City administrators have drawn up a new deal with Carolina Theatre of Durham Inc., extending over 11 fiscal years and including some clauses that were not part of the agreement it replaces.
Among them are specific “performance measures” with city review twice a year and a provision to increase or decrease the city’s base-rate funding of $635,000 per year, “based on performance and based on any city financial conditions that would necessitate downward adjustment,” said City Manager Tom Bonfield.
“We’re extremely pleased,” said Carolina CEO Bob Nocek. The proposed contract resulted from “well over a year” of negotiations between the city and the Carolina management, he added.
Bonfield called the proposed agreement ( bit.ly/1mLMAEG) a “prudent and good arrangement for the city.” City Council members have it on their Thursday work session agenda, and, barring council objections, the agreement would come up for formal approval at their regular meeting April 21.
The nonprofit Carolina Theatre of Durham Inc. has been operating the city-owned theater under a one-year contract extension, since its previous, five-year management agreement expired in 2013. The proposed contract would begin as soon as it is signed and run through December 31, 2024, with options for two five-year extensions.
During the old contract period, the Carolina had several years of operating deficits but finished the 2012-13 with a surplus, and Nocek said current revenue is “tracking ahead of last year.”
The longer-term agreement, he said, is a sign of the city’s confidence in the theater.
“They understand what we’re doing,” he said. “They believe in it.”
The Carolina has an annual budget of about $3.5 million and currently, the city pays the Carolina Theatre of Durham Inc. $614,520 per year to operate and maintain the theater. The old contract provided a 3 percent annual increase in city funding, “every year, no matter what,” Bonfield said, and “previously they had no performance measures.”
The new agreement includes criteria for gauging how well the theater management is doing, according to a memo from city General Services Director Joel Reitzer, Carolina Theatre of Durham developed and the city has accepted.
For example:• percentage of profitable shows
• increases in earned revenue
• deficit reductions
Under the new agreement, the city has an option to make a “fee adjustment” of 2.5 percent to 3 percent each year, up or down, according to performance and the city’s financial circumstances at the time.
“We understand the city’s budget restraints,” Nocek said. “Our long-term goal would be to become less reliant on the city ... to be self-sufficient.”
The city also has an option to reduce its payment if it secures funding for the Carolina from some third source, which might be such as a grant or another unit of government, Bonfield said.
“It’s not a specific plan of action,” he said. “We just felt like ... if we’re making a commitment about subsidizing the operation of the theater, which we are – I would say there are some services provided in return – we wanted to be able to take credit for that, not just have that be always additive.
“As we’re looking at these agreements, which have the opportunity to be very long term,” Bonfield said, “we’re just trying to build in the What ifs? and What might happens? in the future.”