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2015 SCFD Reauthorization Task Force
Report to Board of Directors
April 23, 2015
1
Most Extensive and Inclusive Process in SCFD History
• 300 responses to stakeholder surveys
• 330 individuals volunteered and participated in one or more phases of the
process
• Those volunteers collectively spent over 2,300 hours identifying,
analyzing, discussing and evaluating issues raised, and untold hours
studying materials prior to meetings.
• To date, more than 60 individuals have shared their thoughts by
submitting written communication to the board or speaking at public
board meetings
2
Task Force Members
Kristy Bassuener
Susan Beyda
Susan Connelly
Karen Douglass
Tony Garcia
Jim Harrington
Andrea Malcomb
Dave Montez
Shepard Nevel
Tier I
Cultural Council
Tier II
Cultural Council
Tier III
Former Bd Member
Tier III
Former Bd Member
Current Bd Member
Michelle Nierling
Lisa Rigsby Peterson
Dan Ritchie
Deven Shaff
Rhetta Shead
George Sparks
Gary Steuer
Elaine Torres
Steve Wilson
Local Government
Tier II
Tier I
Tier III
Cultural Council
Tier I
Foundation
Current Bd Member
Tier II
Facilitated by Karla Raines,
Corona Insights
3
Task Force Overview
•
Goals of the Task Force & Work Groups :
 Serve the Public Well
 Ensure a Strong and Sustainable SCFD
•
Task Force was charged by the board with:
 Reviewing work group options that would require legislative change
 Making recommendations
4
Overview
• Task Force was asked to address 15 issues with statutory or legislative
implications
• Plus, as time allowed, 3 issues not addressed by work groups and for
which the board sought the task force’s recommendation
• 18 issues are organized by:
• Recommended
• Not Recommended
• No action required
• Not addressed
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Categories
• Recommended
•
•
•
•
•
•
Eligibility – 4 issues
Tier III – 2 issues
Tier II – 3 issues
Tier I – 1 issue
Tax Levies – 1 issue
Administration – 1 issue
• Not recommended – 2 issues
• No action required – 2 issues
• Not addressed – 2 issues
6
Eligibility Recommendations
• Allow maximum of two SCFD eligible organizations per Federal
Employer Identification Number (FEIN) / Taxpayer Identification
Number (TIN)
 Local government entities currently have the ability to create multiple
sub-divisions that can receive SCFD funding. This can confuse the public
and decrease transparency for use of public funds.
• Redefine Cultural and Scientific facilities in statute
 The statute includes definitions of Cultural and Scientific. Both disciplines
have evolved since they were narrowly defined in the statute in 1987.
Looking to 2030 and beyond, those definitions need to be broader and
more flexible to adjust for both current and future ways to engage and
serve the public.
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Cultural
Scientific
Current disciplines
Facilities
Facilities
Cultural
Facilities
Art
Music
Theatre
Scientific
Facilities
Dance
Zoology
Botany
Natural
History
The primary purpose of the SCFD is "to provide for the enlightenment
and entertainment of the public through the production, presentation,
exhibition, advancement or preservation of art, music, theatre, dance,
zoology, botany, natural history, or cultural history.”
Cultural
History
Re-organizing Cultural & Scientific Disciplines
Physical
Natural
History
Sciences
Life
Sciences
Earth
Sciences
A
Cultural or
Scientific
Organizations
Cultural
History
Performing
Arts
Visual Arts
A cultural or scientific facility is one whose primary purpose enlightens and entertains the
public through the production, presentation, exhibition, advancement or preservation of
visual arts; performing arts; cultural history; natural history; natural sciences, e.g., earth,
life or physical sciences; as these terms are defined by the SCFD board.
Eligibility Recommendations (continued)
Recommended Board Policy to complement Statutory language
• Performing Arts may encompass literary arts if there is a clear public
performance component, e.g., spoken word and all other eligibility
criteria are met.
• Scientific organizations may encompass science, technology,
engineering or math if there is a clear public component, and all other
eligibility criteria are met.
10
Eligibility Recommendations (continued)
• Require minimum operating income threshold of $25,000 or
10 years existence for organizations seeking eligibility
 This is a new requirement to institute a minimum threshold to
demonstrate financial and organizational capacity to serve the public
well. 25 years of serving the public has demonstrated that
organizations below the $25,000 threshold may have difficulty
demonstrating financial and organizational capacity to use SCFD funds.
 Existing organizations will be grandfathered.
