Roanoke Island Festival Park Strategic Plan for Financial Sustainability Final Report
March 2013 Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 2
Table of Contents
I. Introduction
II. Executive Summary
III. Project Scope
IV. Overview: Strategic Positioning
V. Governance Partners and Their Roles
VI. Key Findings: Financial Data
VII. Key Options & Priorities
VIII. Recommendations
i. Five‐Year Operating Projections
IX. Privatization: A Future Option
X. Next Steps
Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 3
I. Introduction
Schultz & Williams (S&W) was engaged by The Roanoke Island Commission (RIC) to create a comprehensive five‐year report to strengthen the financial viability and sustainability of the Roanoke Island Festival Park (RIFP), including the assets and properties administrated by DCR that are located on Roanoke Island. The five‐year plan will identify operating revenue and expenditure projections that support the planned reductions in State appropriations, identify new sources of non‐State revenues and outline the feasibility of shifting the governance of RIFP to a public/private partnership model (privatization). The current expectation of the State is that RIFP will be self‐supporting in fiscal year 2016, commencing July 1, 2015. The final report and consultant recommendations will be submitted to the House and Senate Appropriations Committees in March 2013.
Schultz & Williams is a Philadelphia‐based planning and consulting firm that is dedicated to working with cultural institutions and attractions throughout the country to strengthen their viability and sustainability. S&W has recently completed organizational and financial plans for the North Carolina Zoo and the North Carolina Aquariums that will further leverage their partnership with the State while raising the profile of the State’s cultural resources.
The development of our report was guided by a Task Force that included representatives of the Roanoke Island Commission, the Chairman of the Board of the Friends of Elizabeth II and the Executive Director of the Roanoke Island Festival Park. Task Force members were: Ellen Newbold (Chair of the RIC); Fountain Odom, Earl Willis, Brent Lane, Heidi Leo and Bob Quinn (Appointed Members of the RIC); Warren Judge (Ex‐Officio Member of the RIC and represents Dare County); Tod Clissold (Chairman of the Friends of Elizabeth II); and Kimberly Sawyer (Executive Director of RIC and RIFP).
Rick Biddle, S&W Vice President with over 30 years of consulting and cultural attractions experience, completed the plan and met with the Task Force in October and November 2012, and in February 2013, in completing his findings and recommendations.
We have developed our final report and findings based on our review of the background information that we requested; a site tour of RIFP and its related properties in October 2012; the three meetings with the Task Force members; and our meetings, telephone conversations and data review with the RIFP staff, specifically Kim Sawyer, Executive Director of RIFP, and Amy Hinnant, Operations Manager of RIFP.
We thank Kim Sawyer and her staff for their time, guidance and feedback in helping us to better understand the Roanoke Island Festival Park and the important role that it plays in celebrating history on Roanoke Island.
Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 4
II. Executive Summary
Schultz & Williams (S&W) was engaged by The Roanoke Island Commission (RIC) and the North Carolina Department of Cultural Resources (DCR) to create a comprehensive five‐year report to strengthen the financial viability and sustainability of the Roanoke Island Festival Park (RIFP). The five‐year strategic financial plan creates a “roadmap” to insure RIFP’s continued sustainability and viability as a dynamic mission‐driven cultural attraction that serves the State of North Carolina, Dare County, Roanoke Island and the tourist to the Outer Banks region.
The enclosed report is a strategic financial plan that outlines strategies and recommendations to strengthen RIFP as a dynamic and relevant cultural asset. Once the implementation strategies and recommendations are vetted and approved by the Roanoke Island Commission and Friends, detailed business and operating plans, including any fee and staffing adjustments, can be developed to support the new strategic direction of RIFP.
The Roanoke Island Festival Park is at its “crossroad.” Over the past 17 years, the Roanoke Island Commission, with the financial support of the State of North Carolina, has built a great foundation from which the Park is now poised, given the opportunity of time to plan accordingly, to achieve greater success, growth and impact with the audiences that it serves. The future of RIFP must include the new economic realities (less State support for operations and re‐balancing its sources of operating revenues) and embrace a compelling and integrated vision for the Park – a vision that is endorsed and supported jointly by the RIC and the Friends of Elizabeth II. Both the Commission and the Friends must learn from the past and now plan for RIFP’s new future – one that continues to celebrate Roanoke Island’s living history through interpretive exhibits, relevant programs and compelling visitor experiences.
Roanoke Island Festival Park provides for a fun family experience with a visitor stay‐time that exceeds expectations and the value provided. RIFP is a “relevant, mission‐driven” cultural attraction that provides high value to the residents and visitors to Roanoke Island, Dare County and the Outer Banks region. As recent studies have shown that cultural attractions leverage $3 to $3.5 dollars for every cultural dollar invested, we have estimated that RIFP’s total annual economic impact to the State and Dare County is between $6.2MM and $7.3MM.
RIFP possess the core institutional characteristics of success: a compelling mission; a wonderful site with engaging interpretive exhibits; a strong base of annual visitation; available financial resources from the RIC and Friends that can leverage further investments from its audiences; and a strong partnership with the State of North Carolina and Dare County.
Based on our recent experience with other cultural institutions within North Carolina in creating new governance and operating plans, we believe that the State of North Carolina has three primary strategic roles: Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 5
1. Stewardship: will forever own the land and the facility assets of the RIFP and RIC 2. Leadership: offer strategic guidance and direction when called upon 3. Financial: annually, the State has a long‐term obligation to maintain its assets for the use and enjoyment of the residents and visitors of North Carolina.
We recognize and embrace the new economic realities, but cultural attractions, especially smaller institutions like RIFP, need the time to properly plan and develop the new sources of revenues to be successful, sustainable and viable in the long‐term. We do not believe that the State funding level can be or should be “zero”. To support RIFP as a “relevant” cultural resource, the State of North Carolina must provide the financial resources (a reasonable annual operating appropriation) that allow RIFP to maintain and preserve its assets and to grow and leverage its new operating revenues and partnerships. It is important to recognize that State funding to RIFP has declined from its peak of $2.114MM in fiscal year 2007/2008 to its current (fiscal year 2012/2013) level of $903,500 – a 57% decrease since its 2007/2008 peak.
Based on our review of operating and maintenance expenditures related to site and building assets, the current annual cost to maintain and preserve RIFP’s existing facility (site, buildings and equipment) assets – assets which are owned by the State of North Carolina – is approximately $953,000 – if you include a 3% contingency factor for emergency repair and replacement, the annual cost is $982,000. The annual maintenance expenditures for the site and building assets include annual operating costs for utilities, site and grounds maintenance, ship and boat maintenance, HVAC, equipment and building repairs and an annual allocation for managing the current deferred maintenance replacement needs. RIFP’s annual site and building maintenance expenditures (an annual expense that will continue to increase faster than inflation due to the age of RIFP’s current assets) is directly offset against the State’s annual operating appropriation – an appropriation that we anticipate will remain stable over the next five years. An analysis of future annual maintenance costs for RIFP can be found on page 8.
On page 7, with a stable annual State operating appropriation, we have developed and recommended the five‐year “Growth Option” financial projection plan for RIFP that insures its success and sustainability as a mission‐driven, relevant cultural attraction. Our report including the recommendations and next steps outline the specific action steps to achieve the Growth Option.
The leadership of the RIC and the Friends must come together as “one voice” to address three, integrated, key underlying opportunities that must be resolved as soon as possible as they form the “foundation or building blocks” for RIFP’s future success, growth and sustainability:
1. Enterprise Funds: Utilization of the existing “enterprise funds” to fund RIFP’s three‐year transition growth plan; establish funding limitations on the use of the funds (total amount of funds required – projected at $680,000; and number of years – projected to be used over a three year time period ‐ see page 7 projections ). Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 6
2. Friends Endowment Fund Commitment: The Friends are supportive of RIFP’s new strategic plan and recommendations. The Friends agreed to increase their annual contribution to RIFP with an annual contribution goal of $325,000 based on the Friends current endowment/trust fund “baseline” balance. Annually, the Friends will continue to support RIFP at the $325,000 contribution target goal if the Friends maintain its endowment/trust fund “baseline” balance. Should the Friends “baseline” fund balance decline/increase from its current (2013) funding level, the Friends may re‐assess its annual contribution goal to RIFP. 3. State Appropriation: The State must continue to fund its facility assets and leverage additional and sustainable visitor and contributed revenues to support the core mission and programs of the RIFP with a minimum annual baseline appropriation of $1,058,757 (current level of funding ($903,500) plus the current legislative salary and cost of benefit increase of $155,257).
It is important to note that the continued success and viability of RIFP is built on the realistic resolution of the three integrated planning opportunities outlined above and as discussed further in our report – one opportunity cannot succeed without the other; together they will insure the long‐term growth of RIFP.
In addition, the staff of the RIFP will continue to implement new revenue and program strategies to maintain and grow its operating revenues or reduce its operating expenses without negatively impacting the quality of the visitor experience. Among the strategies that the RIFP staff is implementing:
1. Increase revenues from ticket prices; 2. Expand the availability of facility rentals and promote RIFP as a destination site for weddings and meetings; 3. Develop programming with Girl Scouts and Boy Scouts including overnight trips and camping; 4. Promote Summer Concert Series to better utilize the Pavilion stage and grounds; 5. Charging an admission fees for the University Performance Series; 6. Conducted a needs assessment of RIFP’s operations and staffing resources; 7. Developing facility plans to consolidate the admissions and retail sales experiences; 8. Developing facility plans to create additional “temporary/seasonal exhibits” to increase visitation; and 9. Continuing to investigate additional funding initiatives with the Friends.
RIFP has a great story to tell – to the community, to visitors and to its partners. The Roanoke Island Commission and the Friends must together actively promote this success story through conversations with the State and key leadership members of the General Assembly.
