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Council PKT 05-08-2014 Special AGENDA FEDERAL WAY CITY COUNCIL SPECIAL MEETING / STUDY SESSION Council Chambers - City Hall May 8 , 2014 6:00 p.m. www.cityoffederalway.com 1. CALL MEETING TO ORDER 2. PLEDGE OF ALLEGIANCE 3. PERFORMING ARTS AND CONFERENCE CENTER DISCUSSION • Presentation of Mayor’s Blue Ribbon Panel Findings • City Staff Presentation 4. PUBLIC COMMENT 5. COUNCIL DISCUSSION 6. ADJOURNMENT FEDERAL WAY PERFORMING ARTS AND CONFERENCE CENTER rt n , j *#'ii_ (!� ^;"� & �� j} icy '►S� �`r tj) „ 711. idge 4 Report of the Mayor's Blue Ribbon Panel to City Council May 8, 2014 FEDERAL WAY PERFORMING ARTS AND CONFERENCE CENTER a: ii. rl r�f !y ; f xr 1 . Mayor's Blue Ribbon Panel • Dave Berger • Scott Brown • Brian Bullard • Kath i Ferrari • Rob Harpster • Steve Lewis • Mildred 011& • Pam Smith • Susan Streifel --- 0 TABLE OF CONTENTS 1. Introduction p. i 2. Finance Subcommittee Report p. 1 o PACC Finances PowerPoint presentation, Finance Director Ade Ariwoola p. 4 o Federal Way Performing Arts Center Conceptual Development Cost Evaluation, Mortenson Construction, March 2013 p. 14 3. Operational Pro Forma Subcommittee Report p.15 o Analysis and Critical Review, Performing Arts & Conference Center Pro Forma Operating Budget, Nida Tautvydas, 2/23/14 p. 18 o Memo from Nida Tautvydas to Patrick Doherty regarding Catering Operations, 4/23/14 p. 30 o Written comment from Nida Tautvydas regarding potential cost-cutting measures, 4/24/14 p. 33 o Appendix A to Subcommittee Report—Pro Forma by Nida Tautvydas (incl. Rental Detail) p. 34 o Appendix B to Subcommittee Report— Pro Forma by Nida Tautvydas with 50% cut in contributed revenue— "Hypothetical Worst" case p. 43 o Appendix C to Subcommittee Report— Pro Forma by Nida Tautvydas • with 50% cut in contributed revenue and other compensatory budgetary adjustments—"Reasonably Conservative" case p. 53 o Appendix D to Subcommittee Report— Example of Possible Rental Rate Structure—an alternative presented by Nida Tautvydas p. 63 o Appendix E to Subcommittee Report—Summary of Pro Forma Scenarios p. 64 4. Economic Benefits Subcommittee Report p. 65 o Federal Way Performing Arts and Conference Center. Economic Impacts of Performance Venues—Case Study Analysis. Community Attributes, 4/8/14 p. 69 o Subcommittee Interviews with Real Estate Developers and Broker p. 88 o Written comment from George Petrie, CEO Goodman Real Estate p. 93 o Letter from Bruce Lorig, 3/28/14 p. 95 o Pro Forma Operating Budget Review and Economic Income Update Report, Duncan Webb, 2/28/14 p. 96 o Memo to Blue Ribbon Panel regarding Redevelopment Scenarios and Economic/Fiscal Impact Assumptions, Patrick Doherty, 4/28/14 p. 103 o The Role of the Arts in Economic Development, National Governors Association Center for Best Practices, 6/25/01 p. 112 o How the Arts and Cultural Tourism Spur Economic Development, Craig Watson, Director, California Arts Council p. 121 o Economic Vitality. How the arts and culture sector catalyzes economic • vitality. American Planning Association, 2011 p. 127 5. PowerPoint Presentation p. 135 CITY OF 41111\1■■• Federal Way FEDERAL WAY PERFORMING ARTS AND CONFERENCE CENTER MAYOR'S BLUE RIBBON PANEL REPORT TO CITY COUNCIL MAY 8, 2014 Introduction At the February 4, 2014 Council meeting Mayor Ferrell presented the appointment the nine- member Blue Ribbon Panel to review three principal areas related to the proposed Performing Arts and Conference Center: • Review of the operational pro forma • Review of potential economic and fiscal impacts • Review of the construction cost estimate and financing options The Panel has met on most Thursday evenings since then, in addition to in separate subcommittee working meetings. The Panel's objective has been to review information and studies related to the above- mentioned areas and report their findings and conclusions to City Council at the 5/8/14 Special Study Session. The Panel will not offer recommendations. Process The Panel members were provided a notebook containing a compilation of all pertinent, publicly available information related to the PACC prepared as of the date of their first meeting (a copy of all of this information in the notebook was also presented to each City Council member). In addition, the following additional information was gathered during their review process: • Critical review of the September 2013 preliminary operational pro forma and associated comments and recommendations from Nida Tautvydas, Director of McIntyre Hall at Skagit College in Mt Vernon • Pro forma full-service catering operation at McIntyre Hall and memo regarding potential cost-saving measures in running a PACC, by Nida Tautvydas • Critical review of the September 2013 preliminary operational pro forma by Duncan Webb, as well as updated economic impact projections • Case studies of performing arts and conference center venues in other cities and their impact on surrounding economic vitality and/or redevelopment by Community Attributes, Inc. • Estimated economic and fiscal impact of the PACC on the surrounding City Center area, prepared, with guidance and oversight by the Panel members, by Patrick Doherty The nine Panel members divided themselves into three working subcommittees to focus on the three separate substantive areas and draft corresponding reports. Each of the subcommittees' draft reports was presented to the larger group for vetting and comment, resulting in the final reports presented here. Report The following pages comprise the three reports presented by the three subcommittees, as vetted and approved by the entire Panel. Attached after each subcommittee report are any supporting documents used and/or cited by that report. All other information used to base any findings or conclusions derives from the notebooks presented to the Panel in February (as well as to Council) and will not be reproduced here. I I CITY OF 44k Federal Way FEDERAL WAY PERFORMING ARTS AND CONFERENCE CENTER MAYOR'S BLUE RIBBON PANEL FINANCE SUBCOMMITTEE (BROWN, SMITH AND STREIFEL) May 8, 2014 A. Capital: Construction and Land Development: $31,850,000 Committed Funding Sources: $19,065,842 Shortfall: $12,784,158 Other Potential Sources Low Medium High Naming Rights: $2,250,000 $3,500,000 $4,250,000 Grants: $1,000,000 $1,500,000 $2,000,000 Fundraising: $ 750,000 $1,000,000 $1,250,000 Sub-total: $4,000,000 $6,000,000 $7,500,000 Net Shortfall: $ 8,784,058 $ 6,784,058 $ 5,284,158 Note 1: New Market Tax Credits potentially could provide an additional$7,200,000 towards the cost of the PACC, but Congress has not yet appropriated 2014 funds. Once appropriated, there is a nationwide competition for these allotted funds. This creates a significant risk that the funds will not be allocated for this project. Note 2: The PACC land was acquired with a$5,000,000 conditional grant from the State. This cost is not included as either a source or use of funds in the above capital analysis. Note 3: The alternative of adding a full-service kitchen to allow on-site meal preparation is being evaluated. The primary benefit of having a full-service kitchen is that the quality of the food would be better and the experience improved. The cost of this option, 1 PACC BRP Finance Subcommittee Report 2 including some improvements in storage, is being developed by the City& the developer. The revenues and costs to operate a full kitchen were reviewed by the Pro forma sub- committee. B. Findings: 1. Temporary Funding— There is a need for temporary financing to give certainty to the completion of the project so that potential funding sources such as Naming Rights, more Grants, more Fundraising, and New Markets Tax Credits can be pursued. Temporary financing can be made feasible by a 3-year inter-fund loan from existing funds held by the City. Assuming this Temporary Loan is drawn down gradually and partially repaid as additional funds are raised, a 3-year loan of$12,000,000 at 1% would cost somewhat less than $120,000 in the first year and around $300,000 over the full 3- year term. This loan is allowed under state law as long as the loan interest rate is higher than the deposit interest rate the city is getting on its funds. 2. Permanent Funding— At the end of the 3-year term of the Temporary Loan, permanent funding would be needed for the portion of the Temporary Loan that has not been repaid. This permanent funding would be the last capital funds contributed by the City to the project. Using the low estimate of funds raised plus the interest incurred during the term of the Temporary Loan, the result is a need for$9,150,000 of permanent financing. A 20-year $9,000,000 bond yielding 3% would require $604,942 of annual debt service. The City's Director of Finance indicates that, based on current budget projections, a special tax levy would not be required to cover this debt service. C. Conclusions: 1) The Committee did not analyze the construction and development cost estimates, but Mortenson Construction is reputable and their budget is judged to be reasonable by Lorax Partners. The Committee finds that the financial projections made by the City and various fund-raising consultants are reasonable. 2 PACC BRP Finance Subcommittee Report 3 2) The use of a temporary loan funded by inter-fund borrowing by the City is needed to go ahead with the project. The term, structure, and cost of the temporary loan are reasonable. 3) After the 3-year temporary loan matures, Permanent financing is likely to be required. If the New Markets Tax Credits are received, the need for permanent financing will be significantly reduced. 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CO I U ■. i I L U Cm) CV 4:t1 o r U dm (1) O v' e 4111 0) C+ • 1 c \ 13 Federal Way Performing Arts Civic Center Lorax Partners • Federal Way,WA (C(9fti.j l -[A\111 Conceptual Development Cost Evaluation PERFORMING ARTS THEATER (700 seats) Estimate Date:March 18,2013 UniFormat System Level 1 Total GSF Cost U/C Substructure S 1,018,296 $ 25.20 Shell $ 5,309,139 $ 131.39 Interiors S 3,068,301 $ 75.93 Services $ 4,858,636 $ 120.24 Equipment and Furnishings s 1,543,206 $ 38.19 Special Construction and Demolition 5 147,000 $ 3.64 Building Sitework S 2,644,077 $ 65.43 General Conditions s 1,164,085 $ 28.81 Subtotal Direct Construction Cost $ 19,752,741 $ 488.83 Construction Contingency 5.000% $ 987,637 $ 24.44 Subtotal $ 20,740,378 $ 513.27 Insurances 8 Bond 1.826% $ 378,719 $ 9.37 Subtotal $ 21,119,097 $ 522.65 Contractor's Overhead/Fee 4.000% $ 844,764 $ 20.91 A Total Hard Construction Costs $ 21,963,861 $ 543.55 Gross Building Square Footage 40,408 gsf Bldg Enclosure Area 34,539 vsf Number of Seats 700 seats Site Area 139,150 sf B Wash State Sales Tax on Hard Cost 9.50% $ 2,088,587 Design and Development Costs $ 6,324,995 Project Contingency $ 1,229,063 C Total Misc Development Costs $ 7,554,058 Total Hard(A) + Tax(B) +Misc(C) $ 31.604.486 $ 782.13 Owner Contingency $ 150,000 Total Development Proposal $ 31,754,486 $ 785.85 14 4kii, CITY OF �... Federal Way FEDERAL WAY PERFORMING ARTS AND CONFERENCE CENTER MAYOR'S BLUE RIBBON PANEL OPERATIONAL PRO FORMA SUBCOMMITTEE (BROWN, SMITH AND STREIFEL) May 5, 2014 TASK The Mayor's Blue Ribbon Panel was convened on February 4, 2014 and our subcommittee was tasked with providing an objective, critical analysis of the operational pro forma for the facility. PROCESS The Operational Pro Forma Subcommittee: 1. Reviewed community input and other studies that had been compiled prior to the forming of the Mayor's Blue Ribbon Panel. 2. Reviewed community input that has come through the City's website, since formation of the BRP. 3. Studied, reviewed, and analyzed all data provided by three main content experts: a. Nida Tautvydas, Director, McIntyre Hall, Mt. Vernon, WA—February 2014 Critical Review and comments on the Preliminary Pro Forma o Nida suggested options for changes to the Pro Forma that she thought could be a possibility. o Nida also presented and held a Q& A with Blue Ribbon Panel on March 6, 2014 b. Joe Mcllwain, Director, Edmonds Center for the Arts (ECA)— September 2013 Initial Operational Pro Forma c. Webb Management Services— 2009 Feasibility Report; 2011 Update to Feasibility Report; and February 2014 Critical Review of Pro Forma Analysis (and Economic Impact Report.) 15 PACC BRP Pro Forma Subcommittee Report 2 4. The committee focused on Nida Tautvydas' revised Pro Forma as this appeared to be the most reasonable and relevant to the proposed Federal Way facility. The committee then conducted a sensitivity analysis and made changes to specific variables, resulting in the following scenarios (See attached): A. PACC Pro Forma Operating Budget—Nida's,with no changes made. (Appendix A) B. PACC Pro Forma Operating Budget—Hypothetical Worst Case (Appendix B) o Hypothetically, in response to concerns that the budget may include overly high amounts of contributed income, we reduced such contributions, excluding from Government Entities, by 50% o No reduction to expenses or other income was made. C. PACC Pro Forma Operating Budget - Reasonably Conservative (Appendix C) o Reduced contributed income, excluding from Government Entities, by 50% o Increased Conference/ Meeting Rental income based on revisions made on "Rental Budget Detail" tab. • Changed rate structure to reflect Nida's hand-out on "Example of Possible Rental Rate Structure."(Appendix D) • A modest increase was made in the number of Meetings/Events. o Increased Equipment Rental revenue based on increased events. • Reduced equipment rental from $150 per event to $75 per event in Years 1 & 2 • Reduced equipment rental from $200 per event to $100 per event in Years 3-5. • A modest increase in the number of events renting equipment. o Revenue from labor charges increased based on increased number of events. • Estimated charges include 3 staff at $18 per hour for 4 hours per event. o Bar/Beverage Service increased based on increased events. • $400 per event of up to 100 people. (This is for the morning and afternoon breaks for meetings.) o Reduced Marketing/Advertising by 10%. • This is based on comments that social media and electronic marketing will be more cost effective than traditional print marketing efforts. 16 PACC BRP Pro Forma Subcommittee Report 3 o Combined 2 management positions, such as Marketing and Development Directors, until operational revenue grows. Which positions to combine will not be determined until the Executive Director was hired. o Reduced Box Office wages by 10% FINDINGS • Based on reviews of content experts and the sensitivity analysis, there is enough flexibility in the Pro Forma Statements for a strong Executive Director to manage income and expenses to achieve reasonable net operating revenue and expenses (See Appendix E) while maintaining the same level of contributions by the City (up to $200,000 Annually). • The ultimate name of the facility should have regional significance and indicate its diverse functionality. CONCLUSIONS • A strong, experienced Executive Director (from Year 0) will be critical to the startup and success of the project. • A Board of Directors with financial expertise and connections to the community/region will be necessary in order to actively assist in fundraising for the facility and its programming. • Flexibility for revenue and expense management: o Pricing of events—(Facility rental rates & labor charges) o Kinds of Events o Number of Events o Expense management to help offset variables • Modifications to certain aspects of facility design (and parking)will strengthen overall operations. • There are potential net revenue opportunities if a Full Service Kitchen is added. • It is important that positive cash flows from the operation of the facility be held for both operational and replacement reserve accounts, as determined by the Management. 17 City of Federal Way Performing Arts & Conference Center Pro Forma Operating Budget Analysis & Critical Review Nida Tautvydas 2/23/2014 18 Introduction I was asked by the City of Federal Way to conduct a critical review of the five year operating pro forma developed by Joe Mclalwain, Executive Director of the Edmonds Performing Arts Center, and to provide comments and insights based on my experience as the Director of McIntyre Hall Performing Arts&Conference Center, a facility similar to the proposed Federal Way Performing Arts&Conference Center. I have reviewed the pro forma with the understanding that the FWPACC will be operated by a non-profit organization.The non-profit will operate the facility as a rental house and primary presenter with an emphasis on service to the community, providing facilities and services to community organizations,and city center revitalization. My notations include assessment of the pro forma, recommendations for further consideration and discussion,and a revised pro forma that incorporates revisions and recommendations. Included for reference: APPENDIX A:Joseph Mclalwain Pro Forma Operating Budget* APPENDIX B: Pro Forma Operating Budget—Revised** APPENDIX C: LMN Ground Floor Plan *Joe Mclalwain's pro forma is included with a small adjustment.Several line items regarding box office activity are arranged under Box Office to more clearly reflect revenue centers and expense activity. No figures have been changed. **Appendix B is a revised pro forma incorporates some of the recommendations noted in this analysis. Revised figures are shaded for easy comparison. i Page 19 Pro Forma Analysis & Review The pro forma as developed by Joe Mclalwain was very thoughtfully prepared.As noted,it is based primarily on the Edmonds PACC with added conferencing/meeting rooms, review of other area venues and information provided in the Webb report.The document creates a picture of a thriving venue with strong leadership, an experienced staff, a dynamic fundraising board, an engaged community,a broad base of support and facility usage,active local arts organizations and a robust presenting series. The document reflects a diversification of activity that is strategic not only in service to the community and positioning as a positive economic impact, but also in terms of potential growth and in its ability to weather industry fluctuations. In reviewing the pro forma at a more detailed level,several aspects of the Pro forma are in need of further examination and consideration.This includes: • Missing"Year 0" • Earned to Contributed Revenue Ratio • Programming • Fundraising • Staffing Structure • Marketing • Box Office • Facility Rental • Rental Rates&Structure • Operations • Operating Reserve • Other "Year 0" The pro forma did not include a "Year 0." In order to open a fully operational facility with a robust season of facility presentations,community events,fundraising and rental activity as outlined in the pro forma,one full year of planning with a minimal staff will be necessary.This time will be necessary to schedule and program the season, plan fundraising events, market the facility and scheduled events,fundraise, hire and train staff/volunteers,and prepare the facility and operations for the inaugural year. Staff should be brought on as needed.The Executive Director, Development Director,and Marketing&Communications Director would be needed a full 12 months out,and the Technical Director and Operations Manager about 6 months out.Approximately 2-3 months before opening,the Box Office staff,technical crew and House Managers should be hired,followed by the hiring and training of other support staff and volunteers. "Year 0"Staffing Budget Executive Director 12 months 2I Page 20 Development Director 12 months Marketing&Communications Director 12 months Technical Director 6 months Operations Manager 6 months Box Office Manager 3 months House Manager 3 months "Year 0" budget considerations will need to include operating costs such as office space, equipment,supplies, etc.,as well as expenses related to development,marketing and communications activity.There may be some cost savings if temporary offices and equipment (phones,desks,copiers,etc.)could be provided by the City. I would recommend budgeting for approximately$350,000 in "Year 0." When the facility actually opens could also have an impact on "Year 0"and Year 1 staffing, programming and implementation.The actual operating budget may need to be adjusted to reflect a partial year or a soft open period depending on when the facility will actually be ready for occupancy and public use. Earned to Contributed Revenue Ratio Although there is a diverse earned and contributed revenue stream, in my experience the ratio may be too heavily weighted to a dependence on contributed funding. In Year 1,the earned to contributed revenue ratio is approximately 51:49. By Year 5 the ratio is approximately 56:44, indicating that fundraising activity and levels must not only be sustainable but also have the potential to increase over time.Some facilities operate at or near this range;every community is different as what is appropriate for one area may not be realistic for another.A question to consider is if the FWPACC can reasonably secure this level of ongoing contributed support and how much of the contributed support is from confirmed, secure and ongoing sources. A more stable ratio to strive for is 70:30.This could be accomplished several ways including: increasing facility rental activity and/or rates, programing adjustments, increased ticket sales, and increased services offered—and also by decreasing certain operating expenses and evaluating the budget further to gain operating efficiencies. Evaluating specific programs to reduce exposure/manage risk and adjusting programming/operations to that end would also contribute to a healthier earned to contributed revenue ratio. Programming The pro forma indicates a full season of robust programming in Year 1 with gross revenues of $314,000.The budget includes 23 events plus student matinees in Year 1 expanding to 27 events in Year 5. Gross sales average$13,000 per event with an estimated attendance of 60% and average ticket price of$32.50. My recommendation would be to estimate attendance at 50%of capacity. The average ticket price would be$37.14. FWPACC programming revenues do not cover direct programming expenses—and this is not unusual. In Year 1,the programming revenues total$314,000 and direct programming expenses Wage 21 total approximately$436,725.A shortfall of$122,725 or 22%must be generated by grants, sponsorships and other contributions.This is reflected in the pro forma. Presenting performances involves some degree of calculated risk.Consider reducing the number of programs in Year 1 and budget conservatively. Focus on audience development and cultivate broad based support.Gradually increase the number of programs each year with a strong emphasis on audience development. Fundraising Between 44-49%of the total budget must be raised through contributed support. Each community's capacity for sustained annual giving is different.As this pro forma assumes a substantial fundraising goal which increases over time,this is an area for further consideration. The