Summary of Palmer Auditorium Operating Losses and Bed Tax Underwriting 1982-1995

by Larry Akers

Friends of the Parks of Austin Stakeholder, Town Lake Park Community Project

Note: Supporting City of Austin financial documents are here.

The form of the accounting for the Public Events Facilities Fund has changed every few years, but the balance sheets show a consistent operating losses for Palmer Auditorium, losses which were balanced with Hotel/Motel Tax (“bed tax”) revenues. This report summarizes documents from fiscal years 1982-83 through 1994-95, after which distinct accounting for Palmer is impossible to distill from the Convention Center Departments documents. (Expenditures for all facilities, Convention Center, Palmer Auditorium, City Coliseum, were thereafter lumped into a single line item). This summary presents annual levels of funding and expense. The original source material can be found in the accompanying material, which is also linked from the main finance narrative.

The City’s Convention Center opened in 1992. Prior to that, our only public events facilities were Palmer Auditorium and the much smaller operation of the City Coliseum. The following tables shows annual bed tax funding through the 1980’s, along with the operating revenue, operating expense, and operating loss for Palmer and the Coliseum.

Fiscal Year Operating Revenue Expenses Operating Loss
1982-83 $1038027 1452755 414728
1983-84 $1055465 1640205 587740
1984-85 $1149897 1824778 674881
1986-87 $1140673 1643472 502799
1987-88 $1013063 1734129 721066
1988-89 $1056349 1408939 352590
1989-90 $1085150 1644744 559594
1990-91 $1122200 1937139 814939

Total bed tax transfers into the Public Event Facilities Fund were substantially greater than the operating loss, but that money was used for a variety of other requirements (e.g., CIP transfers for Palmer bonds, cultural arts, administrative support, and others), documented in the balance sheets as “Other Requirements”. Excesses and deficits relative to all these transfers contributed to an “Ending Balance”, which rose and fell year to year, most subtantially in 1990-91, when it completely funded the year’s operating loss.

But the clearest way to view the balance shees is to see that the operating revenues, expenses, and losses are clear, and the only revenue streams supporting the facilities were their own event revenues and the bed tax. Hence the bed tax fully and solely supported the operating loss during this decade at a level ranging from $352,590 to $814,939 (adjusting for inflation, $629,258 – $1,324,180).

In 1992, the new Convention Center opened, and the format of the accounting reports changed considerably. However the reports showed a continuation of the same patterns that had held for Palmer for years.

More recent Palmer revenue and expenses can be found in the Convention Center Revenue Fund Summaries.

Fiscal Year Operating Revenue Expenses Operating Loss
1992-93 992005 1338273 346268
1993-94 844141 1233801 389660
1994-95 951504 1400058 448554

Furthermore, Administrative Services were accounted for separately and without any accompanying income stream during these years. In 1994-95, for example, Administrative Services expenditures totalled $1,048,410, representing an additional 20.4% of the expenditures for all three facilities. Pro-rating this overhead factor into the table above gives a more accurate picture of the total operating loss for Palmer:

Fiscal Year Revenue Expenses Administration Loss
1992-93 992005 1338273 273104 619372
1993-94 844141 1233801 251784 641444
1994-95 951504 1400058 285713 734267

Thus, in 1992-93, Palmer’s operating revenue covered 74.13% of its operating expenses (a note in the report says as such), and including pro-rated administrative services overhead, this percentage drops to 61,56%.

Adjusting for CPI inflation, these losses amount to from $976,966 to $1,066,272 annually.

After 1995, the accounting for all operations expenses vanishes into pooled line items that include (and are completely dominated by) the Convention Center, so no distinct accounting for Palmer can be distilled from the records the City provided.

Also, from 2002-03 through 2004-05, according to the “Convention Center All Funds Combined Fund Summary”, there were Hotel/Motel Bed Tax-Convention Center transfers in (i.e., funding support) in the range $12,753,939 – $13,687,774, annually plus a 2% Hotel/Motel Bed Tax Venue allocation (Is the venue the Convention Center Hotel?) ranging from $5,667,852 to $6,083,455 annually.

In summary, Palmer Auditorium, which was formerly the City’s public events facility, has always sustained operating losses, on the order of $1,000,000 annually in today’s dollars. These losses have been underwritten by the City’s Hotel/Motel Bed Tax.

This precedent was assumed to continue as a mechanism for funding PEC operations by stakeholders and the public during the development of the Proposition 11 package and the Town Lake Park Community Project Master Plan. Furthermore, this level of funding would have substantially covered the operating deficits which the PEC has historically run, and to the extent that this level of funding would not, the dramatic increase in Bed Tax revenues since the period documented here would easily support the difference.