With the leadership of the RIC, the Friends and the State, and given the time to implement its transition plan for growth, RIFP’s future is bright, relevant, viable and sustainable. Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 7
Growth Option with stable State Operating support – mission‐driven, relevant cultural attraction
Operating Revenues Baseline FY `13/`14 FY `14/`15 FY `15/`16 FY `16/`17 FY `17/`18 State Appropriation $1,058,757 $1,058,757 $1,058,757 $1,058,757 $1,058,757 $1,058,757 Admission Fees $355,000 $365,000 $413,910 $434,606 $497,951 $510,096 Performing Arts $30,000 $40,000 $40,000 $40,000 $50,000 $50,000 Admissions Fees Education Programs $5,000 $5,000 $10,000 $15,000 $25,000 $25,000 includes projected Donation/Gifts $15,000 $20,000 $40,000 $50,000 $50,000 $50,000 (not approved) fee Sponsorships $0 $10,000 $20,000 $40,000 $50,000 $50,000 increases in FY `15 Rental Income $43,000 $50,000 $50,000 $50,000 $75,000 $85,000 (OBHC reimbursements) $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 and FY `17 Friends Contribution $175,000 $175,000 $325,000 $325,000 $325,000 $325,000 Subtotal Operating Revenues $1,696,757 $1,738,757 $1,972,667 $2,028,363 $2,146,708 $2,168,853 New Incremental Revenues (Net) $0 $0 $0 $15,000 $60,000 $75,000 Total Receipts $1,696,757 $1,738,757 $1,972,667 $2,043,363 $2,206,708 $2,243,853 Operating Expenses Personnel $1,535,000 $1,565,700 $1,581,357 $1,597,171 $1,598,768 $1,614,755 Performing Arts $120,000 $80,000 $80,000 $80,000 $100,000 $100,000 Overhead Utilities $114,000 $118,000 $120,360 $122,767 $125,223 $127,727 operating Repair & Replacement $66,000 $75,900 $87,285 $100,378 $110,416 $115,936 expenses are Advertising $103,000 $104,030 $105,070 $106,121 $107,182 $108,254 non‐salary costs Insurance $68,000 $69,360 $70,747 $72,162 $73,605 $75,077 Supplies $65,000 $66,300 $67,626 $68,979 $70,358 $71,765 Other $10,000 $10,500 $11,025 $11,576 $12,155 $12,763 Total Operating Expenses $2,081,000 $2,089,790 $2,123,471 $2,159,153 $2,197,707 $2,226,278 Net Operating Margin ($384,243) ($351,033) ($150,804) ($115,791) $9,001 $17,575 Positive shift in Allocation from Enterprise Funds ($351,033) ($150,804) ($115,791) $9,001 $17,575 RIFP’s “bottom Balance of Enterprise Funds $3,800,000 $3,498,967 $3,348,164 $3,232,373 $3,241,374 $3,258,948 line”
Three‐year transition funding from the existing enterprise funds (total of $680,000 –projection of $618,000 with a 10% contingency allocation) to support program growth AND with a stable annual funding from the State of North Carolina and renewed annual financial commitment from the Friends. Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 8
Analysis of RIFP’s future annual maintenance expenditures: operating and additional capital maintenance expenses
Estimated Maintenance Cost for Roanoke Island Festival Park Additional Salaries & Maint. Fringe Expenses Current Budget Benefits Sub-Total Avg 5 years Total HVAC $9,177 $24,340 $33,517 $23,600 $57,117 EII/Other Boats/Trailers $57,224 $132,303 $189,527 $80,500 $270,027 Grounds/Irrigation/ Decks $10,431 $103,602 $114,033 $3,900 $117,933 Facilities/Electric/ Water $189,363 $192,892 $382,255 $16,000 $398,255 Equipment (Maint. & Replacement) $8,069 $23,135 $31,204 $3,000 $34,204 Education/Exhibits/Programs $10,336 $21,268 $31,604 $1,000 $32,604 IT/Phone $13,500 $3,150 $16,650 $26,000 $42,650 Total $298,100 $500,690 $798,790 $154,000 $952,790
Notes: Additional Maint. Exepenses are based on a 5 year average of anticipated repairs and replacement o f the following categories. Please note these are anticipated ove the next 5 years. HVAC 10 units to be replaced EII/Other Boats/Trailers Haul-out each year with DOT and they have indicated the cost will be going up. 2 boat trailers to be replaced. 2 boat motors replaced. 1 inflatable boat replacement. Additional repairs to be completed to the EII which is now 30 years old Grounds/Irrigation/ Decks Replacement rotting decking on docks and decks and replacement of a dump trailer. Facilities/Electric/ Water Replacement of roofs of aging buildings Equipment (Maint. & Replacement) Replacement of golf carts over 10 years old Education/Exhibits/Costumes/ProgramIncreased expenses for materials IT/Phone $26,000 reflects IT cost we are now required to pay to DCR, however this has never beena budget item
For planning purposes, we utilized an annual maintenance expense of $953,000 and increased by 3% as a contingency factor to cover un‐ anticipated or emergency repairs and replacement expenditures –total budget projection of $982,000.
Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 9
RIFP’s site map identifies the current facility assets owned by the State and maintained by RIFP staff
Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 10
III. Project Scope
Schultz & Williams (S&W) was engaged by The Roanoke Island Commission (RIC) and the North Carolina Department of Cultural Resources (DCR) to create a five‐year sustainable and viable financial plan for Roanoke Island Festival Park and to frame the feasibility and strategic opportunities for potentially privatizing the Roanoke Island Festival Park and its related properties and assets. In our completing our plan and report, we completed the following steps:
Step 1: Requested background information about Roanoke Island Festival Park and the Friends of the Elizabeth II, Inc. (Friends). Established a Task Force, comprised of leadership members of The Roanoke Island Commission and the Friends of Elizabeth II, to guide the development of the new financial and governance plans; Step 2: Conducted a brief site tour of RIFP and its related properties with the Executive Director and met with the Task Force to discuss financial, governance and organizational opportunities and challenges; Step 3: Developed potential governance options and financial requirements; Step 4: Developed a draft financial plan and define the strategic opportunities for RIFP; and Step 5: Prepared a comprehensive final report including the five‐year viable and sustainable financial plan and framed the key considerations for a shift in governance.
We have utilized the information gathered from each of the above steps to develop our findings and recommendations. We acknowledge the participation and guidance that the Task Force members provided to us throughout our engagement in helping to prioritize the options, recommendations and strategies for Roanoke Island Festival Park. We also thank the staff of the Roanoke Island Festival Park and the Friends of Elizabeth II for their guidance and assistance in completing our findings and report – their dedication, enthusiasm and passion for the mission of the Festival Park provides for a high‐quality, and enjoyable visitor experience.
As we will discuss below, the Roanoke Island Festival Park is at its “crossroad.” Over the past 17 years, the Roanoke Island Commission (RIC) has built a great foundation from which the Park is now poised, given the opportunity of time to plan accordingly, to achieve greater success, growth and impact with the audiences that it serves. The future of RIFP must include the new economic realities (less State support for operations and re‐balancing its sources of operating revenues) and embrace a compelling and integrated vision for the Park – a vision that is endorsed and supported jointly by the RIC and the Friends of Elizabeth II. Both the Commission and the Friends must learn from the past and now plan for RIFP’s new future – one that continues to celebrate Roanoke Island’s living history through interpretive exhibits, relevant programs and compelling visitor experiences. Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 11
IV. Overview – Strategic Positioning
After visiting the Roanoke Island Festival Park for the first time and touring the site and interpretive exhibits, S&W was impressed with the facilities, exhibits and RIFP staff. Although the facility size is relatively small (27 acres), the visitor and interpretive experiences within the meandering paths provides the feel of a much bigger experience. The exhibits and interpreters were very engaging, as the “in‐character” interpreters provided for a fun learning experience. In our opinion and based on our professional experience, Roanoke Island Festival Park provides for a fun family experience with a visitor stay‐time that exceeds expectations and the value provided.
RIFP offers a strong set of core institutional characteristics that will, over time, further enhance the Park’s relevance as a dynamic cultural resource:
. A compelling mission – interpret, through interactive exhibits and living history demonstrations, the historic site representing the first English settlement in America in 1585; . A wonderful site; great location; a diverse collection of assets; . Well‐maintained, compelling exhibits, living history demonstrations and unique facilities; . Over 50,000 ticketed visitors to RIFP and over 145,000 total visitors annually to the Park; . An engaging tourism and economic magnet for visitors to Dare County, the Outer Banks region and to the City of Manteo; . Available financial resources (fund balances) from both the RIC and Friends that could be utilized to support the RIFP and its future growth; and . A strong partnership with the State of North Carolina, Dare County and the Town of Manteo.
Today, the Roanoke Island Festival Park is at the “crossroad”, as it must reposition itself in light of the new economic realities of less State operating support and the relatively high annual cost of maintaining and operating a cultural attraction and Park. The Task Force, RIC and Friends all understand and recognize this reality. The strategic question is how best to move forward while embracing these new economic realities.
Prior to discussing how best to move forward, we must ask ourselves some basic, tough strategic questions – Is Roanoke Island Festival Park relevant today? Does RIFP offer “mission‐critical” services to its audiences? Does RIFP provide “value” to its audiences and the broadly‐defined communities/tourists that it serves? If RIFP closed, would it matter? In our professional opinion and the Task Force members, the answer to all of the underlying strategic questions is “YES”….the core institutional characteristics outlined above firmly answer this question. Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 12
Given the fact, as noted below, that RIFP has, at least in the short‐/mid‐term, the financial resources within its fund balances to be financially viable ‐ it clearly will need time to reposition its funding resources – and that RIFP is a relevant, valued, mission‐critical, dynamic cultural resource and attraction; the option of “closing RIFP” is not recommended or discussed further.
The other big strategic question that must be discussed before moving forward is “what is the State’s role in Roanoke Island Festival Park?” Based on our recent experience with other cultural institutions within North Carolina in creating new governance and operating plans, we believe that the State of North Carolina has three primary strategic roles:
. Stewardship: will forever own the land and the facility assets of the RIFP and RIC . Leadership: offer strategic guidance and direction when called upon and will insure that its representatives on the RIC have the passion and commitment to fulfill RIFP’s mission and new vision . Financial: annually, the State has a long‐term obligation to maintain its assets for the use and enjoyment of the residents and visitors of North Carolina. With today’s new economic realities, at what reasonable level is the question?
We do not believe that the State funding level can be or should be “zero” as cultural assets, as outlined in the February 2012 Program Evaluation Division’s (PED) report, are expensive to maintain – the median net state cost per visitor for museums/commission facilities within the State is $8.61 per visitor! Based on fiscal year 2011 data, of the 13 museum/commission facilities within the State (including RIFP), the State, in fiscal year 2011, provided over 85% of the annual operating expenses through operating appropriations to these institutions. Again, we recognize and embrace the new economic realities, but cultural attractions, especially smaller institutions like RIFP, need the time to properly plan and develop the new sources of revenues to be successful and viable in the long‐term.
Within our report, we will address the option of reducing the State’s operating support to zero, but we will not recommend this option as a viable strategy. To support RIFP as a “relevant” cultural resource, the State of North Carolina must provide the financial resources (a reasonable annual operating appropriation) that allow RIFP to preserve its assets and to grow and leverage its new operating revenues and partnerships.
It is important to recognize that State funding to RIFP has declined from its peak of $2.114MM in fiscal year 2007/2008 to its current (fiscal year 2012/2013) level of $903,500 – a 57% decrease since its 2007/2008 peak.
Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 13
V. Governance Partners and Their Roles
To help frame the strategic organizational and governance options for the Roanoke Island Festival Park, we have provided a summary of the roles and responsibilities of the current partners – the historical organizational viewpoint has been provided to help clarify the future roles of the respective partners:
North Carolina Department of Cultural Resources (NC DCR)
DCR is a valued partner in the Roanoke Island Festival Park’s development and its future growth and success. DCR’s own mission and attraction‐ related goals, as outlined in the February 2012 PED report, offer the framework that shapes and guides the demonstrations, exhibits and experiences at RIFP:
NC DCR Mission: To enrich lives and communities, creating opportunities to experience excellence in the arts, history and libraries of North Carolina that will spark creativity, stimulate learning, preserve the State’s history and promote the creative economy.
NC DCR Attraction‐Related Goals:
1. Expand education resources available to North Carolina teachers and students through access to the State’s cultural and historical programs and services. 2. Preserve and protect North Carolina’s historical and cultural resources and sites and ensure adequate capital assets.
Roanoke Island Commission (RIC)
The RIC was formed under a state statute in 1995 as an independent commission of the State of North Carolina, located within the North Carolina Department of Cultural Resources. The RIC oversees the activities of the Elizabeth II State Historic Site and Visitor Center, the Elizabeth II, the Ice Plant Island and all other activities (now consolidated under the Roanoke Island Festival Park) under the Department of Cultural Resources (NC DCR). Its mission is “to involve residents and visitors of all ages in a creative and stimulating exploration of Roanoke Island’s historical, cultural and natural resources.”
