After nearly three hours of discussion, the Brown County Council approved the $239,000 appropriation of the county’s CARES Act funding to the Brown County Music Center on Jan. 19.
The motion was approved unanimously, with new member Judy Swift recusing herself.
Residents questioned the council about their decision before the motion was approved.
Questions centered on a long-term financial plan for the music center and government oversight on the budget, the details behind the reason for the $239,000 price tag, and if innkeepers tax should be used only to support the music center, not marketing Brown County.
“Prevent any surprises to taxpayers. What do those projections look like? How much more money is going to be needed? Will it be a loan? A subsidy? Also, what is plan B? What if this is not sustainable?” resident Tim Clark asked.
The memorandum of understanding (MOU) between the county commissioners and the music center includes reimbursing the BCMC $239,000, after the county used the building to hold jury trials and other functions, like county board meetings. The 2,000-seat auditorium allowed some of those events to go on in person instead of over the phone or on Zoom. The venue had closed its doors for other events due to COVID-19 in March.
BCMC Executive Director Christian Webb explained the $239,000 price tag to “rent” the venue after questions were asked by both council members and residents. He said it typically would cost a touring band or musician $10,000 a day to rent the venue, just to open the doors.
When the MOUs were signed earlier in 2020 by Webb and commissioner Diana Biddle, Webb said the future of the music center was uncertain with COVID-19 and that initially, the plan was to have the venue used for a total of 30 days over a few months for court cases.
“The health department wanted to look at it, so we ballparked a month of using it every day in and day out. We knew it wasn’t going to be used every day in and day out, but over the span of five or six months, it was going to be utilized for about 30 days, which is about $300,000,” he explained to the council.
The $10,000 a day did not cover utilities or housekeeping. “I think it came out to closer to $400,000,” Webb said.
“I looked at Diana and said, ‘That’s ridiculous. I can’t in my right mind charge you this full boat.’ We threw in almost a 30-percent discount. … It wound up, not to sit here and look back on each day of usage, but that venue was utilized a lot more than 30 days. It’s still in use today.”
Ultimately, the $239,000 price covered rent, utilities and housekeeping for using the venue, Webb said.
At the Jan. 20 Brown County Commissioners meeting, Biddle said the MOUs were not voted on because they were considered emergency actions in response to COVID-19.
At the Jan. 19 council meeting, Redding said that since the initial CARES Act program was for reimbursement, that authorized the commissioners to gather and submit claims to receive those reimbursements. The council became involved after the program was changed to appropriations requiring their approval.
Since August, the Brown County Health Department also has been running a COVID-19 testing site out of the venue and it is now also the county’s vaccine site.
The music center also has an MOU with the commissioners and the Brown County Health Department. Compensation for that MOU was set at $20,000 and is to come from grant funding, not from the CARES Act.
Originally, the rules for the CARES Act funding were that it would be for reimbursements on expenses related to supplying personal protection equipment, unbudgeted payroll and compliance with COVID-19 restrictions, according to a letter from Barnes and Thornburg attorney Jake German.
German said the council can legally appropriate the funds to the music center since the MOU was signed before rules were changed regarding reimbursement.
In September, the Indiana Finance Authority requested local units of government to submit public health and safety payroll records for costs incurred from March 1 to Sept. 30 after the rules were changed at the federal level. Brown County received $494,248 of CARES Act funding.
Council President Dave Redding had asked Barnes and Thornburg to do a complete legal review of all actions taken by the public officials involved in securing the CARES Act funding, including the council, and the MOUs after questions were raised by residents.
“My conclusion is we have a proper contract where there was an amount identified for the use of this facility from April to the end of year,” Redding said.
County officials will soon have to decide whether or not to sign another MOU with the music center.
“Do we need the music center with all of that space for 2021? That’s something we need to evaluate and work on,” Redding said.
Before the appropriation was approved, council vice president Dave Critser and new member Judy Swift-Powdrill said the council needs to look closely at the music center’s financial situation before signing any additional MOUs for 2021.
“I’m all for paying $239,000, but I really want us to look at 2021. If there’s going to be any MOUs it should be monthly and negotiated prices,” Critser said.
“We need to definitely look at 2021 and we need to be careful how we approach it. Like Dave said, even if it’s monthly reports, that type of thing, we definitely need to look at those carefully,” Powdrill added.
