News

Jun 05, 2023

The City signs up to increase Overture Center's subsidy to $2.3 million, with a catch

The City of Madison and the Overture Center for the Arts will enter into a new

The City of Madison and the Overture Center for the Arts will enter into a new 10-year "structural agreement" on January 1, 2023, that sets expectations for the relationship between the City and the venue. Madison's Common Council approved the agreement during its December 6, 2022 meeting without discussion. If the City keeps to the terms of the agreement in future budget cycles, its annual subsidy for Overture will increase to $2.3 million, starting in 2024.

Overture's subsidy is already the single largest allocation for any arts-related organization or program in Madison's City budget, and has been for many years running—no other individual artist or arts organization gets anywhere near that much unless you count the Madison Public Library, which is a City agency. This one funding item often accounts for more than half of the money the City devotes to the arts in its annual budget. City and county funding for other arts-related grants and programs is minuscule by comparison. Artists of all stripes in the area often struggle to find enough income or opportunities, and Wisconsin is almost dead last in the country in terms of per-capita state spending on the arts.

Leadership at Overture have argued that the City subsidy helps Overture provide educational programs and offer free or low-cost tickets to more community members who otherwise have trouble affording access to the arts. They’ve also pointed out that it helps with other capital and operating expenses, which can make it hard to pin down exactly what the money is for and what kinds of results Overture is obligated to demonstrate to the City. Overture has a significant economic impact, so the City has an obvious interest in keeping it financially stable. If the venue failed, a massive piece of downtown real estate would become vacant, with devastating impacts on property values and the surrounding businesses.

This funding item is also one of very few arts items where the City directs funding to a specific arts organization, right in the budget. When the City allocates (much less) money for Madison Arts Commissions grants, for instance, the budget sets that aside in a fund; and then individual artists and arts organizations have to apply for it. They have to meet certain criteria to qualify for funding, and have to follow restrictions on how they use any grant money they receive. Overture doesn't have to compete in the same way, and has more flexibility in how it uses City money.

When it opened in 2004, Overture was a City-operated venue. By 2010, Overture was facing a mounting financial crisis, and the City decided to transfer control over it to a private non-profit, while keeping some City funding and oversight in the mix. The oversight part includes Overture's pledge to open its board meetings to the public, build up reserve funds, maintain a Community Advisory Council, and report back to the City on its programming and finances.

This history puts Overture in a position no other local arts organization enjoys when it comes to getting City funds. And even with the new agreement in place, it's far from clear what either side is getting.

The venue's relationship with the City has gone through numerous twists and turns since 2004. Initially, the Madison Cultural Arts District, as a City agency, operated Overture. The Great Recession and burdensome debt from construction of the building combined to put Overture into a financial bind by 2008. (And even before all that, former Overture President Bob D’Angelo resigned in 2005 amid a sexual-harassment investigation, and eventually ended up in federal prison on corruption charges.)

City officials considered different public and private models for settling Overture's debt and revamping its governance structure. The Common Council voted in 2010 to transfer control of Overture to a private non-profit while continuing to provide a City subsidy. The Overture Center Foundation fully took over in 2012. Paul Soglin at times pushed for cuts to City funding for Overture during the first of his last two terms as Mayor, but eventually came around to a more supportive stance.

City funding has accounted for between 7 and 17 percent of Overture's annual budget in the years since 2011, Overture's annual reports show. The 17 percent figure is a bit of an outlier: That was in Overture's 2020-21 fiscal year, when the subsidy was reduced but other sources of revenue, including ticket sales, dropped off even more dramatically.