The Commission consists of 24 voting members: six appointed by the Governor; six appointed by the General Assembly upon the recommendation of the President ProTempore of the Senate; six appointed by the General Assembly upon the recommendation of the Speaker of the House; and six ex‐officio individuals, or their designees, appointed due to their elected position. Members serve two‐year terms with no term limits. The Executive Director of the RIC/RIFP is appointed by the Commission. Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 14
The Commission operates an “enterprise fund” within the State, so net operating funds earned (revenues less expenses) during any one year and fund balances are non‐reverting, meaning that revenues do not revert back to its original source and do not revert to the General Fund. As of June 30, 2012, RIC enterprise fund had a fund balance of $4.078MM, according to RIFP financial statements. Per Legislation by NCGA, the Commission now operates as an enterprise fund.
As a Commission and State agency, any contributions made to RIFP are tax deductible as the State is identified as a qualified organization by the IRS.
Based on our review of financial information, it appears that the RIC/Friends have invested between $18MM ‐ $21MM in facility improvements and/or upgrades to the RIFP site over the years. If one assumes an average of $19.5MM total investment with a 25‐year or 4% annual depreciation expense, the annual cost to maintain and preserve the site, exhibits and facilities would be $780,000.
To help support the basis for on‐going support from the State of North Carolina and our noted “depreciation allocation” above, we reviewed the operating and maintenance expenditures related to current site and building assets. Based on our review of an analysis developed by RIFP staff, the current annual cost to maintain and preserve RIFP’s existing facility (site, buildings and equipment) assets – assets which are owned by the State of North Carolina – is approximately $953,000 – if you include a 3% contingency factor for emergency repair and replacement, the annual cost is $982,000. The annual maintenance expenditures for the site and building assets would include annual operating costs for utilities, site and grounds maintenance, ship and boat maintenance, HVAC, equipment and building repairs and an annual allocation for managing the current deferred maintenance replacement needs. RIFP’s annual site and building maintenance expenditures (an annual expense that will continue to increase faster than inflation due to the age of RIFP’s current assets) is directly offset against the State’s annual operating appropriation.
The Commission is created to combine various existing entities in the spirit of cooperation for a cohesive body to protect, preserve, develop, and interpret the historical and cultural assets of Roanoke Island. The Commission is further created to operate and administer the Elizabeth II State Historic Site and Visitor Center, the Elizabeth II, Ice Plant Island, and all other properties under the administration of the Department of Cultural Resources located on Roanoke Island having historical significance to the State of North Carolina, Dare County, or the Town of Manteo, except as otherwise determined by the Commission.
The Commission is responsible for operating and administering: 1) Elizabeth II State Historic Site and Visitor Center; 2) Elizabeth II; Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 15
3) Ice Plant Island; and 4) All other properties under the administration of the Department of Cultural Resources located on Roanoke Island having historical significance to the State, Dare County, or the Town of Manteo.
Because the statute transferred all other Roanoke Island properties under the administration of the Department of Cultural Resources to the Roanoke Island Commission, there are no properties on Roanoke Island of historical significance to the State of North Carolina, Dare County or the Town of Manteo that the Department now administers.
All properties in Dare County that have been allocated to the Department of Cultural Resources and are now administered by the Roanoke Island Commission under Section 143B‐131.2 are identified below. According to the State Property Office database, the following properties are allocated by the Department of Administration to the Department of Cultural Resources, Elizabeth II State Historic Site in Dare County:
Grantor/Grantee Address City Isabel Lennon Warren, One Festival Park Manteo
Willim E Lennon Etux Issac A Ketchum Heirs (Robert R One Festival Park Manteo Hayden)
Malcolm Fearing, III, Scuppernong R. Roanoke Island
George W. Spicer Robert R Hayden Etux Mildred C Et One Festival Park Manteo
Roger P Meekins and Wife Eleanor One Festival Park Manteo T Meekins
In addition to the above properties, RIC are stewards of property located in Martins Point at 6505 N Croatan Highway. Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 16
The Friends of Elizabeth II
The Friends of Elizabeth II is a 501(c)(3) organization which was established in 1982 – 13 years prior to the RIC being formed ‐ with its primary role to support the Elizabeth II ship. When incorporated in 1982, the stated purpose for which the Friends organized was noted as:
. To research the history of navigation and sailing vessels of the Sixteenth Century; . To construct, maintain and operate a replica of a Sixteenth Century sailing vessel; . To develop the educational and cultural aspects of the vessel and interpret and disseminate that information to the public through special programs, exhibits, or related activities; . To disseminate information about the constructed vessel and early English settlements in America; and . To exhibit and display the constructed vessel at public functions and events for educational, cultural and historical purposes.
The current “mission” of the Friends of Elizabeth II is to support history, education and arts programs of the Elizabeth II and Roanoke Island Festival Park. As stated in the Friends current bylaws, “the purpose of the Friends is to act as the non‐profit arm of the Commission and to advise the Commission on matters pertinent to the development and operation of the Site; to publish, acquire, dispose of and rent property or real estate, and any other materials and equipment to enhance its goals; to operate a museum store and other concessions on behalf of the Commission.”
The current Board of the Friends is comprised of eight individuals from the Roanoke Island community with Tod Clissold, the current Chairman of the Board and Task Force member. Members of the Board are self‐selected and nominated by the Board.
As of October 31, 2012, the Friends of Elizabeth II reported a total investment (Trust) fund balance of $7.2MM. These funds include the restricted fund balances and the approved Friends funding for the RIFP/RIC 2012‐2013 fiscal year. The Friends also have approximately $1.2MM (net of depreciation) in land/building assets as of December 2011. Historically, the Friends have not been a fund‐raising organization (Note: nothing precludes the Friends from raising funds) as their primary responsibility has been to manage the Trust funds on behalf of the RIC with their priority being the welfare of the Elizabeth II.
In fiscal year 2012 (commencing July 1, 2011), legislation modified the funding relationship with the Friends and RIC. The RIC could no longer transfer any portion of its net operating funds to the Friends – see Shift in Funding of the Roanoke Island Festival Park subsection below. In fiscal year 2012, the State reduced its annual operating appropriation to RIFP by 18% from the fiscal year 2011 funding level (reduction of ~$423,000); fiscal year 2013’s reduction was 53% from its fiscal year 2012 level of support, or a reduction of $1.017MM. At the same time, RIC asked the Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 17
Friends to contribute to RIFP’s operating programs. In fiscal years 2012 and 2013, the Friends will have provided $252,523 and $296,759 respectively in support to RIFP’s operating programs, including carryover unspent funds from 2009 and 2010.
The Friends’ current financial policy is “that in any given year not more than 80% of the previous year’s total earnings, including but not limited to interest and/or dividend earnings, shall be expended for any Friends” [and/or RIC projects/programs]. The Friends have projected that its “baseline” earnings available for distribution (80% of total earnings) will be $175,000 annually. The $175,000 represents a 2.5% annual draw on the total current market value of the Trust. The $175,000 baseline projection does not include any “restricted or Capital” fund distributions, if needed and/or requested by RIC.
It should be noted that the market value of Friends Trust has increased over the years due primarily to the principle growth of the investments held which are not considered “earnings” by the Friends. Over the past year, the State and RIFP have requested additional funding from the Friends (beyond the 80% of earnings) but the Friends have declined to increase their support beyond their current funding policy, citing that “it is their fiduciary responsibility to manage the Friends assets in such a way that the funds will grow over time with an objective of helping the RIC/RIFP to become self‐sustaining.”
When the Friends were asked what would happen with their current Trust funds IF RIFP would close – there were some previous discussions that the Trust funds could revert back to the State ‐ the Friends noted that their Articles of Incorporation had the following statement of dissolution:
“…upon dissolution of the Corporation, the assets thereof shall, after all of its liabilities and obligations have been discharged or adequate provision made therefore, be distributed exclusively to any association or associations organized for the purposes similar to those set forth in Article III hereinabove or to charitable, religious, scientific, literary or educational organizations which would then qualify under the provisions of Section 501(c)3 of the Internal Revenue Code…”
It would appear that the Trust funds based on the above dissolution agreement would not revert to the State. However, it would also appear that the RIC and the Friends need to have a frank and open discussion – with buy‐in on the new vision and sustainability plan under the new economic realities – to clarify their core functions in supporting the future sustainability of RIFP. If the Trust funds will only grow through market value (could also decline), leadership of the RIC and the Friends have an opportunity to re‐visit the “intent” of the Trust fund and to re‐think best practice approaches to supporting the vision and sustainability plan for RIFP.
As outlined in our “Recommendations and Next Steps”, it is critical that the leadership of the RIC and the Friends work together “as one voice” to chart the future growth and viability of the RIFP – with the State of North Carolina serving as a strong partner in supporting RIFP’s mission. Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 18
Shifts in Funding for the Roanoke Island Festival Park
To help frame the shifts in State and Friends have shifted over the past two years, we have provided a brief summary below:
Since July 1, 2011, there have been a number of versions to how the Roanoke Island Festival Park and the Friends of Elizabeth II are funded by the State and how excess operating revenues (net operating margins generated from revenues less expenses, including any State appropriations) are allocated to the Friends. As of July 1, 2011, RIC was prohibited from transferring any excess operating revenues to the Friends. We have provided a summary of the key changes below.
Prior to July 1, 2011, the RIC must keep seventy five percent (75%) of its revenue and use these dollars for the operation and maintenance of its properties. The remaining twenty five percent (25%) of the RIC’s revenue must be transferred to the Endowment Fund. After July 1, 2000, the Endowment Fund in turn may return eighty percent (80%) of the investment interest earned back to the RIC for operating expenses and capital expenditures. All net operating revenues, including revenues from any State appropriations, may be transferred to the Friends of Elizabeth II. The Friends of Elizabeth II can also raise its own money.
Through June 30, 2011
Roanoke Island Commission Fund Friends of Elizabeth II Must Deposit: 75% revenues collected from property operated by RIC Appropriations Must Use: Transferred [appropriated] funds to May: Transfer to May Deposit: Gifts, grants, bequests carry out purpose of Friends of Elizabeth II this Part to carry out purpose Use For: Expense of RIC and operation and of this Part Note: Nothing maintenance of properties operated by RIC precludes Friends from raising their own Roanoke Island Commission Endowment money Fund
Must Deposit: 25% revenues collected from property operated by RIC
Through 06/30/2000: 100% interest from Endowment forms principle
After 07/01/2000: May use 80% of interest in Endowment to carry out duties
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After July 1, 2011 but prior to July 1, 2012, the RIC must still keep seventy five percent (75%) of its revenue and use these dollars for the operation and maintenance of its properties. All state appropriations must be deposited with the RIC. The remaining twenty five percent (25%) of the RIC’s revenue must be transferred to the Endowment Fund. The Endowment Fund in turn may return principal and twenty percent (20%) of the investment interest earned back to the RIC. Upon the request of RIC, The Friends of Elizabeth II must transfer dollars for the operation and maintenance of the RIC properties, as requested by the RIC. The Friends of Elizabeth II can also raise its own money.
