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County re-crunches museum numbers

Earlier this month, Peoria County administrators crunched the pro forma numbers submitted by the Museum Collaboration Group and found that it was a money-losing proposition. The museum folks objected to that analysis, saying it wasn’t accurate. They got together with the County and re-crunched the numbers, and now the County shows the museum will make a tidy profit.

Erik Bush, the County’s Chief Financial Officer explains what changed:

The first analysis actually showed a dire projection. When discussing the revenues with PRM staff, it became clear that in developing their background materials, PRM had established discounts on their revenue projections, from which I assumed as 100% projections. In reality, these numbers were in some cases 70% of their true projections. In tum, I was discounting discounted figures. A line by line narrative of these changes may be found at the end of this memorandum.

I asked PRM to provide me with the 100% revenue estimates and proceeded to run the second iteration.

The results are summarized as follows:

a. Based on the PRM’s assumptions, their projections could be off up to 9% and still operate in the black over a 20-year period.

b. In using their 100% revenue projections it appears revenues annually meet or exceed 100% of expense projections. The margin of actual to budget has historically been 1-2%; therefore, I find a 9% cushion to a structural deficit reasonable.

c. A key item missing from their pro-forma is the cost of future capital investment. A common benchmark for capital investment is 10%. Based on an expected expense base of slightly more than $4 million, it can be reasonably expected the museum is not showing close to $400,000 in potential annual future costs to properly maintain its assets. This figure is a benchmark and can be driven by annual needs.

d. In the 100% scenario, roughly $100k of the endowment will be necessary to cover the cost of capital investment and break even annually. In the 95% scenario, an endowment ofroughly eight million dollars would be needed to generate the necessary interest (assuming 4% annual return, compounded monthly) to cover the annual cost of capital investment, combined with the projected excess of revenues over expenditures.

The changes are all well-argued, but I still have a problem with a couple of key assumptions:

  • Gallery admissions still based on projected 240,000 visitors per year. On their pro forma, the museum changed some parameters: they raised the average ticket price from $5.25 to $7.50, and they assumed 40% of the 240,000 visitors to the museum would buy a gallery admission, up from 33%. Those changes raised their projected revenue for gallery admissions from $420,000 to $718,000. However, if we use a more realistic estimate of 180,000 visitors per year, the revenue would be $540,000 — $178,000 less than the county/museum projection.
  • Planetarium tickets and attendance projected to go up. I’m stumped as to how the museum folks think they’re going to raise the admission price for the planetarium from $1.50 to $4.00 per student, yet end up having more students (19,000 vs. 16,000) visiting the planetarium, especially with schools in as bad of financial shape as they are these days. Nowhere do they explain how they came up with their number of students or how their number compares with historical attendance numbers. In my opinion, they have to assume at the very least that the number of students won’t increase. So take 16,000 students times $4 and you get $64,000, $12,000 less than the county/museum projection.

So, that’s a total difference of $190,000 from the proposed pro-forma, which would bring their projected revenues down to $4,298,000. That would still cover their projected expenses, but would only give them about a 4% cushion instead of 9%. Also, it would mean they’d have to use roughly $270,000 of their endowment for capital investment instead of $100,000. I don’t know how big of an endowment that would require, but to get $303,750 interest earned takes $6,750,000 of investable funds according to the previous pro-forma analysis available at the county’s website. Do they have that much in their endowment?

Here’s the other thing. The money raised by a county sales tax would have to go toward capital purchases, according to the statute:

For the purposes of this Section, “public facilities purposes” includes, but is not limited to, the acquisition, development, construction, reconstruction, rehabilitation, improvement, financing, architectural planning, and installation of capital facilities consisting of buildings, structures, and durable equipment and for the acquisition and improvement of real property and interest in real property required, or expected to be required, in connection with the public facilities, for use by the county for the furnishing of governmental services to its citizens, including but not limited to museums and nursing homes.

If the museum doesn’t meet their revenue projections, I think it’s logical to expect them to scrap the capital investment fund, especially since they didn’t have it in their pro forma in the first place. Without infusions of capital, the place will get out of date pretty fast, and then you know what will happen? They’ll be back asking the taxpayers for more county tax money under this statute for “durable equipment” and “improvement[s].” And then the taxpayers will really be over a barrel because the project at that point will be “too big to fail,” if you know what I mean.

I still believe that a more compact, urban design would be significantly less expensive to build while still being an attractive civic building, plus it would free up the rest of the block (outside of Caterpillar’s visitor center, of course) for private development (retail, residential components), which will bring in property and sales tax dollars to the city and county. Plus, it would be what the public said they wanted on that block, and what professional city planners over the past several decades have said is needed on that block. Why is this option not being pursued?

County board member Merle Widmer has written extensively on the topic of the museum. I encourage everyone who’s interested in this topic to take a look at his blog, Peoria Watch.

The county votes tonight (County Board Room 403, 6:00 p.m.) on whether to put a sales tax referendum on the April ballot. No other counties of which I’m aware are planning similar measures to support this “regional” museum.

