Hamilton City Theatres Review
Council Workshop
Events and Economic Development
5 February 2013
D-764506
Fundamental Questions
• Are HCC owned and operated theatres meeting the needs of
the performing arts community?
• How do we respond to low utilisation across the theatres
portfolio?
• What business rationalisation opportunities exist across the
theatres portfolio?
• What serious fiscal challenges do we need to front now that
will hit us in the future?
EventsName
and Economic
Group
/ Unit Development
Review Process...a pragmatic and very
open approach on the numbers
•
Independent Review
• Situation assessment and analysis
• Consultation with interested parties
• Financial and issues identification
• Options development
• First draft report
- Completed
- Completed
- Completed
- Completed
- Completed
•
Workshop first cut findings with Councillors
- Now
•
Release of first draft review report
- Now
•
Invite formal feedback from interested parties
- February / March 13
•
Invite supporting or alternative proposals
- February / March 13
•
Final report and recommendation to Council
- April 13
EventsName
and Economic
Group
/ Unit Development
Challenge of balance
Maintain and support a
sustainable, smart and vibrant
performing arts scene in
Hamilton which is an integral
part of the basket of attributes
that make Hamilton a
desirable place to live and
visit.
EventsName
and Economic
Group
/ Unit Development
10 year plan to hold
debt and optimise
Council efficiency and
rationalise operating
costs.
Challenge of perception
Need for
current venues
mix
Status quo is
acceptable
EventsName
and Economic
Group
/ Unit Development
Council
responsibility
yes/no
Value placed
on Council
investment
Consolidation
of venues is
advantageous
Challenge of utilisation
Capacity
In this business
utilisation and yield
whether for community
or commercial benefit is
the primary KPI.
EventsName
and Economic
Group
/ Unit Development
Numbers
- days in the year utilised.
- patrons at the show.
- what people will pay
- size of the market
Context to theatres budget
Consolidated group within the Event Facilities Unit (Hamilton Venues)
Revenue - Full commercial client base
- Community groups client base
40 %
60 %
Costs
- Directly operational related (controllable)
49 %
- Allocated costs to theatres (uncontrollable)
51 %
(Council overhead recharges; debt interest repayment; building occupancy allocation)
Staffing
- Theatres Operation
- Business Development
- Casual event staff
- Technical services shared across EFU
- Administration shared across EFU
EventsName
and Economic
Group
/ Unit Development
4 FTE’s
1 FTE
paid by client
paid by client
HANDOVER to ALBERT
EventsName
and Economic
Group
/ Unit Development
Hamilton Theatres Review
• The Review assessed:
− Whether the 3 theatres are meeting the needs of the performing arts sector
(audience, hirers and practitioners);
− The costs, revenue streams and associated utilisation of the theatres; and
− Whether Council is the ideal owner and/or operator of the theatres or whether
alternative offer greater opportunities.
Hamilton City Theatres Review
Council Workshop 05 February 2013
Context
• Performing Arts attendance levels nationally and internationally are generally
static or in decline reflecting economic conditions;
• This mirrors Hamilton’s theatres which show:
• Declining audience numbers
• Direct operating costs are contained but Council recharge costs have
escalated
• Reducing revenue
• Risks associated with deferred and unbudgeted capital works
• Lack of cost effective alternatives
Context Cont.
• Fiscal implications of Council bringing all three theatres up to a higher standard
are significant and challenging
• Stakeholders feedback does not support the status quo for the performing arts
sector
• Better quality venues are required to meet community and commercial user
needs
Hamilton City Theatres Review
Council Workshop 05 February 2013
Total Patronage & % Days Utilised
Total Theatre Utilisation 2012/13
Commercial Days
14%
Community Days
22%
Non Untilised Days
64%
Hamilton City Theatres Review
Council Workshop 05 February 2013
Patronage & % Utilisation by Theatre
Individual Theatre Utilisation 2012/13
Founders
11%
Clarence St
7%
The Meteor
18%
Non Utilised Days
64%
Hamilton City Theatres Review
Council Workshop 05 February 2013
Patronage & Days Utilised
Founders
Period
Patronage
Days Utilised
2009 FY – 2012 FY (4 year avg)
86,133 patrons
135 Days
2013 FY
68,893 patrons
120 Days
Patronage
Days Utilised
2009 FY – 2012 FY (4 year avg)
23,065 patrons
87 Days
2013 FY
19,115 patrons
79 Days
Patronage
Days Utilised
2009 FY – 2012 FY (4 year avg)
13,345 patrons
102 Days
2013 FY
14,165 patrons
197 Days
Clarence St
Period
The M eteor
Period
Hamilton City Theatres Review
Council Workshop 05 February 2013
Hire Charge Benchmarking
• Benchmarking was undertaken to highlight how the hire charges for the 3
theatres rank on a national and international scale (based on the venue’s
maximum seating capacity and the prices they charge for commercial and
community hire).