From July 1, 2011 Roanoke Island Commission Fund Friends of Elizabeth II Appropriations Must Deposit: 75% revenues collected from property Must Use: Balance of operated by RIC FY12 ‐ $1.9MM unencumbered funds transferred to it only for commission expense May Deposit: Gifts, grants, bequests or operating properties, or maintenance, as requested by Implied Deposit: DCR pays pro rata share for OBX Commission History Center; Proceeds from Buzzy Lane properties Notes: Statutory language allowed transfer of funds to Use For: Expense of RIC and operation and Friends was repealed; nothing maintenance of properties operated by RIC precludes friends from raising their own money
Roanoke Island Commission Endowment Fund
Must Deposit: 25% revenues collected from property operated by RIC
May Use: Funds from principal and remaining 20% interest IF insufficient cash flow AND financial obligations are critical, BUT may not use for capital expenditures
After July 1, 2012, the RIC must transfer one hundred percent (100%) of its funds and revenue to the Endowment Fund. The Endowment Fund will be known as the Historic Roanoke Island Fund (HRIF). All state appropriations must be deposited with the HRIF. Under the current approved legislation, State appropriations will be reduced incrementally in 2012‐2013, 2013‐2014 and 2014‐2015. There will be no State appropriations beginning in the 2015‐2016 fiscal year. The Friends of Elizabeth II must transfer dollars for the operation and maintenance of the RIC properties, as requested by the RIC. The Friends of Elizabeth II can also raise its own money.
Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 20
Effective July 1, 2012
Historic Roanoke Island Fund Friends of Elizabeth II Appropriations Reduced As noted, under the current Must Transfer: All funds held by RIC, include all balances Incrementally: Must Use: Balance of any credited to RIC Endowment Funds unencumbered funds that 2012‐2013: $903K were transferred to it only legislation, the State’s Must Credit to Fund: All operating revenues; include 2013‐2014: $675K for expenses of RIC that are revenues collected from any property operated by 2014‐2015: $450k identified as operating, or support for RIFP will decline RIC, gifts, grants, donations, other financial assets maintaining costs by RIC, Self‐Supporting: and that are requested by from its high of $2.35MM in Must Credit: DCR pays pro rata share for OBX History RIC Center; DCR credits all rental proceeds from Buzzy 2015‐2016 FY11 to zero in FY 16 – the Lane Properties Notes: Subsection remains unchanged; nothing new economic realities but Use For: Non‐reverting enterprise fund used only for precludes Friends from expense of operating and maintaining RIC and raising their own money not viable IF RIFP is mission‐ properties managed by RIC, carrying out any other duties and purpose set out by Part; or for capital critical. expenditures for properties operated by RIC
Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 21
VI. Key Findings: RIFP Financial Data
We have provided some background financial data on Roanoke Island Festival Park in relationship to other State of North Carolina “museums and commission‐facilities” as reported by the Program Evaluation Division in their February 2012 report to the Joint Legislative Oversight Committee. The data provided is helpful in “framing” RIFP’s performance, not necessarily “comparing or evaluating” its performance. It is true that no two cultural attractions (museums and commission facilities included) are alike and therefore it is very difficult to draw like comparisons. Some of the unique institutional factors that impact the “comparisons” are: size/acre; staffing – the 12 identified institutions have full‐time equivalents that range for 3 to 69 staff members; number of facilities/buildings; operating schedule; partners and their roles.
Net State Cost per Visitor Museums/ Commissions RIFP It should be noted that although RIFP’s actual four‐ Number of Sites Compared in Survey 12 1 year average gross and net median cost per visitor Average Expendatures $2,663,037 $2,226,053 are higher than the averages of the 12 identified Average Visitors 244,941 150,347 institutions, it is comparable on its gross with the Median Cost Per Visitor $10.05 $14.81 North Carolina Battleship ($14.83) and significantly Average Revenue $386,762 $603,750 lower on the net cost for both Tryon Palace and Average Net State Costs 2,276,276 $1,879,250 North Carolina Museum of Art ($19.84 and $15.64 Medium Net State Cost Per Visitor $8.61 $12.50 respectively). Notes: Net State Cost per Visitor from Program Evaluation Division
RIFP reflects the average of the prior four years
We have provided a summary of information from the February 2012 PED report below for the 12 museum/commission facilities identified. Of note are the following:
. Only the North Carolina Battleship is self‐funded with no State operating support; very engaged Non‐profit Board with very active fund‐ raising and volunteer programs; . The Mountain Gateway Museum is an outliner as operating costs are extremely low; . Not all of the museums noted in the PED report charge an admission fee for entrance; and . RIFP’s performance is comparable for facilities with greater than a $1MM operating budget Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 22
Museums and Commissions (Department of Cultural Resources) Staff FTE Expenditures Visitors Cost per Visitors Revenue Net State Cost per Visitors North Carolina Battleship 37 $3,094,704 208,651 $14.83 $3,063,217 None Graveyard of the Atlantic Museums 3 $354,603 69,164 $5.13 $5.13 Mountain Gateway Museum and Heritage Center 3 $160,745 330,074 $0.49 $0.49 Museum of the Albemarle 16 $1,097,008 71,828 $15.27 $150 $15.27 Museum of the Cape Fear Complex 4 $614,025 76,337 $8.04 $8.04 North Carolina Transport Museum 11 $979,662 97,489 $10.05 $25,591 $9.79 North Carolina Maritime Museum, BeaufortSouthport 17.254 $1,049,216 $253,947 270,532 58,612 $3.88 $4.33 $420 $3.88 $4.33 NorthNorth Carolina Carolina Maritime Museum Museum, of Art 110 $7,481,195 456,987 $16.37 $333,809 $15.64 North Carolina Museum of History 68.75 $4,760,960 550,277 $8.65 $20,987 $8.61 Roanoke Island Festival Park 29 $2,096,201 146,270 $14.33 $227,521 $12.78 Tryon Palace 58.18 $4,678,934 172,264 $27.16 $1,261,831 $19.84 Notes: Fiscal Year 2011 Reported Data from the 2012 Program Evaluation Committee Report We have provided below summary attendance and financial data as submitted by the RIFP staff as a “baseline” for developing future projections and recommendations:
Admission Fees
Ticket Prices 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Adult $8.00 $8.00 $8.00 $8.00 $10.00 $10.00 Child/Student $5.00 $5.00 $5.00 $5.00 $7.00 $7.00 Group Adult $6.00 $6.00 $6.00 $6.00 $7.50 $7.50 Group Student $3.75 $3.75 $3.75 $3.75 $5.25 $5.25 1/2 Price Sunday Adult $4.00 $4.00 $4.00 $4.00 $5.00 $5.00 1/2 Price Sunday Child/Student $2.50 $2.50 $2.50 $2.50 $3.50 $3.50 Special Price Tickets - Partner $6.38 $6.38 $6.38 $6.38 $6.38 $6.38 Coupons & Discounts Adult $7.00 $7.00 $7.00 $7.00 $9.00 $9.00 Coupons & Discounts Child/Student $4.00 $4.00 $4.00 $4.00 $6.00 $6.00 Programs Adult & Students $0.00 $0.00 $0.00 $0.00 $0.00 $6.38
The fees for the full‐price admission categories were adjusted by $2.00 in fiscal year 2012 to help offset the reduction in State operating support and to adjust for market place pricing. RIFP offers a $1.00 discount coupon via its website that is utilized by approximately 33% of the RIFP’s non‐group visitors. The Child rate covers ages 6 – 17 with the Free child category covering ages 5 and under. Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 23
Consideration should be given to modifying the age distribution of the pricing categories as cultural attractions (and museum‐goers) typically view adults as ages 13 and above; children as ages 3 – 12 and under 3 as free. The shift would serve to increase admission revenues and have no impact on visitation as the current visitor experience and programs are under‐valued given our professional experience and on‐site interactions.
RIFP has a strong paid visitor base of 50,000 visitors and total visits to the Park of 145,000 visitors from which it can build upon in the coming years. Non‐ticketed visitors are attendees to third‐party/sponsored special events, meetings or programs held at RIFP.
Eight‐Year Financial Summary of RIFP’s Consolidated Programs‐ Actuals from FY06 – FY12 and Budget for FY13 One‐time charges
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Budget
Revenues *State Appropriation$ 1,954,666 $ 2,107,240 $ 2,113,509 $ 1,944,643 $ 2,353,971 $ 2,341,367 $ 1,920,154 $ 903,491 *Admission Fees$ 307,517 $ 328,324 $ 344,211 $ 300,000 $ 329,328 $ 301,756 $ 326,406 $ 354,511 *Donation/Gifts$ - $ - $ - $ - $ - $ 796 $ 44,830 $ 15,000 *Misc. Revenue$ - $ - $ - $ - $ 35 $ 810 $ 2,910 $ 33,980 *Rental Income$ - $ - $ - $ - $ - $ - $ 29,239 $ 43,000 Recoveries & Other Revenues$ 969 $ 3,572 $ 351 $ 340 $ 1,880 $ 300 $ 110,069 $ - **Transfer From Fund 1230 (OBHC reimbursements)$ - $ - $ - $ - $ - $ - $ 13,541 $ 15,086 **Interest Earned$ 66,666 $ 96,088 $ 126,007 $ 98,531 $ 51,276 $ 33,710 $ 26,000 $ - ***Transfer of Funds from DCR to RIC (Buzzy Lane)$ - $ - $ - $ - $ - $ - $ 81,670 $ - Friends of Elizabeth II $ - $ - $ - $ - $ - $ - $ 252,536 $ 296,759 Total Revenues$ 2,329,818 $ 2,535,224 $ 2,584,077 $ 2,343,515 $ 2,736,490 $ 2,678,739 $ 2,807,355 $ 1,661,827 Operating Fund Disbursements Personnel $ 1,459,033 $ 1,558,523 $ 1,532,183 $ 1,639,108 $ 1,626,503 $ 1,617,559 $ 1,493,886 $ 1,532,299 Operating $ 308,168 $ 361,993 $ 445,946 $ 342,448 $ 592,915 $ 983,555 $ 480,332 $ 543,445 Transferred to Friends of Elizabeth II, Inc$ 416,000 $ 238,918 $ 292,322 $ - $ - $ - $ - $ - Legislative Mandated Transfer$ - $ - $ - $ - $ - $ 33,710 $ - $ - Total Operating Fund Expenses$ 2,183,201 $ 2,159,434 $ 2,270,451 $ 1,981,556 $ 2,219,417 $ 2,634,823 $ 1,974,218 $ 2,075,744 Annual Operating Margin (Revenues - Expenses)$ 146,617 $ 375,790 $ 313,626 $ 361,959 $ 517,073 $ 43,916 $ 833,137 $ (413,917) Ending Balance (Carry Over Balance)$ 1,714,332 $ 2,090,122 $2,321,968 $ 2,683,927 $ 3,201,000 $ 3,244,916 $3,664,13 4,078,053 $ 6
In each of the past seven years, with the support of the State, RIFP has generated excess net operating revenues that have allowed for the accumulation of over $4.078MM in its non‐reverting enterprise fund balance. The accumulated enterprise fund balance is net of the fund transfers authorized by RIC to the Friends of Elizabeth II, which in total has been $5.348MM and $947,000 from FY 2006. Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 24
The FY 2013 budget projections do not reflect the anticipated additional contribution ($206,959) from the Friends as originally projected. However, it is anticipated that the FY 2013 actual results will be managed to the budget projection (operating deficit of $206,958) as expense reductions have been instituted by RIFP staff to achieve the budget projections. Miscellaneous revenues in FY 2013 include Performing Arts and Education program revenues.