Note: Supporting City of Austin financial documents are here.

The form of the accounting for the Public Events Facilities Fund has changed every few years, but the balance sheets show a consistent operating losses for Palmer Auditorium, losses which were balanced with Hotel/Motel Tax (“bed tax”) revenues. This report summarizes documents from fiscal years 1982-83 through 1994-95, after which distinct accounting for Palmer is impossible to distill from the Convention Center Departments documents. (Expenditures for all facilities, Convention Center, Palmer Auditorium, City Coliseum, were thereafter lumped into a single line item). This summary presents annual levels of funding and expense. The original source material can be found in the accompanying material, which is also linked from the main finance narrative.

The City’s Convention Center opened in 1992. Prior to that, our only public events facilities were Palmer Auditorium and the much smaller operation of the City Coliseum. The following tables shows annual bed tax funding through the 1980’s, along with the operating revenue, operating expense, and operating loss for Palmer and the Coliseum.

Fiscal Year Operating Revenue Expenses Operating Loss
1982-83 $1038027 1452755 414728
1983-84 $1055465 1640205 587740
1984-85 $1149897 1824778 674881
1986-87 $1140673 1643472 502799
1987-88 $1013063 1734129 721066
1988-89 $1056349 1408939 352590
1989-90 $1085150 1644744 559594
1990-91 $1122200 1937139 814939

Total bed tax transfers into the Public Event Facilities Fund were substantially greater than the operating loss, but that money was used for a variety of other requirements (e.g., CIP transfers for Palmer bonds, cultural arts, administrative support, and others), documented in the balance sheets as “Other Requirements”. Excesses and deficits relative to all these transfers contributed to an “Ending Balance”, which rose and fell year to year, most subtantially in 1990-91, when it completely funded the year’s operating loss.

But the clearest way to view the balance shees is to see that the operating revenues, expenses, and losses are clear, and the only revenue streams supporting the facilities were their own event revenues and the bed tax. Hence the bed tax fully and solely supported the operating loss during this decade at a level ranging from $352,590 to $814,939 (adjusting for inflation, $629,258 – $1,324,180).

In 1992, the new Convention Center opened, and the format of the accounting reports changed considerably. However the reports showed a continuation of the same patterns that had held for Palmer for years.

More recent Palmer revenue and expenses can be found in the Convention Center Revenue Fund Summaries.

Fiscal Year Operating Revenue Expenses Operating Loss
1992-93 992005 1338273 346268
1993-94 844141 1233801 389660
1994-95 951504 1400058 448554

Furthermore, Administrative Services were accounted for separately and without any accompanying income stream during these years. In 1994-95, for example, Administrative Services expenditures totalled $1,048,410, representing an additional 20.4% of the expenditures for all three facilities. Pro-rating this overhead factor into the table above gives a more accurate picture of the total operating loss for Palmer:

Fiscal Year Revenue Expenses Administration Loss
1992-93 992005 1338273 273104 619372
1993-94 844141 1233801 251784 641444
1994-95 951504 1400058 285713 734267

Thus, in 1992-93, Palmer’s operating revenue covered 74.13% of its operating expenses (a note in the report says as such), and including pro-rated administrative services overhead, this percentage drops to 61,56%.

Adjusting for CPI inflation, these losses amount to from $976,966 to $1,066,272 annually.

After 1995, the accounting for all operations expenses vanishes into pooled line items that include (and are completely dominated by) the Convention Center, so no distinct accounting for Palmer can be distilled from the records the City provided.

Also, from 2002-03 through 2004-05, according to the “Convention Center All Funds Combined Fund Summary”, there were Hotel/Motel Bed Tax-Convention Center transfers in (i.e., funding support) in the range $12,753,939 – $13,687,774, annually plus a 2% Hotel/Motel Bed Tax Venue allocation (Is the venue the Convention Center Hotel?) ranging from $5,667,852 to $6,083,455 annually.

In summary, Palmer Auditorium, which was formerly the City’s public events facility, has always sustained operating losses, on the order of $1,000,000 annually in today’s dollars. These losses have been underwritten by the City’s Hotel/Motel Bed Tax.

This precedent was assumed to continue as a mechanism for funding PEC operations by stakeholders and the public during the development of the Proposition 11 package and the Town Lake Park Community Project Master Plan. Furthermore, this level of funding would have substantially covered the operating deficits which the PEC has historically run, and to the extent that this level of funding would not, the dramatic increase in Bed Tax revenues since the period documented here would easily support the difference.

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