• venue hireage was divided by seat capacity to obtain a “price per seat”. Note
this comparison makes no allowance for venue quality.
Hamilton City Theatres Review
Council Workshop 05 February 2013
Hire Charge Benchmarking Cont.
• Results:
− Out of the 40 theatres assessed (ranging from seating capacities of 40 –
1,617), after Angel Place (Sydney) and The Opera House (Wellington),
Founders has the third highest commercial venue charge at $4,870 per day;
− From the venues which have a community hire rate, Founders had the
second highest community rate at $3,245, after Angel Place (Sydney);
− Purely out of the 3 theatres, Clarence St has the highest commercial charge
per seat and
− For community purposes, Clarence St also charged the highest rate on a per
seat basis.
Hamilton City Theatres Review
Council Workshop 05 February 2013
Options Investigated
8 options were explored as possibilities for enhancing and maximising the
provision of performing arts facilities in Hamilton.
These include:
• Option 1: Rationalise Spaces and Upgrade Founders and sell Clarence St
• Option 2: Rationalise Spaces and Upgrade Founders but sell The Meteor
and Clarence St
• Option 3: Consolidate to the Academy (University of Waikato)
• Option 4: Consolidate to a new CBD venue
• Option 5: Split commercial and community use into separate venues
• Option 6: Utilise High School Facilities
• Option 7: Status Quo (do nothing)
• Option 8: Consolidate to Claudelands
Hamilton City Theatres Review
Council Workshop 05 February 2013
Option 1 or 2
• Upgrading Founders over a possible 10 year period through a staged approach
(upgrading the fly tower, acoustics, increasing the stage wings and overall stage area,
adding some rehearsal spaces, a black box performance space as a second on site venue
and a foyer upgrade including restaurant and bar);
• Gifting The Meteor building (on an as is basis)to a community group/trust to operate on a
cost neutral basis to Council whilst Council still retains the land;
• Selling Clarence St and redirecting performances which would have previously utilised
Clarence St to Founders Theatre (estimated at 66% of current use);
Hamilton City Theatres Review
Council Workshop 05 February 2013
Option 1 or 2 cont.
• Initiate discussions with Riverlea Theatre to potentially relocate Playbox to The
Meteor and Music Makers to Founders Theatre which could free up the
Riverlea site for possible sale.
• This option helps ensure that stakeholder groups are better off than the status
quo, that Council owned facilities are better utilised and that upgrades occur to
make facilities more marketable
• If a community trust with strong commercial acumen isn’t able to be attracted
to take over the Meteor under Option 2 Council can sell the site
Estimated Operating Cost Savings
Cost savings that could potentially be achieved should Council adopt the
recommendations in Option 1 or 2.
• Under the current operating scenario, the total net cost of service deficit to Council
based on the 2013 FY budget is expected to total $2.3m.
• By implementing the recommendations in options 1 or 2, this NCS deficit could
potentially be reduced to approx. $1.45m per annum
• Saving to Council of roughly $845k in the first year of operation under the
recommended option.
• Estimated net operating cost savings achieved over a 10 year period are
anticipated to equate to just over $8.7m
Estimated Operating Cost Savings – cont:
• If Options 1 or 2 are adopted by Council future savings per annum indicate:
• Controllable expenditure decreases by $172.4k
• Uncontrollable expenditure decreases by $746.5k
• Income increases by $73.4k
• The Net Cost of Service decreases in total by $845.5k
• uncontrollable expenditure includes allocation for interest-public debt,
depreciation, overheads and internal rent charge
• This assumes all controllable and non controllable cost savings items can be
achieved.