Personnel (salaries & benefits) has been and will always be the largest operating expense for RIFP – declining from 83% of the its total net operating expenses in FY 2006 to slightly less than 74% in FY 2013. In fiscal year 2013, RIFP employs a total of 25 full‐time positions: 7 Administrative staff; 8 Education/Interpretive staff; and 10 Technical staff involved in maintaining and preserving RIFP’s facilities.
Non‐Personnel Operating Expenses have typically averaged around $550,000 and include baseline expense allocations for:
. Performing Arts programs ($120,000) . Utilities ($114,000) . Repair and replacement expenses of facilities and equipment ($66,000) . Advertising ($103,000) . Insurance for the facilities ($68,000) . Office, Program and General Supplies ($65,000) . Miscellaneous ($10,000)
Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 25
VII. Key Options & Priorities
As part of our discussions with the Task Force members, we identified and tested with the Task Force a number of strategic funding options to help determine the best and most viable options for moving forward. We recognized that some of the options identified below might not be viable or sustainable from a political or financial viewpoint. However it was important to consider all of the options at this phase of planning and then have the Task Force members help prioritize how best to move forward.
We have identified all of the strategic options below and have provided a summary matrix on how the Task Force members have prioritized each of the strategic options:
Option #1 – Increase State Annual Appropriation
Likely Strategic Outcome: NOT VIABLE; POTENTIAL LOST OF CREDITABILITY WITH STATE AS COUNTER TO NEW ECONOMIC REALITIES
Option #2 – RIC funds from its current projected Fund balance of $4.078MM
Likely Strategic Outcome: SUSTAINABLE FOR 5 YEARS AT CURRENT ANNUAL “RUN‐RATE” OF $750k AND THEN NEW SOURCE OF FUNDING MUST BE IDENTIFIED; PROBABLY NOT THE BEST BUSINESS LONG‐TERM STRATEGY AS FOCUSED ON THE SHORT‐TERM ONLY.
Option #3 – RIC and Friends allocate proportionate share in funding the structured deficit until either State appropriations increase or Fund balances are depleted
Likely Strategic Outcome: WITH A TOTAL AVAILABLE CASH BALANCE OF $11MM, STRUCTURED DEFICIT WOULD BE ALLOCATED AND PROVIDE ALMOST 15 YEARS OF FUNDING AT CURRENT ANNUAL RUN RATE OF $750K WITH NO GROWTH. VIABLE BUT AGAIN NOT A LONG‐TERM BUSINESS STRATEGY.
Option #4 – Identify new sources of operating funding to support “status quo” – such as sponsorship dollars, contributed income, rental/event income, etc. – all non‐visitor related
Likely Strategic Outcome: POTENTIALLY A PORTION OF THE NEEDED INCREMENTAL OPERATING REVENUES MIGHT BE AVAILABLE, BUT PROBABLY NOT SUSTAINABLE OVER A NUMBER OF YEARS, AS SOME RE‐INVESTMENT WILL BE REQUIRED. COULD SHIFT THE RIFP’S CORE MISSION. Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 26
Option #5 – New Partnership with RIC and Friends: RIC Funds Structured Deficit and Friends invest in new capital/visitor experiences and start‐up programs for the initial two years (Years 1 and 2 are investment, transition and getting ready for growth; Years 3 – 5 are incremental growth)
Likely Strategic Outcome: COULD ALLOW RIC TO BE VIABLE, AS FRIENDS PROVIDE “RE‐INVESTMENT DOLLARS” FROM EXISTING FUNDS OR NEW FUNDS RAISED .
Option #6 – Friends “endows” the RIFP with fixed income stream and continues to raise additional “capital support” for RIFP from private sector donors and grants. Friend’s organization becomes more of a “Foundation” role than current hybrid operating model (operating store and membership)
Likely Strategic Outcome: IF ANNUAL INVESTMENT STREAM IS PROPERLY SET (MINIMUM WITH ROLLING THREE‐YEAR FUND RETURN AVERAGE ADJUSTMENT), COULD BE VIABLE AND SUSTAINABLE AND PROVIDE FOR LONG‐TERM GROWTH AND DEVELOPMENT OF RIFP. WOULD PROVIDE OPPORTUNITIES FOR THE FRIENDS TO REFOCUS THEIR MISSION AND ENGAGE THE LOCAL AND REGIONAL COMMUNITIES IN SUPPORTING RIFP.
In reviewing the six outlined options with the Task Force, two additional options were identified and discussed:
1. Close Roanoke Island Festival Park: Discussed as the “easy” answer and not the “right” approach to resolving the new economic realities and challenges. Could be beneficial to the State, as it could have access to the current enterprise funds, but the Roanoke Island could be void of a treasured, valued and relevant cultural resource – one that provides both direct and indirect economic value to the State, Dare County and Manteo. As noted above within this report, we strongly believe that RIFP is very relevant within the economic realities. RIFP needs to be “right‐sized” with the continued operating support of the State of North Carolina. 2. Reality: Reduce operating expenses to match known operating revenues – assuming no State appropriations. Under this scenario, known annual operating revenues would be projected to be between $300,000 and $325,000, with the primary source of the revenues being generated from the Friends Trust fund ($175,000). Current admission and program revenues would be significantly lower than the FY 2013 revenue projections. We do not see this as viable strategy, as we strongly believe that the RIFP is a relevant and culturally rich community asset.
Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 27
Each of the Task Force members were asked to provide feedback on each of the six outlined options to help better develop more relevant plans for RIFP’s strategic direction. We asked the Task Force members to prioritize each of the six options from 1 – 6 based on RIFP’s ability to implement the option (6 was the highest rating and therefore the most likely to be implemented; 1 was the lowest ranking and therefore viewed as a non‐starter). Task Force members were allowed to use each number only once.
Each of the Task Force members responded to the prioritization request individually and therefore they were not aware of how other Task Force members were responding. We developed the matrix below summarizing how the Task Force members prioritized the six options:
Option #1 Option #2 Option #3 Option #4 Option #5 Option #6 Increase Fund from ProPortionate New New Endow RIFP Task Force Member State $$$ Fund Balance Shares Revenues Partnerships Via Friends 1 16 4 53 2 2 13 2 54 6 3 34 2 51 6 4 12 3 56 4 5 65 4 31 2 6 63 2 51 4 7 63 2 51 4 8 12 3 45 6 Average 3.125 3.5 2.75 4.625 2.75 4.25 Viable 23 4 74 7 Not‐Viable 5 4 3 3
Each of the Task Force members were also asked to indicate whether the stated Option was a “viable or not‐viable” strategy – one Task Force member did not participate
The Task Force endorsed Options #4 (New Revenues) and #6 (Endow RIFP via the Friends) as the two most viable options for moving forward. The Task Force also endorsed Option #2 (Use of the Fund Balances) with set fund limitations and a firm (short‐term) timeline to complete the plan for implementing the new revenue sources. Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 28
VIII. Recommendations
We have identified the following recommendations that if implemented will serve to strengthen the viability and sustainability of the Roanoke Island Festival Park. Within each recommendation, we also identified the “timeline” in moving forward with the recommendation.
It should be noted that since the General Assembly reduced RIC’s general operating fund appropriation in FY 11‐12, RIFP staff have implemented a number of operating and program strategies to maintain and/or grow its operating revenues and/or reduce its operating expenses without negatively impacting the quality of the visitor experience at RIFP. Among the strategies implemented are:
1. Increase revenues from ticket prices – a $2 ticket increase was implemented on March 1, 2012; 2. Expand the availability of facility rentals and promote RIFP as a destination site for weddings and meetings; 3. Develop programming with Girl Scouts and Boy Scouts including overnight trips and camping; 4. Promote Summer Concert Series to better utilize the Pavilion Stage and grounds; 5. Charging an admission fees for the University Performance Series; 6. Conducted a needs assessment of RIFP’s operations and staffing resources; identify opportunities for cross‐training of staff; 7. Developing facility plans to consolidate the admissions and retail sales experiences; 8. Developing facility plans to create additional “temporary/seasonal exhibits” to increase visitation; and 9. Continuing to investigate funding initiatives with the Friends.
The recommendations outlined below build upon the strategic priorities endorsed by the Task Force (new operating revenues and “endow” the Friends) and offer a strategy to have the State of North Carolina remain a valuable strategic and financial partner in RIFP’s continued growth and viability.
1. Re‐affirm RIFP’s strategic vision that builds upon its relevant mission
RIFP’s mission (“why we exist” statement) of “interpret, through interactive exhibits and living history demonstrations, the historic site representing the first English settlement in America in 1585”, is very relevant and compelling and fulfills a critical educational, recreational, entertainment and economic value to the residents and visitors the Outer Banks region. RIFP has a great story to show and tell that is enjoyed by over 145,000 visitors annually. Note: The actual number of visitors and/or site users to RIFP is significantly higher than 145,000 visitors annually as residents and tourist can walk the boardwalk adjacent to the RIFP site to enjoy the natural beauty that the local environment offers. Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 29
A “vision statement” is forward or future looking and reflects the strategic direction of RIFP from ten thousand feet. Realistic vision statements are inspiring, somewhat lofty and aggressive, but grounded in a sense of realism. It would become the focus of RIFP’s fund‐ raising/development efforts and help insure that RIFP remains relevant for future visitors, users and generations. The leadership of the RIC and Friends must come together with a unified vision for RIFP and they must embrace and support the implementation of the agreed‐upon strategic direction/ vision.
The vision statement allows the staff of RIFP and the Friends to develop and implement annual action plans that move towards the fulfillment of the agreed‐upon vision.
Timeline: Create a working group of RIC/RIFP and Friends staff and Board to review the mission statement. Then discuss and draft a new vision statement for RIFP. Target Completion Date: Completed by late Summer/Fall 2013.
2. Re‐position the Visitor Service experience to further strengthen the engagement and participation of visitors and users to the RIFP site Note: All of the initiatives summarized below were identified by Kim Sawyer as part of her plan to grow RIFP and its programs and revenues and are currently moving towards implementation at the time of this report . Combine retail and admissions within one building: better overall utilization of the existing space at entry and re‐use of existing retail space; greater use and flexibility of staffing – combining “sales” functions; increased opportunities for per capita retail growth – retail product would be located point of sales/arrival/exit. Product mix and selection would be smaller and more focused. The utilization of attractive retail carts would allow RIFP staff to move retail products throughout the exhibits, if needed.
. New arrival sequence: Better utilization of the “introduction and arrival” space after ticketing. Exhibits related to the Outer Banks History Center could be moved to another building location within RIFP and this existing space could be utilized to “introduce” the living history demonstrations and exhibits. Could be established as “pre‐show” area for the live demonstrations and would help to set visitor expectations to engage all of the unique and compelling exhibits, demonstrations, films and programs within RIFP.
