Just testifying for the arts, people.

Dear Reader, below you will find testimony that I presented recently before a joint hearing of the New York City Council on the impact of the arts on small businesses and community economic vitality.  You may very well be interested in two previous posts on this subject:  The Art$ (wherein I discuss the economic realities of very small versus very large nonprofit culturals in NYC), and The Art$ – Part II (wherein I dig deeper into how very large nonprofit culturals make their money compared to how small nonprofit culturals do).

City Council Testimony to the Joint Hearing of the

Committee on Small Business, and the

Committee on Cultural Affairs, Libraries and International Intergroup Relations

On “The Purchasing Power of Culture: How Cultural Organizations Support NYC Businesses”

September 14, 2012

I’d like to thank the members of the council for the opportunity to offer testimony today to this joint hearing of the Committee on Small Business and the Committee on Cultural Affairs, Libraries and International Intergroup Relations regarding “The Purchasing Power of Culture: How Cultural Organizations Support NYC Businesses.”  I’m particularly pleased to thank the two committee Chairs, Council members Jimmy Van Bramer and Diana Reyna, for their longstanding dedication to these issues and to convening this forum today.

My name is Michael Hickey.  Many of you know me from my former role as executive director of the Center for NYC Neighborhoods and my work coordinating citywide foreclosure prevention efforts to improve neighborhood stabilization.  I’ve testified before the Council many times, and you will recall that I’m a fan of numbers, charts and graphs.

I’m testifying today in my role as a member of the Naturally Occurring Cultural Districts Working Group, and as an independent researcher who has conducted analysis on NYC cultural organizations and their economic profiles.  I’m pleased to have access to data provided through the Cultural Data Project (CDP), a national initiative which in New York State and New York City gather a wide array of financial information from nonprofit cultural organizations applying to access public funds.

The data provides a number of useful indicators regarding the impact of NYC’s cultural practitioners on the arts.  The first is that the overwhelming majority of cultural organizations in this city are quite small, averaging about $250 thousand per year in annual income.  This chart shows the revenue distribution for the 2010 data set.

Source Data: Cultural Data Project

As you can see, a very small group of cultural organizations generates an enormous amount of income from public sources, private philanthropy and earned revenues.  While interesting and worthy of further investigation, the reason I include this chart is to show that the nonprofit cultural sector is overwhelmingly composed of small organizations whose focus is on the local geography, the local arts scene, the local audience, and the local economy.

The image below, taken from the Municipal Art Society’s Arts Digest 2012, shows the distribution of the cultural organizations receiving public funding.  Note the concentration in central and lower Manhattan, compared to the much sparser distribution in the other four boroughs.  Again, this is not a surprising finding, but an important indicator of how public sector funds are finding their ways into our developing neighborhoods.  I believe that Arts organizations who’s primary focus is on appealing to an audience constituency interested in their creative work, tend to towards locating in Manhattan where they believe they can have the most success in attracting those audiences.  I likewise believe that many of the cultural organizations located outside Manhattan tend to curate work more focused on the unique needs and interests of their immediately surrounding communities.

Source: Municipal Art Society, Arts Digest 2012

 The CDP does collect an enormous amount of information about how NYC nonprofit cultural organizations spend their money.  We know, for instance, that of the 750 some nonprofit culturals tracked in CDP for 2010, they spent approximately $3.5 billion.  Unfortunately, as far as I’m aware, no formal study of this data has been conducted to estimate the total spend, and to break down that total spend according to the available expense categories (including catering and food costs, equipment rentals, advertising, security, and so forth), or by other variables such as organizational size, discipline and location.  While the data does not tell us where the purchases of goods and services were made, it does provide some dimension to how much economic activity the cultural organizations themselves generate.  I would further suggest that, since most organizations are small and locally focused, they tend to use local businesses to meet their needs.  Within our NOCD Working Group, we have a number of examples that support this assumption:

The Greenpoint Manufacturing and Design Center manages approximately 600,000 square feet of industrial space in New York City. Those buildings house over 100 small manufacturing and artisanal businesses which together employ more than 500 workers.