The City's already-adopted 2023 budget provides a $2,095,000 subsidy to Overture, so that will remain in place for the coming year. But going forward, there still isn't a guarantee that the subsidy will go up. The funding aspect of the agreement essentially has no legal force behind it. It's contingent, as the language of the document itself makes clear: "The City commits to an annual grant to OCF [Overture Center Foundation, the formal name of the non-profit that runs the venue] in an amount of Two Million Three Hundred Sixty-five Thousand and no/100 Dollars ($2,365,000.00) subject to annual appropriation by the City and subject to the Parties entering into an Annual Performance Contract." (In addition to these long-term agreements, the City and Overture also put together an annual contract to lay out funding specifics and expectations each year.)

"Subject to annual appropriation" is the operative phrase here. Unless the Common Council drastically changes the way it funds the arts like this, it won't actually hold the authority to make that annual appropriation. Most of the money the City spends on the arts comes from Madison's Room Tax Commission. Under state law, the Room Tax Commission has the ultimate say over how the City spends the money generated from taxes on hotel stays. The Room Tax Commission submits an annual budget to the Common Council as part of the overall City budget, and Alders can certainly challenge or question it if they wish. But Room Tax budgets are up to the commission, with or without Common Council approval.

That said, the $2.3 million figure in the new agreement at the very least signals that Room Tax is willing to seriously consider bumping up Overture's funding come 2024, especially if room-tax revenues come back to pre-pandemic levels.

Overture's previous long-term structural agreement with the City, adopted in 2010, helps to illustrate the tentative nature of the new agreement's funding language. (Various disruptions, including the pandemic, the 2019 death of Overture CEO Sandra Gajic, and ensuing changes to Overture's leadership structure, delayed the work on the latest structural agreement.) The old agreement calls for an annual $2 million City grant to Overture, and uses the same "subject to annual appropriation" language. The Room Tax Commission's actual funding for Overture has only met that threshold in three of the past 12 years. In one of those years, 2020, the Room Tax Commission had to amend its budget mid-year as Covid caused room-tax revenues to plummet. The amendment reduced that year's Overture subsidy from $2,095,000 to $1.2 million. In other years in the past decade, the subsidy has ranged between $1.5 million and $1.9 million.

Overture has not forgotten about the gap. A 2021 financial report Overture provided to the City noted: "The cumulative difference between grants OCF has received from the City of Madison since entering into the structural agreement and the grants that were to be received per the terms of the agreement is $4,406,000, including ERP."

City officials and Overture leadership alike have created some confusion about what the subsidy is actually for and how Overture should account for it. Is it meant to support specific programs, and does it obligate Overture to spend the City's money on those programs in particular? Or, given the City's history with the venue and the impact it has on the local economy, is it meant to ensure the long-term financial health of Overture?

During some City budget cycles over the years, Overture leadership has justified the subsidy by arguing that it supports educational programs and enables the venue to give out thousands of free or low-cost tickets each year; and thus, it makes Overture more accessible to kids, low-income residents, and marginalized communities in general. Overture's long-term and annual agreements do require Overture to have this programming and report back on it. Overture has sent the City a lot of documentation over the years that it clearly spends well more than its City subsidy on community programming, plus detailed financial audits.

At the same time, the lines between that programming and the City funds are fuzzy.

Back in 2012, when Mayor Paul Soglin and the Common Council were debating a $1 million cut in Overture's subsidy, Overture responded by threatening that it might have to cut those programs. "When you are looking at the loss of $1 million in revenue, the first places you look to cut are the places that don’'t produce revenue," then-Overture spokesperson Rob Chappell told the Wisconsin State Journal at the time.

A year later, a Cap Times story touched on that programming, too, but still painted a more general picture of how Overture uses the subsidy: "According to Chappell, City money to Overture goes toward operations and maintenance, including staff salaries, utilities, overhead and artist’'s fees, as well as low-cost and free community programs. Overture is also putting money into reserves, a savings fund requested by the City that needs to reach $5 million by 2017." (Chappell is now the executive editor at Madison365.)