• Increase years of existence requirement from 5 to 7 years for
Tier II and from 3 to 5 years for Tier III
 IRS requirements to apply for and maintain 501c3 status have relaxed
significantly over the years. SCFD can no longer rely on this
information to effectively vet prospective recipient organizations.
Increasing the years of existence requirements helps demonstrate
long-term viability in serving the public.
11
Tier III Recommendations
• Exclude the ability of Tier IIs to apply for Tier III funding
 Originally, Tier IIs were allowed to apply for Tier III funds to ensure that
available funds were granted. Today, requests for Tier III funds exceed
funds available, making the original language obsolete.
• Cultural Councils may consider financial and organizational
capacity in funding decisions
 Some councils already consider financial viability in addition to
organizational capacity when considering grant applications and making
grant awards. This will codify their practices and may further encourage
effective funding decisions by giving them statutory authority.
12
Tier II Recommendations
• Add a regional service requirement to Tier II qualification criteria
 The Tier II tax levy is collected from all seven counties; thus these
organizations should demonstrate service to the entire region through
official requirement.
 The requirement will be defined by the SCFD Board.
• Modify Tier II threshold adjustment factor by using the trailing
two-year CPI
 Currently, the Tier II threshold is adjusted annually by the most recent
Consumer Price Index (CPI), which is announced in February. Organizations
do not know the required threshold until after the close of their qualifying
fiscal year. This timing makes it difficult for smaller Tier II and larger Tier III
organizations to plan for qualification. Using the two-year trailing average
allows the change factor to be known in advance of the qualifying fiscal
year.
13
Tier II Recommendations (continued)
• Modify Tier II Intra-Tier Distribution by adding free
attendance
 Current formula is 50/50% weighting between revenue and paid
attendance, which is a disincentive for organizations to provide free
programming.
 Current paid attendance factor has a greater mathematical impact on
dollars awarded than does the revenue factor.
 SCFD Board will set the weighting of the three factors: paid
attendance, documented free attendance, and revenue.
 The Task Force encourages the Board to weight the factors such that
the change does not have a significant adverse impact on any
organization and in fact is incremental.
 Reducing the period of time the Board has to wait between modifying
formula from 5 years to 2 years will provide increased flexibility to
serve the public well.
14
Tier I Intra-Tier Percentages
• Task Force recommends that the SCFD Board accept the
collective recommendation of the Tier I organizations
regarding the Intra-Tier percentages.
 Subsequent to adjournment of the task force, the 5 tier I organizations agreed to
new percentages as follows:
Organization
DMNS
DAM
ZOO
DBG
DCPA
Current % of Tier I
25.00%
20.83%
24.24%
11.75%
18.18%
Recommended New % of Tier I
24.50%
20.33%
24.24%
13.25%
17.68%
 The Task Force did not think themselves qualified to formulate an alternative to
the collective view of the Tier I organizations.
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Tax Levy Adjustment Objectives
• Evaluate current funding in light of the growth in the number
of Tier II (271%) and Tier III (83%) organizations.
• Address funding shortfall affecting several Tier II
organizations (7 of 26 under 8%).
• Address funding shortfall affecting large Tier III organizations
(13 of 14 under 8%).
• Provide additional funding in first year of reauthorization to
address these shortfalls.
• Through additional funding, enable Tier II and III
organizations to better serve the public.
• Recommend changes that are incremental.
16
Tax Levy Adjustment Process
• Numerous alternatives considered:
 Eliminate the base
 Change the base
 Change the percentages below the base
 Change the percentages above the base
 Create a new inflation based tax levy formula
• The process was an exercise in the art of compromise.
17
SCFD Tax Levy Change
New
Base $38,000,000
Current
Below $38MM: 64 / 22 / 14
Above $38MM: 57 / 26 / 17
Base $38,000,000
Below $38MM: 65.5 / 21 / 13.5
Above $38MM: 64 / 22 / 14
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Tier I Distributions
$60,000,000
$52,216,897
$50,000,000
$34,553,200
$40,000,000
$21,680,588
$30,000,000
$20,000,000
$10,000,000
$-
Tier I SCFD Funding
From 2000-2015, Tier I Annual Distributions grew by 59.4%. DCPA added in 2006.
From 2015 to 2030, Tier I Annual Distribution projected to grow by 51.1%.
19
Tier II Distributions
$25,000,000
$21,084,900
$20,000,000
$15,000,000
$11,301,725
$10,387,092
$10,000,000
$5,000,000
$-
Tier II SCFD Funding
From 2000-2015, Tier II Annual Distributions grew by 8.8%. DCPA moved in 2006.