pro forma reflects diversified funding sources with realistic levels of annual giving, sponsorships, major gifts,and grants. However,two areas that I would recommend reviewing are the line items related to Board Gifts and Fundraising Events which increase by approximately 89%and 70%, respectively,in 5 years. Raising between$627,000 to$762,000 annually will require a strong fundraising board and an experienced staff. From annual appeals and sponsorships solicitations,to grants and special events,a development staff of one will require significant support and board involvement to reach the outlined goals. Recommendations: • The City of Federal Way should consider maintaining its annual support level of $200,000 rather than decreasing this support over time. • Establish an Endowment Fund concurrent with the capital campaign and actively seek endowment support so that a base level of funding is available to underwrite operations and programming. Staffing Structure The performing arts are very labor intensive and typically payroll,taxes and benefits account for 40—50%of the annual operating budget. Budgeted at approximately 42%,the staffing budget is reasonable, however it could be structured differently to create additional cost savings and operating efficiencies. For the volume and type of activity proposed I would suggest the p g following organizational structure: Executive Director Development Director Technical Director Oversees technical production staff.This position description should ideally be a cross between a production manager and technical director. Marketing&Communications Director Oversees box office staff. Ideally this position should require graphic design skills, and have experience with web and social media. Operations Manager Wage4 � Pa g 22 • I Oversees house managers,custodial,concessions/bar,security,and volunteer ushers. Part time staffing On call as needed. The Patron Services Manager could be eliminated or hired in when number of events increases. The Education/Outreach coordinator position should remain vacant for the first two years of operations or until educational and outreach programming increases. Consider increasing the salary for the Development Director,Marketing and Communications Director,and the Technical Director positions in order to attract and retain a more experienced staff. Consider an emphasis on volunteer support for a variety of part time functions and also look to establish an internship program. Marketing Creating a branding strategy and comprehensive marketing plan in Year 0 will be essential to achieve the usage, programming and financial goals of the pro forma.A budget of approximately $130,000 and growing to$180,000 in year 5 is more than sufficient to achieve these goals. In fact,with an industry trend toward electronic and web-based marketing and social media,there could be significant budgetary savings in print and radio/television advertising.Conservatively, the savings could be$30,000 or more in Year 1. Box Office The pro forma assumes contracting for ticketing services rather than the purchase of an in house system.There are pros and cons to both options, but both options should be explored thoroughly.Consider the purchase of a ticketing system vs.ticketing services and compare cost over time as well as other issues such as: • Cost to provide services • Fees charged to patrons • Fees charged to clients • Features of the ticketing program • Patron ease of use • Box Office hours of operation • Security • Access to funds • Cloud based vs.server based systems • Technical support • Reporting • Marketing functions • Fundraising functions The pro forma lists ticket fees under Ticket Sales(programming revenues). I would recommend moving this line item to Box Office Revenues so that all revenues and expenses related to Box Office services is readily apparent. (I have made this adjustment in the attached Appendix A.) Box Office revenues are$73,000 and expenses are$46,500 plus staffing costs of approximately 51 Page 23 $58,000 in Year 1. I would suggest reducing the amount of subsidy necessary to provide box office services.The cost of operating the box office and providing services should break even. As mentioned above,a closer evaluation of various options would be necessary to minimize the subsidy of providing this service. Also in considering the price sensitivity of area community arts organizations, patron paid Box Office fees of$4 per ticket may become cost prohibitive and impact facility usage. Facility Rental Based on information from the Webb study and the Federal Way Coalition of the Performing Arts,there is an identified need for performance and rehearsal/meeting space, however, many organizations have stated that they are"extremely price sensitive"and their usage is dependent on affordable rental rates. Over 11 performing arts organizations are identified as potential renters of the facility and projections for theater usage are weighted toward rental by the community arts organizations. I recommend establishing rental rates and policies early on so that community organizations can have time to better assess their ability to make use of the new FWPACC. Usage of the conference/meeting rooms will be in demand by numerous other community organizations and businesses for a variety of uses including: meetings,conferences,trade shows,reunions,receptions,weddings, proms,fundraising events, rehearsals, lectures,and other social gatherings. The number of facility rentals in Year 1 appears realistic at 175 events,and the growth rate appears appropriate over the five year period,with approximately 43%increase in theater usage and an 83%increase in conference/meeting room usage. Additionally, I would recommend a revision of the rental rates and usage projections to more accurately reflect gross revenues and expenses. Rental revenue projections are understated so this will also aid in developing a more accurate budget for rental activity.(For this reason I have not made any budgetary adjustments in the revised Pro forma,Appendix B.) Rental Rates&Structure When revising the rental rates,consider adopting a structure that is more service oriented.The current rates include several categories and additional fees for equipment,services and labor added to the rental rates."will come from the added fees for:set-up,event labor,equipment charges,ticketing fees, bar/beverage service fees, box office fees,etc. Consider a fee structure that is inclusive of required labor or services which would help streamline the rental rates, making them easier to understand.To avoid the perception of"too many fees,consider a base rate that includes set up,and minimal staffing,clean up,etc.Then increase the base rental fee to include a minimum required staff,set-up time and basic equipment.Additional fees would then only apply to larger or more technical events. In the conference and meeting rooms,consider adjusting rates by number of guests.This would help keep the facility affordable for smaller events,and would better offset costs associated with larger groups. 61 Page 24 4 Operations Operating expenses appear realistic for a facility of this size and with the volume of activity budgeted.Two line items that should be reviewed however are the estimates for utilities and custodial support,as these line items do look understated. Operating Reserve Consider establishing an operating reserve equal to at least 20%of the annual operating budget. Both the pro forma and the revised pro forma set aside net operating revenues into a Contingency/Reserve Fund that gradual grow over time.This will help with maintaining positive cash flows and also provide a needed cushion to aid in weathering unexpected operating fluctuations over the years or to budget for extraordinary events. Other Consider developing other potential revenue streams and needed services.Potential future services and revenue streams may include: • Marketing services and support to community arts organizations • Technical training,design&support services • Event planning&Wedding planning services • Educational classes&workshops • Endowment Fund 'Wage 25 4 I Other Considerations/Questions Other considerations or questions for further examination,which could impact the accuracy of the pro forma,are listed below: Resident Companies Resident companies are referenced in the rental rate structure. If the FWPACC is considering establishing Resident Companies as a distinct category separate from local community organization renters,often PAC's will differentiate between and have certain requirements of resident companies. For example, in order to become a resident company,the organization my need to guarantee a certain minimum number of dates for performances and/or rehearsals and commit to a fundraising obligation in order to receive scheduling priority, lower rates and involvement in decision making.Some PAC's will require a certain level of artistic excellence or other criteria as a minimum consideration for resident company status. Catering Decisions regarding how catering is handled and what space and equipment is available can have an impact on revenues,facility usage and viability of catering services.Consider what your goals are for food service and hospitality including the type of events and meals that may be served,the ability for a caterer to work in the space,the quality of experience and the requirements to fulfill those expectations. Caterers will need to prepare food offsite and bring it in ready to serve. Challenges will include: • Quality and temperature of food once it reaches guests. • Servers ability to work in the space and access the conference rooms • Limited workspace&facilities. The patrons/clients experience as well as a caterer's ability to work in the space will ultimately impact the number of rentals.This could have an impact on rental revenues. One consideration may be to explore the possibility for a restaurant to be part of the planned hotel development adjacent to the FWPACC with an agreement regarding catering services. Capital Long Range Plan Performing Arts facilities will always require contributed support to operate.Over the years,the maintenance of the facility and equipment is another financial impact to consider.A long range capital plan should be developed for this purpose. Facility Design/Floor Plan In reviewing the floor plan several questions and concerns come to mind in considering potential impacts to functionality, revenues,access,operations,usage, programming,security, Wage 26 etc.The Floor Plans as developed by LMN will provide a visual reference to my comments below: Parking Lot • The parking lot does not have enough parking to accommodate patrons for theater performances.This problem could be compounded when concurrent events are scheduled. • Limited number of handicapped parking spaces. • School busses/tour busses may have difficulty accessing the parking lot and navigating the guest drop off circle/parking lot.School busses would likely need to drop off students at the street level. • Overflow parking is available across the street in the Sound Transit parking garage with 1,200 parking spaces. Entrance • There are only two doors at the main entrance and a vestibule with additional doors that could restrict traffic flow and create congestion. Box Office • The location of the box office is not ideal.Consider flow of patrons entering the facility and flow to reach the box office,the lobby,and the entrances to the theater house.It is not unusual for 50-200 or more patrons to require contact with the box office prior to a performance. • The location of the Box Office will restrict patron access to the theater. • There is not enough room to accommodate patrons waiting in line for purchase or will call.Additionally patrons waiting in line at the Box Office will restrict access to stairwells and entrances to the theater. • There are only 2 staff positions.At least 4 positions are needed. • There is no area for a Box Office Manager,office furniture,storage,a drop safe,etc. • The Box Office is combined with the House Manager's Office&usher locker room compromising security and service. • A solution might be to make the House Manager's office part of the Box Office. • The location of the Box Office also requires that the lobby will need to be open to the public all hours that the box office is open.This may raise questions of security,access to other parts of the building from the lobby, interference with scheduled lobby/conference room/meeting room events,and could have a potential increase in operating costs. House Manager Office&Usher Locker Vestibule • The configuration and location of the House Manger's office and usher locker room is less than ideal as it is accessed through the Box Office. Bar • There is no fixed bar location.Although service could be provided by portable bars,this will create increased operating expense and could limit providing full bar service. • There is no location identified for bar storage. Locking refrigerated and dry storage would be required. • Bar service will require accommodating a minimum of 3-4 bartenders. 91Page 27 Concessions • The location for concessions will restrict access to the theater and restrooms prior to performances and at intermission. • Having the Box Office and concessions together in a congested location only compounds the problems of traffic flow and will concessions sales. Patron Services • There is no Coat Check location. • There is no area to store/access booster seats. • There is no area to access/store listening devices and other patron assistance items. Meeting Rooms/Lobby • Access to meeting rooms is limited to one door unless the walls are opened up. Stage • Overhead coiling door and acoustic door are only 12 feet high. Considering the height of proscenium and the shell height,this door may not be tall enough to accommodate movement of the shell or other sets. • Coiling doors can be noisy.You may want to consider other options for acoustic considerations. • The pit will be installed requiring manual changeover.Depending on the height of the pit,and how the pit is configured, changeovers can be a costly labor item and may also have scheduling implications to accommodate time to change over the pit as necessary. • Access to backstage/backstage crossover from stage left would require artists/staff to move through three doors to reach the backstage crossover from stage. This could present noise and security issues. Backstage • Service/separating backstage from catering/conferencing would be a plus. • Equipment storage is very limited.The two small storage areas will not be sufficient to accommodate sound and lighting equipment,soft goods,dance floor,platforms, risers, music stands,orchestra chairs,supplies,etc. • Space for props,sets,etc. could be challenging depending on how storage issues are resolved. Dressing Rooms&Green Room • More space is always needed. Stage Door • Limited space does not provide for a security/check-in location. Offices • Office access&location in backstage area Is not convenient for meeting with clients especially in considering backstage activity. • Storage is very limited for office purposes. 10 Page 28 Catering/Pantry/Table&Chair Storage • The areas provided for catering are congested making it a challenging for caterers to work in the space. Configuration also assumes that all caters must prepare their meals off site. • There is limited room for caterers and front of house staff to maneuver in the space. Considering different types of events (plated vs. buffet, breakfast, lunch, dinner, number of courses) and number of guests to serve and the staging that needs to occur. • Equipment such as prep tables,sinks,wash basins, heating carts, refrigeration, etc. will take up space. • The table &chair storage will at times be full and with larger events will be an additional work space for caterers. • Access to meeting rooms and lobby by front of house staff is through several small doorways that are accessed mainly through a public hallway, past restrooms and through the lobby.This could present a challenge for staff to deliver food to tables in a timely manner. • There is a need for custodial closet for clean up near the pantry areas. • There is a need for excellent ventilation and cooling in the pantry areas. • There is a need for lockers or a place for caterers/catering staff to put their personal belongings. Hi Page 29 To: Patrick Doherty,City of Federal Way From: Nida Tautvydas Re: Catering Date: April 23, 2014 As a follow up to ongoing discussion regarding catering operations and conference room usage,the City of Federal Way has asked for additional information and insights regarding catering operations, potential impacts and viability of a full kitchen vs. pantry, and outside vs, in-house catering operations for the proposed Federal Way Performing Arts and Conference Center. The memo to follow includes: • In House Catering Operations& Financial Overview • Pros/Cons In House Catering with a full kitchen vs.working with outside caterers utilizing a small pantry • Pros/Cons In House Catering vs. Outside Catering Where applicable, I have presented my comments using percentages rather than dollar amounts as there are many decisions that have not yet been determined including operating structure, rental rates, operating policies and procedures, staffing etc. In House Catering Operations&Financial Overview Performing Arts Centers with diversified revenue sources are typically in a more stable and resilient financial position. Having another revenue center through the addition of an in house catering department will create a new revenue stream and increase rental opportunities. In my experience,a catering component results in a positive impact on operations, reputation,service and budget.Catering events can represent approximately 30—40%of total facility usage. The FWPACC pro forma reflects 90 conference room events in year 1,growing to 160 events in year 5. This is reasonable and it allows room for growth potential, and with a full kitchen the facility will be more viable for either an in house or outside caterer. In my experience,approximately 80-85%of conference room usage requires some sort of catering services with the majority of events(approximately 78%) requiring meal service.Approximately 15-20% of conference room usage can be attributed to technical production, rehearsals or short meetings for small groups.The percentages will vary depending on programming, community need, marketing, etc. Typically conference room usage is as follows with an average attendance of 220: 15-20%No Food -Tech, Rehearsal, Meeting 10-12%Breakfast 15% Lunch 36-43% Dinner 17-20%Receptions 30 Memo from Nida Tautvydas Catering Operation 2 Catering costs depend on several factors including food costs, menu choices, labor, materials,etc. However, in adding a catering component you should be able to budget a 17—25%"profit".Actual "profit"will vary based on numerous factors as mentioned above.The chart below outlines an example of catering costs by type of event: Breakfast Event Lunch Event Dinner Event Food Costs 29% 31% 33% Labor 49% 46% 40% Misc 5% 6% 5% Profit 17% 17% 22% *Profit does not include facility rental revenue. In my experience staffing with a chef,sous chef and a pool of part time staff for dishwashing, kitchen help and front of house staff minimizes the financial risk and allows opportunity for the department and services to grow. In costing out expenses by working with an estimated number of events,food costs and labor, menu choices can be developed and prices established. When estimating profitability, another factor to consider is size of the group. It is more cost effective to serve a larger group than a smaller one due to the labor required in preparing and serving meals.See below: Labor Hours Per Guest 100 Guests 150 Guests 250 Guests Staff Hours Total Staff Hours Total Staff Hours Total Set-up 3 3 9 Set-up 3 4 12 Set-up 3 5 15 Prep 4 4 16 Prep 4 4 16 Prep 4 6 24 Cook 3 8 24 Cook 3 8 24 Cook 3 9 27 Serve/Clean 4 5 20 Serve/Clean 5 6 30 Serve/Clean 8 6 48 Total Hours 69 Total Hours 82 Total Hours 114 Hours Per Guest 0.69 Hours Per Guest 0.54667 Hours Per Guest 0.456 Other factors which can affect profitability are menu offered and pricing. Finding a balance between what the market will bear,vision for dining experiences and what your margins are to provide that service/meal is key. Food costs have increased significantly over the last 3—5 years making it increasingly important to conduct a cost analysis periodically to ensure that prices are keeping up with rising costs. An average price range for meals is: Breakfast $12-$16 Lunch $12-$16 Dinner $18-$26 In operating our own catering department at McIntyre Hall we typically earn$140,000-$175,000 in revenues annually with a profit margin of approximately 17—22%(equaling approximately$20,000- $30,000 per year at a rate of about 70-90 catered events annually). This figure does not include rental revenue and represents revenues related to food service only. Catering and concessions are a profit 31 Memo from Nida Tautvydas Catering Operation 3 center for McIntyre Hall. It also connects us to the business community, service organizations and leadership throughout the county. Additionally this service affords us a great opportunity to develop new audiences for theater events and increase exposure to the arts. Pros/Cons of Full Kitchen vs. Prep Kitchen Pros Financial opportunity(In House or Outside caterer) Attractive to both in house and outside caterers Ability to prepare and serve quality food, maintain temperatures,etc. Functional space with appropriate space to provide service Variety in menu Opportunity Cons Costs of maintaining equipment Potential Liability Issues Pros/Cons of In-House Catering(with a full kitchen)vs.working with outside caterers Pros Revenue center with the opportunity to increase earning potential/positive bottom line Control of service and client experience Improved quality of food Less wear and tear on the facility Ease of use for the client, i.e. One-stop shopping Positive impact to bar/concessions services through Expanded menu options Staffing overlap Efficient use of perishables, reduced waste Ease in providing hospitality for visiting artists&more cost effective Control of liquor license and revenue opportunities Marketing Opportunities Cons Challenges in maintaining/retaining a skilled, experienced staff Some clients may want to work with other caterers Financial risk 32 CITY OF Federal Way MEMORANDUM TO: Mayor's Blue Ribbon Panel FROM: Patrick Doherty, Community Development Director RE: Written comment from Nida Tautvydas regarding potential cost-cutting measures DATE: 4/24/2014 The following is a message sent by Nida Tautvydas, Executive Director of McIntyre Hall, in response to my inquiry as to potential cost-cutting measures she would suggest to help compensate for the scenario laid out by Scott Brown that contemplates reduced"contributed revenue." In response to your questions regarding a more conservative fundraising budget and possible cost savings with personnel—I would suggest that the staff could be increased as the operations grow. If I were to consider eliminating a position in the first year or two, I would consider eliminating the Operations Director or combining the Marketing and Development position into one. Your Executive Director will most likely be involved in all aspects of the operations,so this decision could be based on the particular strengths of your Executive Director.Again, I would caution eliminating the Development Director as the Pro Forma reflects a substantial fundraising goal. Other costs that could be reduced are in advertising.Again, with a trend in electronic communications, a greater emphasis could be put into electronic communications and a further reduction in print materials (the season brochure)could gain some cost savings.Another area to consider is the Box Office. 