In an effort to further strengthen the organization’s financial stability, the Edmonds Center for the Arts will this year begin adding a $2-per-ticket fee to all performances and will hire a Director of Operations so that Executive Director Joe McIalwain can focus on fundraising, partnerships and other public-facing duties.

That information was included in McIalwain’s 2016 Annual Report to the Edmonds City Council earlier this week.

The ticket fee will apply to all ECA presented performances, and will also be assessed to clients who rent out the facility for their own events. However, the fee for rental clients will be phased in “so they can budget and plan for it accordingly,” McIalwain told the council.

The long-time ECA executive director told the council that proceeds from the $2 fee are estimated to generate at least $60,000 annually starting in 2018. All of that revenue will be reserved and restricted for capital and maintenance improvements, which will help the organization weather unexpected events like the one ECA experienced last year.

In late 2015 and early 2016, a complete server crash destroyed the ECA’s financial and accounting system records. “The beautiful thing is, our team in finance had kept incredible paper records so we had everything we needed to rebuild the system,” McIalwain said. “But what that meant was, we had to invest in the new systems and we also had to invest in labor to re-enter all of that information so we had the record-keeping back on track.”

The result was an unanticipated $33,000 hit to the ECA’s bottom line. Adding to the financial woes were some unexpected equipment problems, including a failing water heater and a pump in the HVAC system.

To address these types of issues, the independent public agency that owns and operates the ECA — the Edmonds Public Facilities District Board — came up with a plan to hire an operations director to take on information technology, financial management, human resources and facilities management. “We need someone to manage the operation in partnership with me,” McIalwain told the council.

Now starting his 11th year as ECA’s Executive Director, McIalwain noted that during the first decade, he was able to handle both the operations and the artistic and outreach side. As the organization has grown, he needs to spend more time “being the face, developing new partnerships and relationships, strengthening our programs and services, fundraising,” he said.

A private donor is providing $125,000 over next three years to help offset the cost of adding the operations director position to what is now a 15-person staff — 10 who work full time and five who are part-time. The ECA is also seeking other funding to ensure that the financial impact on the organization is minimal for the next three years. “That will give me a chance to figure out ways to develop new revenue” for the position, McIalwain said.

Speaking of revenue, McIalwain told the council that during the last five years, the ECA has seen its net revenue from operations increase by $77,230. “So despite this loss in 2016, overall we still operated at a very healthy level,” he said, “and now it’s up to us to get back on track and make sure that 2017 is break-even or better.”

McIlawain also discussed in detail the ECA’s non-operating income (which comes from  Snohomish County sales tax rebates) as well as its expenses, which are related to debt service principal and interest from bonds that funded the 2005-06 remodel of the former 1939-era Edmonds High School into the current performing arts facility.

The sales tax rebates are divided into two tiers, with Tier 1 covering the 2002 bond issue and Tier 2 covering bonds issued in 2008. The nation’s economic recession took its toll on Tier 2 bonds, causing the ECA in 2010 to come to the city — which guarantees the bonds — for assistance in meeting the bond payments. Over the years, the city has continued to loan the ECA money to cover the net revenue shortfall, although the amount the city has been paying has been going down each year.

A rebound in Tier 2 sales tax rebate revenue “is closing the gap between what we are earning and what we are owing in our debt service,” McIlawain said. “I want to acknowledge and once again show my appreciation to the City of Edmonds…for honoring the contingent loan agreement to provide the resources needed to meet debt service obligations.”

McIlawain also said it’s clear that “we still have work to do. Just know that it’s something that our PDF board is aware of, has acknowledged and wants to continue to provide answers for, and wants to work with you in partnership to close this gap and solve this issue and ultimately repay the city what we owe you.”

He added that “not one of those tax dollars is going to operations; it’s all been dedicated to debt service. The operation itself has been solvent all those many years and we’re very proud of that.”

The ECA serves 70,000 people annually with its programming — which ranges from main stage presentations featuring well-known performers to family-friendly events and community outreach. In addition to providing cultural value to the community, it also has a significant economic impact as “all events put people out in the community spending money,” McIlawain said.

“As the operation continues to grow and thrive, we recognize again that it’s our duty to figure out what to do about the debt service issue,” he added. “Thank you for your patience with that over these many years, and thank you for your support.”

— By Teresa Wippel