Funding arts and culture: ArtsWave, Cincinnati

I also wrote a fair bit in my comments on the draft DC Cultural Plan on funding.  The plan makes some very wrongheaded recommendations that loans could fund the arts (see response below).  Although they don't describe accurately that they are recommending loans.

In my comments, I discussed arts and parks related tax assessments like Pittsburgh-Allegheny County's Regional Asset District, cigarette taxes in Cleveland-Cuyahoga County (I am not a fan), the Scientific and Cultural Facilities District in Greater Denver, Salt Lake County's ZAP (Zoo, Arts, Parks), and multi-county programs in Greater Detroit.

A couple months ago that I learned about ArtsWave in Greater Cincinnati.  The organization's primary program is an annual community fundraising campaign for arts and culture, functioning something like a "United Way" program for the arts. 

Formerly called the "Fine Arts Fund," it was founded in 1949.

It'd be easier to do a nonprofit initiative in Greater DC than to try to do a three jurisdiction property or sales tax program for the arts. 

An ArtsWave type initiative needs to be bigger than Washington, DC only in order to have heft since many of the region's wealthiest live in the suburbs ("Glenstone begins taking reservations for fall," Washington Post).  But that would build into the program from the start tensions between the jurisdictions.

Then again, the Denver program is cross jurisdictional, covering 7 counties, and it does skew heavily towards the funding of major institutions, which in the DC area are mostly federal.

"ArtsWave’s funding model is based on achieving five key goals in their Blueprint for Collective Action in the Arts Sector, which affirms that the arts can put Cincinnati on the map, deepen roots in the region, bridge cultural divides, enliven neighborhoods, and fuel creativity and learning. These key values guide every action ArtsWave takes and every grant they award."

From the Cincinnati Business Journal article "ArtsWave closes 2018 annual campaign":

ArtsWave has raised more than $12 million to support Greater Cincinnati arts organizations for the fifth year in a row.

The 2018 community campaign, which began in February, raised $12.2 million for the region’s arts in addition to $300,000 to be used for regional arts marketing. The combined total propelled the organization past its goal of $12.25 million.

The annual ArtsWave campaign remains the largest of its kind in the country both in total contributions and number of donors. This year’s campaign was focused on growing gifts from individuals and leveraging innovation with the addition of new donor benefits, a new event series and more. ...

ArtsWave, which supports about 125 partner organizations, is the nation’s oldest and largest public arts fund.

Note though that DC does provide a fair amount of funding to the arts.  It's just not an open, transparent, and fair process.  The draft plan did not discuss and evaluate this in any depth.

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From my comments on the draft DC Cultural Plan:

The plan inadequately assesses the funding landscape, which is quite limited compared to other cities, because DC does not have a deep base of wealthy philanthropists and foundations because it never had the great industrial-based wealth that tends to generate such actors (e.g., the Abell Foundation which had been associated with the Baltimore Sun newspaper or the Pew Charitable Trusts in Philadelphia using wealth which derived from financial interests in the Sun Oil Company).

Local magnates tend to be focused on high profile projects involving national institutions... Others create their own institutions outside the city, ... Or they put their money in other cities where they can have a higher profile.

Instead the plan outlines opportunities for social impact investing, program related investment by foundations (although DC has a very limited base of foundations), and public private partnerships.

But because cultural endeavors are not significantly profitable nor do they generate significant revenue streams, these options are unlikely to generate significant funds for portfolio property investment in arts and cultural institutions.

Rather than assert as the Plan document does that new models can somehow be uniquely created in DC, it would be helpful to have been provided successful examples of such funding elsewhere so as to be able to adequately evaluate the suggestions.

Program related investment is a very specific type of foundation support that is defined as “investments made by foundations to support charitable activities that involve the potential return of capital within an established time frame.” In short, program related investments are loans. Arts organizations don’t usually generate significant “profits”, that is net income after expenses are paid out of revenues. Therefore, they are unlikely to be able to pay back such loans.

Recommending that arts organizations take on the equivalent of loans, from an asset and risk management standpoint, borders on the outrageous.

There are many examples of how this path has led to organizational failure, both locally (e.g., the City Museum; the Armenian Genocide Museum of America) and nationally. Similarly, arts organizations created with the comparable expectation that they will be “profitable,” like Artisphere in Arlington County, have also failed, because created on the basis of an unrealistic business model, they were set up to fail, not to succeed, and they did in fact fail.

As mentioned above, Signature Theatre was unable to pay back loans to Arlington County, which ended up writing off some debt and refinancing it.

Social impact financing (bonds) involves monetizable revenue streams with the potential for extranormal returns and for financial savings compared to current program expenditures. While the use of social impact bond financing is still very new, it doesn’t lend itself to funding the arts which very rarely has the ability to generate extra-normally positive cash flow or cost reductions in programs.

The examples I am familiar with, such as Salt Lake County’s funding of early childhood education, tend to involve social programs expected to reduce government expenditures over time if successful, but the government lacks the money and/or appetite for risk necessary to finance the program through on its own.

Public private partnerships, the way that they are typically referred in reality, are financing deals. Again, without significant revenue streams such as tuition revenue at a charter school, it seems unlikely that PPPs can generate significant funds for buying, holding and operating cultural space for traditional arts and cultural activities.

On page 46 the document states:

higher property values have been leveraged to create more affordable housing, public benefits and public-private-partnerships that support culture.

It would be useful to have been provided a rigorous evaluation of this claim. The reality is that the actual monetizable impact of community benefits and public private partnerships on the development of significant and permanent cultural facilities space is limited, and the impact can often be marginal because too often the spaces are small, poorly located, not integrated into the broader cultural ecosystem, and/or poorly marketed.

An example would be the previously discussed Brookland Arts Walk and Edgewood Arts Center. The Arts Walk spaces are retail spaces primarily and they are an innovative use of what may have otherwise been marginal retail space.

However, there is not a multi-decade commitment to keep the rents low, which are currently around $15/s.f. (Note there has been a fair amount of turnover of the spaces, although this isn’t necessary a bad thing.) The Edgewood Arts Center space created as part of this project too is very small. Elsewhere, the Washington Project of the Arts has a miniscule space, about 1,500 s.f. in the Atlantic Building, a condominium in the U Street neighborhood.

...

No exploration of other funding systems. While unlike most cities DC almost fully controls its tax revenue streams, including residential income taxes, it still would have been interesting to explore how other communities fund cultural programs and facilities to see if other methods offer some benefit to conceptualizing how DC could improve its own system for funding cultural activities.

Examples include the Regional Asset District in Allegheny County, Pennsylvania; the Scientific and Cultural Facilities Fund in Metropolitan Denver; parks districts and multi-county assessments such as for the Detroit Institute of Arts, the Huron-Clinton Metropolitan Parks Authority in Michigan; the Chicago Parks District; the Hamilton County Parks District in Ohio; and the “Zoo, Arts, and Parks” sales tax in Salt Lake County, Utah.

A more rigorous codification of examples should be developed and included in the plan.