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HomeMy WebLinkAbout2016-29 CC Reso - Adopting Terms for Agmt with Sun House Guild & GHM Endowment Fund1 1 RESOLUTION 2016- RESOLUTION OF THE CITY COUNCIL OF THE CITY OF UKIAH ADOPTING TERMS FOR A BUSINESS ARRANGEMENT BETWEEN THE SUN HOUSE GUILD, THE GRACE HUDSON MUSEUM ENDOWMENT FUND AND THE CITY OF UKIAH WHEREAS, 1. The City of Ukiah ("City") is a general law municipal corporation that owns and operates for the public benefit the Grace Hudson Museum and Sun House collections and facilities ("Museum"); and 2. The Sun House Guild ("Guild") is a California non-profit public benefit corporation with tax-exempt charitable status pursuant to Internal Revenue Code Section 501(c)(3) and is organized for the purpose of supporting the Museum through charitable fund-raising; and 3. The Grace Hudson Museum Endowment Fund ("Endowment") is a California non- profit public benefit corporation with tax-exempt charitable status pursuant to Internal Revenue Code Section 501(c)( 3) and is organized for the purpose of supporting the Museum through long-term fund development and investment oversight; and 4. The City, Guild, and Endowment have worked together for more than three decades to provide for the continuing operations and programs of the Museum as detailed in Exhibit A; and 5. The City, Guild, and Endowment have developed a business arrangement whereby a portion of Guild fundraising and Endowment investment cash-flow is directed to the City to offset the annual operating expenses for the Museum: NOW, THEREFORE, BE IT RESOLVED: Beginning with the Fiscal Year 2015-2016, and continuing each year thereafter, the following formula will be utilized to determine an annual contribution from the Guild and Endowment to the City for the support of the Museum: 1. The Endowment four-year rolling average will be computed as the combined average of the portfolio balance on December 31 each year ("year end"), for the most recent four years. 2. The ENDOWMENT cash-flow will be determined as 2% of the four-year rolling average. 50% of the 2% cash-flow will be used for Revenue Sharing, and allocated to the CITY. 3. The Guild will allocate funds to the City, starting with a flat amount of $20,000 for the 2015-2016 fiscal year, with the next year Guild contribution reduced by 50% of the most recent year -over -year growth of the Endowment Revenue Sharing amount. 100% of the Revenue Sharing amount will be allocated to the City. However, the year -over -year growth of the Revenue Sharing amount will be utilized to determine the amount the Guild will contribute, until that contribution amount reaches zero or the Endowment four-year rolling average reaches six million ($6,000,000) as detailed in Exhibit B. Page 1 of 2 29(1) 4. When the Endowment four-year rolling average reaches six million, the Endowment will allocate 100% of the Revenue Sharing amount to the City, and allocate 75% of the year - over -year growth to the City, and 25% of the year -over -year growth to the Guild for supporting Museum programs, as detailed in Exhibit C. 5. Once the calculations are made for each year, the Endowment will transfer funds to the Guild, and then the City will receive payment from the Guild for the entire annual contribution. THE TERMS OF THE FOREGOING RESOLUTION have been approved and agreed to by Guild and Endowment through formal action of their Boards of Directors, as verified by the following signatures. Paige Paulos, Guild Board President Monte Hill, Endowment Board President THE FOREGOING RESOLUTION IS ADOPTED at a regular meeting of the Ukiah City Council held on May 18, 2016, by the following roll call vote: AYES: Councilmembers Crane, Mulheren. Dobie, Brown, and Scalmanini. NOES: None ABSENT: None ABSTAIN: None ATTEST: i/i/G6 (a/0z' tbL/ Kristine Lawler, City Clerk 1r.%_.