-- UPDATE: AUGUST 19, 2010 –

Dr. Phillips Center Responses/Clarifications to Arts Groups Position

Paper
In reviewing the documents developed and distributed by the Orlando Ballet as recently
as Saturday, August 17, 2019, the Dr. Phillips Center has prepared the following
responses to clarify and correct information being provided on all major issues raised.

1. How Long We’ve All Been Working Together

Arts Groups Assertion Orlando Ballet (OB), Orlando Philharmonic Orchestra

(OPO) and Opera Orlando (OO) have spent the past two
years working with the Dr. Phillips Center (DPC) to reach
agreement on fees and other expenses to be applied
upon the opening of the new Steinmetz Hall at DPC.

Clarification/Correction We have been working closely with these arts groups

over the past two years to document a facilities-use
agreement for Steinmetz Hall. But we have been
working with the OPO and OB since 2005 in the
planning and design of Steinmetz Hall, and on
their transition from the Bob Carr Theater to the
newly built arts center.

Both the OPO and OB have had multiple turnovers in

management and leadership over the years, and
current leadership is relatively new to the process.

The Dr. Phillips Center’s goal has been to provide a

venue for OPO and OB at average rates – not the
highest, not the lowest – of comparable arts centers
within Florida. Because the City had been charging the
organizations very low rent at the Bob Carr Theater, Dr.
Phillips Center has consistently proposed a gradual rate
transition to allow the groups to prepare, adjust and
grow their audiences to ultimately perform in Steinmetz
Hall.

The rate transition was the topic of multiple

presentations and discussions with the arts
groups, and is documented in 2011 and 2013
presentations made to OPO and OB. In 2017, we
again presented both organizations with rental
rates for comparable venues, along with
quantified increases for the final two years prior
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 to Steinmetz Hall opening.

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2. Negotiations Status

Arts Groups Assertion Last week, DPC suspended negotiations unexpectedly,

leaving all three performing arts groups with no ability
to plan budgets or schedule performances for future
seasons as is necessary in our industry.

Clarification/Correction This assertion is incorrect. Good-faith offers have

been presented that addressed the arts groups’
financial concerns but so far, the groups have not
moved from their original positions and have not yet
acknowledged the offers.

Several weeks ago, we did suggest a time-out on

discussions to allow the groups to continue their work
with community leaders to secure additional funding
sources.

Since then, we’ve:

 Made multiple meeting requests to OPO,

which to date have been consistently
declined. In the meantime, we sent an offer
letter to OPO on August 13 that 1)
summarizes and quantifies the specific
amount of financial support the OPO has
received from Dr. Phillips Center over the
past five years; 2) recaps the additional
concessions/contributions the arts center
has already offered toward the OPO’s
transition to Steinmetz Hall; and 3) outlines
what the arts center considers to be the
best option open to the organization.

 Confirmed an August 22 meeting with OO

leadership to continue our discussions.

For the time being, we are holding requested

performance dates for the OPO, OB and OO.

3. Multi-Year Agreements Are Coming, Just Not in Year One

Arts Groups Assertion Orlando Ballet, Orlando Philharmonic and Orlando

Opera seek fair, reasonable and long-term agreements
for up to five years, but every attempt has been
delayed. Multi-year agreements are common practice
and a necessary industry standard so that talent,
staging, costumes and the other complexities can be
confirmed and planned for in plenty of time.

Clarification/Correction This assertion is incorrect. Extended, five-year

agreements with OPO and OB have always been our
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 intention and we included language to that effect in the
terms we offered both organizations.

However, we have built into our strategy the ability to

operate Steinmetz Hall for a full season before such
agreements are made. Dr. Phillips Center will go from
operating two performance spaces to three in the main
facility, and we need the first year to understand how all
spaces will work together. We need the time to evaluate
logistics and the most efficient processes and staffing
for items such as box office, production, security and
guest services. As we’re dealing with a new space, it’s
in all our best interests to get through the first year
together.