25 comments to County re-crunches museum numbers

  • New Voice

    Merle has announced time and place for County meeting tonight, which “will feature Mr. Jim Richerson, CEO Lakeview Museum, Mr. Erik Bush, CFO Peoria County and Mr. Scott Sorrell, Assistant to the Administrator who will provide presentations on the Museum’s plans and the proposed financing efforts, both public and private.”

    Correct me if I am wrong, but hasn’t the PRM group had FAR more than enough time to make their sales pitch? What information will Richerson’s new ‘presentation’ impart that his old presentations did not?

    OH! I GET IT! TWEEKED UP NUMBERS!!!!!!!!!! Square peg…round hole?

    Hells Bells! If this thing is going to pull in that kind of ‘revenue’…I want a piece of the action! Instead of taxing the public [in which case we get absolutely nothing in return], let the museum really go ‘public’ and sell stock. That way we lose our collective pants, contribute to the downfall of the economy, request a govt. bailout, and still make out like bandits.

  • New Voice

    I understand where Merle is going [I hope so anyway].
    It does frighten me that Bush appears to have been completely taken in.
    Whose his buddy?

  • The Mouse

    If you really believe this is going to make a profit, please tell me. I have a bunch of bridges I want to sell you before someone else cleans you out.

  • The Mouse

    Sorry. Last posting was just wrong. It isn’t right to take advantage of the mentally impaired.

  • kcdad

    “Liars, damned liars and statisticians”… Mark Twain

  • vonster

    I want to know why I keep seeing and hearing ads that portray the museum as inevitable, a done deal.

  • Karrie E. Alms

    Vonster — you are just so hilarious — you must have a new mantra other than our community leaders — remember — ‘resistance is futile.’ Just recall how valued dissenting opinions/viewpoints are welcomed. Have to stop bickering so we can be bipartisan.

    kcdad: correct.

    Mouse: When was the last time any business was rent or mortgage free (unless they had already paid off their mortgage)? No rent and no mortgage helps the bottom line, correct?

    NV: Stay tuned — numbers are only the tip of the iceberg.

    And of course all questions are welcome, until you start asking the 800 pound gorilla questions which result in you becoming in an instant — persona non grata. Maybe I could get some business cards made with that as my ‘official title’ for having the nerve to ask those questions and expect accurate answers! 🙂

  • New Voice

    You guys are soooooooooo funny.
    I appreciate your humor, but this is NOT the time for it!

    You must all develop a keener sense of awarness. I adhere to the science of reasoning. I believe in developing a SOUND argument against this project; an argument based on a solid foundation of fact…………….

    For example:
    Did any of you happen to notice the last name of the County’s Chief Financial Officer?
    How interesting is it that the CCFO and the very man who put the U.S. a trillion dollars in the hole share the last name?!?!?

    See what I mean? Now…..go and read my book.

  • vonster

    The guy’s name is CRACarterClintonFrankDoddObamaACORN?

  • Karrie E. Alms

    NV: That is an uncalled comment about Erik Bush and mean-spirited. Please put yourself in time-out and I am not joking.

    Let’s be civil and get the message out why to vote NO on the referendum which appears will be passed tonight. I am keenly aware of the science of reasoning needed for this project. Comparing Erik to Pres. Bush is not the argument.

    Erik will answer questions — just ask him. So as not to be confused, I was referring to emails sent to Lakeview Staff for answers yet not received.

    If you want to share some of your insights and strategies — contact me.

  • Karrie E. Alms

    Oops — I meant to write to vote NO on the referendum for which the resolution to put the refendum on the ballot appears will be passed tonight. Sorry about that confusion.

  • New Voice

    Geez………………………………………………

    Karrie,

    Though I may be setting myself up here. I am going to risk it.

    You DO know I was joking, right?

    Bush’s take on the financial side of this project…?
    C.J. sums it up nicely.

    I still say the ‘name thing’ is some kind of omen……….?

  • New Voice

    Being critical of the museum project [as is] has obviously gotten us nowhere. I have spoken in the past with reps from Lakeview, Peo City Council, and even Peo County. I felt as though I was dealing with two kinds of people; those who tell you to shut-up, or WE will shut you up…or those who are completely lost and really have no idea what is going on.

    The PRM group has been fanatical about pushing this plan through. The way they manipulate the numbers and fudge the data is almost criminal. I do not want to sound like some wacko conspiracy theorist, but what is so damned important about this museum? There is something just not right here.

    When I see such heavy-handed tactics being employed, I have a difficult time believing they [PRM] are doing this soley for the benefit of the community.

    Now, before anyone starts having a fit, I am NOT accusing anyone of anything…
    sort of.

  • Karrie E. Alms

    NV: Hum — just didn’t sound like a joke to me — guess Vulcans just process lots of data and sometimes do not retain their sense of humor if they even have one to at the start. Thank you for helping me to understand it is a joke. I guess we will have to agree to disagree about styles.

