Artistic highs and financial lows – How Nevada City’s successful Foothill Theatre Company lost its fiscal footing
The world premiere of the play “When It Goes Haywire” became an apt metaphor for the fiscal problems encountered last year by the Foothill Theatre Company.
The play by Red Shuttleworth didn’t do well at the box office when it opened last April at the Nevada Theatre, contributing to a $140,000 deficit for the acting troupe and the ouster of longtime artistic director Philip Sneed.
Sneed, who built the community theater into a respected regional company during his 12-year reign, was held accountable for an accumulated deficit approaching $230,000 by a board of directors largely recruited by him.
While he concedes to making his share of errors, Sneed insists that many of company’s money problems were due to factors beyond his control and a management structure not suitable for a million-dollar business.
Present and former members of the board of directors admit the theater company has suffered from weak or indifferent leadership by a board that has experienced a turnover of almost 100 percent in the last two years.
The recent change in the company’s management structure – which now has separate positions for business and artistic affairs instead of one person performing both – is a move that should have been made four or five years ago, said one current member of the board of directors.
Meanwhile, the company has tightened financial controls, trimmed expenses, and emphasized box office appeal in its programming in a effort to retire most of its debt over the next three years.
Current board members – most have been on the panel less than a year – express confidence in the basic strength of the company and are optimistic about it future.
“The company as a whole is strong,” said Nancy Hoagland, one of the few board members present for the changes that occurred during the past two years.
“The public sees the artistic director, but there are a lot of people in the background who make it happen,” she said. “They are still energetic and committed.”
Despite its financial difficulties, the nonprofit professional company has seen ticket subscriptions to its plays grow an average of 8 percent a year over the last four years.
Attendance at Foothill Theatre productions has increased four fold over the past 12 years, from 17,000 to approximately 70,000. The staff has grown from four to 12, and the budget has increased from $280,000 to almost $1 million in the same period.
Much of that growth can be attributed to the work of Sneed, who has been involved in more than 50 productions during his tenure while running the company’s affairs.
But Sneed has also been blamed for problems that have resulted from that growth.
A swelling deficit
He was with the company four years before he was asked to take on Foothill Theatre’s business responsibilities in 1997, an arrangement that is common in small artistic companies.
Sneed said he inherited a debt of $28,000 that was retired in two years, and that the company stayed on budget through 2004. (Foothill uses a calendar fiscal year.)
According to figures supplied by Sneed, the company spent a total of $4,605,216 from 1999 through 2004 – $45,815, or 1 percent, over budget.
But revenue hasn’t met projects in the last two years, leading to a $45,000 operating deficit in 2003 that ballooned to $140,000 in 2004.
Sneed said ticket sales were lower than projected in 2003, which in turn impacted advertising, concession sales, and other earnings. Foothill gets 85 percent of its revenue from ticket sales, and most are single-ticket sales.
With the national economy still in the doldrums, 2003 was not a good year for theater companies. An annual audit conducted by Theatre Communications Group of New York City, “Theatre Facts 2003,” showed that 58 percent of nonprofit theater companies ended the year with a deficit, a 30 percent increase from 2000.
The shortfall in earned income increased into the $80,000-to-$90,000 range in 2004. Ticket sales for “When it Goes Haywire” were disappointing and “Fully Committed,” the company’s summer comedy “which had done well in about every other market in the country, came in about $35,000 short,” Sneed said.
“It’s notoriously difficult to predict which plays are really going to bring the people in,” said Michael Brook, president of the board from 1998 to 2002. “You can plan very conservatively and still end up with a deficit on the year, or get lucky and do pretty well with plays you thought wouldn’t necessarily get the public in.”
Then there were the expense overruns, which Sneed estimated at $20,000 to $30,000. (Sneed said he hasn’t seen the final audited numbers for 2004.)
“We’re 60 to 65 percent labor, and costs are high for specialty skills,” he said. “You can try to get someone for a certain amount, but if you can’t find them, you have to pay more.”
Sneed attributed another $30,000 to $40,000 of the deficit to accounting changes mandated by the current board.
County schools superintendent Terry McAteer, who joined the board last year and is serving as the company’s treasurer, said the accounting changes are long overdue.
“They had horrendous accounting procedures,” he said. “They were actually trying to do accrual and cash accounting simultaneously. … They were using next year’s dollars to pay last year’s bills.”
(Under the accrual method, income is counted when the sale occurs, and expenses are counted when the goods or services are received. Under the cash method, income isn’t counted until money is received, and expenses aren’t counted until actually paid.)
McAteer said that when he joined the board a year ago, “I didn’t know the severity of the problem.” It took him a while to figure it out.
He said the main problem facing the company was that “the artistic group was also conducting the business. … Problems occur when your passion is not to do business.”
McAteer believes the new management structure created by the board should have been introduced four or five years ago. “When you’re running a million-dollar operation, you can’t run it like a mom-and-pop shop,” he said.
Sneed a scapegoat?
“I think the move to a structure with an executive director was a very good move,” said Alison Jones-Pomato, who resigned in December as president of the board. “We’re too big a company to have just one person who is responsible for both the art and the business.”
Jones-Pomato served two stints on the board for a total of 121Ú2 years, most recently from 1998 to December. When she rejoined the board in ’98, she said, “The board was somewhat in disarray. The members they had, with a couple of notable exceptions, weren’t active.
“The staff was quite happy with that situation. It gave them pretty much free rein to run the company.”
Sneed said he told the board more than once that the company needed an executive director to handle business affairs, but that it could never find the money to hire one.
“I feel that my reputation as a fiscal manager has been somewhat maligned, and I need to set the record straight,” he said. “Frankly, I think that when you have a bad year … a scapegoat is needed, and I became it.”
Coming Tuesday: How the Foothill Theatre Company plans to turn its fortunes around and become both popular and financially stable.
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