4. Priority Dates Have Always Been Part of the Agreements

Arts Groups Assertion All three groups seek reasonable rates, priority dates
for performances, and reasonable control over routine
activities such as lobby setup, labor and parking.
Currently, the Broadway series and the Dr. Phillips
Center Presents are given scheduling priority,
preventing local groups from scheduling top level guest
artists and other elements required in the performing
arts.

Clarification/Correction We have provided and continue to hold priority

dates in Steinmetz Hall for both the OPO and OB.
Terms have included guaranteed time periods with the
expectation that the groups will confirm specific dates a
standard 18 months in advance. Broadway shows will
continue to perform in the Walt Disney Theater and
have priority in that space.

5. How Our Rates Compare

Arts Groups Assertion Current theater costs for the Disney Theater and Bob
Carr Theater exceed averages for comparable ballets
and orchestras in similar theaters and cities; we have
documentation validating this.

Clarification/Correction Our rental rates, and the daily all-in costs that
include reimbursables, have been and continue to
be near or below the average of comparable
venues in similarly sized Florida markets.

Our rate research, shared multiple times with the

arts groups, compares our rates to comparable
venues in similarly sized markets, including
Tampa, Miami and Broward County. Our research is
guided by data compiled by the Performing Arts Center
Consortium, a group of 37 arts centers throughout the
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 country, including several in Florida. Certain halls in
Florida, such as Tupperware Performing Arts
Center, the Mahaffey Theater and others, are not
considered comparable to Steinmetz Hall due to
their building design and/or operating models.

Note: scheduling adjustments for all groups may help

alleviate some of their expenses, especially as both OB
and OPO will have their own buildings that could be
utilized for rehearsals. For instance:

 OB currently books seven days in the theater;

some ballet companies utilize as few as three
days in the performance venue to control costs.
 OPO currently books an extra day of rehearsal for
each of its programs, which increases its non-
revenue usage by nine additional days.
 OO initially asked for eight full days in Steinmetz
Hall, a venue more than five times the capacity
of the Pugh Theater (where it currently
performs); this change more than doubles its
venue expenses.

We also understand both OPO and OB are in the process

of renegotiating their contracts with the local stagehand
union. For years, the arts groups have been aware that
they would be required by the union to fall under our
contracted rates, which are much higher than what they
have historically paid. Again, this increase is not a
surprise. We have encouraged the groups to negotiate
directly with the union and should they achieve a lower
rate themselves, we will honor that in our contracts.

6. Steinmetz Hall Seating Capacity

Arts Groups Assertion Although initially committed to be an 1,800-seat house,

Steinmetz Hall will likely seat only 1,500 for ballet,
orchestra, and opera performances, significantly
reducing our ability to generate sales revenue. We
simply will have fewer seats.

Clarification/Correction Yes, Steinmetz has fewer seats than the Bob Carr
Theater and Walt Disney Theater. Arts groups had a
major voice in the design of Steinmetz Hall dating back
to 2003, when discussions and visioning first began.
Steinmetz Hall’s proscenium theater seating is between
1,470 and 1,620, and the concert hall seating is 1,772.

The historical ticket sales trends of the

organizations illustrate that Steinmetz Hall’s
capacity is more than adequate for the arts
groups. Recent ticket sales data for the three arts
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 groups is as follows:

 OB – the average number of tickets* sold

over the past five seasons is 855, which
would fill about 58% of the available seats
in Steinmetz Hall.

 OPO – the average number of tickets sold

over the past five seasons is 1,626, which
would fill about 88% of the available seats
in Steinmetz Hall. To serve its existing
patrons in Steinmetz Hall, OPO will have to
add just five performances – performances
for which they will make additional ticket
revenue.

 OO – the average number of tickets sold

over the past three seasons is 217, which
would fill 15% of the available seats in
Steinmetz Hall.

