The Arts Center of Coastal Carolina's continuing financial problems bring into stark relief why the Town of Hilton Head Island must get a firm grip on what the community can afford in terms of the arts.
Hilton Head, like other communities, must be realistic.
The Arts Center last week asked for -- and received -- a $346,000 advance on its annual accommodations tax grant to keep it afloat this winter.
President and CEO Kathleen Bateson points to the cost of maintaining and repairing the 16-year-old arts center building as the source of center's problems.
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"This building has been eating our lunch for a long, long time," Bateson told Town Council members at an Oct. 31 council meeting. "... Maintenance expenses have eroded our cash flow. The economics don't work. ... Revenues cover administrative and program costs -- and nicely so -- but I don't know what to do with the building. We plug along, and it creates debt."
Therein lies the problem. Revenue is not covering the nonprofit group's costs. As with any business, you can't exclude the cost of maintaining and repairing your facility and say you're covering your costs, especially when about one-third of your revenue comes from government grants and donations, and only about 40 percent comes from program revenue.
That's how the revenue breaks down in the group's tax return for the fiscal year ending Aug. 31, 2011, which was filed in March. That return shows a $551,794 deficit for the tax year.
The town has been here before with the arts center. In 2003, it looked hard at the center's finances, how other similar organizations performed financially and the level of public subsidies they received. Town officials came up with a 10-year funding plan for the center that called for giving it $360,000 in accommodations tax money that year and increasing it by the cost of inflation each year after that.
Hard economic times in recent years have forced the town to reduce annual funding to about 80 percent of the money intended for the arts center and other groups awarded bed-tax grants a year in advance.
Clearly, the arts center's finances are overdue another in-depth look. We don't see a solid business plan that accounts for knowable, long-term costs. How else to explain the long list of needed repairs and outstanding debt that total $5 million?
Center officials say they are trying to raise that money by tapping current and future pledges, and they hope to launch a public fundraising campaign.
But that also has a familiar ring to it. Building an endowment to help cover funding shortfalls has long been a goal for the arts center.
Councilman George Williams put it well at the Oct. 31 council meeting: "It's hard for me to understand why an organization like yours with talented people on the board would get to the point where you have a $5 million nut that's almost impossible to fix. I don't know how we got this far for this long. That's my frustration. ... There needs to be a major shift in the thinking of all of our arts organizations and how we allocate tax money to make this enterprise successful."
To that end, arts center officials have agreed to work with the town to find savings to help with the current and future budgets.
But more than that must be done. The town is talking about hiring consultants to study existing arts programs and venues and consider creative ways to support them. An objective, knowledgeable look at the arts center's finances, as well as the finances of other major arts players, would be welcome.
Certainly, something must change. The town has limited resources unless it wants to raise property taxes for this purpose.
"It's been very unsatisfying on an annual basis to divvy out an inadequate amount of funding for the arts in a piecemeal fashion that meets nobody's needs," Mayor Drew Laughlin said at the Oct. 31 meeting. "We have a patient on life support, and that life support is no longer adequate. We need to make sure the limited resources we have are used as efficiently and effectively as possible."
That starts with being realistic about what the town can afford and what the community at large wants.