Financials – operating costs
COST SAVINGS ACHIEVED PER ANNUM
Founders Theatre Clarence St Theatre
Current Income
The Meteor
TOTAL
$628,805
$272,200
$73,401
$974,406
Current Operating Costs
$1,983,663
$927,394
$408,774
$3,319,831
Future Income
Future Operating Costs
$900,939
$2,400,887
$0
$0
$0
$0
$900,939
$2,400,887
Current Net Cost of Service
Future Net Cost of Service
$1,354,858
$1,499,948
$655,194
$0
$335,373
$0
$2,345,425
$1,499,948
Amortised Operating Costs Savings
Achieved Per Annum from 2013-2022
-$145,090
$655,194
$335,373
$845,477
-$1,494,427
$6,748,498
$3,454,342
$8,708,413
Indicative Net Operating Costs Savings
Achieved Over Approximately 10 years
Hamilton City Theatres Review
Council Workshop 05 February 2013
Financials – indicative Future Capital Expenditure
Capital costs implications
Cost
(3,875,000)
Potential sale proceeds - Clarence Street
Gifting of The Meteor
-
Estimated cost of earthquake strengthening of Meteor
1,500,000
Founders Upgrade
Stage 1
Stage 2
Stage 3
Subtotal
900,000
5,300,000
9,700,000
15,900,000
Less unbudgeted & unavoidable costs of earthquake strengthening
(1,500,000)
Net Investment required
$
12,025,000
Hamilton City Theatres Review
Council Workshop 05 February 2013
Recommended Options
Option 1 or 2 are the recommended options:
• Removes the risk associated with major unbudgeted earthquake code
compliance costs and upgrades needed for Clarence St and The Meteor
• Reduces and consolidates Council sites which are in need of significant
refurbishment/upgrades and which are under utilised
• Reduces theatre operating costs to Council (up to $845k per annum)
• Enables community stakeholders to manage/control The Meteor  create a
community based performing arts hub or if not possible then the site could be
sold by Council
• Releases capital from the potential sale of Clarence St, The Meteor & possibly
the Riverlea Theatre site
• Encourages a structured approach for upgrading Founders
Summary
In summary:
• Hamilton stakeholders do not see the status quo as an acceptable option; positive
change is needed and now expected;
• Currently, the theatres are significantly underutilised both in days hired and
patronage
• Option 1 presents the best opportunities to enhance the provision of theatre
services in line with the recently produced Hamilton Arts Agenda and encourage
greater utilisation.
Hamilton City Theatres Review
Council Workshop 05 February 2013
Summary Cont.
• This will require:
• Upgrading Founders Theatre (potentially on a staged basis over say 10
years)
• Selling Clarence St and moving performances to Founders.
• Gifting The Meteor building to a community group to manage but Council
retains the land (or under Option 2 selling The Meteor if a community
group with strong commercial acumen is not forthcoming)
Hamilton City Theatres Review
Council Workshop 05 February 2013
Summary Cont.
• Net operating cost savings should equate to $845k per annum. (This is
based on 2013 FY Council budget figures).
• The estimated net capex ($15.9m) for upgrading Founders could
potentially be funded with support from various partners including Central
Government and other sources and possible redirection of subsequent
Council savings.
• This estimated capex could be reduced to $12m if proceeds from sale of
Clarence St can be applied for this purpose and reduces to approx $9m if
The Meteor site is sold as well.
Hamilton City Theatres Review
Council Workshop 05 February 2013
The Net Result
If recommendations are accepted, Council and community end up with:
 An enhanced Founders facility which offers higher quality elements for
commercial and community use
 A potential community performance arts hub at The Meteor operated by a
community group with minimal risk to Council
 Strengthening of Hamilton’s Cultural Precinct through the upgrades achieved
and support for the delivery of Hamilton’s Art Agenda
 Better quality facilities with more market appeal to audiences (local and
visitors) and higher venue utilisation levels and yield
 Reduced operating costs
 Avoidance of unbudgeted major expense items and ongoing building costs
No surprises...the buildings
Reducing resident satisfaction with standard of theatres buildings and
facilities.
Founders Theatre

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Tired throughout
Back of house facilities sub-standard
No hot water in some service areas
Stage systems need up-grading
Flying system capacity constrained
Lacks flexible seating / screening configuration
Clarence St Theatre



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Aged stage flying system
No wheelchair access
Insufficient public areas
No air conditioning
The Meteor




Building upgrade work required
Earthquake related strengthening required (below 34% standard)
No back stage or private performer change areas
Limited seating
EventsName
and Economic
Group
/ Unit Development
Where to next...discussion
• Independent Review
• Situation assessment and analysis
• Consultation with interested parties
• Financial and issues identification
• Options development
• First draft report
- Completed
- Completed
- Completed
- Completed
- Completed
• Workshop first cut findings with Councillors
• Release of first draft review report
- Now
- Now
• Invite formal feedback from interested parties - February / March 13
• Invite supporting or alternative proposals
- February / March 13
• Final report and recommended to Council
- April 13
EventsName
and Economic
Group
/ Unit Development