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.