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Base Rental Fee:Block Up to 5 Hours Conference Room Rate Up to 100 Attendees $650 101-250 Attendees $900 250 or More Attendees $1100 Additional Hours $145/hr Conference Room Rental Includes • Conference room with basic sound and overhead • White linens and black table skirting lighting • Technical consultation,house manager,ushers • Ceiling mounted video projector and screen. and ticket takers • Up to 3- 6x8 stage platforms • Bartender(s)for concessions/bar service • Podium • Basic custodial service prior to occupancy and • US and Washington State flags following the event. • 66"round tables,chairs,task tables Additional staff(including staff to set-up events,operate the equipment,technical support,security),rented items, facility alterations and materials used may be CHARGED in addition to the base fee. Theater Rental Rates Theater rental Includes up to 6 hours usage(each additional hour is charged at$115-150/br).Hours are calculated from the time in the facility until the event is complete and all persons/belongings have left.All direct costs for any additional staff(including event staff to set-up events and operate the equipment),rented items,facility alterations and materials used are CHARGED in addition to the base fee.All rates are subject to change. Regular Rate - Nan-Profit Rate _ Mon-Thur I Fri-Sun Mon-Thur Fri-Sun _ Base Theater Rent (up to 6 hours) $775 $900 — $575 $675 Additional Hours $175/Hr $125/Hr $140/Hr rm Perfoance Fee $450 $525 $350 $425 Second Performance same day/same event $250 $325 _ $175 $250 Box Office Fee $1.25/Tx $1.25/Tx $1.25/Tx $1.25/Tx 3%Gross CC 3%Gross CC 3%Gross CC 3%Gross CC Credit Card Fees Purchases Purchases Purchases Purchases Theater Rental Includes • Theatre with house sound and light plot and standard rigging • Stage and dressing rooms prepared prior to occupancy • Permanent fixtures,basic equipment,utilities,air-circulation and healing,basic theatrical lighting and electricity. • All stage curtains in the standard inventory • Technical liaison,house manager,usher staff and ticket takers • Bartender for concessions/bar service • Lobby area 2 hours prior to performance • Auditorium and lobby custodial service prior to occupancy and following each performance 63 W ° C N g - a C CO ✓ CO 0 ▪ 00 N co N Lrl 00 y LO .-I M CN } 0 O 00 N a) cn lO .� N CD Ln C CD (n M c O LLO IF 00 .--� O } n ,- t v i lC M N 0/ /1 M N } CD �r lO V �..� LC M s ,7 1.0 V d CO tO CD N V • W ? t/? CD X CD CI N N N Z Z Z Z Ua. w• w a w W wL CO w w w N w w LU cc cc et 0 0 0 Z Z Z g g g • WWW a 0 a i. 0 0 O O w w LU it LU Z Z Z d CL Ca u L Q X d x v -0 c c d d d LL a a Q o Q'� -- W co N N w > u 0 0 < > w LU O in 0: z Z• O CO • 2 Z 0 a w Z 2 0: 64 41/41, CITY OF Federal Way FEDERAL WAY PERFORMING ARTS AND CONFERENCE CENTER MAYOR'S BLUE RIBBON PANEL ECONOMIC BENEFITS SUBCOMMITTEE (BERGER, HARPSTER, OLLEE) REPORT OF FACTUAL FINDINGS AND CONCLUSIONS 5/4/14 Economic Impact Case Studies' Purpose and Process: Community Attributes, Inc. was engaged to provide a qualitative assessment of economic conditions and development investments in areas that surround performing arts/conference event centers in other cities (Centers). The consultant selected five cities that have community characteristics similar to Federal Way and/or Centers that are similar to the proposed PACC. The five cities are Lynnwood, Bellevue, and Kirkland in the state of Washington, Salem in Oregon and Fairfield in Iowa. Findings and Conclusions: 1. All five case study cities experienced positive economic outcomes, i.e. patron spending and consumer demand, and fiscal results, i.e. new tax revenues, following the opening of their Centers. 2. Four of five Centers were intended as complementing, not catalyzing, a larger redevelopment effort. 3. The Great Recession stalled commercial development in the area surrounding the one Center desired as a catalyst for new private sector investment, i.e. Lynnwood. 4. Although all Centers are supporting growth, general economic conditions, regional market realities, and differing geographic locations were the key "drivers" of subsequent private development investment in surrounding districts. Developer Perspectives on Proposed PACC/Hotel Market Influence2 Purpose and Process: Opinions were sought from experienced local developers and a commercial real estate broker as to whether or not the PACC and its adjacent hotel going forward would positively influence the private sector's potential interest in development in the Federal Way City Center, in ' Source: Economic Impacts of Performing Arts Venues-Case Study Analysis,Community Attributes,Inc.,4/8/14 2 Lorig Development letter dated March 28,2014;Geo.Petrie,Goodman Real Estate email,dated 4/22/14;Blue Ribbon Panel's Developer Interviews Summary,4/24/14 65 PACC BRP Economic Benefit Subcommittee Report 2 particular redevelopment of the 176-acre City Center area that surrounds the former Toys-R-Us parcel now owned by the city.3 Findings: 1. All developers and the broker who were interviewed or submitted written opinions, expressed the belief that a PACC/hotel would positively influence development conditions in the surrounding City Center area. 2. Most developers and the commercial broker anticipate that PACC/hotel-generated additional foot-traffic activity would be a catalyst for further investment in potential City Center reuse and redevelopment. 3. Some developers cited the need for unique PACC architectural design elements or significant financial incentives to spur commercial and/or residential development investment in the City Center area. Economic Impact Analysis of Proposed PACC Purpose and Process: The Subcommittee reviewed the proposed PACC's estimated one-time and on- going economic impacts that were recently re-analyzed by Webb Management Services.4 Findings: 1. A thirty-two (32) million dollar PACC construction-related cost would create a multiplier effect in the local and county economy, creating the following estimated, one-time effects: $59 million in construction-related spending, $15 million in earnings, and 338 jobs (person-years); excluding the economic impact of the proposed, 125-room hotel adjacent to the PACC site. 2. PACC operating expenditures, combined with spending by its audiences and meeting/conference attendees, would generate each year approximately: $3.2 million in sales in the local and county economy; $862,000 in new earnings; and creation of 29 new jobs (excluding effects of proposed PACC on-site hotel). Analysis of Potential Economic and Fiscal Impacts of Potential Reuse and Redevelopment in City Center Area Surrounding Proposed PACC/Hotel Purpose and Process: 1. The Economic Benefits Subcommittee requested an analysis of the economic and fiscal impacts resulting from potential "re-tenanting" (i.e. reuse by new businesses) of existing, vacant commercial buildings, and commercial and residential redevelopment in the 176-acre City Center area surrounding the proposed PACC/hotel site. The Subcommittee also reviewed qualitative studies performed by Webb and other researchers to assess the PACC's potential socio-economic benefit to Federal Way. 3 176-acres consists of City Center Core-and Framed-zoned areas bounded by I-5 Freeway on the east,Pacific Highway on the west,S 312 Street on the north,and S 320th Street on the south. 4 Critical Review of Pro-Forma Analysis&Economic Impact Report, Webb Management Services,2/28/14 66 PACC BRP Economic Benefit Subcommittee Report 3 2. Substituting for a consulting firm unable to perform this task, City staff quantified the estimated one-time construction and on-going economic impacts (i.e. local sales, earnings, and jobs created) and fiscal impacts (i.e. city of Federal Way new tax revenue) based on three, selected growth assumptions.5 These estimated economic and fiscal impacts quantify the potential reuse and redevelopment of the 176-acre, City Center area surrounding the proposed PACC, including an adjacent 125-room hotel. • First, a Low-Growth scenario was created that is based on full re-tenanting of all existing, vacant buildings by new businesses within this 176-acre area. • Second, a Mid-Growth scenario was created and is based on PSRC-determined residential and commercial redevelopment density ratios in Puget Sound suburban areas, as applied to under-developed and vacant properties within this 176-acre area (i.e. 45 or 75 units/acre for residential development projects, and .5 or 1.5 FAR for commercial projects).6 This Mid- Growth scenario presumes full build-out of its growth potential, and is based on currently available land and allowed zoning. • Third, a High-Growth scenario was created that doubles the Mid-Growth density and FAR assumptions, while remaining within allowed zoning and available land. Findings and Conclusions: 1. The tables below summarize approximate, one-time construction and on-going economic and fiscal impacts of the Low- and Middle-Growth scenarios. All figures shown are projected impacts on the Federal Way economy and estimated new tax revenues to the City government. Table A, Low-Growth Scenario--One-time Construction Impacts (M=$ million): Reuse Type Sales Earnings Jobs FW Sales Tax Property Tax Retail $21.2 M $5.4 M 121 $48,634 $16,276 Office $7.1 M $1.8 M 40 $16,211 $5,425 Table B, Low-Growth Scenario—On-going Impacts: Reuse Type Sales Earnings Jobs FW Sales Tax Utility Tax Retail $57.2 M $21 M 669 $486,336 $588,467 5 Economic and Fiscal Impact Analysis,Patrick Doherty memo and spreadsheets,4/28/14 6 PSRC is the acronym for Puget Sound Regional Council;FAR is Floor Area Ratio 67 PACC BRP Economic Benefit Subcommittee Report 4 Table C, Mid-Growth Scenario—One-time Construction Impacts: Land Use Type Sales Earnings Jobs Sales Tax Property Tax Retail $428 M $109 M 2434 $979,981 $327,959 Office $194 M $49.6 M 1105 $444,978 $148,916 Residential $512 M $131 M 2914 $1.2 M $392,693 Table D, Mid-Growth Scenario—On-going Impacts: Land Use Sales Earnings Jobs Sales Tax Utility Tax Type Retail $454 M $167 M 5547 $3.9 M $4.7 M 2. The Blue Ribbon Panel does not consider the High-Growth scenario as realistic under current and foreseeable economic conditions. 3. Given input received from developers regarding the PACC/hotel's positive influence on market conditions, the Blue Ribbon Panel considers gradual reuse and redevelopment in the City Center area as inevitable, yet unpredictable as to its timing. 4. Recent urban economics research documenting the results of cultural arts investment by cities, points to the consequent attraction of private capital in the form of adaptive reuse of existing buildings, as well as retail, residential and commercial revitalization of urban areas.' 5. The emerging creative economy depends on the combination of both public and private investment in arts and culture. Moreover, entertainment and social amenities are keys reason that residents feel "attached"to their community.8 6. In order to leverage the City's proposed investment in a PACC, creating an Economic Development strategic direction and process is essential. This strategic direction and process will serve to attract private reuse of existing buildings and redevelopment of the surrounding City Center area over time.9 'Role of Arts in Economic Development,National Governors Association Center for Best Practices,6/25/01 8 How the Arts and Cultural Tourism Spur Economic Development,Western Cities,May 2013 9 Approaching the Project as an Economic Development Tool,page 52,Feasibility Study for Federal Way PACC,Webb Management Services,July 2009;and Economic Vitality:How the Arts and Culture Sector Catalyzes Economic Vitality, American Planning Association,2011 68 g MI x U.11 r .` W V u) Z >' W C ca IX ILL Z oV CI) V tt 0 Q Z CI) a) FM Z 2 o 0 re ill . 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V ® \ \ 5 R « • Cl j § le . k k V U 0 q c a. o «° CL d ƒ ƒ } ) \ k m 2 U f * \ k J gm 87 PACC BLUE RIBBON PANEL ECONOMIC BENEFITS SUBCOMMITTEE SUMMARY OF REAL ESTATE DEVELOPERS & BROKER INTERVIEWS 4/23/14 Patrick Speer Sr. Director-Development, NW Region Hilton Worldwide 4/16/14 Phone Interview: Mr. Speer's opinion was sought regarding the potential development inducement effect of Federal Way's proposed PACC. Mr. Speer confirmed that Hilton is one of the companies that Lorax Partners has contacted regarding the proposed hotel on the former Toys-R-Us parcel. As Hilton functions as a hotel development services firm, he was reluctant to predict how the PACC/hotel would impact current commercial office and retail market conditions. However,based on his experience and knowledge, Speer did express the opinion that the PACC/hotel "would not have a negative effect, and could only have a positive impact" in terms of attracting commercial development investment to our downtown core area. In response to a request for any relevant example(s), Speer cited the Hilton Garden Inn (210 rooms, 5,000 sq. ft. of meeting space)recently opened in the Cheery Creek commercial district near downtown Denver. He said the hotel development site and surrounding block previously were blighted,but commercial office and retail development was attracted to that block as the result of the hotel going in. Finally, Speer added that either a Hilton Garden Inn or Embassy Suites would be the "best fit" for the former Toys-R-Us site, the latter of which typically is a full-service hotel brand. Company Profile: Hilton Worldwide currently operates 4,000 hotels, in 91 countries, through 10 different "brands" that span the full spectrum of price and quality. Through its hotel development division, Hilton provides a complete array of services to its hotel investor/owners, including site acquisition/entitlement, architecture, construction, operations, and revenue management. 1 88 Marc Gearhart Development Director Holland Partner Group 4/18/14 Phone Interview: Mr. Gearhart believes a PACC/Hotel going in definitely would motivate his company and other multi-family residential developers to "take another look"at the Federal Way downtown core area for its potential to transform into a city center. However,he said South King Co./Tacoma suburban residential rents are not yet high enough for a residential developer to reach today's typical risk-adjusted ROI target(based on $2.50 sq. ft./month rent; So. Lake Union is benchmark), without the city offering a project financial subsidy incentive to make this target achievable. As such an incentive for the former AMC theatre site, or other the downtown core parcel, Mr. Gearhart suggested that the city consider building/owning a public parking structure under a potential residential development to which it sold the air rights. The shared parking structure would Page 12serve apartment tenants, and have additional spaces for daytime transit riders and PACC visitors. Mr. Gearhart believes that potential demand for space leases by apartment tenants, combined with hourly parking fees for other users, would generate sufficient revenue to offset the city's cost to build and operate the shared-use parking structure. If such a city-subsidized residential development project were to occur, Mr. Gearhart believes that new retail/restaurant end-users potentially would be attracted to the new city center, given the catalyst of additional day/nighttime activity generated by new downtown residents, transit center users, and PACC attendees. Being familiar with Federal Way, having previously done a retail project here, Mr. Gearhart added 1) destination-oriented retail development in FW can be successful if centrally-located near a major transportation hub, e.g. Opus North's FW Crossings at 348th/SR 18; and 2) other than medical-related, commercial office market demand is "too shallow"to justify new construction in the near term. Company Profile: Holland Partner Group (HPG) is a Vancouver, WA-based, West Coast urban residential and mixed-use real estate investment firm, and developer of apartment complexes in walkable, transit-oriented expanding employment centers, including six projects built, owned and operated in So. Lake Union, First Hill and Capitol Hill districts of Seattle. HPG is managing or developing 30,000 apartment units, representing a$7.5 billion asset value; and its nearly 1,000 employees took were responsible for a$1 billion business volume in 2013. 2 89 Josh Parnell Vice President/Principal First Western Properties 4/18/14 Phone Interview: Mr. Parnell sees construction of the PACC in the downtown core as a positive move in reshaping the existing area. His company has worked previously with placing tenants in SeaTac Village Center which houses Trader Joe's, and Pavilion Center which is home for Best Buy. He sees the move for such public investment in the specified area as "much needed"and feels it will assist in providing much needed momentum to spur additional investment. Further, he represents a Hilton properties developer who is keeping a close eye on the PACC and whether it moves forward or not. Mr. Parnell advises, however, that the PACC should be viewed as a catalyst to future growth and not the sole component. He believes growth will occur"gradually" as retailers begin to benefit from the increased foot traffic in the area. Mr. Parnell also advised that a very close review should be made of the total number of annual events to be held at the PACC, and questioned whether the 200 plus events are attainable. He also advised stakeholder's to be cautious with expected earnings and sales expectations (multipliers). He felt some of the figures he has seen are very"optimistic." He also advised on making sure there is a strong presence of services available around the PACC that people will want and need in order to avoid leakage of revenue dollars outside of Federal Way. Lastly, Mr. Parnell offered Tacoma as an example where investment in museums and a hotel facility fell flat in attracting additional development. Company Profile: First Western Properties is a premier retail-focused commercial real estate company in the Pacific Northwest. First Western Properties was founded in 1979 as a company whose sole purpose was the leasing of shipping centers built by its former parent company, First Western Development. Since then, First Western Properties has grown to become a full-service commercial real estate brokerage company that serves the greater Puget Sound region, with offices in Kirkland and Tacoma. Both offices are recognized for their high etical standards, knowledge and ability to perform in the commercial real estate industry. First Western Properties has developed a strong reputation for assisting tenants,both small and large, with their location scouting and negotiations. Whether finding just a single space or planning a multiple site expansion, First Western Properties takes great care to treat all customers with tremendous respect and care. Their brokers work with tenants not only to find space, but to advise and strategize with them about effective market penetration and location awareness with the end objective of accomplishing that client's goals. Customers include: McDonald's, Subway, UPS Store, 7-Eleven, Bonefish Grill, Boost Mobile, Starbucks, Chase Bank, Dave& Busters, and Bank of America. 3 90 Maria Barrientos Principal Barrientos Development 4/22/14 Phone Interview: Ms. Barrientos believes the proposed PACC/hotel would have a positive economic influence on restaurants and some other retail businesses in the surrounding area. However, for it to potentially catalyze retail redevelopment investment, she asserted the PACC design needs to have strong visual design elements, create a"sense of place" and have other unique physical features. Ms. Barrientos said these PACC features would be needed to attract more people to the downtown core area, than just its conference attendees and performance patrons. Barrientos also expressed potential concern about a performance/conference center's traffic impacts on creating a"walkable"city center, although she acknowledged the FW Transit Center's proximity as an important mitigating factor. Company Profile: Based in Seattle, Barrientos provides feasibility analysis, entitlement/permitting assistance, construction management and other development services, specializing in restoration/conversion of historic and architecturally significant residential, commercial and cultural arts properties. The firm's current projects include conversion and expansion of the former Del-Teet Furniture building on Broadway, across from the Capitol Hill light rail station nearing completion, into a 24-loft apartment/retail complex. Michael D. Crowson Commercial Land Development Partner Mundo Jo Holdings. LLC 4/22/14 Phone Interview: Mr. Crowson was asked if the City of Federal Way proceeded to build the PACC/hotel would that fact positively influence Mundy Jo Holdings' interest in developing the 50 plus acre downtown" core" area surrounding the former Toys-R-Us site? He stated that he and his company would be interested. He spoke of the PACC and hotel as an anchor, which generates activity and the need for additional services. His list included food shops, retail, boutique shops, and other services. In Mr. Crowson's opinion, the Transit Station could represent an additional strength and would serve as an additional trigger for additional development and perhaps faster development because of the increase in people and activity in the downtown core. Company Profile: Mr. Crowson's experience is broad based in land development and his company's services cover the Pacific Northwest and other western states. Some of the projects he described are completion of mixed-use developments in Queen Anne, Bremerton, and Duvall (includes retail,parking, and apartments/living quarters above). He has also completed a light industrial project in Mukilteo. Mr. Crowson invests in some projects, and he serves as owner manager of some of the projects. He is the Co-Owner of a small shopping center, and developed a 10 home subdivision and a residential 15-lot subdivision in Kent, Washington 4 91 Mr. Kerry Nicholson Sr. Managing Director Legacy Partners 4/24/14 Phone Interview Summary: Mr. Nicholson believes that the PACC/hotel going in should initiate an"urban-style, highly-walkable activity center" and make future residential development in the surrounding area easier, first by attracting new restaurants and other supporting retail end-uses. He anticipated the resulting greater day/night foot-traffic could catalyze the downtown core area and potentially enhance multi-family residential rent values, which then would attract his other multi-family housing developers to seriously explore opportunities to build market-rate, "podium-type" apartments (i.e. concrete first-level, typically for retail and service uses, below wood-frame residential construction up to five or six stories). Mr. Nicholson said that if this type of multi-family product was created in the Federal Way downtown area, the 24/7- lifestyle typical of new residents attracted to such urban activity centers, should trigger additional eating, shopping and entertainment establishments within walking distance. He said the result would be a development synergy, i.e. creating on-going demand for additional multi-family housing and commercial/retail and service businesses reinforcing each other. Finally, Mr. Nicholson added a cautionary note regarding the economic realities of being a"first-in" multi-family residential developer in South King County cities seeking to enhance or create their downtown activity centers: The higher cost of constructing an urban-type apartment project normally is offset by an urban-type rental rate structure, which is difficult to achieve in non-proven, emerging downtown markets. Thus, Mr. Nicholson added that it's challenging to secure traditional lending sources in this situation, without significant financial incentives to help reach return-on-investment targets shaped by successful residential development in existing urban centers like Seattle's Capitol Hill district. Company Profile: Based in CA, with regional offices in Seattle, Legacy Partners is a leading,vertically- integrated real estate investment management firm that develops, owns and operates residential and commercial development assets in the western United States. Legacy's $5 billion current property portfolio consists of 15,600 multifamily units, locally including apartment buildings in W. Seattle, Capitol Hill and Belltown; and 13 million square feet of commercial space, such as Legacy Southcenter Plaza Class A office building in Tukwila, Legacy Centre retail/office complex in Seattle, and several other Eastside commercial office buildings. 