SPAC business plan: Many more events, $4M annual operating deficit

In order for the Sarasota City Commission to be convinced to enter into an implementation agreement to build the new Sarasota Performing Arts Hall, the City Commission must convince the coverage cost of construction, and it must believe the greater Sarasota region can support it.

The commission will take up the matter at its March 17 meeting when its vote will determine whether to proceed beyond the preliminary design phase for the proposed new center or halt the process at this stage.

Commissioners are already considering whether the city and the foundation can go it alone on what is now estimated as a $407 million project without the participation of Sarasota County. The SPAC is eligible for tax increment financing district funding from both the city and county since construction would be within The Bay park.

County commissioners have thus far balked at the idea of pitching in 25% of the cost to match a city contribution, the remainder up to the foundation to raise via philanthropy. That would leave the city on the hook for 50% via the TIF revenues — projected at $146.5 million through 2049 as property value stands today in the downtown area surrounding The Bay park. 

That prospect has already given commissioners some pause, even though project financial consultant Alex Stokes of HR&A Advisors told them during a Feb. 11 workshop the TIF fund will cover the remainder of The Bay park development and the performing arts center as hundreds of millions of dollars in new developments are either under construction or in planning.

In addition to discussing capital cost funding, parking needs and infrastructure obligations of the city per the partnership agreement with the Foundation, the wide-ranging workshop included a presentation of the business plan to demonstrate the operational viability of the facility.

Emily Harney of New York City-based AEA Consulting told commissioners the business model is based on currently available information and will be refined as the project moves forward. The business plan is benchmarked against facilities in a dozen metropolitan areas ranging from Fort Lauderdale with a population of 6.14 million to Little Rock, Arkansas, at 748,000.

Harney advised commissioners to not consider Sarasota County’s current population of just more than 910,000 to support the facility, but its projected growth to 993,000 by 2033. A factor to consider, she said, is average income growth from $64,300 in 2012 to $77,534 in 2022, according to the U.S. Census Bureau.

“We believe that speaks positively to the potential of the population to patronize the Performing Arts Center,” Harney said. “It's also worth noting that the population expands significantly in season. An estimate by Sarasota County predicts that the population swells by about 15% during season, so incorporating that into today's population numbers would be close to a million.”

Expenses will exceed revenue

Ticket revenue makes up the SPAC's largest income category with the 2,700-seat main theater hosting a projected 179 activations over the course of a year, not including load-in, load-out and rehearsal days. The multipurpose room, Harney said, projects at 93 events and 60 additional days of use estimating an annual attendance of more than 500,000. 

That volume of use stands in contrast to the Van Wezel Performing Arts Hall, which had 153 activations in the 2023-24 season, 196 if including Sarasota Orchestra performances. The estimate for first year activations for the new facility is at 353 across all spaces, not including the Orchestra, which is planning to build its own facility on Fruitville Road near I-75.

All that activity estimates to generate $37.25 million in earned revenue in the first year against $41.24 million in expenses, leaving a $3.99 million gap the Foundation must fill via philanthropy. Fifth-year earned revenues are projects at $38.73 million against $42.13 million in expenses, a deficit of $3.4 million.

Sarasota Performing Arts Foundation CEO Tania Castroverde-Moskalenko said expenses exceeding revenues are typical for a theater complex, and she is confident the foundation can cover the deficit, which she also said is not an extraordinary amount.

“The foundation currently raises $2.5 million (per year), but that doesn't include contributed revenue from our special events,” Castroverde-Moskalenko said. As an example, she added, “We have an annual fundraising gala that brings in about $1.3 to $1.4 million.”

Also, a point of contention since the partnership agreement between the city and the foundation was executed in April 2022 is the non-compete language between the SPAC and the Van Wezel. 

It states: “City shall continue to operate the Hall until such time as the new PAC becomes ready for occupancy and operations; whereupon the Hall shall cease operation as a performing arts facility with respect to booking any program or activity that would compete directly with the PAC. The city shall work cooperatively with the Foundation prior to the anticipated opening of the new PAC, to collaborate and complement park programming.”

Castroverde-Moskalenko said the foundation is open to re-examining the non-compete language and offered the olive branch of volunteering the organization to take over management of the Van Wezel from the city.

“Should the Van Wezel be recommended to remain as a performing arts venue by the Purple Ribbon Committee, and should this commission agree to keep the Van Wezel as a performing arts venue, the foundation would like to work with you,” she said. “Of course, it would have to remain a city building with the obligations that come with that, but we would be open to this conversation.”