-g0l?gZG Stophn G. ScalmaniniMayor Page 2 of 2 1 1 1 1 1 1 Exhibit A Grace Hudson Museum's Public -Private Partnership History The City of Ukiah acquired legal title to The Sun House and the Carpenter -Hudson Estate in 1975. Under the terms of this purchase agreement, the house and grounds were "to be used and maintained perpetually as an art and historical museum," dedicated to the memory of artist Grace Carpenter Hudson, her husband, ethnologist Dr. John W. Hudson, and the pioneer Carpenter family. Failure to do so will result in the property reverting to others designated sequentially in the purchase agreement. The City contracted with Sonoma State University to do an inventory of the Estate holdings in October, 1976, a project completed one year later. The resulting 375 page study provided the City with a glimpse into the range and scale of the collections (then numbering over 27,000 items) that it had acquired as a public trust. The project director's recommendations emphasized the need to appoint a Cultural Arts Commission, advisory to the Council, to guide development of the estate into a museum and research center, which was done in 1977. In 1978, the City helped establish an independent nonprofit public benefit corporation, the Sun House Guild, to assume exclusive development and volunteer responsibility for the Estate. The Guild's prime objective was to raise enough private sector funds to build a modern museum to house, preserve and exhibit the large family collection. Increasingly, the Sun House Guild assumed the leadership role previously played by the Cultural Arts Commission, which eventually became absorbed into Ukiah's Parks and Recreation Commission. From 1981 through 1984, successive professional Directors/Curators managed The Sun House. Under their leadership the Sun House was listed in the National Register of Historic Places, interpretive programs and exhibits were developed, the collections were re -housed, and numerous scholars were consulted to help document and interpret the collections. By 1985, the Guild had raised more than $1 million from the community (all private sector funds) and began construction of the Grace Hudson Museum. In 1985, the City authorized two full-time contracted positions, Director and Curator, to prepare for the move into the soon-to-be completed 8,000 sq. ft. Museum, which was gift -deeded to the City by the Sun House Guild in August, 1986. A Museum Assistant and Receptionist were added to more fully staff the newly opened facility. In 1989, an ad-hoc Committee composed of designated Sun House Guild Board members, Museum staff members, two City Council members and other community members drafted the Grace Hudson Museum's Mission Statement and Five Year Plan, which was adopted by the Ukiah City Council. In 1990, the Museum operations were fully integrated into the municipal structure as a division of the new Department of Community Services, with the staff becoming City employees. In 1992, the Grace Hudson Endowment Fund, with its governing Board of Directors, was formed to ensure the long-term financial viability of the Grace Hudson Museum. The initial Endowment Fund balance was $69,000. In the fall of 1998, the Museum's Sun House Guild and Grace Hudson Museum Endowment Fund boards embarked upon a campaign to fund the construction and maintenance of an addition that would showcase the Grace Hudson Museum's permanent collections, particularly its significant holdings of Hudson's artwork and Pomo Indian baskets. At the same time, the Museum building was renovated to upgrade the existing gallery space, install a new security system, and enlarge the staff offices and collections storage areas. Thanks to widespread community support and generosity, more than $1 million was raised for this purpose from private donors. This Museum addition, with its three new exhibition galleries, opened to the public on June 10, 2001. In the fall of the same year, the Grace Hudson Museum & Sun House was selected to become one of 20 charter members of the Historic Artists' Homes and Studios program, an Associate Sites project of the National Trust for Historic Preservation. Beginning January 1, 2005, the 25 -year support agreement between the Sun House Guild and the City of Ukiah was renewed for a like term. The Grace Hudson Museum Endowment (a non-profit public benefit corporation that did not exist when the first support agreement was signed) was incorporated into