Heritage Fest Financials: Analysis

I had been hearing some conflicting things about Heritage Festival finances from various people. Some said it was in trouble financially and advanced their theories why. One person was strident in blaming the city for imposing fees that were destroying the festival. I wanted to take a look for myself. The Ypsilanti Heritage Festival Foundation is a nonprofit of the 501(c)(3) variety. As such, its tax documents are open to the public and, as it says on the tax forms nonprofits such as the Heritage Festival (HF) use, "Open to Public Inspection." I obtained HF tax forms for the years 2002-2012 and analyzed the data. I made some charts to try and understand the data. Here is one showing the overall HF expenses, revenues, and net assets:

Here is another showing the net profit or loss of the festival from 2002-2012:

I also went through each year's tax form and charted the items that were itemized from year to year. Some of the itemized items are within the tax document and others are listed in the "Schedule O" that supplements the shorter 990-EZ that the HF began using in 2008. Here is the chart of items from those tax documents (click it for larger view):

The red-highlighted sections are those that seemed odd to me. Permits ceased to be itemized in 2007, but the festival requires park permits every year. The city's charge for electricity ceased to be itemized in 2007, but the HF uses electricity purchased from the city every year. Advertising costs vary wildly although it is unclear why this would be the case. There is no advertising cost itemized for 2011--I honestly do not know whether the HF forewent all advertising that year but I doubt it. Sales tax varies by orders of magnitude from year to year--it is unclear why.

One item, almost a third of the budget in 2012, is itemized as "Supplies" from 2002-2007 and "Supplies and Other Office Expense" afterwards. This fund jumped from 20,223 in 2009 to 31,005 in 2012. I am not sure what supplies this refers to. I'm more confused about the mention of "office expense" as the HF does not maintain an office. Some nonprofits do, like the Ann Arbor Art Fair with its downtown office; the HF does not. This may just be "official" terminology that I do not understand. Still, why did this fund increase so much in so few years?

The small green box compares festival costs as recorded by the HF and by the city. The city claims it charged $15,599.40 for police services in 2012; the HF itemizes this as "Security" but says the amount was $16,699. The city charges a parks capital improvement fee of $1,000 per day for Tier 4a events (more than 10,000 attendees, has alcohol), per its online fee schedule (Note: This is the 2014 fee schedule, and some costs are higher than they were in 2012). Unless this cost has been folded into another one, I do not see it itemized in 2012. Nor is the city's 2012 charge for electricity and various other smaller city fees totaling $750.

The city did raise fees for some items in 2014--and they apply to all festivals seeking use of city parks. And anyone seeking other city services, such as a notary seal, gazebo rental, building permit, &c. No one likes paying a fee. The 2014 fee schedule is dated June 3 of this year. I presume, perhaps wrongly, that this is when it went into effect. Since June 3, Ypsilanti has hosted the Color Run (they also pay park fees and purchase a lot of police services from the city, due to a desire to ensure that people feel safe after the Boston bombing incident). In July we had the Camaro Superfest, Elvisfest, and in August the Band Organ rally, the Fire Truck Muster and the Parkridge Community Fair. Those are just the big events. Smaller ones also must pay: Farmer's Market, Cruise Nights, and so on. The HF is the only one of these events that has complained--that I have heard of--in more than one online local newspaper, in social media, and several times, that city fees are responsible for destroying this particular festival.

What do these documents suggest if the festival is to continue?

The festival needs an independent and professional treasurer/accountant, one who is accustomed to keeping detailed account of complex budgets and itemizing things in detail. This helps the festival: when items are meticulously itemized, cost trends may be more accurately tracked, and expenses adjusted more precisely as a result. Posting yearly tax returns will also show that the HF is serious about accountability. Increasing transparency and accountability helps the festival by instilling confidence in sponsors.

The festival, like many things impacted by the ongoing recession, must "right-size." Eliminating Friday and making the HF a two-day festival will trim expensive security costs, among others. As many have suggested, charging even $1 would have a great effect. Contrary to what some have said, a $1 admission fee does not "change the character of the festival." And if it does, well, we've all struggled and are still struggling through a global economic meltdown and its aftermath. Maybe it's time--maybe it's necessary--to change.

Another recommendation I would make is that the personnel of the HF should be listed with contact information clearly on the website. I was told that this was not done now out of "concerns for privacy." Many other organizations all over Ypsilanti that also rely on the public's money to survive clearly list their staff's contact information on their websites. What's the big deal? I doubt that anyone would be inundated with thousands of emails, if that is what is meant by "privacy."

Everyone understands that someone who is, for example, a domestic violence victim in hiding from an abusive partner might need or want a lot of privacy. Of course. But the Steering Committee is very large, and this situation is likely certainly not true for every member (and I hope it is true for none of them, naturally).

Public staff listings benefit the festival by communicating that staff is available for community ideas. We have 19,000 brains in the city. If the HF is open to hearing from those with innovative, new, creative, cost-cutting ideas, it only benefits the festival. It also benefits the director by lessening his or her workload so that he or she is not, as is apparently the case at present, forwarding everything to "the right person." It's more efficient to just talk/email directly to a relevant staff person.

And you can email me if you want PDF copies of all of the HF tax documents or the documents I made. Let me know. I did this analysis to try and better understand the HF's actual situation, and I think the recommendations above can only benefit the festival. That in turn benefits local businesses--it's a good goal! Respectfully, I hope this analysis can be a tool to help move towards that goal. Thanks for reading it.