History of festival funds and needs

Bob Dietrich

There has been considerable discussion in local papers regarding the

Festival of Arts and its finances. It appears that most writers are

attempting to discuss finances in good faith, but the issues are

complex. I would like to present a few facts that may clear up some

misunderstandings.

I am chairman of the Festival Finance and the Planning and

Funding Committees. I also serve on the Irvine Bowl Policy and Lease

Committees. This is not very exciting, so my apologies to readers.

There has been some confusion about the number of people,

including staff and volunteers, that support the pageant and

festival. Both groups are critical to the welfare and success of the

festival and pageant. The Festival of Arts and Pageant of the Masters

rely on more than 500 volunteers each year ranging from make-up

artists to pageant cast members and volunteer docents for the art

exhibit. Also, our summer payroll includes 440 dedicated professional

staff including musicians, pageant production staff, security

personnel, administrative staff and others.

The Festival of Arts is operating under a new board for the second

full year. When we began operations in 2001, we had to begin by

adjusting our budgets to cover a nearly $1-million loss that was

generated by a prior administration. By year end 2002, the festival

generated a surplus of $100,000. Based on projections prepared by the

festival controller, we are scheduled to finish the year close to the

projected budget of $6.7 million in revenue. Expenses are $6.1

million plus rent of about $175,000 and Festival Capital Improvement

Trust Fund payments of about $325,000.

The festival currently has about $1.5 million in unrestricted

reserves. These reserves are invested with Wells Fargo Bank. In

addition, there is a dedicated building fund with $476,000. The

proceeds from the gala held Saturday, Aug. 30, should increase the

balance to about $550,000 by the end of the fiscal year on Sept. 30.

During the past two years, the Festival of Arts Planning Committee

has worked with other festival, community and city groups to

establish priorities for improvements.

After considerable study and analysis, the Planning Committee set

a first priority to improve the pageant facilities and

infrastructure.

During this period of time, we were starting our lease

negotiations. One of the key points of agreement by all members of

the city and Festival of Arts lease negotiating committee was to

ensure that the Festival of Arts and Pageant of the Masters would

remain in its current location through the remainder of the lease. In

order to keep the festival in place, a number of improvements were

needed.

During the spring of 2002, the Festival of Arts discussed the

start of improvements with the city. The Festival of Arts Planning

Committee presented the board with a recommended improvement plan and

budget. The plan was prepared in two phases. The first phase

addressed immediate needs of the pageant and basic safety. It was

also constrained by the capital improvement budget and available

reserves. The second phase addressed the concept for future

improvements that would be made as funds became available.

In May 2002, the Festival of Arts presented its plans and budget

for improvements to the City Council in open session. The City

Council unanimously approved the Festival of Arts capital improvement

program proposal.

Phase I included improvement of production facilities and basic

infrastructure to cure the crumbling, unsafe and inadequate

facilities in which the production volunteers and staff were forced

to work in.

At the May 2002 meeting, the City Council approved an ordinance to

cause the city manager to issue building permits for the project. The

budget was about $1.7-million plus architecture, engineering and

other indirect costs.

Phase II included upgrading safety exits in the Irvine Bowl;

improvement of the backstage area including upgrades for the

plumbing, air conditioning and other items; and improvement of the

artist’s exhibit area. The combination of the concrete porch

structures and canvas awnings has been a problem for many of the

artists on the grounds, some of whom lost thousands of dollars in art

during the unexpected rain storm this past August. This was the No. 1

item listed by the artists in surveys conducted in 2001 and 2002.

After the show last year, we were informed by safety officials

that the bowl would require safety upgrades. These improvements were

required to be complete before the Pageant opens in 2004. Some of the

improvements were moved from Phase II to Phase I and additions were

made to the scope of work to be included in Phase I.

The approved construction projects will require large amounts of

money. It is difficult to build a building by spending only our

annual Festival Capital Improvement Trust Fund payment. If limited to

this type of expenditure, we would build pieces of a building over

several yearsUnfortunately, the costs would wind up being

extraordinarily high and would seriously impact the ongoing

operations of the pageant staff that take place year round.

When the city approved the initial Phase II concept plan last

year, then-Mayor Wayne Baglin asked for details on financing. The

Phase I was to be developed out of Festival Capital Improvement Trust

Fund payments (past and future) and capital improvement funds in the

festival’s dedicated building reserves. As the board explained at

that time, the only sources of revenue for the amount of building

improvements planned for Phase II were by fund-raising or by pledging

future payments into the Festival Capital Improvement Trust Fund as

security for a bond. This type of financing arrangement was discussed

extensively during lease negotiations and the lease was structured to

allow that type of financing to take place.

Over the past year, after understanding the amount of work that

needed to be done, the festival began inquiring into possible sources

of funds that could be used that would allow the improvements to be

built without depleting all of our reserves. Although we discussed

many possible sources, the final selection came down to Wells Fargo

Bank. In addition, we discussed with the Festival Foundation possibly

investing a portion of its fund into the project.

The board has not committed to a direction on financing the Phase

II improvements. There are a number of methods that could be

considered. However, a final decision is still well off in the

future.

A question was recently raised in a letter wondering “where the

money went.” To date, the festival has spent about $1 million on the initial approved work on the pageant production facilities, including

the storm drain, retaining walls and other site improvements. This

money came from an initial contribution to the Capital Improvement

Trust Fund of about $300,000 allocated by the city. Since then, the

festival has added more than $600,000 to this account. The initial $1

million spent on capital improvements was primarily from this fund.

The festival allocates funds from its operating budget for capital

improvements, in addition to the building improvements. The festival

board allocated about $200,000 over a two-year period in 2001 and

2002 to completely upgrade the sound system in the pageant bowl. This

new system created better quality sound for patrons at lower sound

levels. We have had no noise complaints from neighbors for the past

two years

I hope that this explanation of facts and history is of some use.

As usual, planning meetings are always open to members. I look

forward to participating with the members of the festival and the

community interested during the next year.

* BOB DIETRICH is a member of the Festival of Arts Board of

Directors.