Emily Gruenewald, Overture's Chief Development and Communications Officer, told Tone Madison this week that "the purpose of the grant remains explicitly for operations and capital expenses." When I asked Gruenewald for examples of Overture's documents breaking down its use of City funds, Gruenewald offered some broad figures: "Since the [2010] Structural Agreement was established the City has provided Overture with $18.8M through the grants. $8.5M has been spent on capital expenditures and $10.3M on operations. This is communicated to the Room Tax Commission in our annual presentation and reporting."

In response to an emailed question asking for a breakdown of how much of the City money has gone toward various programs, Gruenewald says: "The grant is for general operations and capital expenses per the structural agreement; therefore, it changes every year to address the most critical needs. Sometimes the grant has been used to support program funding gaps; however, the majority is used for general operations and, more recently, for capital investments as the building ages and technology upgrades that are necessary to support all of the performances, events and programs that take place in the center."

Asked about previous statements connecting the subsidy to community programming, Gruenewald emphasized that Overture's revenue picture and expenses have changed a great deal over the past decade. "The [Wisconsin State Journal] article you reference is from 2012 and over the past decade our funding model as an independent non-profit has grown through ticket sales, rentals, and contributions, which help to support programming," Gruenewald says. "As with any organization, there is a delicate balance between capital expense, operations, and programming. An unexpected capital expenditure or a projected budget deficit could impact the amount of free/low-cost programming Overture can do. As the building ages, it becomes even more important to have the ability to use these funds for capital improvements."

But Overture has explicitly tied City funding to community programming much more recently than 2012. In August 2022, Overture Chief Financial Officer Chris Vogel gave a routine presentation to the Room Tax Commission. One of the presentation slides mentions the role of Room Tax allocations. The slide does mention maintenance, capital costs, and "investments needed to ensure Overture is a healthy indoor community gathering place." The final bullet point is "Support the return of free and low-cost community programming." Vogel's presentation from 2021 uses the same language.

The new agreement states that "the City Grant shall be used by OCF for operations and capital expenses." That language matches up with Gruenewald's characterization of the agreement. It also encompasses just about anything and everything an organization could spend money on. Similarly, the 2022 annual performance contract states: "The City’'s grant shall be used solely for the operations and capital expenditures of Overture Center." A draft contract for 2023 uses the same phrase.

The requirement that Overture still offer this programming remains in place: "OCF shall continue its commitment to arts, educational and community programming, including free or reduced cost programs and outreach, and include measurable objectives for meeting its goals," the new structural agreement states. It does not go on to define in any specific way what the scope of that programming should be, how much Overture should spend on it, what percentage of the City funds should be earmarked for it as opposed to other capital and operating expenses. Nowhere in the documents Tone Madison reviewed for this story are any such parameters set.

The City requires Overture to offer these programs, and Overture emphasizes those programs to make its case to the public that it should keep getting City funds. But the City does not require Overture to spend City funds on those programs.

In 2022, Overture received $1.6 million from the City. Would you like a breakdown of how that got used, drawing a one-to-one line between the subsidy and specific expenses? As in, "We spent $500,00 of this on educational programs, $200,000 on providing free tickets, $300,000 toward capital costs," and so on? Overture and City officials don't seem to be on the same page about whether that reporting exists.

Language in some of the agreements, including the draft annual agreement for 2023, calls for Overture to provide "segregated accounting to keep track of any amounts received from the City, shall keep a record of where those amounts are spent, and shall provide information to the City demonstrating that the City grant was used for operations and capital expenses as required by the Structural Agreement."

Overture has provided the City with a great deal of financial information over the years. There's a dump of 55 Overture-related documents in Legistar (the system the City uses to track meetings and related documents), which include some budget breakdowns of community/educational programs, lengthy audit reports, and annual reports. This wealth of information demonstrates good faith on Overture's part. Still, dialing in on the specifics of how Overture divides up the City subsidy money among different expenses is next to impossible in these documents. Is that information out there somewhere?

