Durham Performing Arts Center - Costs and History

Costs and History

The theater was developed by Garfield Traub Development of Dallas, Texas in partnership with Chapel Hill architect Szostak Design.

The theater holds 2,712. The first event on opening night was a concert given by B.B. King. The theater is owned by the city of Durham. After talks with ClearChannel fell through, the City negotiated a theater operating agreement with Nederlander Organization and Professional Facilities Management. The operator guarantees a minimum of 100 event performances per year on a rolling three-year average and absorbs any losses for the first five years of operation, at which time the operator could return the management back to the City or negotiate the terms of continued third party management of the theater with the City.

The City borrowed $33.7 million for the center's construction through Certificates of Participation ("COPs"), instruments commonly used to finance municipal facilities. Debt service payments on COPs are subject annual appropriation the City, and as such are considered an annual operating expense rather than a long-term capital obligation. Accordingly, a voter referendum was not required for the issuance of the COPs. Additional sources of funds for the project include facility naming rights, a Duke University contribution, an operator loan, and several other sources. The Duke University contribution equaled $7.5 million. The theater hosts, on favorable rental terms, the seven-week American Dance Festival summer series, which had previously been presented in the 1,232-seat Page Auditorium at Duke University The cost to the city for the $33.7 million in bonds will be almost $70 million over 28 years.

Naming rights were budgeted to bring in $800,000 annually, but in 2007 when the project was $400,000 under that estimate, the city agreed to draw up to $200,000 a year from its general fund to partially make up the difference. The Durham city council agreed to an additional $200,000 request in April 2009 for video and trash facility installation. While the City has had some success with naming rights, securing major naming rights sponsorships has been challenging due to current economic conditions.

However, the theater has far exceeded projections for attendance, activity, gross revenue, net income after operating expenses. Both the City's 40% share of theater net income and income to the City from ticket facility fee surcharges have far exceeded projections. At more than $1.2 million, the City's 40% share of theater net income in fiscal year 2009-2010 was over five times more than originally projected.

Further, the theater has had far greater fiscal and economic impacts than the $7 million to $11 million original annual projections of the City's independent consultant and the Durham Convention and Visitor's Bureau ("DCVB"). The DCVB estimates that the theater had a $10.9 million economic impact to the City in just the first seven months of operation. In the 2009-2010 fiscal year, the City of Durham reported that the theater had a citywide economic impact of over $24 million.

The Durham Performing Arts Center has been credited with benefiting the restaurant business in downtown Durham, in spite of the 2008 - 2010 recession. Five downtown restaurants opened in downtown Durham in proximity to the theater since its opening, significantly supported by pre- and post-show seatings generated by the theater. The theater was cited in a CNN Money and Fortune Magazine article ranking the City of Durham as number one in its list of "25 Best Places to Retire."

In spite of the sharpest decline in the travel and leisure sector in a generation due to the recent recession, the State of North Carolina ranked as the third highest state in hospitality job growth according to the Bureau of Labor Statistics. The Durham Performing Arts Center was cited as contributing "to the growth of leisure and hospitality jobs in North Carolina over the past five years" by the Triangle Business Journal.

In 2004, the chairman of the board of what was to be DPAC's primary local booking, the American Dance Festival, said that the goals of DPAC and the goals of the festival were at odds. Although the supporters of DPAC's construction mentioned the dance festival as a primary reason for building the theatre, the festival's request for a small black box theatre was not granted. However, in 2009, the festival said that the larger theatre had solved many complaints about the festival's previous space at Duke University.