5 92 CITY OF Federal Way MEMORANDUM TO: Mayor's Blue Ribbon Panel FROM: Patrick Doherty,Community Development Director RE: Written Comment from George Petrie, Goodman Real Estate DATE: 4/23/2014 The following is a message sent by George Petrie,CEO and President of Goodman Real Estate of Seattle, regarding the potential influence that development of the proposed PACC might have on redevelopment of the nearby City Center land. Successful cities need to have a center;something that is "the place". Now and into the future "the place" will be centered on something that creates a lifestyle focus. Lifestyle encompasses so much of what we do day to day:live,play, work,relax. The PACC is an outstanding start to creating lifestyle center. Ideally it is connected to a vision/plan that is tied to land use and public investment. What would Federal Way like to look like in 10—30 years as the Puget Sound region adds 1 million people? Define Federal Way broadly and the vision will become clear what else needs to be included in "the place". Is it farmers markets? Is it office? Is there a need to create a light rail from the far point of Federal way that runs down 320`h to the place? The initial investment will gather some attention and interest from developers such as ourselves. To expand the interest the vision must be broad, allowed by zoning and a proactive attitude by land use planners within the city. How can the city build off the Aquatics Center theme? Perhaps focus on water sports and add an ice skating rink for short and long track skating and hockey? The place has to draw new and more people to stimulate developers to build. One thing we have learned is retail of the future is very different from retail of the past. The city has such an opportunity to craft how it wants to grow in the next decade. Part of that growth is the gentrification of the existing housing product:mature people move out, young people with families move in, city makes renovations easy and simple, city has rezoned retail urban center near PACC for residential and has provided infrastructure for transportation and lifestyle around "the place" 93 Memo to Blue Ribbon Panel Statement from George Petrie Page 2 of 2 The PACC, in connection with a master plan, is exactly the type of investment Federal Way can make to stimulate creating "the place"which will draw people (demand) and developer investment (supply). Much of that demand could come from the existing resident population as they transition from a single family to multifamily living environment. Company Profile: Headquartered in Seattle, Goodman Real Estate is a privately-held, diversified real estate investment firm specializing in middle-market, multifamily and commercial projects (i.e. $25-100 million range). The company has developed apartment complexes, hotels and resorts, and office and retail buildings, with currently managed real estate assets totaling$2.5 billion. Goodman is developer of the 164-unit Kent Town Center Apartments, as well as many other multifamily projects in Seattle and elsewhere in the Puget Sound region. 94 LORIG March 28,2014 Mr. Patrick Doherty Director Community& Economic Development Department City of Federal Way 33325 8th Avenue South Federal Way,WA 98003 Dear Mr. Doherty, In cooperation with the City of Federal Way,we have been studying the feasibility of constructing a 150-200 unit market rate apartment building on the block at S.316th Street and 21S` Avenue S. immediately across S.316th Street from the proposed Performing Arts and Conference Center. This project,as we envision it,would be an anchor for future downtown development and, we think, provide the impetus for additional future investment in the downtown Federal Way housing market.We would expect the apartment project to generate 6-8 permanent jobs with another 25-30 jobs in the planned retail spaces on the ground floor,totaling up to 12,000 square feet. Our economic market feasibility studies indicate that the current market rate rents for the housing we envision are currently below levels that are needed to make new construction economically feasible. However,we believe that the proposed Performing Arts and Conference Center, if built,will be viewed as an important area amenity that will likely increase the demand for and rental rates for downtown housing and therefore make any planned apartment project much more feasible in the near term than would otherwise occur.The Performing Arts and Conference Center will be an important addition to Downtown Federal Way and will be instrumental in attracting people to live and play downtown.Without it being built,we could not continue to consider building the apartment project on the site. We sincerely hope that Federal Way can find a way to make this important project happen. Sincerely, Bruce Lorig REAL ESTATE DEVELOPMENT+MANAGEMENT 2025 FIRST AVENUE I SUITE 420 I SEATTLE,WA 981211 MAIN 206.728.7660 I WWW.LORIG.COM 95 (ID CTmanagement services cr. Incorporated report to: Patrick Doherty, City of Federal Way from: Duncan Webb,Webb Management Services regarding: Federal Way Performing Arts and Conference Center date: February 28, 2014 Webb Management Services, Inc. is a management consulting practice for the development and operation of performing arts facilities. We work for governments,schools,developers and arts organizations on facility feasibility, business planning and strategic planning.The practice was founded in 1997 and we just started our 315"'assignment. We developed the original feasibility study for new arts and meeting facilities in Federal Way in 2009, updating that work in 2011. We are now asked to project the operating performance and then the economic impacts of the project in order to inform project leadership on the potential impacts and benefits of that specific project, and to support their fundraising efforts. 1.Pro-forma Operating Budget Review A pro-forma operating budget is a complex model that projects operating revenues and expenses for the long-term in order to inform decisions to be made in the short-term. There are a number of significant challenges in building these models,including: • Estimating activity on the part of non-profit arts organizations • Setting rental rates that are challenging but within reach of key users • Anticipating how the market(principally audiences)will respond to new facilities and programs • Considering how competition (other venues and programs)will respond to the project • Forecasting how activity(and thus earned revenues)will increase over time • Recognizing that the future does not unfold in a neat and predictable fashion In our minds, it really boils down to the challenge of predicting revenues associated with the key activities of the building.And we respond to these challenges by being as conservative as possible in suggesting how activity develops over time. Now let's look more closely at the most recent version of the pro-forma for the project, developed in September 2013. building creativity Empire State Building 1 350 Fifth Avenue,Suite 4005 I NY,NY 10118 1 t:212.929.5040 I f:212.929.5954 1 webbmgmt.org 96 CD Crmanagement services al incorporated • The Rental Budget Detail spreadsheet is very helpful.The scaling of rental rates is good, as long as the Year 1 rents offer reasonable value relative to other venues in the market area. • We might be inclined to increase rental rates each year in line with CPI escalations,but these rates do not increase by too much. • The level of rental activity projected for the theatre, conference and meeting spaces is quite low,with some reasonable increases in Years 2 through S and the annual discounting of that rent estimated down to a budget number. We would suggest that there is a significant upside here,particularly if the meeting and conference business is aggressively promoted when the building opens. • The opening year of a building tends to be somewhat unique, depending on the effort put into opening events. Often,the second year sees a bit less activity,which tends to grow again in the third year. • On the main spreadsheet,the first key number is ticket sales from presenting. It is assumed that there are 23 presented events in Year 1.With an average capacity sold of 60%,this means total attendance of 9,660 and an average ticket price of$32.51. If it is assumed that the mix of presented programs is similar to Edmonds,those key inputs are reasonable. • In Year 1,there are presenting costs of$250,000, not including advertising. If we suggest that 50%of marketing costs relate to presenting,there is a net loss of$1K from presenting.This is also quite conservative. • We would suggest that the patron fees should increase more over time in line with activity and attendance growth. • For all of these earned income numbers,we might suggest that a more incremental approach be taken. Certainly the opening of the building should be the occasion for a series of special events with big-name performers. But after that, it would be reasonable for the building to slow down and build its program incrementally over the next 2 or 3 years. Earned income might be a little lower initially, but expenses would also be lower and the risk of initial financial challenges would be greatly reduced. • In the contributed income section,we would also be inclined to start lower on private sector sources but have them grow more over time. • We would acknowledge that raising money for an endowment is very difficult, but this is so important to develop over time.We would suggest trying to build something into the pro- forma initially, no matter how small the amount. • We like the size of the staff, but might suggest that the support staff cost be reduced in the beginning and then increased over time to reflect an overall strategy to start slow with programming and build over time. • Total benefits start at 22% of salaries,which is likely only possible with a nonprofit operator. • Many of the operating cost line items should also grow with activity levels. • It's good to see costs for volunteers and development activities included,though the margin on fundraising events may be high, at least initially. • Earned income as a percentage of operating expenses starts at 53%in Year 1 and increases to 58%in Year 5.We think that's pretty realistic. 97 s CD management 'f; services cr. incorporated Overall,we would suggest that the latest version of the pro-forma is sufficiently conservative for the City to proceed. 2. Economic Impact Update Economic impact means that something has happened to increase economic activity,which includes new sales (people buying more things in the County as a result of having more money to spend),new earnings for workers (the additional money they have in their pockets because of new sales) and new jobs in the local economy(which arise because of that new economic activity). These impacts are caused by various inputs, namely capital and operating expenditures. The key is that when a dollar is spent locally,some portion of it stays in the local economy to be spent again and again, until all of it "leaks"out of the local economy. We calculate the total impacts of expenditures by applying multipliers to the industry sectors in which the money is spent—whether that be on couriers, computer service, or construction. And we get these multipliers from the Bureau of Economic Analysis, part of the Department of Commerce in Washington DC, which has calculated how money spent in every County in every industry leads to new activity, earnings and jobs. We have purchased the multipliers for King County and have them attached to this report. Specifically, we are using RIMS Type II multipliers to project final demand based on 2010 census data, all of which have been updated since our 2009 impact analysis. Construction Impacts The first impacts relate to the construction of the Center. Here,the estimated construction budget of $32 million leads to$59 million in new sales,$15 million in new earnings and 338 new person years of employment in the County. One-time Impacts of Construction on King County, WA Input Construction Budget $ 32,000,000 Final Demand Outputs Multipliers(Industry Project Outputs 230000) Sales 1.8564 $ 59,404,800 Earnings 0.4736 $ 15,155,200 Employment(person-years of 10.5537 338 employment) Annual Operational Impacts The second set of impacts relate to the operation and expenditures of the organization running the performing arts and conference center. Each year,this organization spends significant amounts on goods and services,much of which is spent locally.And these expenditures are then subject to the multiplier effects for each of the non-personnel spending categories. 98 4 s (ID rnanagernen( cr service s Er incorporated We calculate the ongoing impact of the facility using what is called the bill of goods approach,shown in the following chart. We estimate expenditures on everything from utilities and hotels to waste management and advertising.This is taken from the most recent pro-forma operating budget for the PACC based on the first year of operations.The second step is to discount these expenditures so that we are only counting new expenditures that are made inside the County.Then we can use our three types of multipliers to calculate new output, earnings and jobs associated with new County spending in each of those industries. Operational Impacts on King County, WA Bill of Goods Approach(Opening Year) Inputs Multipliers Outputs Current Non- Local Expenditures in Output Earnings Empl't New Sales New Earnings New Empl't Category personnel King County Expenditure (dollars) (dollars) (jobs) ($000's) ($000's) (jobs) expenditures s Power Generation and Supply $ 80,000 50% $ 40,000 ! 1.4467 0.2814 4.9556 $ 57,868 $ 11,256 0.2 • Water,Sewage and other $ 5,000 100% $ 5,000 1.7650 0.4066 8.9320 $ 8,825 $ 2,033 0.0 System Retail Trade $ 25,000 75% $ 18,750 ' 1.7739 0.4759 15.6993 S 33,261 $ 8,923 0.3 Transit&Passenger 5 5,000 50% $ 2.500 1.9369 0.4851 13.9265 $ 4,842 $ 1,213 0.0 Transport ation Telecommunications $ 1,500 50% 5 750 1.7691 0.3189 6.4357 $ 1,327 $ 239 0.0 Insurance Agencies/Brokerage S 15,000 50% S 7,500 2.0317 0.5388 12.6822 $ 15,238 $ 4,041 0.1 Equipment Rental $ 40,000 50% $ 20.000 1.9626 0.4375 8.5905 $ 39,252 $ 8,750 0.2 Legal Services S 15,000 75% S 11,250 1.9628 0.7329 12.3951 $ 22,082 $ 8,245 0.1 Accounting&Bookkeeping $ 10,000 50% 5 5,000 1.8232 0.5898 14.9501 $ 9,116 S 2,949 0.1 Services ..Computer related services $ 15,000 75% 5 11,250 1.8728 0.6365 12.0954 S 21,069 $ 7,161 0.1 Advertising&related services $ 50,000 50% S 25,000 1.8816 0.5785 13.3825 $ 47,040 $ 14,463 0.3 'rotessional& technical $ 25,000 100% 5 25,000 1.9940 0.7945 18.8249 5 49,850 $ 19,863 0.5 ,Services Office administrative services S 25,000 50% $ 12,500 2.0335 0.6552 15.5579 S 25,419 S 8,190 0.2 Business support services $ 25,000 50% 5 12,500 1.8751 0.5112 18.0934 $ 23,439 $ 6,390 0.2 .Business to building $ 50,000 50% $ 25,000 1.8542 0.5041 21.3501 $ 46,355 $ 12.603 0.5 Waste management $ 5,000 100% $ 5,000 1.8138 0.4058 8.5273 S 9.069 $ 2,029 0.0 Other Educational Services $ 50,000 75% 5 37,500 j 1.8925 0.4780 22.0533 5 70,969 $ 17,925 0.8 Performing arts companies $ 250,000 25% $ 62.500 1.9393 0.5647 38.0234 $ 121,206 $ 35,294 2.4 Promoters of performing arts $ 75,000 50% S 37,500 2.0712 0.5136 31.8107 $ 77,670 $ 19,260 1.2 .Hotels&motels $ 20,000 100% S 20,000 1.7944 0.4687 15.1010 $ 35,888 $ 9,374 0.3 Food services $ 25,000 100% $ 25,000 i 1.8824 0.4904 20.2389 $ 47,060 $ 12,260 0.5 Postal Service $ 15,000 100% S 15,000 1.7688 0.6386 12.7445 S 26,532 $ 9,579 0.2 •Averages and Totals N 311,500 I 1 5409,500 }' 1.8751 • 0.5175 • 15.8869 I S 766.843 I S 212.459 I 8.2 The chart shows that$410K in new local spending in the County drives $767K in new sales, $212K in new earnings and 8 new jobs(in addition to those in the PACC). 99 CD a Ill illc`�ji;'.Illii )l , er-vices tux� iilcorpt)r:itetj Annual Audience Impacts The second component of operating impacts is the ancillary spending of facility audiences. To calculate these numbers,we start with the projected attendance at events in the first year and then remove the component that is simply shifting expenditures within the County. We are then left with two groups-those coming from outside King County, and then those from within the County who would otherwise be attending events elsewhere (e.g.Tacoma or San Francisco). Total attendance includes both presented events (about 10,000 in Year 1), and rental performance attendance,which we would conservatively project as 30,000 in Year 1. PACC Performance Audiences Total Paid Theater Attendance 40,000 (Opening Year) King County Attenders 60% 24,000 Recovered County Attenders 10% 4,000 Non-County Attenders 30% 12,000 The next chart then shows how and how much audiences spend in conjunction with attendance at performances. This is national data provided by Americans for the Arts. So, for each group, those coming from outside of the County and those from within the County (our re-captured audience that otherwise would have gone outside the County),there is a certain amount spent on eating, shopping, traveling and so on. Then we apply our King County multipliers for each of these categories. For both groups of audiences, local expenditures drive new sales, earnings and jobs. Again, these are jobs created outside the building as a result of audience spending. Ancillary Spending Im pacts of Event Audiences at the PACC on King County, WA Ancillary Spending Impacts Per Capita Total Direct(Induced) Output Total New Earnings Total New Job Creation Total New Expenditure Estimate Expenditures Multiplier Outputs(Sales) Multiplier Earnings Multiplier Jobs Recovered County Attenders Food Services $ 8.15 $ 32,600 1.8824 S 61,366 0.4904 S 15.987 20.2389 0.7 Retail Trade $ 2.80 S 11,200 1.7739 $ 19,868 0.4759 $ 5,330 15.6993 0.2 Transportation S 4.27 S 17,080 1.9369 $ 33,082 0.4851 $ 8,286 13.9265 0.2 Overnight Lodging S 0.96 $ 3,840 1.7944 $ 6,890 0.4687 S 1,800 15.1010 0.1 Miscellaneous S 0.60 S 2,400 1.8751 $ 4,500 0.5175 $ 1,242 15.8869 0.0 Sub-total S 67,120 $ 125,707 $ 32,645 1.2 Non-County Attenders Food Services S 15.28 $ 183,360 1.8824 Ir5 345,157 0.4904 $ 89,920 20.2389 3.7 Retail Trade S 8.70 $ 104,400 1.7739 IFS 185,195 0.4759 S 49,684 15.6993 1.6 Transportation $ 5.82 $ 69,840 1.9369 iS 135,273 0.4851 $ 33,879 13.9265 1.0 Overnight Lodging $ 19.97 S 239,640 1.7944 rS 430,010 0.4687 $ 112,319 15.1010 3.6 Miscellaneous $ 3.29 $ 39,480 1.8751 '$ 74,028 0.5175 $ 20,432 15.8869 0.6 Sub-total $ 636,720 S 1,169,663 S 306,234 10.6 Total Impact of Ancillary Total(1.2) $ 703,840 $ 1,295,370 $ 338,879 11.7 Spending Page 5 100 CD DIR management services crincorporated Meeting and Event Attendees Given the nature of the project, we would add a third type of operating impact—that of individuals attending meeting and events at the new facility. There are no simple (and free) per capita expenditure guides for meeting and events, but we did collect the following information from specific studies: • The average attendee at events at the Oregon Convention Center between 2010 and 2012 spent$308.29. The average out of town attendee in 2012 spent$372.' • The average attendee at events at the Washington Convention Center spent$670 in 2011.2 • The U.S. national average meeting attendee generated$1283 in direct spending in 2012.3 The PACC pro-forma suggests that there would be 90 room rentals in Year 1, which probably represents some 60 or so events. If the average attendance at those events is 100 people, and if we assume that 25% of those visitors are coming from outside the County to stay overnight in Federal Way, we could suggest that those visitors bring $600,000 of new expenditures to the County. Using average multipliers from above,we can then suggest that those new expenditures in the County yield $1.1 million in new sales,$310K in new earnings,and 9.5 jobs in addition to those in the PACC. Ancillary Spending Impacts of Meeting & Event Attendees at the PACC on Kin• County, WA Non-County Attenders Per Capita Spending Total Spending Output Total New Earnings Total New Job Creation Total New Multiplier Outputs(Sales) Multiplier Earnings Multiplier Jobs 1,500 $ 400.00 $ 600,000 1.8751 $ 1,125,049 0.5175 5 310,517 15.8869 9.5 Oregon Convention Center Annual Report 2011-12;Oregon Convention Center Economic and Fiscal Impact Analysis Report 2010 and 2011 72011 Annual Report Washington State Convention Center The Economic Significance of Meetings to the U.S.Economy,2012,Convention Industry