Testimony of Lawrence J. Wilker President, John F. Kennedy Center for the Performing Arts to the House Appropriations Subcommittee on Interior and Related Agencies March 27, 1996 On behalf of the Board of Trustees, I am pleased to submit to the Subcommittee the FY1997 budget for appropriated funds for the John F. Kennedy Center for the Performing Arts, the nation's performing arts center, and a living Presidential memorial. The Center's FY1997 budget justification includes $10.9 million, an increase of $500,000 over FY1996 request levels, for facility Operations and Maintenance, and includes $9 million for Capital Repair, an amount even with the FY1996 request. The Center will require a 4.8 percent increase for its Operation and Maintenance program to compensate for (A) unavoidable rate increases in electricity and other utilities, (B) the phased elimination of an extraordinary backlog of minor repair of the building (now under study and estimated to be a minimum of $7-$8 million), and (C) increased preventive facility maintenance, designed to reduce costly capital repairs in the outyears, and further buildup of the minor repair backlog. This budget actually shrinks the amount allocated to personnel and benefits while including required pay-raise adjustments, thereby allowing the Board to begin to allocate valuable appropriated resources to a proactive program of preventive maintenance, and elimination of the minor repair backlog. The FY1997 Capital Repair and Rehabilitation budget is level with the FY1996 request. The planned FY1997 program is part of a 25-year Comprehensive Building Plan, and will address critical building systems and life safety and accessibility issues. To meet the Plan objectives, the Kennedy Center will require the authorized amount of $9,000,000. Financial and Performance Measurement Objectives Since assuming control of building operations, maintenance, and capital repair, the Board has implemented several measures to streamline operations and increase efficiencies in all aspects of the appropriated fund management. The Board has contracted with other government agencies for contract and financial management services, and has retained an in-house contracting officer to supervise and facilitate contracting for goods and services. The Kennedy Center Department of Finance has established necessary accounting and bookkeeping systems required for the receipt and expenditure of appropriated funds, and will continue to refine management reporting and procedures. To further increase efficiencies and improve appropriated fund management, the Board is completing the following performance objectives for its appropriated fund operations: Performance standards are being developed for the maintenance and operation of the building, including benchmarks against which productivity, operational expense, patron and visitor satisfaction, etc., can be judged. The development of these standards are being initiated by incorporating industry standards and by the experience gained after two years of monitoring performance of this unique facility. Building repair response times are being reduced and cost controls are being achieved through a new work-order system. Cost-benefit analyses of useful service lives of equipment and fixtures will provide a rational basis for scheduled preventive maintenance and regular replacement. Comprehensive Building Plan As required by the P.L. 103-279, the Board completed on-time, in July, 1995, a Comprehensive Building Plan which for the first time in the history of the Center addresses the care and repair of the monument building over the course of the next 25 years. This plan will be updated annually. In the meantime, critical capital repair work progressed very well in FY1995 and FY1996, with the Board obligating in FY1995 alone, $36 million in funds previously appropriated to the National Park Service. The Board also has underway a Facilities Management Assessment which will provide for increased efficiencies in the maintenance and operation of the facility. FY1997 Operations and Maintenance program The Center is required to expend in the FY1997 budget approximately 3.1% more in personnel and related costs, due to Federal pay-raise assumptions. However, overall the Center's budget for Personnel and Benefits is below the FY1996 request. The Center in FY1997 will absorb some $200,000 in inflation costs in non-personnel Operations and Maintenance contracts and other functions. The increased non-personnel request for FY1997 provides for projected increases in utility rates, reduction of the extraordinary backlog of minor repairs, and increased preventive maintenance services. Utility Rate Increases. The Center's electric utility provider, PEPCO, has implemented significant Maximum Demand Charge rate increases, effective July 11, 1995. The Board estimates that these increases will amount in an increase of approximately $400,000 in FY1997 over the FY1995 actual amounts after adjustments for reduced energy and water consumption expected to accrue from current capital improvements. This increase is anticipated in spite of significant energy-saving measures already implemented, including replacement of the Center's obsolete chiller, building automation systems scheduled for FY1996, and the replacement of fixtures with energyefficient lighting. The FY1997 planned emphasis on preventive maintenance and minor repairs should further reduce outyear utility consumption. The Center also anticipates an approximately $60,000 increase in water and sewer charges in FY1997. Building Emergency and Minor Repairs and Replacement. Condition audits conducted as part of the Center's Comprehensive Building Plan identified a backlog of a minimum of $7-$8 million in regular building and equipment maintenance and minor repairs. Most building systems, as well as interior and exterior architectural elements, were not adequately maintained during the building's first 25 years, resulting in this backlog. In some cases, equipment and systems