Gold Coast City Council report shows HOTA almost $1m behind on forecast revenue earnings
A probe into HOTA and how to manage it is being kept secret as reports show the cultural precinct is falling well short of predicted revenue earnings. DETAILS INSIDE
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An investigation into HOTA and how to manage it is being kept secret as financial reports show the cultural precinct is almost $1 million behind on forecast revenue earnings.
The initial findings of Sharpe Advisory consultancy into the operation of the $37m ratepayer asset are not being released.
The Gold Coast City Council has made public only some of the comments from a confidential officer’s report discussed in closed session by councillors last month.
However, the attachments, including the consultancy report, remain redacted in full.
A financial performance summary shows a net profit of $1.597m for the budgeted forecast of $2.573m for the six months ending last December.
Four reasons were listed for the poorer revenue result.
However, those were also blacked out.
“The reduction in revenue against budget and additional employee costs have been partially offset by savings in other expenditure,” the report says.
The savings have occurred in part due to changes in programming and exhibitions caused by Covid cancellations. Gallery visits and the cinema were “performing slightly under”.
HOTA was closed for 10 days in August last year due to a Covid lockdown.
However, the publicity continued to have a negative impact for much longer.
HOTA’s biannual report, included in the latest reporting, read: “Across the cinema and gallery program, it took six weeks for visitation to recover to pre-lockdown levels and this has subsequent revenue impacts across the HOTA cafe.”
The financial outlook is improving with high ticket sales for Sleeping Beauty and Ocean Alley leading to the best box-office returns for February this year in five years. It was predicted April would be another bumper month.
Consultants found the task “proved complex” because “HOTA is yet to experience a normal year of operations”.
Councillors concerned about ratepayer money had earlier resolved to have a review of HOTA’s food and beverage operating model by March next year, and to engage a consultant to develop a three-year plan.
The council is providing $17.9m for 2021-22.
An earlier Bulletin report detailed major infrastructure upgrades creating a $29m hole in the city’s budget to fix the precinct’s ageing central arts building.
A building condition analysis report showing repairs being needed to the 36-year-old theatre explains why the council was lobbying federal and state governments to fund a $295m refurbishment to create new theatres.
Councillors are unable to comment because the discussions were held in closed session and “on budgetary matters”. But they believe the reports may be made public post-budget.
Eye-watering financial cost of HOTA
February 2: Ratepayers will pay $15.07 million and another $5.5m from the sale of council assets to operate the new Home of the Arts this financial year.
HOTA’s $20m operating budget is forecast to balloon to $32m next financial year.
The costings show the cultural precinct is more expensive to run than Destination Gold Coast, the Gold Coast Turf Club or what will be required to start Brisbane’s next National Rugby League team.
A council spokesperson confirmed on Friday that “HOTA received a $15.07m operating grant subsidy from council in 2020-21 and its 2021-22 operating grant subsidy will be decided by the council as part of its budget deliberations in coming months.”
Financial projections tendered to council show HOTA expected to make a $5m profit this financial year. Its operating costs had been revised from $22m to $20m.
It has predicted a loss of $285,000 for the next financial year. Despite council yet to determine its contribution, HOTA has budgeted for grants of $16.2m to offset the projected $32m operational costs. Another $1.8m will come from the sale of City assets and $12.8m from the sale of goods.
In its latest biannual reporting to council, HOTA maintained it was “well positioned” to respond to operational disruptions created by COVID-19 but did not underplay the threats.
The report repeated the warning from Deloitte Access Economics that “the arts industry may not fully recover until 2026”.
“For HOTA this has a number of implications including access to touring product, exhibitions, national and international loans of artworks and major acts,” the HOTA report said.
“We may simply not be able to access content. There is also the likely impact on cultural tourism due to interstate and international travel restrictions.”
CEO Criena Gehrke said: “HOTA has always been committed to a balanced budget and delivering break-even or better results.
“Revenue through ticket sales particularly in Q1 and 2 of FY21 continued to be impacted by COVID. However, sponsorship, grants and bequests totalled $1.6m, indicating growing recognition of the importance and success of the HOTA precinct.”
The $60.5 million public gallery, the largest outside a capital city in Australia covering six levels, opens on May 8 and is to feature the entire creation series of William Robinson, one of Australia’s great artists.
Council had been unable to source an operator for the ground floor-cafe and level-five rooftop area leading ratepayers to fund the fit-out, and officers at a council committee meeting were asked about future arrangements.
Councillors were told the plan was for council to be the operator for 12 months then “go to the market”.
Statements provided as part of its annual reporting by HOTA also confirm “assets transferred” of almost $8 million — some of these assets were considered land surplus to council’s needs.
A council report at a governance committee meeting shows councillors recently supported a recommendation to sell a 5188sq m block at Wintergreen Drive, Parkwood with the “proceeds of the sale transferred to the cultural precinct reserve”.
Council CEO Dale Dickson confirmed the sale of Wintergreen Drive land to fund HOTA, but rejected suggestions of an ongoing asset sale.
“No. The City has a funding plan for the staged development of the HOTA precinct and the sale of identified surplus land parcels has formed part of that funding plan for over a decade. The funding plan does not relate to HOTA operations but rather capital works including the new art gallery,” he said.
Ms Gehrke said the revised FY21 council assets transferred was $5,523,504.
“This amount includes approximately $3.1m for fixtures, fitting and equipment for the HOTA gallery which would be in line with any new facility,” she said.
“The remaining amount of $1.9m is the value that was reprovisioned from 2020 for capital projects placed on hold across HOTA due to COVID-19.
“The revised GCCC assets transferred estimate for FY22 is in progress in preparation for the City’s budget review process.”
Asked whether HOTA would run at a loss during COVID or could be profitable, Ms Gehrke was bullish about its prospects.
“HOTA, Home of the Arts continues to deliver to the budget provided by the City of Gold Coast, even under the challenging operating conditions caused by COVID,” she said.
“HOTA continues to run financial scenarios to adapt their operation in an uncertain COVID landscape and in this financial year are tracking to budget.
“HOTA’s next biannual report, due to the City soon, will show that from July-December 2020 HOTA remained a vibrant and busy precinct, welcoming more than 160,000 visitors to more than 140 events.”
Across six days in January, more than 13,000 people attended a three-day ice cream and circus festival, cinema screenings and sell-out shows from comedy supremo Carl Barron.
“During this period they also employed 248 artists and supported 42 local artists to create new works and contributed more than $2.1 million to the local economy, “ Ms Gehrke said.
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