7 A MANAGEMENT MODEL STUDY

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1 7.1 Aim s and Objectives of the Management Model Study Positive Solutions is part of the consultant team and is w orking on the governance and m anagem ent model to ensure appropriate operating arrangements fo r the Precinct. The governance arrangements drive the follow ing aspects of precinct operations: Leadership and coordination Business-to-business marketing (e.g. to potential tenants, developers) Destination branding and marketing (to the general public, potential visitors) Site activation and place making. Asset management and maintenance. Common administrative and technical services. Resident and tenant relationships. Revenue generation and com m ercial sustainability. In light of cultural precinct experience elsewhere in Australia and overseas five options have been considered for operation of KAP. These are: 1. Direct operation by artsact. 2. Operation by a consortium of m ajor tenants and stakeholders on-site. 3. Operation by a new arm s-length but controlled entity - a Governm ent-owned corporation or possibly a statutory authority - with responsibility fo r all functions and activities on-site, but effecting delivery through tenant and sub-contractor arrangements. 4. Operation by a new, independent entity - w ith responsibility fo r all functions and activities on-site, but effecting delivery through tenant and sub-contractor arrangements. 5. Operation by an existing agency, extending its scope of activities to include KAP. This could be by invitation or through a tendering process. 7.2 Issues surrounding different m anagement models The potential benefit of artsact operating the site is that the agency has a strong understanding of the arts and cultural sector, ow nership of the Vision fo r the Precinct and, am ongst its staff, experience of cultural facility management. However, there are some significant disadvantages including: Facility or precinct operation is not core business for artsact and could divert focus from its m ore strategic roles. artsact m ay be conflicted by operating KAP while being responsible fo r m onitoring and ensuring best public value. Third-party resourcing, including philanthropy, w ould be m ore challenging w ithin a governm ent operating environment. Day to day decision making will become constrained by Government bureaucratic processes. The operation of the site by a consortium of tenants and stakeholders has the benefit of ensuring a strong voice by those m ost affected by effective operation of the Precinct, and harnessing their com m itm ent, but it presents several disadvantages: Conflicts of interest, with tenants being their own landlords' Diversion of arts and other organisations from their core business, and potentially overstretching them The probable lack of destination marketing, event m anagement, and necessary asset m anagem ent experience required. Neither direct artsact operation nor the tenant-consortium approach has been considered further in this study. Page74

2 7.3 The Recommended Model Each of the rem aining options has merits. However, the project team recom m ends that a new, independent entity be established to realise the Precinct Vision. The focus, energy and expertise required - and the com plex range of onsite and stakeholder relationships to be m anaged - suggests that allocating responsibility to an existing entity could pose risks to that entity's current operations and may com prom ise the Precinct's development. Further, it is recom m ended that the entity be placed at arm s-length from Government at as early a stage as practical after the process of establishm ent. The selection of initial board m em bers should be recom m ended by artsact, and approved by the M inister fo r the Arts, bearing in m ind the range of cultural, marketing, property m anagem ent and other skills which will be appropriate to the operating entity. The Management and Governance w ork also recom m ends that: a. The board should be capped at a m axim um of eight mem bers. The initial board appointed by the Minister should be a m inim um of three and a m axim um of five. b. M em bership of the com pany and m em bership of the board should be synchronised. The project team sees no compelling reason to expand the membership to a w ider base. c. The board be obliged to report to Government and to consult w ith tenants on a regular basis, as indicated below. Initial board m em bers w ill be appointed by Government (process to be determined), but it is recom m ended that subsequent to initial establishm ent the board have pow er of co-option to control its own m em bership and skills m ix in the longer term, with appointment of the Chair continuing to be subject to Government approval. If the recom m endation to establish an independent entity is adopted it w ill be at the discretion of the board of that entity to determ ine w hether fees should be paid to the directors. If a controlled entity is established the project team would recom m end that reasonable fees should be paid to the directors. W hile it is not standard practice fo r arts boards to be paid, the entity operating the Precinct has a m uch w ider rem it than arts boards - including significant property responsibilities. The risks and responsibilities, as well as the level of com m itm ent required during early years of operation, merit financial recognition. A CEO w ill have overall day-to-day responsibility fo r Precinct operations and program s. The role w ill need to be strategic, outw ardly-focused and change-oriented. A high proportion of the CEO's tim e is likely to be devoted to partnership-building, public com m unications, tenant negotiations - at the same tim e as maintaining effective day-today operations. It w ill be in the interests of the Precinct Vision and the O perator's overall effectiveness fo r tenants, the arts com m unity of Canberra, and other com m unity and business stakeholders to be closely consulted and engaged in the Precinct's development and operations. The consultant team have recommended mechanisms for this. The sources of revenue for a Precinct operating entity could include: Rental income. Hiring incom e from short-term use of specific facilities. Car parking income. Business partnerships or sponsorships. Event-related income. The main areas of expenditure will be: Asset management and maintenance. Energy and other establishment overheads. Branding, marketing and com m unications activity. Site activation and program m ing (events). Administration related to tenant liaison, event management and stakeholder liaison. Page75

