Theater Operators vs. Government Landlords
Last month, I laid out the various ways that cities have their theaters operated. I looked at five models — government, dominant users, new nonprofits, educators, fee-for-service managers — considered their relative pros and cons, and confirmed that there are examples of successfully operated theaters in each category. But I also hinted that there’s often trouble in paradise, with all types of operators running into trouble with their government landlords. So let’s look into that next.
We recently completed a strategic plan for a California theater that is city-owned but operated by a 501(c)3 set up for that purpose. The theater was formerly an old high school that the city took over and renovated with some private philanthropic support. When we arrived, the venue had operated successfully for 10 years, with the city providing key operating support. But there was significant tension between the city and the operating organization, with the mayor and other city council members agitating for better financial performance and less direct city support.
We did our analysis and were impressed by how the building was programmed and operated. So where was the tension coming from? Well, it turned out that every time an audience member had a complaint about the building or its events or staff (such as a “Friends” organization that had effectively gone rogue), they called the mayor. Who, in turn, called the facility manager to raise hell.
We wondered where the board was in all of this. And there we discovered more drama, for it turned out that the mayor’s last election opponent was on the board and using the board’s monthly meetings to criticize the mayor and his administration. Not surprisingly, word got back to the mayor about these shenanigans and the threats to reduce city funding started filtering back.
So here was a situation in which a 501(c)3 nonprofit, tax-exempt organization was established to operate a venue as a mission-based community asset, but the organization abdicated its responsibility at the board level and let the city retain effective control over it. The right structure was there, but it wasn’t working because the board wouldn’t lead the organization towards an independent mission and more private sector support.
Then there’s the Artisphere project in Arlington, VA. This was a short-lived community arts center created in leased space formerly housing the Newseum in Arlington’s Rosslyn commercial core. Artisphere was the brainchild of Norma Kaplan, who was for many years the county’s cultural affairs director. We had done some feasibility work for the county and Kaplan recognized the opportunity to develop needed facilities in this existing but empty structure. Kaplan and her staff wrote the business plan, which we vetted and endorsed for the county leadership. It was a brilliant concept: adapting an interesting urban space into a very cool combination of small and flexible performance, exhibition, teaching and gathering spaces, plus a strong technology component and lots of food and beverage opportunities. Kaplan persuaded the county to operate the space for the first three years, while a board and organization was built to take operational control in the fourth year.
The capital investment to improve the space was a reasonable $6 million, and the county signed a long-term lease from the building owner. Kaplan even managed to convince the local business improvement district to be a financial partner, so local businesses would make significant annual contributions to support operations, given the potential economic impact of the project on the area.
We had a grand time at the opening party, and an executive director hired from the nonprofit sector took over the day-to-day management of the space. Kaplan, having grown increasing frustrated with the ongoing battles with senior management and elected leaders, decided to take early retirement and left the county.
As soon as she left, there was no one at the county able and willing to continue the fight for attention and resources needed to make Artisphere a success. There was a new county manager. The effort to build a board and prepare them to take over operations was neglected, and as soon as the inevitable operating challenges arose — attracting users, promoting events, driving earned income — Kaplan’s former combatants pounced, declaring the project an ill-conceived waste of taxpayer dollars.
And so, within four years of the grand opening and all the chest-thumping politicians mugging for the camera, the county pulled the plug and walked away. It may well have been that the business plan was too optimistic, having been written prior to 2008, but it was a tragedy to abandon a next-generation arts center with so much upside. And it happened because there was no longer a champion for the project within county government to fight for and to maintain the political support needed to get through those early challenges.
Then there’s the one about the successful facility management organization (actually a nonprofit running one of the best performing arts centers in the country) getting fired after three tortuous years running a smaller arts center in an adjacent community. This is a very competent organization already managing three other facilities besides its own. What went wrong here? It depends on whom you ask, but to me it was an issue of unrealistic expectations and sloppy contracting. Elected officials believed their shiny new building would attract touring musical theater (despite only having 800 seats) that would bring fame and attention to the community. Town staff believed that an outside operator could deliver significant value for a very small fee and limited risk. And that left the operator in the impossible position of having to deliver a big bang for a very small buck.
There are more stories of failed operating arrangements, but these three do the job of highlighting some common challenges. It doesn’t matter what structure you have if people want to misbehave, or to put their personal and political interests ahead of the mission and goals of the facility.
Even when government is the key provider of ongoing support, when an independent operator is put in place, it must aggressively assert itself as keepers of the mission and developers of outside funding streams so that the organization can build independence and sustainability.
I’ve heard too many business leaders assert that government is not smart, efficient or motivated enough to run a theater. That’s just wrong. I’m not saying they all do a good job, but many do. What I see as the big challenge for government-run facilities is mobilizing the political skills and resources necessary to ensure that a theater can be programmed, operated and sustained with appropriate support and not inappropriate influences.
The other challenge for all government-owned facilities is to be operated with clear goals that are understood and agreed upon before things go south. This is where tools like the Balanced Scorecard become so important, providing a way for the public and private sectors to define and measure success for the greater good. The operator, in whatever form, should be held accountable to achieve what can and should be achieved. Not what is impossible, unrealistic or simply misunderstood.