. Traveling/special exhibits: With re‐positioning the existing retail space to the entry/admissions area, RIFP could “re‐claim” this space for traveling/special exhibits that would be developed or exhibited to increase and attract visitors to the site. Typically, traveling exhibits are seasonal exhibits that are open or operate for three‐ nine months during the year. Visitors to cultural Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 30
attractions respond positively to a “call to action” or visit that traveling/special exhibits create – they become “must see now” exhibits before it is too late. Traveling exhibits also increase visitor stay‐time which further enhances the value of the RIFP visitor experience. RIFP could create its own “special exhibits” from its collections or it could “rent” a traveling exhibit that is in line with its mission from a number of third‐party producers. Typically, special and traveling exhibits create additional sponsorship or underwriting opportunities (marketing, advertising, grants among them) to help support any direct costs associated with exhibiting the special exhibit.
. Branding, marketing and awareness: RIFP’s new financial model with its new economic realities will rely on increasing paid visitors and/or members. To increase its visitation, RIFP will need to increase its marketing and awareness among visitors to the Outer Banks (tourist) and to residents and visitors to Dare County/Roanoke Island through a variety of advertising channels: print, graphics, signs, partnerships and social media, among them. In FY 2013, RIFP has budgeted over $100,000 to support its existing programs through the advertising channels. Cultural attractions typically as a benchmark allocate 5% ‐ 7% of its total operating resources for advertising‐related activities and services (non‐salaries). Advertising “partnerships” could have a significant impact on the amount of advertising resources and therefore the range of allocations.
Enhancing RIFP’s “signage” off of the main access roads to/within Roanoke Island will also increase awareness and help promote a sense of change or “newness” at RIFP. The new arrival sign at the bridge to RIFP (in process) will also help celebrate a visitor’s arrival to RIFP and Manteo.
Timeline: Under the direction of Kim Sawyer, RIFP Director, create a staff working group of RIFP and Friends to implement the facility investment and implementation plan. Target Completion Date: Completed by Fall 2013 with full implementation by the Spring of 2014.
3. Clarify the core functions of RIFP and Friends staffs in supporting the future sustainability of RIFP
Based on our discussions with the Task Force members, it is clear that RIC/RIFP staff and the Friends if managed as “one voice with one game plan” will together insure the long‐term viability, growth and success of RIFP. Under its new financial and economic realities model, change must occur within RIFP. To fully leverage the changes, together the leadership of RIC and the Friends must embrace the future plan and then agree on how, when and by whom the plan will be executed. The new plan will only be successful if there is leadership, willingness and accountability. Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 31
With an agreed‐upon new vision statement for RIFP, the mission statement of both RIC and the Friends must be examined and/or re‐ affirmed – together.
Potential opportunities of core functional changes at RIFP that will need additional discussions:
. Shift retail to RIC/RIFP staff with the consolidation of the admissions and new arrival sequence outlined above. Opportunities to “cross‐train” staff in admissions and retail functions – currently be developed by RIFP and Friends staff. . Shift in permanent to temporary status of the interpretive positions to better match seasonal operations and program schedules. This opportunity needs careful review, as the interpreters are the backbone of the living history demonstrations but the shift could allow for more temporary interpretive staff to be on site within this new approach. Total salary dollars (expenses) may not be saved but additional interpreters on site would add significant value to the visitor experience and stay‐ time. . Sales/Revenue opportunities to promote and book rental spaces for weddings, concerts, meetings and family events during the peak visitation periods. Additional staff may ultimately be required to sell the RIFP amenities, but in the short‐term, assess opportunities to internally re‐organize staff communications and program functions ‐ currently be developed by RIFP staff. . Members of the Friends: There is a role for a membership program at RIFP and we recognize that the Friends have recently begun to revise its membership benefits and fees. If memberships are to be sold, the admissions staff should cross‐sell at the point of sale. We would recommend that since RIFP staff and Friends will be developing a new vision statement and examining/reaffirming their respective missions, where members fit within the core organizational functions of RIC and Friends may be resolved after the mission discussions.
Based on our experience in working with a variety of cultural attractions, under the new economic reality model, memberships are more “annual pass” subscriptions as members want free access to the attraction and discounts on programs, events and activities. Typically, members are more “value than support” oriented users. Typically, only a small portion of the cultural attraction’s base members are “major donors.”
. Development/fund‐raising initiatives – discussed with the Task Force as opportunities do exist. However, the target donor market of the Outer Banks, Roanoke Island and Dare County has a very limited capacity for supporting seasonal, cultural attractions and institutions. RIFP’s single largest opportunity maybe with “major donors” who have visited or experienced the Park. Again, the list of donors maybe small, but the financial capacity of these responsive, hands‐on major donors is significant and should not be over‐looked in RIFP’s visitor cultivation efforts. Gaining additional visitor demographic data and promoting Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 32
on‐site the unique but compelling opportunities to engage donors in RIFP’s current and future fund‐raising strategies while visiting RIFP is a key strategy for success.
At least in the short‐/mid‐term, the fundraising and development initiatives should be managed by RIC and more specifically by the Executive Director of RIFP. As noted within our assessment, the RIC can receive tax‐deductible contributions and with its enterprise funds can insure that unrestricted and restricted gifts are maintained in the donors’ best interests. With its new vision statement, RIFP has an opportunity create a compelling “case for support” that focuses on RIFP and not RIC or the Friends.
Opportunities have been identified to increase the awareness of RIFP through creative fund‐raising strategies that engage a broad spectrum of RIFP’s potential donors, including naming rights of buildings, the gardens and/or benches.
Timeline: RIC, Kim Sawyer, RIFP Director, with the Friends leadership team develops a plan for implementation. Target Completion Date: Completed by late 2013/early 2014.
4. Friends: clarify its baseline annual operating support to RIFP
We would recommend that the Friends re‐visit their current policy of providing 80% of its endowment “earnings” to RIFP. Since the funds retained by the Friends (over $7.2MM in current market value) are viewed as an “endowment or trust fund” for RIFP, we recommend that the Friends establish an investment policy for the endowed funds that provide an annual fixed percentage draw based on the three‐year rolling market value average of the unrestricted funds. This fixed percentage draw, typically 5% of the three‐year rolling market value average, is a best practices approach among cultural attractions, institutions and non‐profits in general, supported in whole or part from endowment funds. Note: Some members of the Task Force believe that in prior years the Friends provided a fixed percentage draw of the endowment/trust fund investments but in recent years moved to more conservative approach.
By utilizing a fixed percentage draw, the investment fund manager of the endowment fund has a known investment or performance goal to produce annually; establishes accountability; and leverages any appreciation/decline in the market value of the endowment funds with its three‐year rolling average. We believe that the fixed percentage draw (5% goal) is a more forward‐thinking, business‐ focused approach to supporting the programs and activities of RIFP than the percentage of annual “earnings.” This approach also integrates and leverages the other new funding strategies identified for RIFP within this report – sustainable State funding and increased earned/contributed revenue programs. Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 33
With RIFP’s new vision statement and its new economic realities implications, establishing a known investment goal and funding commitment from the Friends will allow RIFP to proactively plan for its future growth and success. The 5% investment goal of a projected three‐year average of a $6.5MM (estimated only) would provide approximately $325,000 in annual support to RIFP.
Once the leadership of the Friends and RIC establish an agreed‐upon annual financial commitment to RIFP from the Friends’ endowment/trust funds, consideration could be given, as part of re‐engaging the State in maintaining its annual operating appropriation to support RIFP, to allowing a percentage draw on the principle of the endowment fund to support “capital investments” at RIFP. This strategy has been successful utilized with other cultural attractions where the percentage draw is low (a total of 10% of the total fund balance as an example); the timeline for the draw is short‐time (no more than three years); and the purpose is “non‐operating” or revenue leveraging initiatives. Again, this option should be considered only after a new agreed‐upon annual fixed percentage draw of the endowment/trust funds can be established by the Friends and RIC.
Note: Under the leadership of Tod Clissold, Friends Chair, the Friends have agreed to amend its current level of annual support to RIFP. Specifically, in early March 2013, the Friends indicated that they are supportive of RIFP’s new strategic plan and recommendations. The Friends have agreed to increase their annual contribution to RIFP with an annual contribution goal of $325,000 based on the Friends current endowment/trust fund “baseline” balance. Annually, the Friends will continue to support RIFP at the $325,000 contribution target goal if the Friends maintain its endowment/trust fund “baseline” balance. Should the Friends “baseline” fund balance decline/increase from its current (2013) funding level, the Friends may re‐assess its annual contribution goal to RIFP.
Timeline: RIC Chair, Kim Sawyer and the Friends leadership team develop a plan for implementation. Target Completion Date: Completed by Spring/Summer 2013.
5. Annual State Appropriation
For many years, the State of North Carolina has been “the major donor” in supporting cultural attractions and institutions within the State. In most cases, especially among the 12 “museum and commission” institutions identified in the February 2012 PED report, the State provided over 75% of the respective institutions’ operating support, excluding the Battleship. Among all cultural attractions/institutions (regardless of size and scope within the US), the public‐sector funding benchmark typically ranges between 25% ‐ 33% of total operating revenues as more public/private funding models are implemented throughout the country to better leverage the Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 34
collective financial resources of both partners. Smaller operating budget/attendance facilities typically require a higher percentage of public‐sector support as these institutions do not have the funding capacity to generate additional “visitor or contributed” revenues. Note: In fiscal year 2012, the State’s appropriation to RIC provided almost 100% of total operating expenses compared to 50% in the projected fiscal year 2013 operating year. In future years, we would recommend that the State continue to fund RIFP at the current baseline of $1,058,757 which is the FY `12/`13 appropriation of $903,500 adjusted by $155,000 to cover the projected increases in State salaries and related benefits in FY `13/`14. It is important to recognize that State funding to RIFP has declined from its peak of $2.114MM in fiscal year 2007/2008 to its current (fiscal year 2012/2013) level of $903,500 – a 57% decrease since its 2007/2008 peak.
The primary reason that the State, or any public‐sector partner, must continue to fund its respective cultural institutions is that the “facility assets and any future investments” remain under the control of the public partner. If the facility assets are going to remain in‐ use or not be reduced in terms of scale or size (our assumption with RIFP as noted above), then the State has an obligation to annually support and help maintain or grow its assets.
Based on our review of operating and maintenance expenditures related to site and building assets, the current annual cost to maintain and preserve RIFP’s existing facility (site, buildings and equipment) assets – assets which are owned by the State of North Carolina – is approximately $953,000 – if you include a 3% contingency factor for emergency repair and replacement, the annual cost is $982,000. The annual maintenance expenditures for the site and building assets would include annual operating costs for utilities, site and grounds maintenance, ship and boat maintenance, HVAC, equipment and building repairs and an annual allocation for managing the current deferred maintenance replacement needs. RIFP’s annual site and building maintenance expenditures (an annual expense that will continue to increase faster than inflation due to the age of RIFP’s current assets) is directly offset against the State’s annual operating appropriation – an appropriation that we anticipate will remain stable over the next five years.
As noted above, the State of North Carolina has been and should remain RIFP’s “major donor” – even with the new economic realities. As its major donor, members of the RIC and Friends Board must cultivate the leadership members in the State legislature. Members of the RIC and Friends must engage the current majority of the legislature in conversations about RIFP’s mission and vision and the critical role that its plays for tourists and residents of the Outer Banks region. It is well known that “people give to people” and to insure the State’s participation as RIFP’s major donor, members of RIC and the Friends need to present a strong, compelling case for continued support to the legislature. Annually, strategies must be identified among the members of RIC and the Friends to communicate, cultivate and solicit the participation of the leadership members in the State legislature. Key members of the legislature should be encouraged to visit and/or experience the core mission of RIFP. Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 35
To insure the State’s long‐term funding commitment to RIFP, the leadership of RIC must actively recruit new members of the RIC who have the experience, relationships and integrity to communicate, cultivate and solicit its major donor – the leadership of the State legislature.