"Overture provides audited financial statements, annual community impact reports, progress on building cash reserves and a capital endowment, a breakdown of how the funds were spent and general organization information, such as the current strategic, marketing and fundraising plans, subsidies to local arts groups and program service numbers," Gruenewald says.

Asked whether Overture gives the City a one-to-one breakdown of how it spends its annual subsidy, Gruenewald initially replied, "Yes, we provide them that detail." Later in our exchange, the answer became more confusing: "While we maintain that level of detail, we have not been asked to provide a breakdown in our annual reporting to the City of Madison," Gruenewald wrote in an email. "This level of detail has not been made available to the public, however, our Annual Report, which is available on our website, includes comprehensive financial reporting. Our audited financial statements are also available on our website."

Vogel, Overture's CFO, followed up to clarify: "This breakdown that Emily provided earlier (since the Structural Agreement was established the city has provided Overture with $18.8M through the grants. $8.5M has been spent on capital expenditures and $10.3M on operations) is the level of breakdown that we have provided the City in our annual reporting. We have not been asked to provide further details. It also should be noted that we actually provide this on an annual basis for each annual grant, not just in the aggregate as we have presented here. As Emily also previously mentioned, we also provide additional reporting including on how our Educational and Community programs are funded. From our understanding, the totality of the reporting that we provide has satisfied the reporting requirements in our structural agreement."

Vogel also sent Tone Madison the foundation's latest audited financial statements; you can also find these for previous years at the Legistar link a few paragraphs above. There's a lot of detail here, but it's not really meant to provide the breakdown we’re looking for. I asked to make sure! "No, our audited financial statements do not provide that level of detail," Vogel says.

If Overture does provide a detailed breakdown to the City, this might be news to members of the Madison Arts Commission and the City's one full-time arts official, Arts Administrator Karin Wolf. "I don’'t recall receiving the segregated accounting," Wolf says. Wolf says Commission members have long pushed for more clarity about how exactly Overture uses its subsidy.

"As the body in the City, who is charged with evaluating the performance of arts contracts for the city, members of the Madison Arts Commission have repeatedly expressed frustration that they don't understand the whole picture of how City funding is being spent at Overture and who it is serving," Wolf says. "They have tried to set up better evaluation metrics with Overture for years. […] those attempts haven't been very successful."

(During our email exchange, Gruenewald also claimed that, since Room Tax dollars have provided the subsidy since 2017, "Overture no longer receives funding from taxpayers." This is an inexplicable statement. The people paying room taxes may not be Madison residents by and large, but they are still taxpayers, and Room Tax revenues are still public funds for public use.)

Gruenwald acknowledges the frustrations of MAC members. "The Annual Performance Contract reporting requirements have not changed since the original structural agreement was signed, which Overture has used as the template in reporting to MAC," she says. "It has come to our attention through discussions with MAC about the structural agreement that the previous reporting requirements didn’'t reflect the information the commission felt was important and we will be working with Karin Wolf and MAC starting in January 2023 to discuss an updated reporting template."

The City may have some additional leverage to push for more detailed numbers. The new structural agreement and the draft 2023 annual contract show that some of the specific reporting requirements will be spelled out on an annual, not once-a-decade, basis. That means that when it comes time to set a new annual contract, City officials who aren't happy with the reporting Overture has provided can theoretically take that opportunity to push for more.

If the search for a more specific, one-to-one breakdown of where the City funds go seems like splitting hairs, consider what the City asks of people who apply for a grant of up to $3,000 from the Madison Arts Commission (MAC). The level of accountability suddenly takes on an inverse relationship to the amount of money.

Right from the start, the requirements for what people can and cannot do with small MAC grants are far more hard-and-fast than the contractual requirements for Overture's use of its subsidy. "Grants may be used for artists’’ fees, legally required royalties, production expenses, space rental, marketing costs, purchase of expendable materials, required insurance, etc.," states MAC's application form. "MAC grants cannot be used to fund prizes or awards, grantee’'s tuition, purposes other than outlined in the grant, permanent equipment, travel outside the City of Madison, refreshments or debts incurred for past activities." (Bold theirs.)

