Film society’s cinema straining the budget
On the big screen, the story of the Austin Film Society’s effort to operate its own arthouse movie cinema might have culminated with its successful $2.4 million fundraising campaign and the fanfare surrounding the high-profile opening of its theater last spring.
Little more than a year later, however, the organization has been wrestling with the realities of running a niche business.
The theater — called the AFS Cinema — has fallen short of the film society’s financial forecasts, prompting cost cuts and a determination that the facility likely will need to rely on donations indefinitely to help fund its operations, according to internal film society documents reviewed by the American-Statesman.
The film society is a nonprofit entity that has received millions of dollars in financial support from Austin taxpayers through the years.
Minutes of an April 26 film society board meeting that are marked “confidential” also indicate the board was preparing to downplay financial challenges at the organization — characterized at the time as a “deficit” — even as a campaign was in the planning stages to raise money for Austin Studios, the 20-acre produc-
tion complex in the Mueller development that it leases from the city.
“The board determined that the FY18 deficit should not be discussed publicly,” the minutes of the board meeting say.
“Rather, the board requested that (film society CEO Rebecca Campbell) develop a comprehensive case that outlines the Film Society’s future, which includes Austin Studios, the AFS Cinema and Austin Public,” according to the meeting minutes. “The message should be broad and positive, and should support staff and board members in raising funds for the capital campaign.”
In a written statement, Campbell told the Statesman that a midyear financial review determined some of the film society’s operations — which, according to the minutes, included the cinema, Austin Studios and the Texas Film Awards — were performing below expectations. But she said “meaningful interventions” have been made since then. Her statement didn’t address the theater specifically or any of the organization’s other divisions.
“During a mid-year financial review, AFS staff determined that the organization would miss some income targets, and reported this to the Board of Directors in April,” Campbell said in her statement.
“Since then, AFS has made meaningful interventions to address the underperformance of those business lines,” she said. “AFS’s fiscal year ends August 31st at which point we will undergo our routine annual audit (AFS’s financials have been independently audited for the past 17 years). AFS does not share mid-year financial projections with the public, as is standard for any nonprofit, and elects to publicly share annual audited financials on our website.”
Campbell declined a request for an interview to discuss the organization’s financial situation. The Austin Film Society also declined to release its current year budget or financial projections, although it provided an audit of its previous fiscal year that ended in August 2017.
That document shows a drop in the organization’s cash position, pegging the figure at $378,145 as of Aug. 31, 2017, compared with about $1.22 million a year earlier. Still, the film society’s assets climbed to $4.23 million over that time, from about $3.05 million on Aug. 31, 2016, corresponding to the renovation and opening of the AFS Cinema.
The Austin Film Society is a 33-year-old organization started by local film buffs, including director Richard Linklater, who remains a board member. Its mission has been to highlight obscure and nonmainstream independent and foreign films, to foster and showcase Texas filmmakers and to help build Austin into a hub for movie and media productions.
The organization receives substantial support from Austin taxpayers, including $315,353 in cultural arts grants in the city’s current fiscal year.
In addition, Austin voters have approved two $5 million bond propositions — in 2006 and 2012 — for upgrades and expansions to Austin Studios, which the film society leases from the city for $100 a year.
The film society has been widely viewed as a good steward of its finances. Charity Navigator, a nationally known evaluator of nonprofit groups, currently gives the Austin Film Society an overall score of 93.32 out of 100 and a four-star ranking, the highest, although those figures are based on 2016 financial data.
For much of its history, the Austin Film Society lacked a permanent venue for film screenings before mounting a fundraising campaign to renovate and expand the venue formerly known as the Marchesa Hall and Theatre, which it had been using since 2013.
The revamped facility opened in May 2017, complete with two theaters, a bar and cafe in a lobby designed as a gathering place for film aficionados. Even in a city that boasts many multiplexes, strong second-run movie houses and a few independent theaters, AFS Cinema has become a significant arthouse venue in Austin, screening independent movies that wouldn’t necessarily show up at Violet Crown, the Arbor or Alamo Drafthouse,
But the challenges of the business seem to be taking a toll, with the cinema’s cafe an early casualty. The AFS Cinema has recently only offered relatively standard movie fare, such as candy and popcorn, as concessions, despite opening little more than a year ago with featured dishes that included “classic egg salad toast with hickory smoked trout roe.”
Linklater and 11 other film society board members who participated in the April 26 board meeting either declined to comment or didn’t respond to requests from the Statesman to discuss the film society’s financial issues.
Board member Adam Chibib said he couldn’t remember precisely what was said during the meeting, and he declined to comment on how he would have reacted had he heard a discussion about publicly downplaying financial challenges.
“Obviously, a lot of things were spoken at that meeting, and I can’t recollect what was said or transcribed,” Chibib said. “I have no idea if that was said or not.”
Eric DeJernett, the film society’s treasurer and a board member, told the Statesman the discussion summarized in the minutes was “not as incriminating or inflammatory as the person who gave it to you would like you to believe,” but he declined to elaborate.
According to the minutes, a number of the film society’s operations — including Austin Studios, the Texas Film Awards and the cinema — were performing below “net income budgeted targets” after a midyear review, and the organization was at risk of running out of money by the end of its current fiscal year if the situation wasn’t addressed.
“The combined underperformance results in an overall deficit for AFS that cannot be covered with current assets,” the minutes say. “To be clear: if no action is taken, AFS will run out of cash before the end of the fiscal year.”
Still, the organization’s finance director, Lana Price, “emphasized that we will run out of cash only if AFS does not make meaningful interventions,” according to the minutes. Price, who is leaving the organization this month, didn’t respond to a request for comment.
The plan discussed during the April 26 meeting to help avoid such a cash crunch “depends on philanthropy ... to cover the net losses of the AFS Cinema, including its portion of AFS overhead,” the minutes say.
The cinema is poised to become self-reliant over time, the minutes note, but the plan discussed by the board to help surmount the film society’s overall financial challenges “assumes that (philanthropy) will be responsible for raising funds to support the AFS Cinema for the foreseeable future.”
In some other business lines — such as Artists Services and Community Media — the possibility of reductions in programs and staffing was discussed. For Austin Studios, which is a source of revenue for the organization because production companies rent its facilities, the proposal called for more money to be spent on deferred maintenance, repairs and improvements.