Council Page 6 101 (ID cr. management services ED= incorporated Summary Here then is a chart that summarizes all construction and operating impacts: Summary of Ecgnomic Impacts Construction Impacts 'nput i,cal Expenditures) $32,000,000 Output(Sales) $59,404,800 Earnings 15,155,200 Jobs Created • ars) 338 Ongoing Annual Impacts ) $409,500 Operations Output(Sales) $766,843 Earnings 212,459 Jobs Created (annual) 8 Audience Spending Input(Base Year Customer Specie $703,840 Output(Sales) $1,295,370 Earnings $338,879 Jobs Created(annual) 12 Meeting/Event Spending Input(Base Year Customer Spend) $6U0,000 Output(Sales) $1,125,049 Earnings $310,517 Jobs Created(annual) 10 Total Annual Operating Impacts Output(Sales) $3,187,252 Earninas $861,855 Jobs Cr, 29 The one-time impacts of this construction project are significant, but even more important are the ongoing impacts of the new operating organization's spending in the County, plus the impacts of new audiences and event attendees spending more money, leading to$3.1 million in new sales, $860,000 in new earnings and 29 new jobs, annually. We would note that a couple of these numbers are lower than those in our original estimate, which reflects the more conservative approach taken in terms of the operating budget and the forecast of activity in the initial years of the project. r,L. 102 p CITY OF Federal Way MEMORANDUM TO: Mayor's Blue Ribbon Panel FROM: Patrick Doherty,Community Development Director RE: Redevelopment Scenarios and Economic/Fiscal Impact Assumptions DATE: 4/28/2014 The following is explanatory information regarding the Redevelopment Scenarios that I produced for your consideration, as well as for the Economic and Fiscal Impact Analysis resulting from those scenarios. I developed these redevelopment scenarios with your input and guidance as a result of the economic consultant firm Community Attributes declining to perform the Fiscal Impact Analysis originally contemplated in its scope of work due to an inability to meet the City's deadline. Redevelopment Scenarios The three scenarios presented represent a range of potential redevelopment scenarios that could occur as induced or"kick-started" by a significant public investment in the City Center,such as the proposed PACC. We chose an area we believed to be most proximate to the site of the proposed PACC and, therefore, most likely to be influenced by its presence. This area is the City Center Core-and City Center Frame-zoned land bounded by I-5 and Pacific Highway South on the east and west,and S 312th Street and S 320th Street on the north and south. This represents a land area of 176.33 total acres(the entire City Center is 414 acres). The three scenarios are intended to bracket what may be possible,given the current land availability and zoning potential. Lowest Growth Scenario • The lowest-growth scenario simply implies retenanting of vacant commercial building space. • For this and all redevelopment scenarios,commercial building space is roughly split 75% retail (including hospitality) and 25%office. This assumption is simply based on the existing condition in the City Center wherein a low amount of office space relative to retail, service and hospitality 103 Memo to Blue Ribbon Panel PACC Redevelopment Scenarios& Economic Impact Page 2 of 6 is present,as well as due to the large land mass in outside the City Center available for office tenancy and development. • No residential development is proposed as this would be improbable and/or infeasible in existing commercial building space. Middle Growth Scenario • This scenario derives from a set of complicated variables that the City uses to determine our "Buildable Lands Capacity"as reported to the Puget Sound Regional Council (PSRC) and the State Office of Financial Management(OFM). • These variables include both vacant land as well as"redevelopable land,"the latter defined as land whose current improvements have less value than the floor area ratio (FAR)contemplated by the growth targets(explained below by FAR). • The spreadsheet provided by PSRC contains many variables that deduct from the raw acreage figure, including deductions for critical areas, rights-of-way, public purposes,a "market factor" representing the level of development supported in our submarket. PSRC also imposes a split between land development capacity for housing and land development capacity for commercial. That split is 35%of the land reserved to accommodate residential development and 65%to accommodate commercial development. (I have attached the spreadsheet provided to me by our GIS analyst after inputting all the variables,for your reference.) • Once those acreage values are derived,the PSRC also provides for residential density factors based on their understanding of suburban submarkets: o 75 units/acre on City Center Core-zoned land and o 45 units/acre in the City Center Frame-zoned land. For reference,the Korean Women's Association "Senior City"apartments on the east side of the Transit Center are developed at a density of 87 units per acre. • Similarly, using the corresponding acreage figure that results from the 65%split dedicated to commercial uses,the commercial redevelopment potential is calculated. Again, PSRC provides commercial density factors,expressed as FAR(floor area ratio, meaning the amount of building floor area as a ratio of the site area or acreage): o 1.5 FAR for City Center Core-zoned land (meaning development at a ratio of 1.5 SF per 1 SF of site area) and o 0.5 FAR for the City Center Frame-zoned land. For reference,the Parklane Office Building(John L Scott offices) is developed at a density of 0.53 FAR and the Courtyard by Marriott Hotel is developed at a density of 2.4 FAR. • Lastly,as above for the Low-Growth Scenario, a split for the commercial redevelopment potential is applied of 75%for retail and 25%for office. 104 Memo to Blue Ribbon Panel PACC Redevelopment Scenarios& Economic Impact Page 3 of 6 High-Growth Scenario • This scenario simply represents a doubling of the middle-growth scenario for the purposes of creating an upper bracket. • It should be noted that,while this level of commercial and/or residential development density is not currently found in our City Center, it is easily accommodated by our existing zoning. For example,at the highest level of development contemplated by this scenario (i.e., 150 units per acre of residential and/or an FAR of 3.0 on a City Center Core-zoned property), this would likely take the form of either an approximately 10-story residential building and/or commercial development ranging from 6 to 10 stories. The existing zoning allows up to 145 feet (approximately 14 stories)for office and up to 200 feet(approximately 20 stories)for residential development. Economic and Fiscal Impact Analysis On-Going Impacts The attached spreadsheet details an economic and fiscal impact analysis resulting from these redevelopment scenarios. • Using the "Three Rivers Method" presented by the CCIM (Certified Commercial Investment Member) Institute (copy of webpage attached) and multiplier tables purchased from the U.S. Bureau of Economic Analysis' Regional Input-Output Modeling System(RIMS II), I was able to provide an approximation of potential economic and fiscal impact. • The initial difficulty lay in deciding whether to attempt to project economic impact for all three general land use types(retail, office and residential). As I further contemplated the interrelationship between these land use categories, I discovered that,once economic impacts for the retail sector were projected, it would be next to impossible to account for the overlapping impacts contributed by the office and residential sectors. That is, since retail is the ultimate"destination"for most spending dollars by most economic sectors,wouldn't the office workers and residents in the vicinity ultimately be the ones making those retail sector expenditures captured in the retail figure? Of course new retail development in the vicinity would not capture all of these new office employees'and residents'expenditures, since they would also shop at the Mall and other existing commercial centers, but there is no way to deduct their contribution towards this new retail spending. Therefore, I decided to let the projected expenditures derived from new retail development stand alone as the"surrogate"for the majority of the new spending associated with new redevelopment growth, recognizing that this undercounts total retail spending because of the growth in spending sent to other, pre- 105 Memo to Blue Ribbon Panel PACC Redevelopment Scenarios& Economic Impact Page 4 of 6 existing commercial destinations not included in this calculation. At best,therefore,this is a very conservative estimate of economic impact. • I took the retail redevelopment square footage figures from each of the three redevelopment scenarios and applied a conservative annual retail sales per-square-foot figure of$250, derived from the average sales for 2013 at a nearby City Center shopping center. This yielded the three retail sales figures corresponding to the three redevelopment scenarios. • To focus on purely Federal Way-specific tax revenue, I applied our City sales tax rate (.0085)to this first"direct-sales" figure to derive the direct fiscal impact in retail sales tax to the City. • Using the multipliers provided by RIMS II,you can see the results for each of the economic outcomes. • I then applied our City sales tax rate(.0085)to the ultimate direct+indirect sales figures to derive the fiscal impact in retail sales tax to the "Greater Federal Way"area, recognizing that some of this indirect spending could happen beyond the City's corporate limits. • For an approximation of the fiscal impact in utility tax to the City, I used the ratio of utility tax to retail sales tax that the City receives annually citywide (utility tax @ 121%of retail sales tax). One-Time Construction-Derived Impacts • I researched construction costs using the Reed Construction Cost Calculator available online and sorted for the Seattle market. I used the following conservative per-square-foot total construction costs. o Apartments: 4-7 stories, $175/SF o Office: 5-10 stories,$173/SF o Retail Store: $127/SF o Tenant Improvements: $50/SF o No inflationary factor is included as no specific time horizon for the redevelopment scenarios was formulated, although naturally these construction cost will grow with each passing year. • For each of the redevelopment scenarios and each of the land use categories(retail and office for lowest-growth scenario; retail, office and residential for middle-and high-growth scenarios) I applied these construction costs and then put them into the construction impact spreadsheet used by Duncan Webb (also from RIMS II) in his report regarding the impacts from construction of the PACC. • For sales tax impacts to the City from the total sales related to construction, I applied the City's sales tax rate of.0085 and divided that figure by 50%to account for expenditures made outside Federal Way and/or for untaxable components of the construction costs. • In addition, I calculated the one-time property tax receipts for"new construction" allowable by State law (after that the new buildings are simply subsumed into the City's overall Assessed Valuation and become part of the base upon which the property tax rate is calculated to allow 106 Memo to Blue Ribbon Panel PACC Redevelopment Scenarios& Economic Impact Page 5 of 6 for the City's State-mandated 1%cap on annual property tax revenue growth). That figure is derived from the City's property tax rate of$1.4223 per$1,000 of improvement value. Duncan Webb's Economic Impact Information for the PACC In doing this work I made some observations about the work Duncan Webb produced for us related to the economic impacts from the PACC construction and operations.Since Webb omitted potential fiscal impacts to the City, here are some potential fiscal impact scenarios: • Regarding construction, based on the same assumptions as above(50%of impact to the City and using the City's sales tax rate),the$59,404,800 in total direct+indirect sales derived from the approximately$32,000,000 project could yield approximately$252,470 in one-time Federal Way sales taxes. • Related to on-going impacts, Webb calculated impacts for performance audience attendance. In so doing he excluded the approximately 24,000 King County residents attending performances. This is due to the standard econometric models that focus on impacts to a County, not to a specific City. In speaking with Webb,we have learned that it would be possible to approximate "direct spending" by these 24,000 King County residents, using the average day-tripper expenditure figures found in the lower Table on Page 5 of his report($16.78/day). This figure does not, however, account for the Federal Way residents choosing to attend the PACC for a performance who might otherwise spend those dollars elsewhere at a different event in Federal Way. For this reason, he warned against using the multipliers to project further indirect impacts, earnings and jobs. • Further related to on-going impacts, Webb calculated impacts for attendees at the Conference Center. His assumptions were that the 90 room rentals stated in the initial operational pro forma he reviewed would translate to approximately 60 events per year. At 100 attendees per event, he projected that perhaps 25%would come from outside the County and spend an overnight. He applied a total spending per overnight attendee of$400, based on average spending by attendees at other conference centers cited. However, he did not calculate any impact from the 75%of attendees who would be day-trippers yet would still spend money locally on meals,gifts,gas,and other goods and services. Using the expenditure per capita figures in his Table on 5 for performance audience attendees, one can get a conservative estimate of the per capita expenditures of non-performance attendees(I say"conservative" because this is a daily expenditure figure and these day-tripper conference attendees may come for more than one day but I am conservatively using just one day's worth of expenditures).The total of these expenditures is$16.78 per attendee. Applying this figure to 75%of conference center attendees results in a conservative additional direct sales figure of$75,510 over the $600,000 Webb projected for overnight attendees. City of Federal Way sales tax on the total of $675,510 would be$5,742 annually. 107 Memo to Blue Ribbon Panel PACC Redevelopment Scenarios& Economic Impact Page 6 of 6 • Finally, Webb presents a "Total Annual Operating Impact" summary. The attached spreadsheet updates this summary based on the above-described changes and assumptions.The table separates out direct-spending impacts and the resulting City sales tax and the total of direct+indirect spending impacts (accounting for those direct impacts to which the multipliers could be applied) and the resulting "Greater Federal Way" sales tax (recognizing that with indirect spending not all expenditure will occur in the Federal Way City limits). • The addition of fiscal impact figures results in approximate annual City sales tax revenue of $18,628 from direct sales and $27,092 in "Greater Federal Way" sales tax revenues from the total of direct+indirect sales. Regarding on-going impacts, it is difficult to estimate what percentage of all direct+indirect 108 City Center Redevelopment Scenarios for Projection of Economic and Fiscal Impact The following "redevelopment scenarios" were created in a 176-acre area surrounding the PACC(from Interstate 5 to Pacific Hwy South, S 312th St to S 320th St). Scenario 1 represents simply retenanting of existing vacant building space (since all vacant buildings are commercial, no residential development is considered in this scenario.) Scenario 2 represents the level of"current development capacity," as reported by the City to the Puget Sound Regional Council and State OFM using their spreadsheet and development assumptions. Scenario 3 represents a simple doubling of the Scenario 2 redevelopment levels. Residential Redevelopment Scenario 1: N/A Scenario 2: 1753 dwelling units x 2.206570 persons/household =3,868 residents Scenario 3: 3506 dwelling units x 2.206570 = 7,736 residents Commercial Redevelopment For the commercial development, we have the following employees per square foot rates that we use again for reporting to OFM, PSRC, etc.: Retail/Service: 1 employee/450 sq ft Office: 1 employee/250 sq ft For the three redevelopment scenarios contained in the spreadsheet, we are conservatively assuming a split between general commercial/lodging/entertainment and office of 75%to 25%, respectively. Scenario 1: 305,153 sq ft. 25%office=76,288/250 SF= 305 employees 75% retail = 228,864/450 SF=509 employees Total: =814 employees Scenario 2: 2,420,827 sq ft. 25%office=605,206/250 SF= 2,421 employees 75% retail = 1,815,620/450 SF=4,035 employees Total: = 6,456 employees Scenario 3: 4,841,656 sq ft. 25%office= 1,210,414/250 SF=4,842 employees 75%retail = 3,631,242/450 SF= 8,069 employees Total: =12,851 employees 109 0) LID a1 al V1 ID N (0 N N l!1 .i N .-1 M Ol CO • M N a1 0) a Cif CO 00 00 vi R Lii Lei NI LO. H a! N ti N V1 V) a al CO 00 41 �( a, U/ 00 lD .'1 N M N C t0 .-� U! N VT N Vl U) O a H .-i • m N v) a N 10 ..0 00 u 00 N a O o N m ID p ` C O 001 O.■ 00 d N VNl N mu" 'N o N 00 ID U) CO W a-I M F .�.. 2 V in. 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Q tO o z p V1 u To '^ F E in 0 z n N N O V GI m in m u m m m I..0 n a •-+ .ti ri 2 7 p O E W N m . 2 x to .'i en ry V V 00 0 L' O ~ W 00 to F d en_ . M m Q N p O N R T z To X = NY . C x W > 0. Q 1-O CSC a. a x m m CCO r :2 m N m to 06 to W a m n N y N T r-:y ^ in .n o C7 c C 8 Q O bJ 0 O 0 a O O OUI LA tD V1 O J .-I O N 0 N m OO N m n 'J 7 Q in C 01 Q W Z N N t O UW co co U 111 Issue Brief NGA Center for BEST PRACTICES Economic and Technology Policy Studies Contacts:Phil Psilos,(202) 624-5330 Kathleen Rapp,(202) 624-7734 June 25,2001 The Role of the Arts in Economic Development Summary The non-profit arts industry,with $36.8 billion in annual revenue,is a potent force in economic development nationwide. States and communities have integrated the arts into their economic development arsenal to achieve a wide range of direct and indirect economic goals. Arts programs have served as components of high-impact economic development programs by assisting state and local government in: • Leveraging human capital and cultural resources to generate economic vitality in under-performing regions through tourism, crafts, and cultural attractions; • Restoring and revitalizing communities by serving as a centerpiece for downtown redevelopment and cultural renewal; • Creating vibrant public spaces integrated with natural amenities,resulting in improved urban quality of life, expanded business and tax revenue base, and positive regional and community image;and • Contributing to a region's'innovation habitat' by simultaneously improving regional quality of life—making communities more attractive to highly desir- able,knowledge-based employees—and permitting new forms of knowledge- Nationally, the non-profit intensive production to flourish. arts industry is a $36.8 billion business that sup- Governors can position their states to use the arts effectively by promoting new ports 1.3 million full-time partnerships among state agencies,communities,and the business sector and by jobs. Governments also harnessing the power of the arts and culture as tools that unite communities,create reap considerable economic opportunity,and improve the quality of life. economic benefits: $790 million in revenue at the The Arts in the 21St Century Economy local level, $1.2 billion at The arts are emerging as a potent force in the economic life of cities and rural areas the state level, and$3.4 bil- nationwide and assuming an important role as a direct and indirect contributor to state economies. Thriving cultural life generates income,jobs,and tax revenue,and lion at the federal level.' it also creates visibility for a state.The arts and heritage activities that are prominent features for some states and regions—Broadway and off-Broadway in New York City; the entertainment industry in Southern California;the summer dance,theater and music festivals of the Berkshires;and jazz in New Orleans,to name a few—establish an identity that becomes a regionally and nationally recognizable destination. In this sense,arts-related events have long been regarded as important components in tourism development. In the New Economy,however,the arts are gaining recognition for their role in making communities attractive to workers who want to be identified with—and participate in—these opportunities during their scarce leisure time. The arts and cukural life of a region are also principal determinants of quality of life, which is widely recognized as a critical factor in location decisionmaking for New Economy workers and companies. A 1998 KPMG survey of more than 1,200 high- technology workers examined the factors associated with the attractiveness of a 112 new job.It found that"community quality of life"was the second most important factor—lust below salary—and more important than benefits,stock options,or company stability.2 The arts combine with more traditional quality-of-life factors including safe neighborhoods,good schools,strong infrastructure,and accessible recreational and outdoor"natural" attractions,to create more viable,desirable and livable communities. Additionally,the arts promote teamwork and team building,advance visual skills,may help increase standardized test scores and encourage problemsolving—all necessary elements for a productive and self-sufficient workforce. As such,investment in the arts may be among the most innovative workforce development tools at the disposal of state • governments. Public interest has increased yearly in the per- Direct Economic Impact of the Arts Nationally,the nonprofit arts industry is a $36.8 billion business that supports 1.3 million forming arts to such an full-time jobs. Governments also reap considerable economic benefits:$790 million in extent that they now out- revenue at the local level,$I.2 billion at the state level,and $3.4 billion at the federal draw sporting events and level. Economic impacts on individual states and regions include the following: movie houses, an accom- plishment once thought •The arts generated $849 million in revenue for Virginia businesses,provided 1 8,850 full-and part-time jobs,and produced $307 million in value-added income for Virgin- impossible. ia's workforce and entrepreneurs.3 •Total spending of$188 million by non-profit arts organizations in Louisiana has pro- vided nearly 2,500 full-time jobs and produced $4.8 million in state and local govern- ment revenues.4 • Every dollar Michigan invests in the state's Council for Arts and Cultural Affairs results in $10 of in-state direct spending.' •Oregon is home to 441 non-profit arts and cultural institutions that injected $100.2 million