    I agree with you that there are many pieces of the museum puzzle which do not make sense and for that I think and feel it is best to keep putting the facts before the public. Perhaps people do not come forward for the the reasons you have mentioned, but the polling place is a place where their opinion will be tallied by their vote in privacy.

    As passionate as you are against the museum — the PRM group is passionate for their cause too. As I tried to explain to Jim Richerson, the museum project is like the tail of the coment — so many Peoria projects with rosey projections which have never panned out — you know the list. He shared that is not the case with his project — time will tell the outcome.

    I would like to see an effort to Build A Better Block because the current plan is not effective as CJ wrote above and is not what the public asked for in planning that block.

  • The Mouse

    New voice – conspiracy theory or not, you are right; something is rotten in river city. And vonster, I don’t have any use for that rogue’s gallery of politicians you named, but, let’s be honest, they couldn’t have done their dastardly deeds without a lot of help from Republicans. Have you forgotten about Benedict Arnold Paulson? Today, Obama, Pelosi and Reid are merrily driving us over the cliff, but Republicans are putting gas in the car from them.

  • New Voice

    Karrie,
    OK. Frustration breeds a [very] dry sense of humor.
    Did you really think I had ISSUE with Erik Bush because of his last name?
    MY GOD WOMAN!
    Now, if his name were Schock……………………………………..

    Anyway….passion? I don’t know if that is the word I would use. Richerson is overly optimistic and he knows it. Will he admit it…? The PRM group have not been willing to bend on ONE SINGLE ISSUE. They have repeatedly asked for public input; when they got it, they ignored it.

    I agree with you, it is best to put the facts before the public. I am STILL waiting for the PRM group to do this. I’ll bet I am not the only one.

    Will check in later to poke fun at Karrie.

  • Karrie E. Alms

    NV: Stop needling me —- you are messing up my instrument readings on my Inspector Gadget gadgets!:)

    I have read communications from the City which support your assertion that Lakeview is not willing to bend on issues. Sounds hauntingly familiar to D150’s style of communication.

    Mouse: It is my understanding at this point, that Lakeview has spent at least $1M or more on this project so far and so one could expect that they will keep charging ahead to try to reach their anticipated finish line. It is blocked, what then? How would they repay monies already spent? Mouse are you on this side of the river so we can count your vote in the NO column?

  • vonster

    The Block will be on the ballot. Just vote no!

  • Karrie E. Alms

    Vonster: Please be sure to tell all your friends that it will not be listed as the museum or the Block on the ballot. From the Peoria County’s website …

    The sales tax referendum on the April 7 ballot will ask the public whether to increase Peoria County’s sales tax rate by 1/4 of 1% for 20 years to help fund construction of public facilities. This amounts to 25¢ for every $100 of retail purchases. Peoria County will use the money raised from the sales tax increase to help fund the Riverfront Museum Project.

    The museum project is “Peoria’s own economic stimulus project’ as heard at last night’s Peoria County Board Meeting because it will provide jobs for unions.

    Peoria County Board members voted by resolution to:

    Support legislation that would provide a voter-approved regional funding vehicle for the Peoria Riverfront Museum per the Peoria County 2008 Legislative Initiatives Summary.

    A county wide sales tax increase, only Peoria County in this specific case, is now considered by some speakers at the meeting as a ‘regional’ funding vehicle because people who live in Washington shop in Peoria and Peoria County. Gotta love that logic.

    Just vote no!

    support legislation for a voter approved .

  • kcdad

    54 people very hour (if the museum is open for 12 hours each day) entering the museum every single day of the year.
    Possible?
    uh….. not so much

  • The Mouse

    the vote (if it’s honestly counted) will be overwhelmingly no. Question is, will they take no for an answer?

  • vonster

    I think the public said no on the Wreck Plex, Cat Stadium and Joseph’s “Rape Peoria with whats her name’s help” Plaza. Didn’t matter.

  • New Voice

    Cool.

    Gotta hand it to Merle. It took a lotta sand to stand up and vote no.

    Karrie,
    If the council considers this a regional tax [what ever the logic], then the ‘region’ should be allowed to vote on said tax. Lets see how Woodford-Tazwell County residents react to this new ‘tax.’ Twisted logic breeds twisted logic.

    Mouse,
    Will they take NO for an answer? Why should they?

    It was interesting to read about Schock’s latest romp through D.C. Schock voted against Obama’s latest stimulus proposal. What, with all of the shovel-ready projects awaiting funding back home………………….. Was Schock refering to the sewers and sidewalks, or something else entirely?

    Nothing like feeding off the fears of the people. You dangle that golden carrot – museum = jobs, economic growth, etc – and any reservations the public may have had about funding a multi-million dollar museum during this economic downturn, may go out the window.

    Hells Bells [again], how can we vote against our own little ‘economic stimulus’ plan?!?!?

  • Karrie E. Alms

    NV: I think you meant ‘county board’ not ‘council’.

  • New Voice

    Yes, yes, yes……..’county board!’ NOW you are REALLY on my list.