Board Chair Chico Lager Addresses the Ways and Means Committee Regarding Sales Tax Legislation

Posted on February 10, 2011

Thank you for allowing us to testify before you today. I am Chico Lager, Chair of the Board of the Flynn Center for the Performing Arts.

I think the key question in trying to figure out whether imposing this tax is a good or bad policy decision largely comes down to whether or not the tax will adversely impact the number of tickets sold. Members of the non-profit arts community are convinced that it will, but I know that some members of this committee do not share that opinion.

Given that ticket sales account for less than 40% of the Flynn's operating budget, I'll start by saying that if we thought we could increase ticket prices by 7% without losing any sales we would have done so long ago. In fact, all arts organizations agonize over the prices we set for tickets because we know just how price-sensitive the market is and how critical this decision is in determining the success of an event.

But since none of us can say with certainty what the exact impact of the tax will be, I thought I'd share with you some facts that speak to the general state of the arts and the Flynn in particular.

It is no secret that non-profit arts organizations throughout the country are struggling financially. According to a December 30^th article in the Wall Street Journal, there were 15% fewer concert tickets sold nationally in 2010 compared to the previous year. The waning tolerance of patrons for rising prices was cited by the Journal as the number one reason for the decline in sales.

At the Flynn, our subscription sales are at a five-year low. Four years ago, we sold over 17,000 tickets during the subscription period. This year we sold less than 11,500; compared with the previous year, that is a decline of 21%. Sales to our best customers, who purchase tickets to five or more events, have declined by 41% over the past four years. At the same time, the economic downturn has also forced individuals, corporations, and foundations to reassess their charitable giving.

The imposition of this tax comes at a time when all of the arts organizations in this room and those on whose behalf we speak are struggling.

• We are struggling to sell as many tickets as we used to.
• We are struggling to deal with costs for artists and theatrical presentations, which are increasing faster than inflation.
• And we are struggling to retain our existing audiences, while at the same time figuring out how to attract younger patrons from a demographic that now spends more time playing video games then they spend listening to music or watching movies combined.

While I respect that this is not an opinion that everyone around this table shares, please appreciate that those of us who live in this world everyday really do believe that a 6-7% tax will not go unnoticed and that it will impact sales.

Why does any of this matter? Would it really have any impact if a few more arts organizations followed in the footsteps of the Vermont Mozart Festival and downsized or disappeared?

It strikes me that if non-profit arts organizations didn't exist and you, as our elected officials, were trying to design a cost-effective way to stimulate the local economy, you'd be hard pressed to come up with a better model with a higher return on investment then what the organizations represented here provide.

The arts truly are an economic engine in Vermont that generates significant activity in the hospitality industry. We are essential to tourism-one of the state's most important economic sectors-and to Vermont's brand. The cultural diversity offered by non-profit arts organizations make the state attractive to businesses that are considering locating here, and it helps them recruit and retain the employees they need.

Non-profit arts organizations have also become the anchors of historic downtowns and small towns throughout Vermont. The impact of Catamount Arts; the Barre, Bellows Falls, or Vergennes Opera Houses; the Weston Playhouse, the Paramount, or the Flynn on their respective communities cannot be overstated.

Non-profit arts organizations have also assumed an increased role in education. At the Flynn, our education programs now rival our presenting series in size and scope. They include student matinees for over 40,000 school kids every year, performing arts classes and camps, and over 1,000 hours of in-school workshops for children and teachers throughout Vermont.

Arts education helps kids learn how to think creatively and solve problems, skills that are essential in today's economy. Many kids figure out who they are and how to express themselves through the arts.

It is the earned income from the presentations the state proposes to tax that makes possible the education missions of non-profit arts organizations. A decline in ticket sales will adversely impact these programs at a time when schools are cutting arts education from their budgets and the need for what we do has never been greater.  

When I was here at the end of the last session, some of our conversation went to the question as to whether non-profit arts organizations were any different from commercial enterprises given that we sold tickets to concerts or shows, not unlike what a for-profit promoter does. I've brought copies of the Flynn's most recent annual report with me. It is heavy on pictures, and light on text, so if you give it five minutes you will get a flavor of what we do.

If you look at the numbers in the back, you will see that we raised $2.1M in contributed support last year to fund our operation and fulfill our mission. Even if we sell every ticket we budgeted for this year's presenting season, we will still lose a quarter of a million dollars, not factoring in any administrative overhead. And that is the most commercial aspect of our operation. Non-profits like the Flynn only exist because of the incredible generosity of hundreds of volunteers and local businesses that donate their time and money to sustain these organizations and make the fulfillment of their missions possible. They are fragile and they should not be taken for granted. The services they provide to our state and our communities are real, and the tax that will go into effect on April 1^st puts many of them at risk.  

I would like to leave you with one final thought. Through no fault of anyone here, this issue came up late in the last legislative session and was considered in isolation, apart from the pending debate on whether there should be fundamental changes in the structure of the sales tax. But from the standpoint of simple fairness, it seems that the question of whether to impose a sales tax on patrons of non-profit arts organizations should be considered in the context of the overall review of the sales tax that the Tax Commission has cued up for debate. Museums and the often-cited tuxedo rental remain exempt. Why not include non-profit arts organizations in that pending conversation?

Thank you again for allowing us to testify before you today.