3 Governance costs. The Precinct Operator can be held accountable fo r delivering the Vision fo r the Precinct through several m echanism s. First, a head lease or (if the land were transferred to the operating entity) a covenant w hich obliges to fulfil stated objectives fo r the Precinct; secondly, an approved strategic plan fo r the Precinct, which w ould be reviewed and refreshed periodically, and supported by annual business plans; thirdly, a Charter w hich articulates the principles and expected outcom es fo r the Precinct. There are a num ber of existing m odels w hich m ight inform these docum ents, including arrangements at Salamanca Arts Centre in Hobart, A bbotsford Convent in Melbourne, and Federation Square Pty Ltd, also in Melbourne. The project team recommends the development of a sim ilar fram ing docum ent for KAP. It is proposed that the planning and reporting fram ew ork between the Precinct Operator and Government com prise the follow ing: Preparation and approval of a three to five year strategic plan fo r the Operator - this w ill form part of a service agreement. For transparency and accountability the approved plan should be available from the Precinct website. Preparation and approval of an annual business plan and budget. Provision of a quarterly or six-m onthly report by the Operator to Government, describing program activities, financial results, a risk assessm ent update, operational issues and progress against the strategic plan. The form of the report w ould be agreed by the tw o parties and m ight include sum m ary charts or dashboard' techniques fo r com m unicating results easily Regular meetings between the CEO of the Precinct and a principal contact within Government An annual presentation to and discussion w ith artsact, Chief Minister, Treasury and Econom ic Development Directorate (CMTEDD). 7.4 Findings and Recom mendations of the Management Model Based on the Management Model work, the follow ing recommendations can be given: 7a. Recommended Model: The project team recom m ends that a new, independent entity be established to realise the Precinct Vision. The focus, energy and expertise required - and the com plex range of onsite and stakeholder relationships to be managed - suggests that allocating responsibility to an existing entity could pose risks to that entity's current operations and m ay com prom ise the Precinct's development. It is recom m ended that the entity be placed at arm s-length from Government at as early a stage as practical after the process of establishm ent. The selection of initial board m em bers should be recom m ended by artsact, and approved by the M inister fo r the Arts, bearing in m ind the range of cultural, marketing, property m anagem ent and other skills w hich w ill be appropriate to the operating entity. 7b. S tructure of the Board: 7c. Fees: The recommended structure for the board is: a. The board should be capped at a m axim um of eight mem bers. The initial board appointed by the M inister should be a m inim um of three and a maximum of five. b. Membership of the com pany and membership of the board should be synchronised. c. The board be obliged to report to Government and to consult w ith tenants on a regular basis. If a controlled entity is established the project team w ould recom m end that reasonable fees should be paid to the directors. W hile it is not standard practice for arts boards to be paid, the entity operating the Precinct has a m uch w ider rem it than arts boards - including significant property responsibilities. The risks and responsibilities, as well as the level of com m itm ent required during early years of operation, merit financial recognition. 7d. A range of measures should be put in place to ensure accountability and transparency, these Page76

4 A ccountability: include: Preparation and approval of a three to five year strategic plan fo r the Operator - this will form part of a service agreement. Preparation and approval of an annual business plan and budget. Provision of a quarterly or six-m onthly report by the Operator to Government, describing program activities, financial results, a risk assessm ent update, operational issues and progress against the strategic plan. Regular meetings between the CEO of the Precinct and a principal contact within Government An annual presentation to and discussion w ith artsact, Chief Minister, Treasury and Economic Development Directorate (CMTEDD). Page7

5 FINAL RECOMMENDATIONS 8.1 Final Recom mendations of the Study This report provides the follow ing recom m endations and it is the opinion of the project team that these recommendations be implemented to allow for the successful realisation of an arts precinct at the Kingston Foreshore: 8a. Functional Brief: The Functional Brief has been prepared based on the inform ation derived through the consultation process. It proposes a range of different types of space and also proposes a level of co-location which is consistent with the arts hub policy objectives. The Functional Brief recom m ends that the identified arts organisations w ill require about 7,571sqm of floor area in office, exhibition, retail, w orkshop, training, meeting circulation and servicing type spaces. These spaces could be located in one or more buildings, arranged close together to ensure strong w orking synergies between the different arts organisations can develop. 8b. Parking: The precinct should replace the 480 public parks that current exist, plus provide the parking generated by new development and parking generated by the arts organisations. The parking generation fo r the arts organisations has been based on the Parking and Vehicular Access Guidelines Code and it is estim ated that 7,571 sqm of arts use w ill generate about 152 employee parking spaces. 8c. Consultation: 8d. Statutory Planning: In contrast to the view expressed in K in g s t o n A r t s P r e c in c t S tr a te g y, prepared by Susan Conroy, there now appears to be strong support fo r the developm ent of an arts precinct at the Kingston Foreshore by a range of different arts organisations in the ACT. In addition to this, there are a range of other organisations (both governm ent and private) that have expressed an interest in being located on an arts precinct and thus indicating that a mixed use arts focussed' precinct at the Kingston Foreshore would have considerable support. The current CZ5 Com m ercial Zones Development Code and Kingston Precinct Code indicate that a mixed use arts precinct w ould be suitable fo r the site and that the m ajority of proposed uses would be permissible. It is the opinion of the project team that the precinct should be considered a special place,' unique to other parts of the Kingston Foreshore. There should be a variation to the Territory Plan to increase the flexibility of perm issible uses, floor area restrictions and possibly height restrictions to ensure that the intention of an arts precinct as described in this report be realised. 8e. Design Option: 8f. M anagem ent Model: The arrangem ent presented in Design Option One w hich not only provides the optim um outcom e fo r the arts organisations, but presents the preferred urban design outcom e which would provide the best outcome for the com m unity. The project team recom m ends that a new, independent entity be established to realise the Precinct Vision. It is recom m ended that the entity be placed at arm s-length from Government at as early a stage as practical after the process of establishm ent. The selection of initial board m em bers should be recom m ended by artsact, and approved by the M inister fo r the Arts, with consideration of the range of cultural, marketing, property m anagem ent and other skills which will be appropriate to the operating entity. Page78