Facility Planning Advice for PACs (Part 2 of 2)

performing arts center facility planning adviceLast week we met Greg Garfield, President of Public/Private LLC in Dallas, who is involved in the Buddy Holly Hall of Performing Arts and Sciences facility under construction in Lubbock, Texas.

What factors contribute to successful PAC projects – those that meet deadlines, budgets and objectives? In Part 1, Garfield discussed the roles played by his firm and its partners, including development services, market studies, community engagement, conceptual design and budgeting. In Part 2 this week, Garfield discusses budgeting, options for ownership, related financial considerations and the importance of involving the PAC facility operator early.

Soup-to-Nuts Budgeting

Armed with the PAC building program and conceptual design, Garfield partners with an active, blue-chip contractor familiar with the local community. “We’re looking for a firm with relevant experience, capable of providing guaranteed maximum price and completion dates with payment performance bonds, if needed,” he says. Either that contractor or a cost consultant that specializes in PACs helps create an early development budget.

This budget includes all of the hard and soft costs, direct and indirect construction costs, professional fees, pre-opening costs, etc. “It’s everything we can think of – from soup to nuts – that it will cost to complete and open the building,” comments Garfield. He says the budget includes various contingencies appropriate for an early phase project.

If the project moves ahead, Garfield’s firm works to further develop and refine the design with the architect and engineer, reducing contingencies along the way. “We want to ensure there’s a realistic budget so we can meet the guaranteed maximum price set by the contractor,” he notes.

Ownership, Financing, and Funding

Garfield says the last piece of pre-development strategic analysis is perhaps the most important: the ownership, financing and funding. Who will own the facility? The city? A nonprofit? “There are many different options for ownership, governance and operations,” he notes. Performing arts centers and other cultural, sports and entertainment venues developed or planned by Garfield have variously been owned by cities or counties, municipally controlled special purpose vehicles, intergovernmental entities or 501(c)(3) nonprofits.

Financing and funding may come from a variety of sources, including philanthropic grants or contributions, naming rights, box seat/suite sales, personal seat licenses, facility net operating income, facility fees, parking revenue and/or financing from one or more municipal agencies/sponsors.

Sources of repayment for municipal bond financing may include increments of sales tax, hotel occupancy tax, TIF income and many other revenue streams.  “Every community is different in the municipal financing tools available,” says Garfield. He says that financings for his company’s developments have never required recourse to a municipality’s general fund or its commitment to raise residential property taxes if needed.  Garfield works with each client to determine the best possible financing structure consistent with the client’s financial and legal goals and constraints.

Foundation for Success

PACs and other public assembly facilities planned and developed by Garfield have had a variety of different operating models.  Whether the operator is a municipality, a private nonprofit, or a commercial operator, Garfield recommends including the operator early in the design process to help ensure the facility is properly planned and equipped. Having the operator’s early involvement along with an experienced theater consultant helps to ensure that all programmatic elements and equipment are included; that spaces are designed for maximum operational efficiency; and that artists, guests, and building staff are secure and comfortable.

Many communities get the “cart before the horse” in approaching performing arts centers and other facilities, says Garfield.  Announcing ambitions before a comprehensive strategic business plan is conducted, or designing a building without appropriate planning and assessment of financing and funding capacity are common mistakes.  According to Garfield, this can be counterproductive and delay the realization of desired facilities for years. Much more than just a market study, Garfield says good strategic business planning by an experienced developer is the necessary first phase to ensure a successful development.

Garfield says, “We apply a level of professional rigor in early planning that produces results that are diligently researched, realistic and reliable so that community ‘buy-in’ is achieved and there is a solid foundation for success.”

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