this new agreement. In 2010, the Grace Hudson Museum was awarded a highly competitive $3 million Nature Education Facilities Grant from California State Parks to develop the Museum's grounds into interpretive areas focusing on native plants, animals and the diverse local ecological zones in which they live, Pomo Indian use of these species and the techniques they used to manage the natural environment around them; along with contemporary sustainable living practices. This project, named the "Wild Gardens" will triple the Museum's current teaching space, is under construction and is slated to open in the spring of 2017. In 2011-2012, City of Ukiah support of the Grace Hudson Museum's operations was threatened due to the then on-going economic crisis which left the City with a significant shortfall in its General Fund. An ad-hoc committee was formed with representatives from the City Council, City Staff, the Sun House Guild Board and the Grace Hudson Museum Endowment Fund Board. After negotiations, a three-year support agreement for the Museum was reached - Resolution 2012-28. During the ensuing three-year period, the Sun House Guild and Endowment Fund Boards embarked on an intensive fundraising drive that was successful in increasing the Endowment Fund balance more than 75% to reach $3.592 million by end of April, 2016. In 2013, the Museum's "dry" fire suppression system, which was close to 30 years old, was in desperate need of repair. It was determined to take advantage of better, newer technology, and to completely re -vamp the existing system. This re -design and re -installation, culminating in a new state of the art fire detection and fire suppression system for the Museum, with the entire expense borne by the Grace Hudson Museum Endowment Fund. Currently the Museum presents 4 temporary exhibits each year, along with a number of public educational programs including school tours, cultural demonstrations, slide lectures, gallery tours, book signings, poetry readings, painting workshops, movie screenings, dance performances, etc., enhancing the quality of life in our local community. Some 12,000 visitors come to the Museum each year, helping to increase Ukiah tourism, with its associated business and City revenues. More than 2,000 students, primarily from Mendocino County, visit the Museum each year. Additionally, Museum staff supply local schools with exhibit -related educational resources, every year, at no charge. Both of these visitation numbers are expected to increase dramatically with the opening of The Wild Gardens at the Grace Hudson Museum. Over the past 30 years, the Sun House Guild and Grace Hudson Museum Endowment Fund have secured private sector funds in excess of $5 million and spent those funds toward procuring collections, funding annual exhibits, facility improvements, and contributions to the City operating expenses. This has resulted in a 10,000 sq. ft. Museum being built and gift -deeded to the City, along with many furnishings and other improvements. Over the past 20 years, Museum staff have applied for, and successfully received, $4.5 million in grant funds for Grace Hudson Museum infrastructure projects, educational programs and collections care. These grants were awarded by private foundations, national programs, and state sources. In addition, the Museum has greatly increased its fine art, Native American, and local history related collections through donations and some strategic acquisitions. Over the last 25 years, the value of the Museum's collections and the number of items in these collections, have both dramatically increased. Thus, for an initial investment of $1 15,000 in 1975, the City of Ukiah now owns an asset conservatively valued in excess of $1 1 million, which will soon consist of 4 acres of landscaped grounds, Museum buildings and furnishings, and invaluable art, ethnographic, and historic collections. On an annual basis, City of Ukiah support for the Museum is matched by the in-kind labor donated by an active group of some 80 volunteers, the Sun House Guild's annual funding of the Museum's exhibitions and educational programming in excess of $50,000, and the Guild/Endowment re -imbursement to the City of a part of the Museum's operating costs. Summary: Since its inception, the partnership made up of the City of Ukiah, the Sun House Guild, and the Grace Hudson Museum Endowment Fund has been enormously successful, by any measure, in ensuring the Grace Hudson Museum's growth and encouraging its notable accomplishments. As enjoined to do by its mission statement, the Museum has been increasingly successful in becoming "a living cultural resource for the entire community" providing "quality educational experiences in the arts and humanities for all visitors." 