Like a lot of grants, MAC grants require applicants to pitch a specific project, and aren't meant to be used for existing operating expenses outside of that. Applicants have to break down their proposed project budget by expense category and detail additional funding sources. MAC guidelines lay out some detailed scoring criteria for applications. People who receive grants need to provide a final report when their project is over, once again breaking down funding sources and detailing not just how final expenses shook out, but specifically how much of the City grant money they spent on the various expense categories.

In all fairness, a single art project and an entire large non-profit are very different things. Any non-profit, including Overture, does have to provide some publicly available documentation of its activities—like 990s (legally required) and annual reports (pretty standard for any large, public-facing org)—and bring in outside accountants for regular, detailed audits. Point is, an individual artist needs to draw that one-to-one connection between the City funds they receive and how they spend them.

The Madison Arts Commission and the City's Finance Committee actually discussed the agreement in a handful of open meetings this fall. But, as so often happens with arts funding items in Madison, there was little participation from actual members of the public. MAC can make recommendations to the Common Council, and has the power to dole out those grants everyone else has to compete for, but it doesn't have any policy-making power.

Wolf says City staff met with Overture's resident companies board and surveyed members of Overture's community advisory committee while working on the new structural agreement. MAC discussed the agreement in its September and November meetings, and MAC's grants subcommittee also discussed it in November. Then, MAC referred it to the Council, which followed a routine process by referring it to the Finance Committee, who also discussed it and passed it back up to Council.

"Any time members of the community have questions or want to express themselves about how they feel arts funding should be allocated, they should feel free to reach out," Wolf says. "They can email Arts Program Staff at [email protected] or attend any public meeting of MAC, Room Tax, or the Common Council and speak to items posted on the agenda."

So, it's not that people involved don't welcome public engagement. It's just that the City's usual processes are difficult to navigate in a way that can discourage participation. And arts items are often treated as low-priority as City officials balance a host of other policy issues.

During the Common Council meeting and Finance Committee meeting at which the agreement was discussed, District 4 Alder Mike Verveer did not disclose that he is a member of Overture's board. Under the terms of Overture's agreement with the City, the Mayor gets to appoint at least three of Overture's board members, so Verveer is one of those. This gives the City some oversight of Overture, but also creates a potential conflict of interest. I asked City Attorney Mike Haas whether it was a problem for Verveer not to disclose this, during the routine part of City meetings where people are asked to. "It is not because he is [a] City appointee to the Board and those appointments do not create the same ethics concerns," Haas says. Verveer did not respond to a request for comment.

When the agreement reached the Common Council—the body with the actual power to approve it or not—it was lumped into Council's "consent agenda." That's a parliamentary tool that allows the Council to roll up a bunch of items together and pass them all with relative speed. Consent agendas are meant to give governing bodies a quick way to dispense with business that is routine or doesn't require debate. That's why the full Council didn't actually have a discussion about the agreement before signing off on it.

This stretches the definition of "routine." While the new agreement doesn't dramatically change the terms of Overture's relationship with the City, the context has changed a great deal.

When the City and Overture signed the first structural agreement in 2010, Overture was transitioning from City to private ownership and digging its way out of a deep financial hole. Since then, Overture has stepped up its fundraising and built up a strong revenue stream from ticket sales. Today, the organization is a decade into being fully owned and operated by a private non-profit. That initial crisis is well behind it. Like any arts organization it took a severe blow during the pandemic, but also received millions of dollars in federal COVID-19 relief funds, including $10 million from the Shuttered Venue Operators Grant program. All in all, this is good news—the City wanted a stable, solvent Overture Center, and got it. Maybe someday the level of public conversation and engagement around the City's agreements with Overture will catch up with that success.