must be repaired to keep them functional in the short term, even though they may be replaced later as part of the Capital Repair program. Recent examples include an emergency repair of the antiquated fire alarm system and a temporary emergency repair of the chillers two years before they were scheduled to be replaced. These stop-gap measures require inordinate amounts of facility maintenance personnel time, plus supplies, equipment, and outside repair contracts. Consequently, building minor repair expenses in the Center's Operations and Maintenance budget will continue to be higher than they are expected to be after capital repairs, restoration and renovation are completed. Preventive Facility Maintenance. To maintain current levels of operating expenses and reduce future minor and capital repairs, a major emphasis has been placed on proactive preventive maintenance of all components of the building and grounds. The increase included in the FY1997 budget provides for specialty service contracts, supplies/materials, and equipment for the preventive maintenance work which will be routinely scheduled by an automated facility management system. FY1997 Capital Repair and Rehabilitation program In Stage I of the Comprehensive Building Plan, FY1995 - FY1999, the capital program will address several critical remedial actions, particularly life safety and accessibility projects needed to bring the structure up to current standards and codes. In addition to the annual appropriation of approximately $9 million, an unobligated balance transferred from the National Park Service to the Board of Trustees will be fully obligated by the end of FY1996. Work in FY1997 and beyond will require the full authorized appropriation of $9,000,000. The Comprehensive Plan did not take into account $3,000,000 rescinded by P.L. 104-19 from unobligated capital funds from prior years. The effect of the rescission will be felt in delaying the start of projects, or phasing large projects over multiple years. Board Accomplishments When we last appeared before the Subcommittee on March 3, 1995, the institution was in the midst of implementing the requirements of P.L. 103-279 which provided for control and management of the facility to transfer from the National Park Service to the Board of Trustees. It has been a year of great accomplishments for the Board, including: Completion, on time, of a comprehensive plan for the care and repair of the monument building over the next 25 years. Obligation in FY1995 of $36 million from available start-of-year balances for critical capital repair, including complete replacement of the leaky roof and roof terrace, and replacement of obsolete building systems. This unprecedented activity was executed under the direction of a very small in-house staff, and made possible through efficient arrangement with other government agencies, most notably the National Park Service, Army Corps of Engineers and the Defense Contract Management Command (DCMC). • Initiation of a complete Facilities Management Assessment which will result in the development of performance standards for the maintenance and operation of the building, including standards against which productivity, operational expense, patron and visitor satisfaction, etc., can be judged. In short, we will be applying commercial and industry standards and principles to the operation of the Presidential monument. All of these activities are executed under one authority, the Board of Trustees, and overseen by a special committee of the Board, the Operations Committee. The Center is a federal/private partnership. The building, a federal asset, is maintained and operated with appropriated funds, and the artistic and educational programming which enliven the Presidential memorial are presented by the Board with funds raised from private and government sources. It is the local, national, and international performing arts and education programming that distinguishes the Kennedy Center from all other Presidential monuments. Private fundraising for these activities in FY1995 broke all past records. Since the Subcommittee held a hearing on the Kennedy Center's funding last March 3, the Center's Chairman, James D. Wolfensohn, has become President of the World Bank, and has stepped down as Chairman of the Board of Trustees of the Kennedy Center. His successor, James A. Johnson, is expected to assume the position of Chairman on May 1. As President and Chief Operating Officer, I continue to provide operational leadership to the Center, including programming and administrative responsibilities encompassing both appropriated and non-appropriated fund activities. The Board has met all goals for obligating available balances to address the significant and most urgent conditions of the facility. Beyond this, the Board is conducting a thorough review of all appropriated fund operations, with a goal of realizing greater efficiency and implementing a proactive minor repair program. We will continue to keep the Subcommittee informed of these activities. In its 25th anniversary season the Center has a great deal to celebrate. Aside from an unprecedented year of activity in presenting the finest in the performing arts on our stages and in communities across the country, the Center realized a small budget surplus for each of the last two years. Fundraising in FY1995 reached an all-time high. The Center's leadership in the arts in education reached teachers and students in all 50 states, and the number of new programs created for young people and teachers as a result of the Center's presence in communities was never higher. The Board of Trustees and the Congress can be very proud of the results of its new partnership at the Kennedy Center. I welcome the opportunity at your request to provide additional information for the Subcommittee's hearing record on the activities of the Board since the passage of P.L. 103-279. Thank you for your consideration of the Center's FY1997 funding needs, and for your past support. 24-697 96-32 |