Jerry Kaufman

Commentary

The cultural gem of North County, the California Center for the Arts, Escondido, appears to be a cubic zirconium. From a financial and management perspective, we are having problems.

Are high-energy costs one of the causes? Absolutely.

To help ease the budget crunch, the city gave the center's foundation board $350,000 in October last year, and a loan of $500,000 in March. The loan is to be forgiven if the center can raise $2.5 million in five years.

According to the Dec. 31, 2000 operating statement, the net operating loss for the center was more than $800,000 despite the fact that the city's management fee paid to the foundation has risen from $1.5 million to $1.9 million, with annual increases based upon the Consumer Price Index.

The arts center foundation also has a line of credit, which has been increased from $230,000 to $1.3 million, and as of February this year it has used $983,000.

Try that on your own credit cards. The center will pay this back out of future ticket sales, but the squeeze will come if ticket sales don't meet expectations.

Then what?

Well, they can just go next door to City Hall for another cash infusion.

If the city keeps on increasing its management fee, where is the center's incentive to operate prudently? Even though it is a nonprofit business, the arts center is still a business and it should be operated on an efficient economic basis, with accountability to the owners -- the citizens and taxpayers of the city.

Not-for-profit is also supposed to be not-for-loss. The burden for the city is supposed to be decreasing, rather than increasing, as the center becomes more self-sufficient.

The arts center has been in operation since 1994 and is just now preparing to introduce an endowment and a planned giving program that will allow it to accept gifts of $10,000 or more.

Why have they waited so long?

The center's foundation has been in existence for four years and it would seem that things should be more stabilized. Instead, Board meetings are still closed to the owners -- the citizens of Escondido; Board members are having trouble raising money; board members are resigning as their input is squelched by an aggressive leadership, and the CEO does not seem to be accountable to the board on all issues.

The city wants to see the center succeed, and has agreed to be responsible for certain operational expenses. However, the burden for the city must decrease over the years and the center must reach a break-even financial position through the application of sound business principles. The city has a responsibility to review the financial practices of the center and its foundation, and to ensure that all avenues are explored that could lead to increased revenue and decreased expenses.

Entertainment has become big business for the new casinos springing up in the county. We should collaborate with them and other local venues such as Humphrey's, Thornton Winery, and the San Diego Chamber Orchestra, to bring in stage productions, concerts and entertainers.

In addition, market research is vitally needed to determine the type of entertainment that will be best supported by San Diego residents.

North County Times columnist Jerry Kaufman of Escondido is a physical therapist.

4/26/01