*Note, the Nutcracker performance is not included in

this figure as we have mutually agreed to keep that
performance in the Walt Disney Theater, and we are
currently holding two weeks in December to
accommodate that request.

7. Responses to Specific Requests

a. 5-Year Rate Freeze Rate freeze for five years from 2018-19 rentals, patron
facility and box office fees, along with front of house
costs such as cleaning, ushers and security personnel.

Response The arts center has currently agreed to lower its

rental rate for the first year in Steinmetz Hall to
below the lowest rental rate for comparable
venues in the State of Florida. This rate is also
$600 less than what OPO charges for rent at its
900-seat Plaza Live venue. This rental rate will be
frozen for the first two seasons in Steinmetz Hall.

It’s important to know our facility, box office and

processing fees are in line with like venues across the
country as well as the ticketing leader, Ticketmaster. We
routinely analyze our fees for comparison in the
marketplace.

The direct reimbursable costs represent actual out-of-

pocket expenditures, such as custodial, ushers, security
and safety officers. These event-specific costs are
passed on to all users at our cost, with no mark-up, and
are driven by external factors, such as required
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 minimum and comparable marketplace wages. These
pass-through expenses could increase or decrease from
one year to the next, and therefore cannot be set five
years in advance. We periodically conduct efficiency
and best-practice reviews on our staffing models to
determine our optimal methodology, including how the
upcoming opening of Steinmetz Hall will affect the
facility as a whole. Should our reviews result in lower
costs, we will pass on the savings.

b. Priority Dates Priority for dates in Steinmetz Hall for the next 5 years;
and secured Nutcracker dates in Disney Theater.

Response We are currently holding dates for OPO and OB in

Steinmetz Hall and, assuming we can reach an
agreement with each organization, those dates will be
offered for the length of those agreements.

Dates for OO’s first set of performances in Steinmetz

Hall are also on hold and secured, provided the Opera
feels it can successfully move from a 294-seat hall to a
1,470/1,620-seat hall in one season. We look forward to
more discussion on this topic this week.

For Nutcracker, per their request, OB has been offered

time in December in the Walt Disney Theater. We will
narrow exact dates upon solidifying our Broadway
schedule, which takes place each December. It has
always been understood that the Broadway series would
have priority in Walt Disney Theater and OPO, OB and
OO would have priority timeframes in Steinmetz Hall.

c. Lobby Usage Reasonable terms for lobby usage.

Response As a multi-use venue with thousands of guests

attending multiple events at a given time, terms for
lobby activations are reasonable and able to be
discussed and adjusted through the first year. Terms
follow guidelines of other venues with similar
capacities. We are happy to discuss specific activation
requests for the new space as it comes online.

d. Resident Status Resident Company status

Response Both OB and OPO are considered “Resident Contracted

Companies.” They are specifically referenced in our
contract with the City of Orlando as companies for
which we are to provide a venue.

Orlando Opera and the Festival of Orchestras were also

referenced in the 2007 agreement with the City, but
those businesses have since dissolved. Florida Opera
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 Theater was formed in 2010 and subsequently changed
its name to Opera Orlando. Opera Orlando has currently
performed in the Pugh Theater for three seasons, but
we believe it does not yet have a sufficiently long
financial track record to be able to guarantee multiple
performances, especially in the larger Steinmetz Hall.

We are exploring a process by which Opera Orlando and

other organizations can apply for resident contracted
status and we look forward to working with them to
reach that goal.

8. Who Sells What Tickets, When

Arts Groups Assertion Of the three groups, the Philharmonic is the only group
that seeks to maintain management of individual and
subscription ticket sales. DPC indicated that it will allow
OPO to sell only 10 percent of available single tickets
while DPC maintains control of the remaining 90
percent. Additionally, DPC seeks to provide priority
ticket sales access to their donors and board above our
own patrons. OPO seeks equal access; whoever sells
tickets first.