Timeline: RIC Chair, Kim Sawyer and the Friends leadership team develop a plan for implementation. Target Completion Date: Completed by late Spring/early Summer 2013; thereafter, an ongoing strategy for the RIC leadership.
6. Diversify RIFP’s operating revenue to remain viable and sustainable
The funding models of successful cultural attractions across this country are developed through three primary funding sources:
1. Earned Visitor Revenues & Programs: admissions, retail, education programs, rentals & events; 2. Contributed Revenues: memberships, annual fund, grants, foundation support and endowment programs (Friends); and 3. Public‐Sector Revenues: State of North Carolina in the case of RIFP.
RIFP’s current funding model is “out‐of‐balance” especially with the new economic realities – too high of a dependency on State funding. To achieve a more balanced funding model for RIFP – with less dependency as a percentage of RIFP’s operating budget from the State – the staff of RIFP, in the short‐term, need time to further plan, develop and implement the earned and contributed revenue programs and the funding opportunities that will serve to provide future operating revenue growth.
To diversity RIFP’s operating revenues over the next five years, we would recommend that RIFP establish a two‐tiered funding approach:
A. Short‐Term (Years 1 – 3): Transition Planning & Getting Ready for Growth B. Mid‐Term (Years 4 – 5): Growth
We have outlined below how best to implement the two‐tiered approach.
A. Short‐Term (Years 1 – 3): Transition Planning & Getting Ready for Growth
Mission‐driven cultural attractions like RIFP are challenged in responding quickly to dramatic shifts in its funding structure ‐ the current shift from 100% State funded in FY 2012 to 50% funding of operating expenses in FY 2013 presents a number of short‐term financial challenges. Although this shift represents the new economic realities of State support for cultural attractions, RIFP needs Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 36
time (1 – 3 years) to properly plan and implement new funding programs to re‐balance its operating budget under the new economic realities.
If given the time to properly plan (our recommendation), RIFP could:
1. Develop new marketable programs and experiences that will generate additional visits and/or new sources of sustainable revenues. Note: Over the next three to five years, the goal should be to increase the percentage of paid visits to RIFP. Revenue and attendance growth will be achieved through: . Traveling/special exhibits/special events that create a “call to action or visit”; . Expanded rentals, events, meetings and concerts; . Sponsorship initiatives for exhibits, visitor amenities, graphics and boardwalks that build awareness and the RIFP brand; and . Grants and underwriting support for education and interpretive programs; cultivate major donors from visitors who embrace RIFP’s core mission and programs. 2. Reassess human resources/capacity to insure that RIFP’s staffing plan responses to the seasonal operating schedule, visitor expectations and demands and shifts in visitor usage of the RIFP site. There could be shifts in the number of permanent positions to more temporary positions (increasing the actual number of staff on‐site) that would serve to increase the value of the visitor experience through additional demonstrations and programming. 3. Develop potential partnerships with other Roanoke Island cultural attractions to create synergy, cross‐promote, increase stay‐time and/or promote a day visit to Roanoke Island. Opportunities exist to create “bounce‐back” marketing among the Roanoke Island cultural attractions that offer unique visitor discounts or special (limited‐time) experiences. 4. If the RIC and the Friends work together to develop a new vision and implement a 5% annual draw of the three‐year rolling average of the endowment fund’s market value, the incremental operating support will support the transitional costs of getting ready for growth.
As noted within this report, we strongly believe that RIFP is a relevant and valued cultural asset that will grow. We would recommend that, over the next three years, RIC utilize a minority share of its current enterprise fund balance (over $4MM as of July 1, 2012) to invest in RIFP’s future programs and success – positioned as “venture” funding for RIFP. The financial pro forma models developed in the following section of this report identify the potential annual limits and timing for utilizing the minority Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 37
share of the current enterprise funds. Once the new operating revenue programs are fully developed by year three, no further investments from the current enterprise fund are anticipated, assuming that the State and Friends remain valued partners as identified within this report. To insure accountability, the RIC must be firm with the leadership of RIFP on the financial amount of the minority share and the length of time (years 1 – 3) that the enterprise funds would be utilized as “venture” funding for future growth.
We have assumed that a minority share of RIC’s current enterprise funds will be utilized during years 1 – 3 – exclusive of the Friends endowment fund investments. We anticipate that the Friends will invest in RIFP through a fixed percentage draw of the three‐year average market value of the total unrestricted endowment funds as outlined above.
B. Mid‐Term (Years 4 – 5): Growth
Although RIFP will never stop growing its programs, events, visitation and activities, after the initial three years (potentially before the third year), the staff of RIFP will have implemented the facility, programmatic and operational recommendations noted above. With the implementation of the new recommendations outlined within the “Short‐Term” above:
. paid attendance will have increased; . net profits from retail operations will increase; . new sponsorships will be identified; . admission rates and fees will be modified to reflect the visitor experience and market conditions; . greater awareness of RIFP and its mission will be known throughout the State, Dare County, Roanoke Island and tourist to the Outer Banks region; . operating grants from regional foundations will be secured to further develop the interpretive programs and living history demonstrations; and . cultivation efforts of engaging a small group of major donors will provide a source of operating support and donor engagement.
The State of North Carolina and the Friends will be sustainable funding partners to RIFP providing both financial support for leveraging new resources and strategic guidance to the leadership of RIC and RIFP. Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 38
Within the “Mid‐Term” approach, no enterprise fund resources will be allocated, as new sustainable sources will have been developed and implemented.
Timeline: RIC Chair, Kim Sawyer and the Friends leadership team develop a plan for implementation. Target Completion Date: Short‐ term plan completed by Spring 2014.
Financial Projections‐ Five‐Year Plans: Two Options with different outcomes
We have developed two five‐year financial plans for RIFP with two different funding scenarios and two different outcomes:
1. Status Quo Option with declining State operating support
This option compiles with the current State legislative direction to eliminate State operating to RIFP. Although this option allows RIFP to remain open, the core mission and visitor experience that is deeply embedded in the institutional fabric of RIFP would be significantly modified and changed forever. RIFP would at best be on “life support” as a mission‐driven, cultural institution as to support the elimination of State funding, existing staffing and programmatic levels would need to be eliminated or reduced by 50% or more. RIFP could remain on “life support” by accessing the enterprise funds available (approximately $3.85MM) but these funds will be exhausted within the next seven to nine years, if not sooner.
The elimination of State operating support would not allow RIFP to develop new revenue programs as staff positions and interpretive programs would be eliminated and/or significantly reduced. This is not a viable or sustainable model for RIFP. The State should consider closing RIFP if the State does not want to provide the minimum level of funding to RIFP to support is annual cost of operations/depreciation – estimated at $780,000 annually.
2. Growth Option with transition funding and stable State operating support
This option allows RIFP to remain a mission‐driven, relevant cultural attraction that engages and supports both the tourist and residential audiences of the Outer Banks region. This strategy develops new marketable revenue programs over the next three years, through the use of short‐term “transition funds” from the existing enterprise fund, that will generate increased paid visitation to RIFP and sources of operating revenues. This option also leverages the Friends’ endowment funds in supporting the transition costs and future growth initiatives. The Growth Option is a forward‐thinking, business‐focused approach that leverages the existing enterprise funds to invest in RIFP’s future, while clearly establishing funding parameters to eliminate the risk of using more than a minority share of the existing enterprise funds. Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 39
Financial Projections: Underlying Planning Assumptions
We have identified the following underlying financial assumptions that support the two pro forma operating models:
. The RIFP will be a viable, successful and sustainable cultural asset and resource under the management and operations of RIC with the support and guidance of the Friends. Therefore, RIFP will remain and grow as a relevant cultural attraction within the State, Dare County, Roanoke Island and tourist to the Outer Banks region. . RIFP’s baseline annual operating expenses are $2.08MM, including personnel and overhead operating expenses. We recognize that actual expenses in fiscal year 2013 will be less than $2MM. . RIFP’s annual paid visitation will be approximately 50,000 visitors generating $360,000 in admission revenues – total RIFP visitation will be approximately 150,000 visitors including paid, free and third‐party/event‐based visitors. . RIFP’s fund balance as of June 30, 2013 (ending FY `13) will be approximately $3.8MM after funding the FY`13 “structured deficit” of ~$212,000. . Beginning in fiscal year 2014/2015, the Friends will invest $325,000 of its endowment into RIFP’s general operating fund – we have assumed that the Friends will use fiscal year 2014 to re‐align their investment fund allocations and therefore have utilized only $175,000 in Friends investment revenues in fiscal year 2013/2014. . The State’s current baseline annual appropriation is $1,058,757 which is the FY `12/`13 appropriation of $903,500 adjusted by $155,000 to cover the projected increases in State salaries and related benefits in FY `13/`14. . RIFP, under the leadership of the RIC, continues to operate as an enterprise fund with all net revenues utilized to operate RIFP. . New revenues from sponsorships, major donor support, grants and/or contributions will be managed by the RIFP as RIFP/RIC can receive tax‐deductible gifts and contributions. . The recommendations outlined above will be utilized in the development of the five‐year “Growth Option” financial projections.
Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 40
Status Quo Option with declining State support
This is not a viable or sustainable model for RIFP – fulfills current State legislative mandate; high risk for all partners
Operating Revenues Baseline FY `13/`14 FY `14/`15 FY `15/`16 FY `16/`17 FY `17/`18 State Appropriation $1,058,757 $675,000 $450,000 $0 $0 $0 Admission Fees $355,000 $365,000 $292,000 $219,000 $182,500 $182,500 Performing Arts $30,000 $0 $0 $0 $0 $0 Education Programs $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 Donation/Gifts $15,000 $25,000 $40,000 $50,000 $50,000 $50,000 Sponsorships $0 $10,000 $10,000 $10,000 $10,000 $10,000 Rental Income $43,000 $50,000 $50,000 $50,000 $50,000 $50,000 (OBHC reimbursements) $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 Friends Contribution $175,000 $175,000 $325,000 $325,000 $325,000 $325,000 Subtotal Operating Revenues $1,696,757 $1,320,000 $1,187,000 $674,000 $637,500 $637,500 New Incremental Revenues (Net) $0 $0 $0 $0 $0 $0 Total Receipts $1,696,757 $1,320,000 $1,187,000 $674,000 $637,500 $637,500 Operating Expenses Downward trend Personnel $1,535,000 $1,535,000 $1,228,000 $767,500 $767,500 $767,500 that negatively Performing Arts $120,000 $0 $0 $0 $0 $0 impacts the Utilities $114,000 $115,000 $100,000 $100,000 $100,000 $100,000 visitor Repair & Maintenance $66,000 $33,000 $20,000 $20,000 $20,000 $20,000 experience and Advertising $103,000 $50,000 $50,000 $50,000 $50,000 $50,000 growth Insurance $68,000 $69,360 $70,747 $72,162 $73,605 $75,077 Supplies $65,000 $32,500 $30,000 $25,000 $25,000 $25,000 Other $10,000 $5,000 $5,000 $2,500 $2,500 $2,500 Total Operating Expenses $2,081,000 $1,839,860 $1,503,747 $1,037,162 $1,038,605 $1,040,077 Net Operating Margin ($384,243) ($519,860) ($316,747) ($363,162) ($401,105) ($402,577) Transfer from Enterprise Funds ($519,860) ($316,747) ($363,162) ($401,105) ($402,577) Balance of Enterprise Funds $3,800,000 $3,330,140 $3,013,393 $2,650,231 $2,249,125 $1,846,548 Requires funding from the existing RIC enterprise fund balance, while implementing significant reductions in staffing, mission‐ related interpretive programs and the expense cuts to overhead operating expenses for maintenance and repairs. Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 41
Key Outcomes of Status Quo Option with declining State support:
. Achieves State strategic directive of eliminating State support . Declining annual paid attendance as reductions in interpretive programming and demonstrations have a direct impact on paid visitation . Elimination of the Performing Arts programs – program and grant revenues do not support the direct expenses incurred . Friends funding contribution will be $325,000 from its endowment fund balance, commencing in FY 15 . No or limited opportunities to develop new revenue programs as RIFP would be severely challenged to maintain its current baseline of programming, demonstrations, events and visitor experiences . Significant reductions in staff positions and reductions in the current variable expenses of advertising, supplies and repair and maintenance. Fixed costs for utilities and insurance would remain with some savings due to closing buildings or exhibits. . Significant reductions in the enterprise fund balance – at least a 50% reduction from baseline of $3.85MM – could be larger draw on the enterprise fund if donor or sponsorship revenues are not identified
Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 42
Growth Option with stable State Operating support – mission‐driven, relevant cultural attraction
Operating Revenues Baseline FY `13/`14 FY `14/`15 FY `15/`16 FY `16/`17 FY `17/`18 State Appropriation $1,058,757 $1,058,757 $1,058,757 $1,058,757 $1,058,757 $1,058,757 Admission Fees $355,000 $365,000 $413,910 $434,606 $497,951 $510,096 Performing Arts $30,000 $40,000 $40,000 $40,000 $50,000 $50,000 Admissions Fees Education Programs $5,000 $5,000 $10,000 $15,000 $25,000 $25,000 includes projected Donation/Gifts $15,000 $20,000 $40,000 $50,000 $50,000 $50,000 (not approved) fee Sponsorships $0 $10,000 $20,000 $40,000 $50,000 $50,000 increases in FY `15 Rental Income $43,000 $50,000 $50,000 $50,000 $75,000 $85,000 and FY `17 (OBHC reimbursements) $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 Friends Contribution $175,000 $175,000 $325,000 $325,000 $325,000 $325,000 Subtotal Operating Revenues $1,696,757 $1,738,757 $1,972,667 $2,028,363 $2,146,708 $2,168,853 New Incremental Revenues (Net) $0 $0 $0 $15,000 $60,000 $75,000 Total Receipts $1,696,757 $1,738,757 $1,972,667 $2,043,363 $2,206,708 $2,243,853 Operating Expenses Personnel $1,535,000 $1,565,700 $1,581,357 $1,597,171 $1,598,768 $1,614,755 Performing Arts $120,000 $80,000 $80,000 $80,000 $100,000 $100,000 Overhead Utilities $114,000 $118,000 $120,360 $122,767 $125,223 $127,727 operating Repair & Replacement $66,000 $75,900 $87,285 $100,378 $110,416 $115,936 expenses are Advertising $103,000 $104,030 $105,070 $106,121 $107,182 $108,254 non‐salary costs Insurance $68,000 $69,360 $70,747 $72,162 $73,605 $75,077 Supplies $65,000 $66,300 $67,626 $68,979 $70,358 $71,765 Other $10,000 $10,500 $11,025 $11,576 $12,155 $12,763 Total Operating Expenses $2,081,000 $2,089,790 $2,123,471 $2,159,153 $2,197,707 $2,226,278 Positive shift in Net Operating Margin ($384,243) ($351,033) ($150,804) ($115,791) $9,001 $17,575 RIFP’s “bottom Allocation from Enterprise Funds ($351,033) ($150,804) ($115,791) $9,001 $17,575 line” Balance of Enterprise Funds $3,800,000 $3,498,967 $3,348,164 $3,232,373 $3,241,374 $3,258,948
Requires short‐term (3 years) transition funding from enterprise fund balance to develop and implement new revenue and marketable visitor programs and experiences – approximately $680,000 (projection of $618,000 with a 10% contingency allocation) or 18% of the existing fund balance. State’s role is RIFP “major donor partner” that provides annual operating appropriation to support the maintenance and facility improvements to the RIFP site – State’s investment decreases from 60.9% of total revenues in FY 2014 to 44.9% in FY 2018 – a 26.3% decline over the five years. Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 43
Key Outcomes:
. RIFP remains a mission‐driven, relevant cultural attraction . The State continues to provide funding for partnership support and facility maintenance; State funding stable over the next five years . Annual paid attendance continue to increases from baseline of 50,000 through FY 2018 by offering new programming (traveling exhibits, special events and new visitor experiences); developing new “call to action/visit” proactive, advertising programs; and creating new partnerships with other regional cultural attractions . Re‐alignment of the Performing Arts programs – program and grant revenues support 50% of the direct expenses incurred . Friends funding contribution will be $325,000 from its endowment fund, commencing in FY 15 . New incremental revenues commencing in FY 2016 relate to re‐focused retail experiences; underwriting of traveling exhibits . Investment in staffing to support new marketing/event programs; re‐alignment of interpretive staffing; grant‐writing support and cultivation . Overhead operating expense are projected to increase by 1% ‐ 2% annually over the five years . During the initial three years of transition (FY 2014 – FY 2016), the enterprise fund balance will be utilized to fund the net operating cost of the transition. We have projected that the total three‐year transition investment (venture funding) will total $680,000 with the largest investment occurring in year one (FY 2014) when $351,000, excluding contingency of transition funding would be required. We have projected that after the initial three years, no further transition funds from the enterprise funds will be required as RIFP will be operating at a positive breakeven with the stable funding from the State of North Carolina.
Note: As noted within this report, to insure accountability and commitment to RIFP’s growth option, the RIC should establish enterprise funding limits and timelines on the use of the transition funds – not to exceed $680,000 (projection with a 10% contingency) and to be utilized within the next three years. Detailed annual operating plans for the next three years can be developed to insure that the limitations and timelines are achieved.
Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 44
IX. Privatization – A Future Option
Many cultural attractions and institutions within North Carolina and throughout the country have explored the privatization option, especially with the new economic realities that are impacting cultural and educational institutions and the national “trickle‐down” impact of less Federal funds. Exploring options for a shift in governance, or privatization as a term, within museums, historic sites and cultural institutions is a national trend that will continue to be discussed as public‐sector entities re‐evaluate their core functions and responsibilities under the new economic realities. Public‐sector entities cannot abandon their cultural assets but must seek, over time, to re‐balance its current level of appropriation with other sources of funding – earned (visitor) and contributed (donor designed) sources.
S&W has developed a number of privatization plans both within North Carolina (the North Carolina Zoo and the North Carolina Aquariums as two examples) and in supporting cultural institutions throughout the country. In all cases, the key “success factors” for implementing a shift in the governance is leadership and willingness. Institutions that explore the shift in governance must have dynamic, passionate and strong leaders – both on their respective Boards and among the staff – and have a determined and dedicated willingness to create a new governance, operating and financial model that is viable and sustainable for future generations. In our experience, without these two core success factors, attempting to create a shift in governance or privatization will fail.
Based on our experience, in our opinion, currently RIC and RIFP are not ready for a shift in governance or privatization – the leadership and willingness are not in place today to address this opportunity. However, we would recommend that once the RIC and RIFP, in partnership with the State and the Friends, complete the implementation of RIFP’s Growth Option as outlined above that a privatization plan be discussed and potentially created. In the meantime, the RIC should continue to identify and recruit new members of the RIC who have the leadership characteristics, foresight and willingness to plan for a future shift in RIFP’s governance structure.
Since new economic realities will most likely re‐surface again over the next five years, we would assume that any shift in governance would be modeled as a public/private partnership (P3) between the State of North Carolina and a private not‐for‐profit partner.
Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 45
X. Next Steps
Based on the recommendations identified within this report, we have summarized the immediate “next steps” for fulfilling Roanoke Island Festival Park’s Financial Sustainability Plan:
I. Clearly define the core functions and roles of the Friends and how the Friends will further support the mission and vision of RIFP a. One voice with one strategic game plan i. RIC operates RIFP and raises operating revenues and capital investment funds 1. Enterprise fund utilizes operating reserves to support future growth initiatives . Develop criteria for utilizing of the existing enterprise fund to support the “transition funding estimated at $680,000” to support RIFP’s Growth Option – see page 35 and subsequent pages of this report . Written agreement with the State that RIFP enterprise funds will be used for RIFP general operating programs and visitor experiences that support its core mission 2. Earned revenues, contributed $$$ and memberships have best/highest use within RIC/RIFP Enterprise Fund as 100% allocated to RIFP instead of current 2.5% or anticipated 5% from Friends ii. Friends endow RIFP programs as focus of Friends efforts will be on maintaining current resources and not RIFP operations 1. Engage the leadership of the Friends in creating a fixed percentage return of the endowment fund . Due to the leadership of Tod Clissold, Friends President, the Friends have agreed to amend its current level of annual support to RIFP. Specifically, in early March 2013, the Friends indicated that they are supportive of RIFP’s new strategic plan and recommendations. The Friends have agreed to increase their annual contribution to RIFP with an annual contribution goal of $325,000 based on the Friends current endowment/trust fund “baseline” balance. iii. Reaffirm mission statements of RIFP and the Friends iv. Develop strategic vision statement for RIFP – a “looking forward” vision statement that is compelling and engaging but based in financial reality. Roanoke Island Festival Park Strategic Plan for Financial Sustainability: March 2013 – Final Report Page 46
2. Re‐engage RIC leadership in securing annual State Appropriation a. Identify RIC leadership to cultivate, communicate and solicit State legislature to maintain State funding for RIFP b. Develop new “case for support” to secure sustainable operating support from the State and to promote RIFP’s mission and vision 3. Develop implementation plans to leveraging RIFP resources a. Reassess staff allocations within new economic realities i. Cross training of visitor service staff in admissions and retail – part of Next Step #1 above of refocusing Friends ii. Seasonal temporary interpretive staff iii. Volunteers b. Continue to develop new revenue/marketing initiatives to grow visitation and site usage i. Weddings, scout programs, special events and evening rentals are recent examples of new marketing initiatives that has increased revenue potential ii. Cross‐promotions with other Roanoke Island cultural attractions: second‐day visits at discounted prices; special events & rentals c. Continue to implement facility/visitor improvements to improve operating efficiencies and higher utilization of existing space i. Integrate admissions functions with new retail sales within entry area ii. Traveling/special exhibits area renovated in existing retail space d. Create a fundraising/development plan i. Focus on “naming opportunities” and sponsorships of existing exhibits and visitor amenities 1. Benches, rocking chairs, interpretive exhibits, stage and trees ii. Create major donor opportunities for underwriting interpretive demonstrations and exhibits 1. Create on‐site signage promoting opportunities