Biddle said the music center is one of the only places in the county that could be the site of COVID-19 testing and vaccinations due to Americans with Disabilities Act requirements.
“It was Barnes and Thornburg’s suggestion that we enter into an agreement with the music center in order to basically use up the remainder of CARES Act money that was available to us,” she said.
Resident Sherrie Mitchell said that it was unfair to taxpayers to use $239,000 of the CARES Act funding to pay the music center when the installment purchase contract states the county’s innkeepers tax should be used to pay the mortgage payments if the venue does not have enough money to do so.
“I don’t have a problem with the music center being paid, I have a problem with the music center being paid $47,800 a month when we have already in our installment purchase contract agreed to give taxpayer money, which is the innkeepers tax, to pay this mortgage,” she said.
The Brown County Convention and Visitors Commission manages the innkeepers tax, a 5-percent tax on overnight room rentals in the county. CVC President Kevin Ault also attended the Jan. 19 meeting.
He reported the innkeepers tax fund has around $84,000 in it after a $150,000 loan to the music center was paid back to the county.
Ault said the innkeepers tax has been used to pay the mortgage payments on the music center mortgage. The venue will be required to pay interest only until the end of 2021, which is about $37,000 a month.
Due to slower winter months for visitors, Ault said he did not expect that fund to build back up immediately. “We’re probably going to have enough to pay the interest payments only. We’ll probably have enough money to get it out for about three months,” he said of the fund.
Ault also serves as co-president of the music center’s management group. He said the intent was to use the $239,000 in CARES Act funding for operations “because at this point we’re collecting no money.”
“We have to pay the utilities, what little salaries we have. We three employees that are all working at 50 percent salary right now. They have all taken reductions. That money is going to be used to do that,” he said.
Music center finances
Webb gave a presentation on the music center’s financial situation for 2020 with a projection for 2021 if shows start happening there in the third quarter.
In 2020, the music center received more than $120,000 in grant funding to help cover costs, including $72,600 from the Paycheck Protection Program. Even with grant funding and cutting expenses, the net gap for 2020 was negative $158,215.47.
For 2021, the forecast budget has the music center earning $77,875 in profit if more than 50 shows on the books happen.
“We looked at our profit, expenses, operating income and interest-only mortgage payments. That puts us on a profitability margin for the end of 2021. The point is, we have to get there. Again, I don’t know if we will,” Webb said.
The $77,000 in profit is projected after the music center pays the interest-only mortgage payments and more than $2.6 million in expenses.
At the Jan. 26 management group meeting, the music center’s controller Jeff Overby presented an update on the music center’s bottom line for 2020, which was at $76,195.91, and included the receipt of the $239,000 in CARES Act funding. Webb’s presentation at county council was based on the preliminary profit and loss statement without the CARES Act money since it had not yet been received, Overby explained in a follow-up email last week.
Overby and Webb also spoke about the music center applying for a portion of the $10 billion federal grant funding that will be made available to independent music venues across the country. The Shuttered Venue Operators grant program was approved as part of the recent COVID-19 stimulus package. Based on the grant’s formula the music venue has up to $1.9 million in grant funding available to it.
Webb said that when the Small Business Administration opens the application window, they will be ready to submit. However, the music center’s ability to apply for the grant funding will be delayed until phase two because the music center received money from the CARES Act.
The first phase of grant funding is only available to venues that lost 90 percent of their gross revenue last year due to COVID-19. Phase two applications will open two weeks after the first phase.
”We were borderline right there (at the 90 percent mark). It’s a good problem to have,” Overby said.
Webb also said that show offers for the venue were starting to come back in and that the music industry was still eyeing at third quarter return for indoor shows.
“The artists don’t want to cancel. They don’t want to lose revenue either,” he said.
He said the shows that are being offered are at full capacity, with all 2,000 seats available.
“We’re keeping an eye on everything going on in our venue and around the world. We’re hoping for the best,” Webb said.
Ault and Webb are expected to come back to the February county council meeting to provide a financial update on the music center and innkeepers tax using their audited numbers.
New council member Scott Rudd said he supported approving the CARES Act appropriation for the music center because the venue is the site of a needed service in the county currently.
“As a new council member, I’m looking at this thinking our job is to facilitate the flow of funding to needed services, and I can’t think of a better example right now than the delivery of vaccines to our first responders and health officials,” he said.