From 2015 to 2030, Tier II Annual Distribution projected to grow by 86.6%.
20
Tier III Distributions
$16,000,000
$13,640,127
$14,000,000
$12,000,000
$10,000,000
$7,243,825
$8,000,000
$4,587,737
$6,000,000
$4,000,000
$2,000,000
$-
Tier III SCFD Funding
From 2000 to 2015, Tier III Annual Distributions grew by 58%
From 2015 to 2030, Tier III Annual Distributions projected to grow by 88%
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Tier III Distributions by County
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$-
Series1
Adams 14.3% Arap 20% Boulder 9.5%
Broom 2.3% Denver 30.5% Doug 8.1%
Jeff 15.3%
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Percent of SCFD Distribution by Tier
80.0%
70.0%
$33.4MM
$52.2MM
65.1%
60.1%
60.0%
50.0%
40.0%
$10.9MM
30.0%
21.3%
$21.1MM
24.3%
$7.0MM
20.0%
13.6%
$13.6MM
15.7%
10.0%
0.0%
2014
Tier I
2030
2014
Tier II
2030
2014
2030
Tier III
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First Year Change 2017 to 2018
$2,000,000
+13.4%
$1,500,000
$1,567,000
+13.8%
$1,000,000
$1,031,000
$500,000
$-
$(500,000)
-$618,000
-1.73%
$(1,000,000)
Tier I
Tier II
Tier III
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Growth Comparison
Projected Compound Annual Growth by Tier Over Next 10
years
6.00%
4.00%
3.00%
4.96%
4.88%
5.00%
Average
Inflation past 10
years = 2.42%
2.85%
2.00%
1.00%
0.00%
Tier I
Tier II
Tier III
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Administrative Percentage Recommendation
• Increase SCFD Administrative Percentage to 1.5% of total
revenue collected
• In SCFD’s 25+ year history, the .75% of revenue allocated to
administration has never been sufficient to cover the actual
operating costs. SCFD has relied upon interest income, an
unreliable funding source, to make up the difference.
• The SCFD operating budget is less today than it was in 2000.
• Since 1990, SCFD has grown by 1 county cultural council, and 1
Tier I, 21 Tier II, and 108 Tier III organizations to over 275
organizations today, but the Admin staffing has not increased.
• Additional funding is needed to ensure:
 that eligibility is properly verified, and
 that the taxpayer dollars (over $50 million) provided to the District are
properly administered and accounted for, and
 that the District fully complies with the statutory authorization.
26
Options NOT Recommended
• Lower Tier II threshold to include large Tier III organizations
 Whether due to funding caps or other county guidelines, most larger Tier III
organizations receive a low percentage (<8%) of their operating income from
SCFD.
 Although this issue was of great concern for TF members, the TF decided not
to recommend lowering the Tier II threshold. The TF does recommend that
each Council review its internal policies and its grant request maximum dollar
caps, and consider the impact those caps may have on large Tier III’s ability to
provide programming to the public. The recommended increase in Tier III
funding should help to make this possible.
• Should there be a fourth tier?
 Inadequate funding for large Tier III’s was also an impetus for considering a
fourth tier, but TF members felt the issue should be addressed through
revised Council practices as noted above and the inter-tier levy distribution.
27
Options Where No Action is Required
• Develop new audiences and enhanced services for underserved
populations and youth
 The metro area’s population has grown and changed significantly since 1988.
Organizations will need to serve all segments of the community throughout
the District in a greater variety of ways and with more free and reduced cost
options. This is a general policy statement of value and importance that can
be implemented without a statutory mandate.
• Movement of money between Tiers II and III
 When a Tier III organization grows to meet Tier II requirements, there is no
mechanism for increasing funds to Tier II, and vice versa. Although there was
a desire to address this issue, because voters approve the tax levy percentage
assigned to each of the Tiers, funds from one tier cannot be moved to
another without a public vote.
28
Additional Options Not Addressed
• A. Sunset provision (Number of Years)
 There was inadequate time to address this issue.
• B. Elimination of 5% Discretionary Provision
 There was inadequate time to address this issue.
29
Conclusions
• On behalf of the Task Force, thank you for entrusting us to help
shape the future of SCFD.
• Our belief is that responsible, fair, accountable and transparent use
of the tax dollars provided to SCFD will lead to continued voter
support.
• Our recommendations are forwarded to you mindful of this
imperative.
Questions?
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