Biz Journal: Could tax-based funding be key to sustaining city’s arts and cultural institutions?

This story was originally published at the Philadelphia Business Journal

After the recession hit in 2008, Philadelphia’s arts and cultural institutions have had to focus on diversifying their revenue streams in order to sustain themselves. And, while they’re doing all they can, from lowering ticket prices to offering more diverse programs, experts say a tax-based funding model could be key to sustaining the sector.

“The big one for us is dedicated public funding, which Philadelphia does not have that other cities have,” said Michael Norris, interim executive director of the Greater Philadelphia Cultural Alliance.

Earlier this year, City Council approved a revised 2015 fiscal year city budget, giving the Philadelphia Cultural Fund a $1.3 million increase for grant-making, increasing its budget to $2.9 million and its total budget to $3.1 million.

The 70 percent increase comes four years after the organization’s budget was cut from $3.2 million to $1.84 million, where it remained until this year through an appropriations process.

The appropriations process, however, may not be enough to sustain the arts sector in the long run, those with skin in the game are saying.

“There is public funding for the arts in the city and state level, but we basically have to fight for that money every year because it’s appropriated in the budget process every year,” Norris said.

What are other cities and states doing?

Pittsburgh’s Allegheny County has what is called the Allegheny Regional Asset District, a special purpose unit of the local government. It supports and finances regional assets such as sports facilities, cultural institutions, and parks and recreation through the following assets:

• Contractual, a 10-year funding commitment.
• Annual, given on an annual basis.
• Multiyear, more than one year of commitments beyond the contractual asset period.

For 2014, the district’s grants totaled more than $90 million.

As to why it’s needed, the district said it needed to stop relying on real estate tax as a the main source of funding. It was also set up to provide a local tax relief program for low-income senior citizens.

Here’s more:

The need to preserve recreational and cultural institutions and libraries important to our families and our economy without burdening any one municipality or the county government. Most of these institutions faced a decrease or elimination of local support because of other demands on government budgets.

Read more about the Allegheny Regional Asset District here.

Other states and regions that have similar funding models including Alabama’s Council on Arts and Humanities model, which is an income tax check-off; Oregon’s Cultural Trust, which is based on a system of income tax credits; and Fort Lauderdale, Fla.’s Broward Cultural Affairs Council, which is funded through a sales tax on admissions, music stores and rental of tangible property. (Source: Greater Philadelphia Cultural Alliance).

Norris said this public tax-based budget model is smart because it would provide a consistent stream of revenue, and also because it’s tax-based, which can be large — “way more than” than what the city is getting now through the appropriation’s process.

Getting public and political support

Getting public tax-funded models would take time to initiate, leaders say, especially after an economy that’s just getting out of the recession.

“The question is how do you make the case to the public, and then for the politicians who serve the public?” said Joe Kluger, chairman of the Mayor’s Cultural Advisory Council and principal at WolfBrown, a nonprofit consultancy.

Politically, Kluger said it would also take more time for Philadelphia to adopt such models because of the city and state’s focus on funding other sectors such as education and infrastructure.

“To get a politician to stick his or her neck out and say allocating tax dollars to ‘quality of life’ organizations is a ‘must-have’ versus a ‘nice-to-have’ when you have so many other pressing needs [would be difficult,]” Kluger said. “I’ll be the first to tell you that I wouldn’t, politically, nor would the public, propose discussing this as an actionable item until the state addresses the higher hierarchy of needs that are must-haves.”

However, once the economy stabilizes, Kluger said he’s hopeful tax-based funding can finally be put on the table. But, it’s not something he would “broach now.”

Read more on Philadelphia’s arts and cultural crisis here and here. (Must be a subscriber to PBJ to access the 2nd link).

Photo by Francis Hilario