of direct spending in the state's economy in fiscal 2000. Oregon's non-profit arts sector employed 3,623 individuals.6 • The arts support more than 245,000 jobs throughout the six states of New Eng- land, 3.5 percent of the region's total job base, and more than the area's software or medical technologies industries. The arts industry exhibited a 14 percent growth over a four-year period,much higher than New England's overall economic growth of 8 percent.? Economically,the non-profit arts sector has an important—if difficult to measure--sym- biotic role with the commercial arts sector. According to the Policy Economics Group of KPMG Peat Marwick,the non-profit sector acts as a research and development arm for many for-profit enterprises,such as television and film,design,advertising,media, publishing,recording and emerging multimedia industries.8 Comprehensive nationwide research on the economic impact of the arts sector as a whole—combining for-profit and non-profit arts industries—is not presently available. However,statistics on the performing arts permit an order-of-magnitude comparison. Public interest in the performing arts has increased yearly to such an extent that these activities now outdraw sporting events and movie houses. According to the Bureau of Economic Analysis,consumers spent$9.4 billion on admissions to performing arts events in 1998—$2.6 billion more than admissions to motion pictures and $1.8 billion more than total spending on spectator sports.9 Spending on performing arts events increased by 16 percent or$1.2 billion between 1993 and 1998. In the same time period,real expenditures for both motion pictures and spectator sports grew by$900 million. o Creating Economic Activity out of Regional Cultural Traditions Thriving tourism and cultural destinations are growing out of once-latent artistic and 2 113 cultural resources and contributing to economic sustainability in rural communities and regions. Cultural activities attract tourists and spur the creation of ancillary facilities such as restaurants,hotels,and the services needed to support them. Cultural facilities and events enhance property values,tax resources and overall profitability for communities. In doing so,the arts become a direct contributor to urban and rural revitalization. In rural western North Carolina,the non-profit organization,HandMade in America, In rural western North promotes the fine craft of handmade objects as a means to sustain communities Carolina, the region's and economic development. The organization unified 23 counties and 4,000 artisans crafts contribute$122 mil- under a viable business and marketing plan that branded the region as a cultural lion annually to North destination. Handmade in America helped increase revenues 10 percent to 15 percent Carolina's economy for many craftspeople and generated more than $1 1 million in investment in six of according to statistics pro- the region's smallest towns. The region's crafts contribute $122 million annually to vided by HandMade for North Carolina's economy. l America. Elko,Nevada,is a remote rural community with a western heritage that became the stuff of poetry. Though known as strong silent types,good with a rope and gun,many cowboys entertained each other with poems they memorized or rhymes they made up on the spot.Folklorists began surveying local ranchers to find out more about cowboy poets. What they found convinced them that Elko,once the hub for Nevada's 19th century cattle empire,was a perfect choice for a Cowboy Poetry Gathering. With support from NEA,Elko held its first gathering in 1985.Since then,this wildly successful event has grown into a phenomenon that attracts 8,000 visitors and adds some$6 million to Elko's economy. Its success spawned more than 200 similar events across the nation,as well as books and radio shows. The Kentucky Arts Council and eight counties along Route 23 are creating a cultural tourism plan designed to promote economic,community and cultural development in the state. This initiative seeks to prove that cultural/heritage tourism can be used as an effective economic and marketing tool to transform a region once considered moribund into a thriving business endeavor. Route 23 was chosen because of its concentration of musical heritage—many country music stars come from this area—and talent.'2 Plans are underway to create a Website and arts marketing network along the corridor,a video highlighting each county and an audio driving tour. Arts and Culture Lead Efforts to Revitalize Communities By partnering with the cultural sector,state,county and municipal governments are melding business incentives and the arts to revitalize decaying downtown areas. Cities such as Philadelphia,Pennsylvania;Charleston,South Carolina;and Newark,New Jersey,have used the creation of arts districts as centerpieces in efforts to combat crime and suburban flight by restoring vitality to the downtown areas. Government- Cities such as Philadelphia, led efforts have catalyzed private development interest in the adaptive reuse of Pennsylvania, Charleston, urban structures to create retail,residential,commercial,and cultural spaces. As South Carolina, and these projects gain momentum,additional private capital has flowed into the areas Newark, New Jersey have surrounding these projects. used the creation of arts In Philadelphia,Pennsylvania,the Avenue of the Arts—a mile-long section of South districts as centerpieces in Broad Street—has been a major catalyst for downtown revitalization. This cultural efforts to combat increasing district,anchored by the Academy of Music and modeled after successful performing crime and suburban flight arts districts around the country,was initiated by the Central Philadelphia Develop- by restoring vitality to the ment Corporation in the early 1980s and supported by cultural institutions,the Wil- downtown areas. ham Penn Foundation,local property owners and civic leaders.Under the leadership 3 114 r of former Philadelphia Mayor Edward Rendell in the early 1990s,the transformation of South Broad Street into the Avenue of the Arts progressed rapidly and became a centerpiece in the city's strategy to strengthen the area as the region's premier cultural destination. Presently,there are I I cultural and educational institutions and 7 individual perfor- mance spaces in the Avenue of the Arts district. The project has also stimulated significant private-sector investment. A number of historic warehouses have been converted to upscale housing,and other preserved structures have been targeted for conversion to moderate-income residences. Total investment in the project stands at approximately$650 million. The district's cultural organizations,hotels,restaurants, and retail businesses generate at least$157 million in revenue annually and support 2,800 full-time and over 1,000 part-time jobs.'3 Throughout its history,Charleston,South Carolina,has stood as a cultural center of the South,but its glory had faded by the late 1960s.Rather than bulldoze its past, culture and history became building blocks for the city's revitalization.The resurrection of its historic homes and districts balanced with commercial development has been one of the hallmarks of Charleston's rebirth as a destination that uses its cultural capi- tal to draw visitors and to create an attractive working environmentThe city's renewal coincided with the birth of its world-class cultural event—the Spoleto Festival USA. The event's founder,eminent Italian composer Gian-Carlo Menotti,saw Charleston as a perfect reflection of its counterpart—Spoleto,Italy,with its wealth of theaters, churches,and other performance spaces.The lessons learned in Charleston became the seed for the Mayor's Institute on City Design,which is funded by the National Endowment for the Arts in cooperation with the U.S.Conference of Mayors and the American Architectural Foundation. At the institute,the value of design and a city's cultural assets as tools of economic development are key lessons for leaders seeking solutions to renewing their cities and states as attractive places to work, Newark,New Jersey- live and visit which suffered devastating urban riots Newark,New Jersey,which suffered devastating urban riots in the 1960s and of the 1960s and subse- subsequent decades of blight,is undergoing unprecedented revitalization after becom- quent decades of blight-is ing the home of the seventh largest arts center in the country,the New Jersey Performing Arts Center (NJPAC). Built largely with state government funds,but now undergoing unprece- sustained by earned income and private donations,the public-private partnership that dented revitalization after created NJPAC began with a decision by former New Jersey Governor Thomas H. becoming the home of Kean who saw a need for a center to enrich the state's cultural life. He commissioned the seventh largest arts a consulting firm to study New Jersey's performing arts organizations and determine center in the country, the the type,size,and location of facilities required by the state's performing companies. New Jersey Performing The consultants recommended creating a performing arts center in a city that could Arts Center(NJPAC). become a cultural district,spurring the growth of other institutions nearby and encouraging the development of facilities such as restaurants,cafes,retail establish- ments and office buildings. Newark was the most logical choice for NJPAC because of its proximity to private and public transportation and because it presented an opportunity to catalyze the revitalization of a moribund city. The location also promised access to an estimated 4.5 million people—more than half the state's population—who live within a 25-mile radius of Newark. The key to the project's success was a partnership between government and the private sector.Much of the funding came from state,county,city and federal sources and the remainder came from individuals,foundations and corporations.Governor Kean's initiative continued after he left office with the help of Governors Jim Florio and Christine Todd Whitman.NJPAC solicited donations from foundations and corpora- 4 115 4 dons such as Bell Atlantic,Merck & Co.,The Black United Fund and Prudential Insurance Company. By NJPAC's grand opening in 1997,the Arts Center had raised $187 million—$125 million from federal,state and city contributions and $60 million from the private sector. From the beginning,NJPAC has worked to reverse Newark's image as a city consumed by race relations problems.The center provides a venue for world-class artists and it attracts diverse audiences from Newark and surrounding suburbs to revitalize the city. From Itzhak Perlman to the Gypsy Kings,Lauryn Hill to the Vienna Choir Boys,the Royal Concertgebouw Orchestra Amsterdam to the Alvin Ailey American Dance Theater,NJPAC strives for inclusion and diversity. Its outreach efforts are most evident:26 percent of all ticket sales went to minorities,a number five times greater than normal for any other facility of its size. Moreover,NJPAC has spurred an unprecedented revitalization of Newark. With developers and tenants recognizing Newark's renewed potential,the city is witnessing the return of several sports teams, new restaurants,the development of an underground high-tech culture and the opening of small businesses at a steady clip. Many point to NJPAC as the reason for renewed interest and pride in Newark. Creating Vibrant Public Spaces to Showcase Urban Amenities Renovations combining art and function also stimulate economic development in urban areas that lack exposure to foot traffic and tourists. San Francisco,California; and Baltimore,Maryland,have succeeded in reconfiguring underused or poorly con- structed public spaces to convert neglected natural amenities into key development assets. After a major freeway collapsed during the 1 990 earthquake,San Francisco,Califor- nia,was presented with an opportunity to reunite its downtown with the waterfront, which had effectively been cut off from the city and its residents. The city's response came in the form of a functional sculpture.The Promenade Ribbon Sculpture is a 2.5-mile ribbon of illuminated glass block connecting the waterfront and downtown areas. The sculpture rises and falls in elevation,alternately functioning as seating,tables for al fresco dining,and as a barrier between people and cars. To allow easy vehicle access to waterfront piers and commercial areas,its profile is reduced to ground level in some areas. According to the San Francisco Arts Commission,the sculpture encourages pedestrian activity day and night,and provides an opportunity for people to walk,rollerblade,bicycle,rest,eat and appreciate the beauty of the San Francisco Bay. By opening up the city to more foot traffic,the city's creation has benefited San Originally an area in Balti- Francisco's residents and tax base alike. more without amenities or tourism despite its harbor- In Baltimore, Maryland,the Rouse Company developed Harborplace on a vacant, side location,Harborplace grassy area in one of the least desirable sections of downtown. The project was one of the first to employ state-of-the-art design techniques designed to emulate attracted more visitors than the intimacy of a classic bayside city center. Today,occupying this space are two Disneyland in the first year glass pavilions housing 150,000 square feet of pedestrian-access retail space—sidewalk it opened. cafes,restaurants,and a mix of national and local retailers. Magnet cultural institutions of the Mid-Atlantic have turned this pedestrian friendly space into a marquis location. At present,the National Museum of Visionary Art,Port Discovery,the Baltimore Science Center,and the National Aquarium are all located in a single square mile. Originally an area in Baltimore without amenities or tourism despite its harbor-side location,Harborplace attracted more visitors than Disneyland in the first year it opened. With this transformation,Baltimore created a tourism industry—complete with recreational and convention traffic and associated revenue—where none had 5 116 • previously existed. In addition,the city's downtown established a powerful brand identity based on the harbor's rebirth. The Arts, Quality of Place,and the Knowledge Economy In the past decade,states have begun to realize that their economic fortunes are increasingly tied to the location preferences of highly mobile knowledge-workers who form the intellectual backbone of the new economy. These workers value"quality of place"above nearly all other factors--including job market conditions—in choosing In recent years, innovative where to locate. According to Professor Richard Florida of Carnegie Melon University, commercial businesses, four factors determine quality of place:lifestyle,environmental quality,a vibrant music nonprofit institutions and and arts scene,and natural and outdoor amenities. independent artists all have become necessary In part,this reflects the changes in cultural preferences related to the demographics ingredients in a successful of this workforce. Vibrant cultural districts hold strong appeal to younger employees, region's innovation "habi- whose skills are seen as essential to success in many industries. Professor Florida tat." explains: "Firms such as Zefer,an Internet consulting firm based in Boston's'cyber-district' have been all but forced to locate their satellite offices in areas where they feel they can get the best talent. Lower Manhattan,San Francisco's'South of Market,' Chicago's Bucktown and Pittsburgh's'Cultural District' are among them. Zefer co-founder Matthew Burkley notes that in the future these workers will have even greater power to determine location in large part because they are in such demand...'In today's labor market,you have to be where your team members want to be. You don't tell people how they want to live—they tell you:"1 4 Beyond simple residential preference,there are solid economic reasons for skills-based workers to seek a vibrant culture relating to the nature of work in the New Economy. First,creativity is an essential raw material:cultural participation keeps the creative skills required of a knowledge-based workforce sharp. John D.Ong,Chairman Emeritus John D. Ong, Chairman of The B.F.Goodrich Company,explains: Emeritus of The B.F. "People who create in our companies—whether they be scientists,marketing Goodrich Company, experts or business strategists—benefit from exposure to the arts.People cannot explains: "People who create when they work and live in a culturally sterile environment....The economic create in our companies- benefits of the arts greatly transcend and outlive any of the normal cycles....That whether they be scientists, is why business invests in the arts—even when times are tough,and when there is marketing experts or busi- increased pressure to manage money carefully."'5 ness strategists-benefit Even in traditional manufacturing industries,most new value is created through human from exposure to the arts. capital-intensive activities and interactions requiring a mix of analytical,creative,and People cannot create when managerial skills—engineering,product design,marketing,branding,and advertising. As they work and live in a Joel Kotkin and Ross DeVol articulate in a recent report produced by the Milken culturally sterile environ- Institute,"Packaging,positioning,and the culturally intensive role in production have ment...." become far more important,whether selling new clothes,furniture,or restaurant concepts."16 Further,access to,and contact with,the creative and cultural sectors is increasingly fundamental for business success. In a network economy,according to Peter Calthorpe and William Fulton, "Economic activity is volatile and unpredictable. It's impossible to predict what an entrepreneur or a business or even an employee might need from one day to the next in order to thrive.''7 In recent years,innovative commercial businesses,non-profit institutions and independent artists all have become necessary ingredients in a successful region's innovation"habitat." Inner-city warehouse districts and other nontraditional business environments are particularly fertile locations for the development of new industries that require a high degree of creativity,intellectual expansiveness,and collaborative work among multiple firms in related industries. 6 117 The production of software,media vehicles,and other complex intangible products may flourish in knowledge-value neighborhoods,where knowledge spillovers and collaborative innovation can most easily occur. Leveraging aVibrant Cultural Scene into Austin's high-tech economy High-Tech Success is the product of forethought State and local government leadership in Austin,Texas,recognized early that its on the part of the Austin unique cultural environment was a competitive asset to the New Economy. Through community, led by the deliberate and strategic action, Austin has built a world-class high-technology Chamber of Commerce, economy on the base of a thriving cultural center recognized for its outstanding higher education and indus- quality-of-place. try communities. The boom in Austin's high-tech economy has been led by the chamber of commerce, higher education and industry communities. Local leadership asserted itself through university-led industry-targeting studies,the chamber's creation of an economic development arm to recruit businesses,targeted intervention by the state,the creation of a business incubator and the recruitment of venture capital firms. Companies relocating to Austin and local startups alike were attracted to the city's assets:a highly educated workforce available at competitive wages,science and engineering strengths at the University of Texas,relatively low-cost land,and an enviable quality of life. Austin has been one of the most outstanding success stories in the New Economy. High-tech employment in the region has increased 88 percent since 1 990,adding 42,250 high-tech jobs.The city ranks as the fourth most wired in the nation,behind San Francisco,Washington D.C.,and San Jose. At the same time, Austin has worked to preserve cultural vibrancy as a key competitive asset throughout its sustained period of high-technology growth. Austin leverages $158 million of state funding (fiscal 2000) with a number of innova- tive revenue instruments designed to support the arts.Bond funding has been used to launch non-profit institutions,such as the Mexican-American Cultural Center, The State Theater,George Washington Carver Museum and Cultural Center. The city offered bond funding for the development of a downtown theater,but was reimbursed by the nonprofit sector after an unexpectedly successful fundraising campaign. Austin raises $3.5 million annually through a hotel-based bed tax,dispersing these funds through"cultural contracts" with event sponsors (contingent on matching funds from the private or nonprofit sector). Since the inception of this tax,funding has increased to over 80 percent of the city's nonprofit arts institutions.The city also dedicates I percent of total new public construction costs to installing arts in public spaces. General fund allocations support Austin's four museums,an arts center, an outdoor theater, and a winter festival. Arts Help to Preserve, Expand, New Economy Successes Even in the most successful New Economy regions,civic leaders are beginning to take stock of artistic and cultural assets,recognizing that they are essential to quality of life,which is,in turn,necessary for sustained growth.In 1997,municipal government authorities in Silicon Valley,California,embarked on a yearlong planning process in which more than 1,000 local individuals and groups were consulted on the role of arts and culture in the region's future. This led to the decision by Silicon Valley's public and private leadership that the area would become the first to consciously 7 118 develop and connect creative capacity across business and cultural realms. The group's blueprint document,20/21: A Regional Cultural Plan for the New Millen- nium,includes specific recommendations on arts and cultural education,artistic and organizational development,community and neighborhood arts,as well as leadership and funding. The plan envisions a decade-long,regionwide,collaborative process in which up to $250 million will be raised from private sources.The region's digital industries will work alongside government and the nonprofit sector to maximize the integration of artistic assets into the civic life. Cultural Initiatives Silicon Valley—led by a board of Even in the most success- industry,government,and civic leaders—was created to implement these recommenda- ful new economy regions, dons,working to develop the cultural and creative aspects of Silicon Valley life. civic leaders are beginning to take stock of artistic and State Strategies for Effective Arts Integration cultural assets, recogniz- Governors have several motives to promote the arts as a critical component in an ing that they are essential overall economic development strategy. These range from community renewal and to quality-of-life, which is, revitalization to contributing to an innovative business climate. Arts and cultural districts in turn, necessary for sus- may thrive without the explicit support of state government. However,the effective tamed growth in the new synthesis of strategies related to the arts and cultural industries into a broader economic economy. development plan can provide governors with tools and solutions for areas in which more traditional policy instruments have returned unsatisfactory results. Though arts- based strategies will not be the primary economic development drivers for most com- munities.they may provide the"missing link":where traditional approaches have not been effective on their own,they may,coupled with the arts,become powerful tools for change. One of the most appealing aspects of an arts-based economic development strategy is the degree of strategic flexibility it can afford governors and local leadership. To advance the integration of the arts in economic development,there are several strategies governors can pursue. • Encourage collaboration among the business community, state arts agencies, eco- nomic development,tourism and education departments to create a more integrated approach to public investments. • Evaluate and nurture culturally based industries indigenous to the state,especially areas or regions that have difficulty sustaining"imported" businesses due to lack of infrastructure or other factors. • Focus on changing regional and community images by capitalizing on the design of more people-friendly sites that encourage foot traffic and increased retail and com- mercial ventures. •Where vibrant high-technology economies exist,use the arts to continually improve quality of life and the creativity of the business environment—recognizing the needs of the present workforce as well as helping to attract new knowledge workers. •Work to eliminate stereotypical views of the arts and introduce them as a tool for a state's economic development plans by highlighting their contributions to the state and regional economies. • Stay informed of innovation concerning the arts on the local level.Future policy ini- tiatives can be consistent with what is already occurring in communities—strengthen- ing current initiatives while building on them—thereby creating a win-win situation for the state and its constituency. 