Clarification/Correction There is misunderstanding on this issue. Both the

OPO and OB will sell their respective subscription
tickets. For the OPO, this represents the majority of its
total ticket sales. We also already agreed to allow OPO
to sell single tickets for subscriber add-ons.

Dr. Phillips Center will sell the remaining single tickets to

OPO’s performances, as we do with all our clients, which
is an industry best practice to avoid patron confusion.
This best-practice model follows other ticketing
consortiums, all of whom recommended the venue sell
all single tickets to avoid patron confusion. OPO will
receive a rebate on all single tickets sold by Dr. Phillips
Center.

9. Our In-Kind Financial Support to OPO and OB

Arts Groups Assertion DPC’s claims of having given $2 million in rent and
services is misleading and theoretical. According to
DPC’s theory, IF they rented the Hall at FULL
commercial rate for every week that we are in it that
they could make that much more money.

Clarification/Correction This assertion is incorrect. We have provided the

organizations $2 million in in-kind rental and other
support, such as marketing, event and ticketing
assistance. We derived that figure from our non-profit
rate, not our full commercial rate. If we compare the
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 rent support to our commercial rates, the total support
to all three arts groups exceeds $3 million.

In the offer letter shared with OPO August 13, we further

quantified the amount of support Dr. Phillips Center has
provided specifically to OPO. All in, the subsidy support
to OPO is approximately $272,000 annually; over the
past five years, the total amount exceeds $1.3 million. A
break-down follows:

 In the past five years, Dr. Phillips Center has

provided OPO $86,000 per year – or $430,000
total – in in-kind rental support. The value of that
contribution is based on the standard non-profit
rate that other not-for-profit arts groups pay.
When comparing the rent support to the arts
center’s commercial rates, the total support
exceeds $229,000 per year, or $1,149,500 in
total.

 The arts center has supplemented OPO’s

marketing investment by promoting its shows on
the arts center’s website, in direct email
marketing, in ad buys and in public relations
efforts. Tessitura ticketing assistance and event
banquet support have also been provided. The
total value to date of this additional support is
$42,000 per year, or a total of $210,000.

Note: In addition to the $1.3 million in subsidy support,

the arts center engaged the Philharmonic for multiple
presentations and was charged by OPO a premium rate,
resulting in a payment to the Philharmonic of $659,000.
The premium rate is approximately $55,000 more than
the arts center would have paid a contracted orchestra.

11. Dr. Phillips Center Operates Day-to-Day Without Public Funding

Arts Groups Assertion DPC was established and construction approved by

Orange County, the City of Orlando, and significant
public funding.

Clarification/Correction Public and private funding contributed to the

construction of the Dr. Phillips Center building. The Dr.
Phillips Center raised a significant amount of private
philanthropy for construction and is one of the largest
donors to the building, which is owned by the City of
Orlando. The Dr. Phillips Center is solely responsible for
maintaining and sustaining the arts center, operating
the arts center at risk, and has invested millions in its
upkeep.
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MORE: Context for Specific Rate Increases

Arts Groups Assertion OB – Over the past two years, rental rates have gone up
50 percent and are projected to increase by an
additional 26 percent over the next two years.

Response Rate increases have been discussed among the City,

County, Dr. Phillips Center and the arts groups for years,
dating back to 2005. They should come as no surprise.

The rental rates have increased year over year in line

with our plan to gradually increase the rates over time
to reach an average of comparable venues in Florida.
While the percentage increases are in the double digits
over the two-year periods referenced, it is important to
note that the beginning rent charged by the City for the
Bob Carr Theater was quite low and far below averages.
Although dollar increases are not particularly large,
percentage differences can seem higher if taken out of
context.