• Ninety‐one percent of the business owners and employees live in New York City, many within the zip codes adjacent to the building where they work.
• Employees in GMDC’s buildings make an average of $42,000 annually compared to $27,000 
and $25,000 for retail and food service, respectively.
• A total of $65 million in revenue is generated in their buildings annually, with an additional $35 million being 
induced or indirectly generated.

Fourth Arts Block conducts a wide variety of what can only be called Lower East Side business boosterism activities, including one of the most diverse and compelling annual cultural and small business festivals in the city, local restaurant tasting tours, coordinating free energy assessments and incentives for local business owners, and holding their annual “Load Out” event – allowing people to swap still usable equipment while simultaneously diverting reusable and recyclable items from the waste stream.

The Queens Museum measures that it spends approximately $1 million annually on goods and services provided by local businesses, including events catered by local eateries like Tortilleria Nixtamal in Corona, Delhi Palace in Jackson Heights, and Spicy and Tasty in Flushing; or ordering exhibition supplies from Mensch Mills or Beplat Hardware.  The CIG itself, including 33 of the largest cultural organizations in the city, estimates that it spends $600 million with local vendors.

Betsy Immershein, a consultant who specializes in both sustainability and supports to nonprofit culturals, reports that just one of her clients based in Long Island City works with over 80 businesses in the surrounding community.

And of course groups like The Point CDC and El Puente are well known for their work in incubating local creative sector businesses, and using community development and local organizing strategies to engage both businesses and artisans in making their work both more accessible and commercially viable.

But there’s something else I want to point out.  Nonprofit culturals in New York City are different from their nonprofit peers in that on average they generate more than half their income from earned revenues.  For most nonprofits, the average is far lower – usually in the neighborhood of 10-15%.  These same organizations earned their bread and butter through a combination of ticket sales ($437 million), classes and workshops ($77 million), touring ($45 million), concessions ($34 million), space rentals ($83 million) and many other types of entrepreneurial activity.

By the way, nonprofit culturals that own or control their performance or rehearsal spaces derive significant rental income from these activities.  The overwhelming majority of their users are other small nonprofit culturals who don’t have access to permanent or consistent spaces themselves.  As you know, the small nonprofit culturals are most deeply engaged the cutting edge creative work New York City is known and respected for.  In a sense, nonprofit culturals with space are critical service providers to the sector itself.  Still, there are no formal programs to support culturals with space in showcasing, managing and maintaining active rental programs, leaving money on the table and spaces unnecessarily dark.

All this is to say that not only do nonprofit culturals exist as economic engines on their own, attracting audiences, students and other cultural practitioners, many of them have also taken on the work of building the economic vitality of their local businesses because they seem them as partners in their overall economic well-being.  These are groups who:

• Provide technical assistance to member organizations and affiliated partners to improve operations and to access other supports;
• Develop special programs to enhance sustainability, reduce overhead costs, and centralize routine functions;
• Hold events to showcase local partners, attract new consumers, and build local identity;
• Facilitate networking between members and affiliates to create new synergies and expand opportunities for growth;
• Provide marketing support that is community branded while still being producer-specific;
• Engage the wider community in planning, programming and development to strengthen a sense of place.

This work is happening within community-based cultural clusters all around the city now, but it’s largely unseen and certainly under-supported.  We must develop strategies as a city that allows us to recognize and support creative clusters.  We must:

• Begin by acknowledging that they exist, and that they exist in a structured way that deserves official and sanctioned designation;
• Create room at the table for these community-based creative sector network leaders to be actively engaged in planning and implementing programs and strategies with their business peers and public partners;
• Reduce or eliminate bureaucratic snags and barriers using the tools and processes of parallel networks;
• Create access to public space for community cultural uses through innovative agreements and carefully crafted exceptions;
• Increase support generally to neighborhood based cultural organizations; and
• Seek equitable diversity of representation and engagement in these efforts from community based cultural partners of differing size, structure, and practice.

We already know enough to affirm that creative clusters have a deep and lasting impact in their communities.  Indeed, in many cases they are already connected to or even embedded within networks of local small business leaders, community development partners, advocates and organizers.  It’s time we made it official, and it’s time we made it stronger.

I thank you for your time and I look forward to any questions and comments you may have.