8 119 Endnotes i "Jobs,Arts and the Economy," published by Americans for the Arts,Washington, D.C.,1 994. 2 Information found at http://www.nga.org/cda/files/Florida.pdf. 3 Information found at htt p://www.vaforarts.org/pdfs/Wessex.pdf. 4 The Council of State Governments, More Than a Song and Dance:The Economic Impact of the Arts in the Southern Legislative Conference States (Atlanta,Ga.:The Council of State Governments,2000),50. 5 Center for Arts and Public Policy,An Analysis of the Economic Impact of Non-Profit Arts Organizations Networked with the Michigan Council for Arts and Cultural Affairs (Detroit, Mich.:Wayne State University, 1995),2. 6 Oregon Arts Commission,The Economic impact of Oregon's Nonprofit Arts Sector (Denver,Colo.:Western States Arts Federation,2001),3. 7The New England Council,The Creative Economy lnitiative:The Role of the Arts and Culture in New England's Economic Competitiveness (Boston,Mass.:The New England Council,2000),4. s KPMG Marwick LLP,Policy Economics Group,The Arts:A Competitive Advantage for California (Sacramento,Calif.:California Arts Council),4. 9 National Endowment for the Arts,Research Division,The Arts in the GDP:Consumers Spent$9.4 Billion On Admission Receipts for Performing Arts Events in 1998 (Washington, D.C.:National Endowment for the Arts,2000), I. io Ibid. i Information found at http://www.wnccrafts.org. 12"Kentucky's Cultural/Heritage Corridor," State Spotlight(July 1999).National Assem- bly of State Arts Agencies,Washington,D.C. 13 Information found at http://avenueofthearts.org/econ_summ.htm. 14 Joel Kotkin and Ross C.DeVol,Knowledge-Value Cities in the Digital Age (California: The Milken Institute,2001),21. is Information found at http://www.bcainc.org. Business Committee of the Arts,Inc. Executive Lecture Series, 1995. 16 Joel Kotkin and Ross C.DeVol,Knowledge-Value Cities in the Digital Age (California: The Milken Institute,2001),24. 17 Peter Calthorpe and William Fulton,The Regional City:Planning for the End of Sprawl (Washington,D.C.:Island Press,2000). Thanks to a cooperative agreement between the National Endowment for the Arts and the National Governors Association Center for Best Practices and with significant research assistance from the National Assembly of State Arts Agencies,this is the first of three Issue Briefs where the NGA Center will explore and demonstrate effective policies and practices that best integrate economic development and the arts. 9 120 I How the Arts and Cultural Tourism Spur Economic Development Page 1 of 6 Send to printer Close window How the Arts and Cultural Tourism Spur Economic Development BY CRAIG WATSON � � 4 ,' 'i itt . y�)64.. 14112ksicit:. ,, ,TTT l •• ✓i•L /,d ..x . a ,�"I.. 1 -� + • .a' vi. ■ \1 ,; �+ ,Nod o i Craig Watson is director of the California Arts Council and can be reached at cwatson(a)cac.ca.gov. It's the question that all local officials ask themselves: How can we attract and retain profitable businesses and talented people?A key component of such efforts—and one that's often mislabeled an"amenity"—is arts and culture. Creative businesses play a huge part in the California economy.These businesses comprise the arts, design,digital media and other fields that utilize a creative workforce. More than 134,000 creative businesses employ 500,000 Californians,with another 100,000 freelance or part-time creative workers in the mix. In addition,the Golden State's 4,553 arts organizations contribute$3.56 billion annually to its economy. But the value of the arts extends beyond the direct economic impact.When Gallup and the Knight Foundation set out to answer the question"What attaches people to their communities?"in a three-year study, researchers found that the key reasons cited by residents for loving their cities were entertainment and social offerings, how welcoming the city is and its aesthetics—in other words,the arts and culture. Creative Placemaking: "Every Mayor's Dream" – Today's buzzword to describe communities'investment in arts and i 1<„ culture is"creative placemaking"— which means using the arts to develop an area where people want to live, rr. a .,..._ w il. .1..., ork and con re ate. Urban-planning 7 9 9 p 9 N •� I researcher Ann Markusen defined this ` ' http://www.westerncity.com/core/pagetools.php?pageid=12119&url=%2F Western-City%2F... 5/7/2014 How the Arts and Cultural Tourism Spur Economic Development Page 2 of 6 concept for the Mayors' Institute on t- -=:7-7 K C p, ai City Design in the white paper i•p' sr . �' ' Creative Placemaking: - '} %// • • • ti. In creative placemaking, - .„,:,anf partners from public, private, Bergamot Station features art galleries,performing arts theatres and other nonprofit and community creative businesses. sectors strategically shape the physical and social character of a neighborhood,town, city or region around arts and cultural activities. The economic impact of clustering creative businesses was explained by Jamie Bennett,director of public affairs for the National Endowment for the Arts. Bennett said,"A theater has 1,000 people show up at eight o'clock and leave at eleven o'clock.A museum might have 1,000 visitors spread out over the course of an eight-hour day.A rehearsal studio might have 30 people coming and going every hour over 12 hours.You put the three different organizations in proximity to one another and,all of a sudden, you have a full day of positive foot traffic on a street—feet that belong to people who need to eat meals,buy newspapers,go shopping and take public transportation.You have every mayor's dream." The key is to treat the arts as an essential part of the city's identity. Successful creative placemaking builds the economy at the local level,enhances surrounding non-arts businesses and provides job opportunities and ways for individuals to participate in activities associated with the arts and cultural events. The results bring people together, spark community pride and create a more vibrant"place." Other states are actively investing in arts and culture as a challenge to California's historic leadership in the global creative economy.The National Governors Association(www.naa.orq)examined this issue in the report New Engines of Growth:Five Roles for Arts, Culture and Design. The report notes that as technology sectors have shifted from basic engineering to the added values of innovative design and creative products,establishing a network of creative workers is vital to staying competitive. Tap Your Local Talent — --- ; .... :1 Successful creative placemaking I 4.4$! acknowledges and supports local arts �" — r 'a and culture. "Art and artists are the } . • ! 4:s r,r •, r ' J (,j• asset all communities are gifted with," a ,� !a noted Carol Coletta,director of i IP�4E , ArtPlace,a collaboration of 13 leading national and regional foundations and • • or •. . F '. ; six of the nation's largest banks that invests in creative placemaking. "Ina is•■• a r - i ! time when we especially need to jump- start economic and development Tech entrepreneurs,artists and designers participate in San Francisco's momentum in our communities, I have 53 MPlaceWorks'Urban Prototyping Festival. to ask, 'Why wouldn't you put every single asset you have available to work to make that happen?'And that includes art and artists." Creative clusters that combine artists and entrepreneurs have mushroomed in California cities. In Santa Monica, an old rail yard has blossomed into the visual-art gallery complex of Bergamot Station. Originally a railway station in the 19th century, Bergamot Station functioned as a warehouse storage facility until the 1980s when the City of Santa Monica purchased it for a future use as a light-rail station. When the light-rail project stalled,the city approached a local developer and architect to create an artists'and gallery space. It opened in 1994 and has since become a key attraction both locally and for tourists,with more than 600,000 visitors each year visiting the galleries and other businesses in the complex. http://www.westerncity.com/core/pagetools.php?paged=12119&ur1=%2FWestern-City%2F... 5/7/2014 How the Arts and Cultural Tourism Spur Economic Development Page 3 of 6 In San Francisco's South of Market neighborhood, a handful of nonprofits teamed up with entrepreneurs to establish the 5MPlaceWorks partnership where tech entrepreneurs mix with artists and designers.These creative clusters may seem spontaneous, but are the result of direct and meaningful planning and investment. Yet clusters of arts, culture and entrepreneurship aren't exclusive to major urban areas. Smaller cities can take advantage of local talent to showcase the community's unique personality and, at the same time, provide important job training and creative interaction for local citizens. Modesto Fosters Creative Innovation ' _ - de Modesto's new Building Imagination . j k ' Center is a contemporary art and video r -art venue. It's also an education and artist residency center. Its activities, _. •• •• , �,�! including investment in local video _ ‘ w :."� artists, encourage production and job p"--4 ;.• ' training for anyone interested—mid- level professionals, recent graduates of • California State University, Stanislaus, t 1 -,� and members of the public. Li The Building Imagination Center is part of a greater network of the Modesto \, arts and culture scene, and its monthly short documentary projects on local Modesto's Building Imagination Center offers video production traini subjects enhance these characteristics showcases local artists and art programs. and bring the community together, according to Jessica Gomula-Kruzic,the center's director.The center plans to highlight other local cultural assets, such as the American Graffiti Car Show and Festival and the area's largely unknown architectural treasures,which include buildings designed by Julia Morgan, Frank Lloyd Wright and other notable architects. The center is not solely for professional artists and filmmakers, however. It also offers free workshops that teach individuals how to create short videos using common devices like smart phones. As technology advances,the nature of work is changing, and employers increasingly expect employees to have multimedia skills. One-minute videos for YouTube and websites are being produced by businesses from real estate to restaurants and retail. "We're hoping to give people the skills to do those things," said Gomula-Kruzic. The Role of Cultural Districts Cultural districts are zones that aggregate cultural or artistic ventures(both nonprofit and commercial) and, in the process, stimulate economic development.A dozen states nationwide have enacted official cultural-district designations, some with remarkable measurable results. An analysis of Maryland's arts and entertainment districts notes a 17 percent growth in new jobs, goods and services, and wages from new business in the state's arts and entertainment districts between 2008 and 2010—a significant achievement during the recession. Some California communities are already moving in this direction.A part of San Diego's downtown East Village area, called the I.D.E.A. District for its focus on innovation, design, education and arts, was conceived by a pair of local developers who have partnered with higher education institutions,the San Diego Foundation, community groups and others. "[Local governments] need to answer the question, 'What do people want?'Artistic, cultural and social experiences are what keep people in a community,"said David Malmuth, one of the founders of the I.D.E.A. District. http://www.westerncity.com/core/pagetools.php?pageid=12119&url=%2F Western-City%2F... 5/7/2014 I How the Arts and Cultural Tourism Spur Economic Development Page 4 of 6 r Pete Garcia, Malmuth's partner in the I.D.E.A. District project,emphasizes the need for communities to identify their own strengths and not be swayed by what's popular elsewhere. Cultural district supporters need to ask the question,"What is our city about?And what is it missing?" Malmuth encourages planners and coordinators to work quickly, perhaps in small ways rather than spending too much time on long-term planning. He said, "Take too long and the community loses focus, loses enthusiasm." Creating an Arts Oasis • l F> •A rebirth of the creative community is t under way in Palm Springs and the Coachella Valley. Palm Springs has long . been a popular vacation spot for film r; t� i��►� • ,+ • ' 1• stars. In the 1980s and'90s the area was `. better known as a retirement community + } ,tz.. / ® • than as a place of creative economic AC�/`�� • activity. • • Today the creative economy is thriving in #111121.*_,„ JI the region, notes Robert Stearns,the "I'.. Cdr executive director of ArtsOasis,an initiative of the Coachella Valley The Coachella Valley Music and Arts Festival draws large crowds of young Economic Partnership. Policy-makers people to a six-day event over two weekends. and leaders in the area sensed that the arts and creative businesses were a strong economic driver.A study of the area, Creative California Desert, revealed that the creative economy is"a robust engine that employs nearly one out of every five persons working in the Coachella Valley and produces a raw impact of close to$1 billion per year." This vigorous creative activity started in small ways.The Palm Springs International Film Festival began as a modest proposal in 1989. Now, almost 25 years later, it's a major international event that draws 140,000 visitors in a 10-day period.The festival's success encouraged film-related businesses to set up in the area. A weekend trade show grew into the Modernism Week, a celebration of architecture and related businesses,like clean energy and design,that attracts experts worldwide. Interest in visual art, architecture,design and modem art produced art festivals and fostered a unique brand of cultural tourism,where people visit different art studios and participate in hands-on projects.The area has also been successful in attracting younger people,due in part to the success of the Coachella Valley Music and Arts Festival, a six-day event spanning two weekends. One result of local leaders'discussions and planning around arts and economic activity was the ArtsOasis website (htto j/artsoasis.ora),which lists the regional arts-related activities in a single comprehensive resource to help facilitate event planning and cultural tourism.Another result is the development of a creative marketplace and trade center for talent, services and products—initially for film and media workers, but with the goal of expanding to other creative industries. Stearns sees this collaboration as a key way to build the creative economy during tough economic times."It doesn't take a lot of infrastructure money for this community," he said."Building the creative economy requires building the creative community." The first step,according to Stearns, is to determine exactly who is in the local creative community."If you look at the broad field,you may see there is a much bigger world than the'starving artists'and the nonprofits,"he said.While the traditional arts play a very big role,they are only part of the overall creative economy. If your community is home to creative businesses or related industries, invite them to participate and include them in your city's creative placemaking efforts. http://www.westerncity.com/core/pagetools.php?pageid=12119&ur1=%2F Western-City%2F... 5/7/2014 I How the Arts and Cultural Tourism Spur Economic Development Page 5 of 6 Pasadena and Levitt Pavilions Partner to Revitalize Area,Create Festivals While local governments are strapped for funding, public-private '!'4!�.:z = •. 1 - • partnerships can be instrumental in building the creative economy,and '"°4;'N" - Levitt Pavilion in Pasadena offers a great example. ,. ,. . ... 4• •V. .1, 4.: • Levitt Pavilions is a national nonprofit whose goal is bringing '''1 , •.. . ...rs` communities together through music.To qualify for its support, a city '; - w must make available a publicly owned space and commit to at least 50 r ',:• - r free music concerts annually. Levitt Pavilions provides capital seed �,i.��'' I. funding to renovate or build a music venue, and a local"Friends of the '� Levitt Pavilion"nonprofit must be formed. In addition,the local -_ ,,. A � government maintains the location. :....p. .. - The first Levitt Pavilion project,other than one in the founders' Levitt Pavilion draws families to hometown in Connecticut,was the band shell in Pasadena's Memorial diverse events. Park.The park was run-down and suffering from the effects of crime, vagrant drug use, homelessness, graffiti and under use. Levitt Pavilions provided approximately$250,000 in capital seed funding plus annual operating support to improve the band shell for public concerts,the local"friends of'nonprofit raised the additional funds(about$1.5 million), and an annual music program for the community was born. The free concerts are a vital part of the Levitt Pavilion model. By hosting the community events,the venue becomes a destination in the city for people from all socioeconomic backgrounds,especially families."It brings out the entire community,"said Vanessa Silberman,director of communications for Levitt Pavilions."There's a sense of neighborliness —a nice small-town feel in a city." The turnaround for the area in Pasadena is significant,said Silberman. Nearby Colorado Boulevard in the center of Pasadena's original downtown had undergone a revitalization, evolving into the extremely popular Old Pasadena area. Prior to the Levitt Pavilion investment, local residents avoided Memorial Park because of the crime problem. Now the area around the park has become as vibrant as Colorado Boulevard,with new condominiums, restaurants and other amenities nearby. The success of the Levitt Pavilion partnership is due to the long-term commitment of the city, the local nonprofit and the national Levitt organization. In conjunction with the Levitt Pavilion project, Pasadena launched an annual music festival called Make Music Pasadena. Now in its sixth successful year, Make Music Pasadena presents Grammy Award-winning musicians and top recording artists performing blues,jazz,folk,alternative rock and more.The festival's eclectic mix of music appeals to audiences of all ages and has earned it high praise. It's been dubbed by L.A. Weekly as"Los Angeles' best free festival." More than 30,000 fans flock to Pasadena to hear 500 musicians performing 140 free concerts on 35 stages spread throughout the city—all in one music-filled day. Your Town,Your Arts Enhancing the creative sector is essential to the future of the Golden State. But investing in the arts doesn't necessarily need to strain the pocketbooks of local governments or require extra staff.Assess what is already in your own community.Assist and support the local businesses, nonprofits and residents who propose innovative projects. Invite creative leaders to share ideas,and encourage high-quality proposals that can make a real difference.A little investment in the arts can go a long way toward keeping your community on the forefront of the creative economy. Creative Placemaking Resources 125 http://www.westerncity.com/core/pagetools.php?pageid=12119&url=%2F Western-City%2F... 5/7/2014 How the Arts and Cultural Tourism Spur Economic Development Page 6 of 6 Resources and funding opportunities for cities interested in investing in creative placemaking are listed below. • Our Town grants from the National Endowment for the Arts (www.arts.gov). Organizations may apply for creative placemaking projects that contribute to the livability of communities and place the arts at their core. • Art Place funding (www.artplace.orq).Art Place works to accelerate creative placemaking through grants and loans, partnerships, solid and imaginative research, communication and advocacy. • Creating Places of Vitality grants from the California Arts Council (www.arts.ca.gov) . This program targets rural and underserved communities in California by supporting partnerships and cultural activities that create a distinct sense of place. • Various websites consolidate hundreds of grant opportunity listings. These include www.California.grantwatch.com,www.foundationcenter.orq, and www.arts.ca.gov(see opportunities/grants). California communities have plenty of creative assets, both large and small,that can be utilized even in this tough economy.The California Arts Council website(www.arts.ca.dov) lists hundreds of festivals throughout the state that demonstrate our will and desire to have arts in our communities. Local governments may be strapped, but a small investment in the arts and creative communities can have a huge impact in the long run. Additional Resources Available http://www.westerncity.com/core/pagetools.php?paged=12119&ur1=%2F Western-City%2F... 5/7/2014 .1 ; '�` • rr: Or:;"'y ' I I I • .