of life, promote Broad Street revitalization and economic development, enhance arts education, ensure historical preservation and help meet the needs and aspirations of our diverse arts community.  In addition to the areas reported on above, the Committee understands that the arts, business and educational community are focusing on educational programming, community engagement, marketing and collaborative visual and performing arts activities.  While all of these activities are important to the community, the Committee believes that the highest priorities in the months ahead will be:

• Achieving the $20 Million fundraising goal for the Enhanced Plan,

• Recommending governance and organizational structures of the Center,

• Completing 50% of the Design documentation of the Center,

• Landscaping of construction site at Broad and 6^th Streets,

• Completing the details for a recommendation on the facilities management entity and related financial pro forma,

• Coordinating the schedule of Landmark Theater improvements,

• Completing of design for construction – April 2007,

• Issuing RFP for construction – June 2007

• Planning Grand Openings of the Center’s facilities – Fall 2009

The Committee is committed to doing its part to help ensure that these important projects stay on track and on time – and that communications are open and timely.  Because of the importance of the above areas, each will continue to be closely reviewed and the Committee will fully report on each activity in its Final Report, which will be issued on December 31, 2006.  In the meanwhile, the Committee welcomes questions and comments from the arts community and the citizens of the City of Richmond.     

End of Report

Enclosures Follow:

Draft of Enhanced Plan’s Floor 1

Draft of Enhanced Plan’s Floor 2

High-Level Design and Construction Timetable