Additionally, the arts center has agreed to only raise

OB’s rental rent by $425 for performances in Steinmetz
Hall for the first year, making the percentage difference
in rent for those performances 10%. OB is choosing to
keep Nutcracker in Walt Disney Theater, which will not
have a resident contracted rate once Steinmetz Hall
becomes available. OB has been offered the standard
nonprofit rate instead.

Arts Groups Assertion OPO – The Philharmonic has experienced a 123 percent
increase over the past five years in the Bob Carr
Theater.

Response Again, rental rate increases were anticipated by all

parties and should come as no surprise. Prior to the
2014-2015 season, the Bob Carr Theater was operated
by the City of Orlando, which heavily subsidized rental
costs for the OPO and OB, charging just $1000 for
performance nights – far below other venues. In October
2014, Dr. Phillips Center agreed to operate the Bob Carr
and charged an initial rental rate of $2,000. Each year
since, Dr. Phillips Center has gradually increased rental
rates, with the intention of eventually reaching an
average, more sustainable rate. The high percentage
increase noted in the assertion needs the appropriate
context.

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 In typical orchestra configuration, Steinmetz Hall
Arts Groups Assertion capacity is a 37 percent reduction from Bob Carr
Theater capacity, requiring OPO to add Classical
Concerts in order to serve its existing patron base.

Response Steinmetz Hall was designed and is being built with the
full knowledge of – and approval by – all key
stakeholders, including the three arts groups in
question. Based on recent sales trends, OPO should
anticipate adding five additional performances to
accommodate current demand. Adding these
performances will increase expenses, but they also
provide the organization the opportunity to generate
revenue from ticket sales.

Audience growth is a positive development and we are

happy to continue helping the OPO evaluate and plan
for its transition to Steinmetz Hall.

Arts Groups Assertion OPO – In relation to additional concerts, DPC’s proposed

direct facility costs – rental and labor rates – constitute
a 95% increase in venue expenses from Bob Carr
Theater to the first season in Steinmetz Hall.

Response Transitioning from the Bob Carr to Steinmetz Hall is

significant and involves a different operating model. The
buildings have different layouts and locations, e.g. the
number of entry doors and emergency exits, traffic
patterns, etc., all of which will impact staffing, security
and other costs. Using conservative estimates, we
predict per-performance pass-through costs in total may
increase as much as 17%, or approximately $20,806,
per year.

During the first year in Steinmetz Hall, rental rates will

likely increase approximately 9%, or $425 per show.

Other costs, such as artist parking and union stagehand

contracts, are not included in direct reimbursables as
they are subject to OPO arrangements.

Arts Groups Assertion OO – The Opera would experience an increase from the
$16.30 per seat rate it pays to DPC in the Pugh Theater
to a cost of $33.17 per seat in Steinmetz Hall, monies
that go to DPC before anything goes to artists, the
orchestra, etc. With the non-profit rate and additional a
la carte expenses offered to OO by DPC, this would rise
to a 203 percent increase.

Response Opera Orlando currently performs in the 294-seat Pugh

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 Theater, where there are low rental rates ($600 per
performance) and lower associated costs. Performance
expenses to present in Steinmetz Hall, which has
capacity for up to 1,750 and is meticulously designed
for acoustics, are naturally higher than in the Pugh
Theater, especially as the organization is considering
rentals of up to eight full days. Without a list of
assumptions used by OO, we cannot calculate specific
costs, but are ready to work with their team to plan for
a reasonable, ultimately successful transition.

Arts Groups Assertion DPC made a commitment to local nonprofit arts

organizations and assured the community that
Orlando’s
fine arts would be able to call DPC “home” for the
majority of regular season productions. Under their new
requirements, we simply won’t be able to afford to use
Steinmetz Hall, the crown jewel of our community.

Clarification/Correction Dr Phillips Center agreed to provide a venue for OPO

and OB along with 80+ other local arts organizations.
The arts center is committed to helping all such groups
utilize the facility without impacting its proven and
successful business model. The financial strength of the
venue is critically important to all involved.

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