-.\'Y. „ ,,L1.. s. .fir . ' rw--"^r i' ), . / ' 1 e---.7--47..., / ' ,rem ' �� ''',! �.,} ;1i.., .. f i s� I� ti 1. ii 1 IL.-- , ,,eAs#, $11 •...n. 1.: rfoi )1 ..... , ff Ibela7,,,L.,1 r ” '. PT 0, . te _, LC-lin -11Y__ . _ ,, . . „, , . „......, A,' '" aof■ ! '.. • How the arts and culture sector catalyzes economic vitality U.nd 1 Worry S IAN I 1 1 , .r ! Terms such as"creative economy; "creative class,"and "cultural economy"are becoming more common among KEYPOINT#1: urban planners,arts administrators,economic developers, Economic development is enhanced by concentrating and business and municipal leaders.'These terms refer- creativity through both physical density and human ence a variety of types of jobs,people,and industries,in- capital.By locating firms,artists,and cultural facilities cluding the sectors of visual,performing,and literary arts, together,a multiplier effect can result. as well as applied fields like architecture,graphic design, and marketing.Whatever label is used,this use of terminol- KEYPOINT #2: ogy linking culture and the economy indicates recognition The recognition of a community's arts and culture of the connections among the fields of planning,eco assets(and the marketing of them)is an important nomic development,and arts and culture. element of economic development.Creatively The activities of the arts and culture sector and local eco acknowledging and marketing community assets can nomic vitality are connected in many ways.Arts,culture, attract a strong workforce and successful firms,as well and creativity can as help sustain a positive quality of life. • improve a community's competitive edge KEYPOINT #3: • create a foundation for defining a sense of place Arts and cultural activities can draw crowds from within and around the community.Increasing the • attract new and visiting populations number of visitors as well as enhancing resident • integrate the visions of community and business leaders participation helps build economic and social capital. • contribute to the development of a skilled workforce KEYPOINT#4: To pursue economic development projects with a creative Planners can make deliberate connections between approach,there are four key i the arts and culture sector and other sectors,such pp ey po nts to consider: as tourism and manufacturing,to improve economic outcomes by capitalizing on local assets. ill Prepared by the American Planning Association,as part of a American Planning Association collaborative project with the RMC Research Corporation and with A;odomq Greor Corwnunn es Ilupprl funding from the Rockefeller Foundation KEYPOINTS Competition,definition,attraction,integration,and con- space,or creative district is an example of a facility-centric tinued development are all pivotal aims for economic method,while a people-oriented approach could include development professionals.Traditional outcomes of facilitating arts professionals'development by approving economic development in planning include job cre- live-work spaces,supporting arts centers,creating cooper- ation,increased tax revenues, increased property values, ative marketing opportunities,or commissioning artworks. increased retail activity,and more sustained economic Program-based approaches target a specific issue within vitality.These goals are often pursued through programs a community,such as developing an arts program— such as workforce development,recruitment,amenity whether gardening,mural making,or public art display- packages for firms,local property investment,and poll- ing—to address the issue of vacant property;promoting cies that support business.When combined with cre- health education through a local arts festival,exhibitions, ative approaches,these traditional programs can create or performances or plays with health themes;or displaying a richer context for economic development. artwork in vacant storefronts to attract passersby and en- liven an area.Whether targeting economic improvement Economic development approaches that integrate arts through facilities,people,programs,or all three,creative and culture are usually combinations of facility-centric, strategies can strengthen economic vitality(Table 1). people-oriented,and program-based approaches. Development of an arena,cultural center,incubator Each key point is explored in greater depth below,with examples and connections to the strategies in Table 1. Table 1.Creative Strategies for Improving Economic Vitality Strategy Description Promotion of Assets Promoting cultural amenities for the purpose of attracting economic investment and skilled workers Development Promoting community development through artistic,cultural,or creative policies Revitalization Promoting community and neighborhood revitalization through artistic measures and strategies that emphasize creativity Economic/Job Clusters Creating economic or job clusters based on creative businesses, including linking those businesses with noncuitural businesses Education Providing training,professional development,or other activities for arts,cultural,or creative entrepreneurs Arts-Oriented Incubators Creating arts-specific business incubators or dedicated low-cost space and services to support artistic,cultural,or creative professionals Branding Developing visual elements that communicate a community's character;using logo development and graphic design for advertising,marketing,and promoting a community Districts Creating arts,cultural,entertainment,historic,or heritage districts Live-Work Projects Providing economic or regulatory support for combined residential and commercial space for artists Arts-Specific and General Public Providing public or private economic or regulatory support for Venues marketplaces,bazaars,arcades,community centers,public places, parks,and educational facilities of various types .... .... ...... ...... Events Using celebrations or festivals to highlight a community's cultural amenities Urban Design and Reuse Implementing the reuse of existing sites or buildings for arts and culture purposes Public Art Supporting temporary and permanent public-art projects 128 • Concentrations of cultural The Crane Building in North Philadelphia is an example KEYPOINT#1: enterprises and creative of a facility-centric redevelopment for creative busi- "' `; workers in a geographic nesses and artists.Originally built in 1905 as a plumb- development area provide a competitive ing warehouse,the building today houses Crane Arts is enhanced by edge,likely by elevating (www.cranearts.com),with four floors of artist studios concentrating the quality of life, improv- and suites and a variety of project spaces available creativity through ing a community's ability for community programs and cultural development. both physical to attract economic activ- Facilities include an art-restoration studio,a ceramics density and ; '``' ity,and creating a climate studio,a multimedia studio,and a printmaking,paint- human capita.'G in which innovation can ing,and sculpting studio.One of the office suites is a flourish. cultural coworking space opened by Peregrine Arts (www.peregrinearts.org)for entrepreneurs,consul- Concentration of culture-sector firms and highly tants,artists,writers,visionaries,and anyone working skilled workers,along with related facilities and busi- in design, media, history,the arts,and cultural heritage. ness,enables partnerships and cooperative projects to The building has been successful enough that Crane develop.Concentration also facilitates the marketing Arts is considering opening another building.As an of skills and products.The physical density of creative economic development tool,the building is beneficial and cultural firms promotes the sector's prosperity, not only to the creative occupants but to adjacent which is in turn economically good for the local area communities and the design profession as a whole.For as a whole. example,during the recent economic recession, local architects with few or no incoming projects partici- Clusters of culturally oriented businesses and workers pated in a gallery exhibit at Crane Arts in an effort to can breed innovation and new specializations.Places "get back to the act of making things"'The exhibit was where innovation is prized are naturally attractive to an effective tool for marketing and design. innovators and conducive to creativity of all types,as the frequency of exchange promotes creative activity. In Tampa, Florida,a local developer designed and cre- Planners can develop projects that deliberately lo- ated the Sanctuary Lofts(www.sanctuarylofts.com)as cate creative professionals in a facility or area.Density an urban revitalization project to concentrate creativ- or concentration of creative facilities can occur on a ity and attract residents back to the downtown.The range of scales,from a single building to a streetscape, project began with an early 20th-century Greek Revival neighborhood,or district. church in the Tampa Heights historic district that was transformed into loft apartments with space for creative-studio rentals.Many of the existing materials were salvaged, including doors,windows, pews,and hymnal racks.Sanctuary Lofts now serves as workspace for painters,artists,photographers,designers,and ar- chitects.This unique living space can assist in facilitat- ing communication between creative organizations and the public and can create a stronger sense of iden- tity for community residents. AMERICAN PLANNING ASSOCIATION 129 Recognizing and strength- For example,Taos,New Mexico,has a number of des- KEYPOINT#2: ening existing assets are ignations intended to promote it as an arts and culture The recognitlo ` vital parts of community magnet.The State of New Mexico has designated Taos of a community's development and can an Arts and Cultural District.'The New Mexico Arts and arts and contribute to economic Cultural District Resource Team reviews the state of culture assets development. the creative economy and emphasizes building upon is an importa t current assets to develop economic well-being.At the element of Assets include those related federal level,Taos is designated as part of the Northern economic to entertainment(e.g.,the- Rio Grande National Heritage Area.Additionally,Taos is development. aters, performing groups), pursuing the New Mexico"Quality of Life"local option personal development tax(a tax incentive to improve energy and water con- (e.g.,community centers, servation,sustainable building,employment benefits bookstores),and education (e.g.,schools, museums),as such as job-training programs and employer-provided well as more directly to job creation and industry(e.g., child care,and other quality of life factors)to support translators,designers).Cultural and creative amenities the continued formal existence of the Arts and Cultural are assets as well as excellent tools for identifying and District.It is also considering the construction of an promoting other community assets. arts-incubator space,to complement its affordable housing project,ArtSpace6Taos's approach to eco- Creative-class theory suggests that a high-tech,highly nomic development is based on asset recognition and educated workforce prefers a location with creative directly connected to the arts and culture sector. amenities.'A flourishing arts and culture sector can affect where workers in the information economy, Another way to recognize assets and capitalize on especially younger ones,want to live and as such is them economically is to find ways to publicize and important for workforce recruitment and retention display the community's existing artistic talent and strategies.4To promote local culture and creativity, related amenities,such as ethnic foods,costumes,and communities can deem an area or part of town as an visual arts and crafts.For example,in New Orleans the arts,cultural,or creative district.A district is technically cultural heritage of Louisiana is celebrated through a designation to name and centralize creative assets the New Orleans Jazz and Heritage Festival.This festi- by locating and drawing attention to cultural assets val increases tourism through a showcase of music of throughout the community.There may be economic every kind—"jazz,gospel,Cajun,zydeco, blues, R&B, incentives to live or work in such a district. rock,funk,African,Latin,Caribbean,and folk to name a few."' 130 Arts and cultural activity Boston Art Windows is a collaboration between can increase attention the city and local artists aiming to fill vacant store- Arts and cultural , and foot traffic to an fronts in the Downtown Crossing area with exhib- activities in area, including attract- its that draw pedestrians.9The space is a streetside an area can 1 ing visitors and increas- art gallery incorporating interactive video, light- draw crowds ing the length of time ing,and sound to encourage passersby to pause from within and money they spend, and enjoy the spectacle.One artist's camera re- and around the thereby contributing cords the movements of pedestrians and plays community. to continued develop them back in time delayed video loops that even- ' ment. Similarly,the tually cover a screen.The redevelopment authority presence of public art involves curators with the storefront show,seeing and related streetscape amenities such as artist- the exhibit as an opportunity to facilitate changes designed lighting,signs,and benches is a way to to Downtown Crossing as economic development attract pedestrians. continues. Arts and cultural activity often attracts attention, In Grand Rapids,Michigan, local artists, business whether for casual perusal or artistic investment. owners, and the public engage in an annual cre- Such activity can include events at culturally spe- ative event called Art Prize(www.artprize.org/ cific facilities such as theaters, museums, music home).Art Prize is an open contest in which any clubs,and galleries,as well as cultural activity in artist,established or emerging, can show work venues such as arenas, public parks,community and any visitor can vote on it. In essence,Art Prize centers, and schools.Communities can also de- is the creation of a context for the city to become velop creative ways to make artistic activity hap- a temporary art gallery. During this informal cre- pen in vacant or underutilized spaces. Several ative event, public participation, interaction,and communities have embraced the practice of pro- economic development are strengthened as more moting creative activity in vacant retail windows than 100 venues open for it(including local retail and storefronts as a revitalization tool. and business spaces). More than 1,000 people vol- unteer.The resulting relationships extend beyond An economic redevelopment process can often the boundaries of the competition to strengthen last several years. In an attempt to temporarily interaction among retail shops, business own- transform a street scheduled for redevelopment ers, and the art world. Economic benefits of the in Brooklyn, New York, by the local BID,the local contest include increased traffic and improved arts group Ad Hoc Art(http://adhocart.org/site) business. transformed a row of vacant stores into a street art gallery. Known as Willoughby Windows,the block of Willoughby Street between Bridge and Duffield was turned into a temporary art exhibit,which included a photography-themed screenprint where a camera store used to be,woven paper maps,and a large cash register(representative of the perceived financial mistakes of Wall Street).8 This temporary, creative art exhibit transformed an otherwise vacant eyesore into an interesting space for pedestrians. AMERICAN PLANNING ASSOCIATION 131 Establishing oppor- Brooklyn, New York, is experiencing an economic KEYPOINT#4: tunities for partner- transformation as a result of food.A growing gas- (linters can ships among various tronomical entrepreneurial energy is transforming make deliberat economic sectors and once industrial,underutilized pockets of Brooklyn connections creative professionals is into culinary oases. Entrepreneurs in their 20s between the a way to promote eco- and 30s,who often have a strong sense of corn- arts and culture nomic development. munity and creativity,are opening restaurants, sector and other;"a• The talents of artists bars, pubs, specialty shops, butcheries, coffee sectors. (especially related to shops,and other food production and processing design and communica- facilities throughout the borough.These busi- tion) can enhance the nesses are not only meeting the growing local value of local products and services and increase and regional demand for locally produced and their dissemination. wholesome foods but also creating an incubator for culinary quality, craftsmanship,and artistry. Partnerships often begin with economic clusters For example,the outputs of Cut Brooklyn,a knife- that are closely related to or dependent on the making business, become the inputs for Brooklyn design field;examples include marketing,tourism, Kitchen,a specialty store;cacao nibs,a product high-end manufacturing, and filmmaking.These of Mast Brothers Chocolate, and Ethiopian coffee economic clusters are groups of organizations beans from Gorilla Coffee are added to beer at with related producers,suppliers,distributors, and Sixpoint Craft Ales;and root vegetables purchased intermediaries. Proximate organizations can take from a nearby farmers market are combined with advantage of shared interests, relationships,and wort from Sixpoint to make relish at Wheelhouse economies)0 Pickles. Deliberate team building by planners can help This new collaboration between business own- artists,designers,and people in related economic ers is resulting in increased economic vitality and clusters to their shared advantage. Connecticut, sense of community between merchants as well for example, has recently instituted Cultural and as residents.13 In February 2010, recognition of the Tourism Partnership Grants that encourage in- economic,environmental, health, and social im- terdisciplinary collaborations among tourism, pacts of food production, processing, access,con- historical,film, and arts organizations.11 The goal sumption,and waste disposal prompted residents is to help localities develop relationships and of New York City and the Manhattan borough strategies to improve tourism, an important goal president to develop"FoodNYC: A Blueprint for a in economic development.12 The grants support Sustainable Food System,"a report that establishes projects such as film and arts festivals,develop- goals and provides recommendations for improv- ment of garden and museum trails,seasonal crafts ing and balancing the health,economic, and envi- and events,and theater packages. Lead applicants ronmental needs of the city.This report recognizes must be nonprofit organizations, but they can the untapped economic potential of the region's partner to seek funding for both profit and non- food system,as well as the health,equity,and en- profit ventures. vironmental challenges of this economic sector. 132 CONCLUSION The economic development field has changed in the last decade from one that primarily empha- sized location and firm-based approaches to one that more overtly acknowledges the development of human capital. Human capital refers to the sets of skills, knowledge,and value contributed by a population and has become a recognized asset as firms choose where to locate (and cities choose what to advertise and develop and whom to recruit) and entrepreneurs develop economic activity. Members of some sectors of today's workforce seek certain characteristics in the places they choose to live. Places with entertainment options, public interaction, lively streets,and recreational and educational amenities are preferred,along with arts and culture activities and amenities. Leaders in the field of planning and economic development are developing noteworthy,creative approaches to making places of any scale more satisfying to this workforce,while increasing eco- nomic viability and competitiveness. This briefing paper was written by M. Christine Dwyer (senior vice president,RMC Research Corporation) and Kelly Ann Beavers(PhD candidate, Virginia Tech, and American Planning Association arts and culture intern),and edited by Kimberley Hodgson,nice(man- ager,Planning and Community Health Research Center,American Planning Association). AMERICAN PLANNING ASSOCIATION 133 Endnotes 1 Landry 2000;Florida 2002, 13.See Oliver Schwaner-Albright,"Brooklyn's New Culinary Movement;New York Times, 2 Inga Saffron,'Changing Skyline:Phlla Architects Offer Some Homegrown Ideas; February 24,2009,available at www.nytimes.com/2009/02/25/dining/25brooklyn. Philadelphia Inquirer,October 9,2009. html;'More Voices from Brooklyn.New York Times,February 26,2009,available at http•1/ 3.Richard Florida,The Rise of the GeativeGass(New York:Basic Books,2003). dinersjournal blogs nytimes.com/2009/02/26/more-voices-from-brooklyn;and Kim Severson,"YOung Idols with Cleavers Rule the Stage;NewYorkTimes,available at www. 4.Richard Florida,Who's Your City?:How the Creative Economy Is Making Where to Live the nytim es com/2009/07/08/dining/08butch html. Most Important Decision of Your Life(New York:Basic Books,2009) 5 Rick Romancito,'Taos Arts and Cultural District a First for New Mexico;Taos News, October 24,2009;available at www taosnewssom/articles/2009/10/28/entertainment/ doc4ae31 f6a 1733e086547611 txt See also www taosgov.com. 6.APA Arts,Culture and Creativity survey,2009. Arts and Culture 7."Testimony by NGA Center for Best Practices Director John Thomasian before the Briefing Papers House Education and Labor Committee on the Economic and Employment Impact of the Arts and Music Industry"March 26,2009;available at www.nga.org/portal/site/nga/ This is one in a series of briefing papers on how planners can menuitem0f8c660ba7cf98d18a278110501010a0/?vgnextoid=db4bd36852440210VgnV CM1000005e00100aRCRD. work with partners in the arts and culture sector and use creative 8."WilloughbyWiindows:VacantBrooklynBlockBecomesStree tArt Gallery'August12, strategies to achieve economic,social,environmental,and 2009;available at www.psfkcorn/2009/08/willoughby-windows-vacant-brooklyn-bkxk- becomes-street-art-gallery html community goals. 9.Yvonne Abraham,local Artists See Windows of Opportunity;BostonGlobe, June 7,2005.Available at wwwboston.com/news/local/artides/2005/06/07/ Please visit our website at www.planning.org/research/arts to local_artists_see_windows_ofopportunity. learn more about this series. 10.Testimony by NGA Center for Best Practices Director John Thomasian. 11 See www.cultureandtourism.org/cct/cwp/viewasp?a=2211&q=293780. Copyright O 2011 by the American Planning Association 205 N.Michigan Ave.,Suite 1200,Chicago,IL 60601-5927 12 Testimony by NGA Center for Best Practices Director John Thomasian. www.planning.org 134