06/01/08 — Revenue won't pay all bills for Paramount

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Revenue won't pay all bills for Paramount

By Anessa Myers
Published in News on June 1, 2008 3:19 AM

The Paramount Theatre is bringing in performances, but will it bring in the dollars?

One of the largest single line items in the city's $48.2 million 2008-09 budget is the Paramount Theatre at $681,038.

But even though Goldsboro city officials don't expect to make any money off of it, they believe the theater has more to offer than just monetary gains.

Currently, the theater's operating budget is expected to be $297,042.

City finance officials anticipate $10,000 for electricity, $21,000 for natural gas, $5,570 for insurance, $18,220 for building maintenance and $12,600 to bring in performances.

Salaries for the theater director, a theater service coordinator, senior custodian and other part-time positions total $154,143.

Other costs included in the operating budget are office supplies, cleaning supplies, employee benefits, postage and various small-ticket items.

On top of the day-to-day costs, though, the debt service for the next fiscal year totals $383,996.

"The debt service is for what we expect to have to pay after David Weil utilizes money he collects via donations and the insurance proceeds we forwarded to him early on," City Manager Joe Huffman said. "This amount could be reduced if new contributions come in before we issue the debt.

"The debt service assumes we will have to issue new debt totaling $5 million."

However, the theater is only expected to bring in $146,936 in revenue, leaving the city in the red for more than $500,000.

Huffman said the cost translates into a very small amount of property tax.

"Once you reduce the overall impact of these costs by factoring in the anticipated revenue of $146,936, the result is a net cost of $534,102," he said. "One cent of property tax will generate $207,034 -- including the annexation under judicial consideration. Otherwise (not including annexation) a penny is expected to generate $200,944 next year.

"When you divide $534,102 by $207,034, the overall cost of the project appears to be the equivalent of what 2.5 cents of the tax rate generates."

He explained that governments don't follow the same steps for finances as private businesses do.

"The argument I have heard in the past is that government should be run like a business. I do agree that there are similarities. However, the one big difference I see is that government is not driven by profit -- at least not in the short term," he said. "I have heard that businesses typically survive an average of 20 years. Governments can last decades beyond that amount of time, even if they are totally dysfunctional.

"Government typically ends up doing the things that the private sector sees as not being worthwhile from a financial standpoint."

And as for the half-million dollars the theater will likely cost the city, Huffman said that isn't out of the ordinary.

"While there are some parallels in proprietary funds like water and sewer -- although even these municipal activities typically involve public health issues -- in the general fund, it is difficult to expect to make a net gain in revenue at the department level," he said. "Activities like police and fire service are good examples."

His belief is that if someone could have built a performing arts facility to generate revenue in Goldsboro, one would have already been built by the private sector.

"To me, government gets to do the worthwhile things that no one else seems to think will make money," he said.

So why jump into a large financial project knowing that the numbers might not balance out?

Huffman said it's more about what continued development downtown can spark.

"The Paramount will not generate revenue by itself. However, there is a big picture to consider," he said. "I think council members decided to move forward because they saw a need. They saw the facility as a way of meeting the expectations of a citizenry with very high expectations.

"The facility will meet these needs. If this kind of investment makes Goldsboro more attractive as a city, it is likely we will have a better chance of keeping folks in the area and attracting folks to our city. This is the economic payoff piece. Goldsboro, like other cities, is heavily involved in economic development on several fronts."

Still, Huffman said, financial success with the Paramount Theatre isn't out of the question -- it might just take time.

"While the private sector looks at outcomes for shorter periods of time, the city looks long-term. Investments are made with the understanding that results might not be achieved for decades," he said. "It is my opinion that all of our departments make Goldsboro more attractive and livable. The Paramount Theatre is the latest example of this kind of investment."