An ongoing series, State of the Arts is a look at the municipal funding landscape in Hamilton, its opportunities and restrictions and how this compares to other municipalities in Ontario.
Miss the introduction to this series? Part one provided an overview of the historic funding landscape and how public funders are evolving to recognize artists and groups with diverse visions and increased community impact.
The arts community was filled with hope when the City of Hamilton announced a change to the structure of its arts funding in 2015, increasing funding available to artists and organizations through the City Enrichment Fund by $500,000. By 2020, according to the City’s website, a total amount of $2,466,738 had been distributed to arts and culture organizations under this program specifically in a stream of funding called “operating.” Typically, operating grants offer ongoing support of an organization across a period of time (such as a season or year), rather than project funding, which provides one-time support for specific initiatives (such as a concert). Due to the pandemic, some conditions of funding were renegotiated; as such, this series utilized 2019 results when analyzing information.
In 2019, the City’s statements show that a total of $2,773,742 was approved for distribution across four streams of funding, with the largest amount – $2,437,364 or 88% of the total funding available – being allocated for operating funding, which was distributed to thirty-two successful applicants.
While $2.4 million dollars may seem like a lifeline and opportunity to expand for many arts organizations, over 50% of these funds went to just two organizations; The Art Gallery of Hamilton ($1 million) and Theatre Aquarius ($260,000). Combined with the operating grants made to the Brott Music Festival ($182,800) and the Hamilton Philharmonic Orchestra ($171,666), the total amount distributed to the top four organizations is 66% of the operating funds granted in 2019. The remaining twenty-eight organizations split the last available 33% of $823,000.
The significant funding received by these four organizations is likely a result of their status as longstanding cornerstones of the arts community. However, part of the intention behind the change to the funding structure in 2015 was to allow for new organizations to see greater opportunity and build Hamilton’s status as an arts incubator. Additionally, when considering distribution of funds, one must also consider how these funds will be utilized. An organization with a large accumulated surplus may not have need for such a large municipal contribution year-over-year, yet an arts organization scaling up its programming to impact underserved areas may be in critical need of that funding to update their infrastructure to deliver on their mission.
For example, the Brott Music Festival received $182,800 from the City of Hamilton in both 2018 and 2019, representing 10% of their operating budget during the same time period. From 2015-2019, the festival reported financial statements to the Canada Revenue Agency (CRA) showing an accumulated surplus of almost $300,000; roughly 17% of their operating budget.
The Hamilton Philharmonic Orchestra (HPO) received a slight increase in their funding from the City of Hamilton between 2018 and 2019, despite reporting an accumulated surplus to the CRA of almost $500,000 over the period of 2015-2019, or roughly 25% of their operating budget. Like the Brott Festival, the accumulated surplus of the HPO exceeds the amount the organization receives in annual funding. While maintaining funding from the City of Hamilton demonstrates the need and importance of the commitment from the City to these longstanding organizations, without increased infrastructure or growth from either organization, the current level of funding received is simply adding to their accumulated surpluses. It would be more meaningful for the City to reduce funding to both organizations in a way that would minimally impact operations, but could provide several thousand dollars to other underfunded organizations in need of support to increase their infrastructure.
It is important to note that the numbers utilized in this article are from 2019. As such, it is currently unknown how these organizations have fared as a result of COVID-19; however, with substantial accumulated surpluses, both of these organizations would be well-positioned when compared to many others to weather an unpredictable financial storm – such as a pandemic.
While an organization with a large accumulated surplus may not have as much need for a large municipal investment year-over-year (particularly if operations are relatively unchanging), and may be well-positioned in times of turbulence, organizations with substantial accumulated deficits are much less prepared to weather uncertainty. Once an accumulated deficit reaches a certain percentage of an organization’s operating budget, public funding is often reduced, or additional conditions are made as a result of funding. Usually, this involves the creation of a deficit reduction plan. This is part of a funder’s due diligence to ensure that they are supporting and investing in organizations and projects that are sustainable and will use the awarded funds responsibly.
The Art Gallery of Hamilton’s financial statements show an accumulated surplus of almost $3 million, yet a deeper dive into their individual statements suggest that this is due to a substantial surplus of $14 million recorded in 2015. Since then, the AGH has reported year-over-year deficits of at least $900,000 annually. Despite this, in both 2018 and 2019, the gallery received $1 million each year from the City Enrichment Fund, representing a total of 17% of the organization’s 2019 operating budget.
Theatre Aquarius received a slight increase to their operating funding from the City Enrichment Fund between 2018 and 2019, despite having a year-over-year accumulated deficit since 2015 of $582,421. Based on the organization’s reported financial statements to the Canada Revenue Agency, this deficit of half a million dollars represents roughly 12% of the Theatre’s operating budget. With a deficit of this percentage, other public arts funders would request a formal deficit reduction plan as part of overall considerations for ongoing funding. It is unknown how or if this is a factor in the City of Hamilton’s process.
With substantial deficits year-over-year, one can wonder how these organizations will manage their finances to meet ongoing obligations. Will the City one day be responsible for them? There may be a point when the City faces a last-minute ask to “save” the organization, as has happened in other Ontario municipalities. Before that day arrives, it is worth considering if the City’s investments would not see better return elsewhere, or if other oversights and restructuring is needed to protect these investments and make change to eventually see a positive return.
Like the HPO and Brott Festival, there is no question that the AGH and Theatre Aquarius are longstanding, important cornerstones of the arts community. However, the restructuring of arts funding was intended to give greater opportunity to emerging and growing arts organizations. While this has been done to a certain extent, there is much room for improvement.
Although these organizations are responsible for their own financial management, they are not responsible for the amount they receive each year from the Enrichment Fund, which is decided through an application and assessment process. Without a commitment to change and re-examine the funding structure of its programmes, including the operating funding stream, it is difficult to imagine change. The next article in this series will take a closer look at the different streams of funding available to artists and arts organizations, and its impact on the City of Hamilton’s abilities to reach the goals identified in their 2016-2025 strategic plan.