2 GRACE HUDSON MUSEUM ENDOWMENT FUND SHG 50% & CITY 50% SHARE OF ENDOWMENT YEAR OVER YEAR GAIN PERIOD: 2015 thru $6.0MM 1111 Exhibit B Year ENDOWMENT GUILD TOTAL CITY Four Year Rolling Average 2% Cash Flow For Endowment 25% Reserve_Revenue 25% Sharing To City 50% Reimbursement 50% Growth 50% YOY Growth 2015 2,692,402 10,386 13,462 30,000 20,000 50,000 2016 3,057,136 14,857 15,286 31,000 1,000 19,500 50,500 1% 2017 3,731,828 18,977 18,659 37,000 6,000 16,500 53,500 6% 2018 4,235,613 21,534 21,178 42,000 5,000 14,000 56,000 5% 2019 4,758,483 24,377 23,792 47,000 5,000 11,500 58,500 4% 2020 5,356,492 27,347 26,782 53,000 6,000 8,500 61,500 5% 20XX 6,000,000 30,000 30,000 60,000 7,000 5,000 65,000 6% Reimbursement Balance Forward 2003thru2014 Reimbursement 2015to$6MM Total Payment to the City 2003 to $6.OMM 343,550 300,000 110,800 95,000 Notes: 1. Until the Endowment portfolio balance 4 year rolling average reaches $6MM, the Sun House Guild reimbursement payment will be reduced by 50% of the Endowment gain for the 2016 & beyond reimbursement. 2. When the Endowment portfolio balance 4 year rolling average reaches $6MM the Sun House Guild will contribute their total fundraising directly to Museum activities and the Endowment spending calculation will be re-evaluated. 3. When the Endowment portfolio balance 4 year rolling average reaches $6MM the Endowment will contribute 75% of the gain to the City. 25% of the gain will be allocated to the Sun House Guild for Museum Public Programs. 4. The Board's contribution to the City for expense reimbursement grows 6% annually. Expense Reimbursement to City 454,350 395,000 87% 849,350 C:\Users\John\Desktop\For Katie - Resolution\00 Endowment Spending Projection Scenarios .50 REVISED 160509 JBM 5/10/2016 GRACE HUDSON MUSEUM ENDOWMENT FUND SHG 25% & CITY 75% SHARE OF ENDOWMENT YEAR OVER YEAR GAIN PERIOD: $6.OMM thru $9.2MM Exhibit C DISTRIBUTION AFTER ENDOWMENT REACHES $6MM Year ENDOWMENT GUILD TOTAL CITY Four Year Rolling Average(1) 2% Cash Flow For Endowment Reserve Revenue Sharing Public Programs 25% To City Reimbursement Growth 25% 25% 50% YOY Growth 75% 20XX 6,000,000 30,000 30,000 60,000 5,000 65,000 20XX 6,460,000 29,716 23% 32,300 67,184 52% 2,184 546 66,638 3% 20XX 6,947,600 33,348 24% 34,738 70,866 51% 3,682 920 69,945 5% 20XX 7,464,456 37,322 37,322 74,645 3,779 945 73,700 5% 20XX 8,012,323 40,062 40,062 80,123 5,479 1,370 78,754 7% 20XX 8,593,063 42,965 42,965 85,931 5,807 1,452 84,479 7% 20XX 9,208,647 46,043 46,043 92,086 6,156 1,539 90,548 7% Endowment Contribution to Guild Operations Reimbursement Balance Forward 2003 thru 2020 Reimbursement $6.omM to $9.2MM TotalPayment to the City 2003 to$9.2MM 583,550 530,834 6,772 200,800 5,000 Notes: 1. The year over year performance is shown as 6% with $100K in contributions. 2. Beginning when the Endowment 4 year rolling average performance reaches $6MM, the City will receive 75% of the endowment year over year increase and the remaining 25% will be allocated to the Sun House Guild to fund a portion of the Museum Public Programs commitment. 3. Endowment will increase commitment to the City to 52% in first year and 51% in the second year (approx. $4,000) to maintain a positive upward trend after the Sun House Guild stops funding. 4. The board's contribution to the City for expense reimbursement continues to grow at 6% annually. Expense Reimbursement to City C:\Users\John\Desktop\For Katie\00 Endowment Spending Projection Scenarios .50 REVISED 160218 784,350 535,834 68% 1,320,184 JBM 2/29/2016