Good morning, everyone. When I started 2 ½ ... I have kept that pledge, whether the news was good or bad. As you may ..
Good morning, everyone. W hen I started 2 ½ years ago, I pledged to you that I’d always tell you the truth. I have kept that pledge, whether the news was good or bad. As you may know, over the past few months, we’ve been evaluating every part of the Foundation’s operations. While this evaluation has been taking place, I know that rumors have been flying. I know this has caused anxiety. I know that it has been stressful. I am sorry for that, and I want to thank you for your patience. I felt it was more important to be very thoughtful and methodical about how we conducted this examination than to do it quickly or give you partial information. This is about peoples’ lives and the life of the Foundation; it is too important to r ush. Today, I want to tell you where we are, how we got here, and more importantly, where we’re going. You are going to hear a great amount of detail this morning. I wanted to walk through this detail with you first. W e are a community of wonderful, dedicated people. A nd while this information will almost certainly become public, I wanted you to hear it directly from me. Our goal must be to find a way for us to continue to tell America's enduring story. This means that we need to focus on our core educational mission -‐-‐-‐ the
1
Historic A rea, the Museums, and Educational Programs. These are the r easons why people come visit us, it is why they care about us, it is why they support us. And it is why so many of us have chosen to work here and even make our careers here. But to be able to continue to tell our story r equires us to be financially stable and, sadly, that stability is threatened unless we take decisive action. Only financial stability will allow us once more to focus on what we do better than anyone else in the world – share A merica’s history and deliver outstanding guest experiences. But please understand: This is about much more than one organization’s financial stability. The fate of Colonial W illiamsburg will have a massive impact on the surrounding community – economically, culturally, and otherwise. This is why I have invited to be with us this morning members of our Board of Trustees, the City Council, state officials, r epresentatives and administrators from James City and York Counties, and business, education, r eligious and health care leaders from our community. The Foundation's future success is our collective responsibility, and I thank our elected representatives and community leaders who are here with us today. But as important as CW is for the local and r egional communities, Colonial Williamsburg’s mission has an even larger impact on our Nation. What we do here -‐-‐ bringing history alive and telling our story -‐-‐ helps A mericans reconnect with our history and cherish it as much as we do. It is a message that our Nation needs today more than ever. Colonial W illiamsburg has played this r ole in the past. It is the r ole we will play far into the future, provided we make the r ight decisions.
1
CW and our special r ole all began with Dr. Goodwin and Mr. Rockefeller. They had a vision to r estore and preserve a city that would serve as the world’s greatest argument for why our founding, our freedom, and our past matter to present and future generations.
2
The Foundation’s core mission since Rockefeller and Goodwin has been built on three key pillars: the Historic A rea, Educational Programs and Museums. They are why all of us want to work here.
3
That vision and that mission led to r emarkable growth and r elevance. The world beat a path to our doorstep. In 1 976, our attendance peaked at almost 1 .3M ticketed visitors.
4
Our success in the 1950s, 1 960s and 1 970s as the leading living history museum in the world led the Foundation to establish, in 1 983, the Colonial W illiamsburg Company. The idea was for the Company’s for-‐profit businesses -‐-‐ hotels, r estaurants, retail, and golf -‐-‐ to subsidize our non-‐profit educational mission.
5
Unfortunately, the r eality has been very different. There has not been a single year since 1983 where the Company has made a profit. So instead of the Company supporting the core mission, the Foundation’s endowment has had to subsidize the Company’s losses and support the costs of our core mission as well. The Foundation’s financial burden from these commercial losses has been compounded by our debt.
6
In the years before Jamestown’s 400th anniversary in 2 007, the Foundation borrowed funds to make substantial improvements to our Hospitality facilities and to r enovate the Visitor Center to accommodate the level of visitation we expected. The amount of money we borrowed was based on assumptions about visitor numbers and hotel occupancy r ates that didn’t materialize. Some of these projects also had significant change orders and cost overruns, so we borrowed more money, which further added to our debt. This debt was also used to fund annual operating deficits that were generated in Hospitality and other operations during the seven-‐year construction period that ended in early 2 007. By the end of last year, 2 016, our debt stood at $ 317M, with due dates coming very soon.
7
Finally, during the past decade, times and tastes have changed in ways that affected us and many other historical sites and museums. Less history being taught in schools. Less money for school field trips. Changing technologies have r evolutionized the way people of all ages process and learn information and, frankly, in ways that are not always helpful to the guest experience and to CW. Americans are taking much shorter vacations than before. The 2 008-‐09 r ecession has meant less discretionary income for millions of A mericans to spend on places like CW.
8
The cumulative impact of these decisions and trends has been declining visitation. We now attract about half the visitors we did 3 0 years ago. Over the past decade and a half, the Foundation made decisions that did not fully account for this declining visitation. As a r esult, our annual budget grew out of alignment. In other words, we have been spending far more money than we have been taking in. We have been living beyond our means – and doing so for quite some time now. To put it in concrete terms.......
9
In 2014, the Foundation lost $ 176,000 -‐-‐ every day. Last year, the Foundation lost $ 148,000 -‐-‐ every day. That’s a huge improvement, more than $ 28,000 every day, and more than $ 10M worth of improvement in just two years. But it is not enough. These losses are not acceptable. A nd they are not sustainable.
10
So where has this money come from to make up for our losses? How are we able to stay in business and pay our bills? The answer is, our endowment.
Cultural institutions like Colonial W illiamsburg – and colleges like W illiam & Mary, museums like the Chrysler in Norfolk, and historic sites like Mount Vernon and Monticello – are not intended to make a profit. They are mission-‐driven, and they typically lose money on their operations. That’s why an endowment is so critical. It is a type of savings account. W e at CW, and at these other institutions, withdraw funds from our endowments each year to cover critical costs of operations, personnel and other expenses. Without an endowment, we couldn’t pay all of our bills to support our people and programs.
So the key question is: How much should we r esponsibly withdraw from our endowment? Standard practice is about 5 cents for every dollar, or about 5 percent a year. The remaining 9 5% needs to stay in the endowment, to be invested and gain interest. Otherwise, we drain our endowment pretty quickly. And that has been the problem facing us. In our case -‐-‐ because of our annual losses and debt -‐-‐ we’ve taken out much more than 5 % a year, starting in 2 001. In some years, we have taken out more than 1 2 % -‐-‐ which of course means less money to be invested and gain interest that can support our core mission.
11
In total, in the decade before I arrived, we took $ 600M from the endowment. This is more than unhealthy. As you can see from this graph, it is unsustainable. If we keep doing it, we will go out of business. We cannot let that happen. This was the financial situation we faced when I started at CW two and a half years ago. Honestly, these financial losses were daunting, almost overwhelming. It was clear to me that if we did nothing, these losses would lead to mission failure.
12
So two and a half years ago, I started by looking at the Foundation's existing business structure, to see where we were losing money and to see where we might make money if we made some prudent investments.
We decided to see if we could fix the financial challenges by taking some incremental steps. In other words, we tried to make the existing Foundation work better – more efficiently, less costly, more profitably. We brought in world class experts and consultants to help us, including McKinsey, A ccenture, Geller Capital Partners, Ernst & Young and A .T. Kearney; many offered their services to us free of charge. We tried new things, like uplighting the Historic A rea, placing a skating r ink next to Merchants Square, starting a colonial musket r ange, opening the Liberty Lounge and embracing our military, introducing Liberty as CW’s mascot, and celebrating haunted Halloween on DoG Street.
13
We also made prudent investments in our hotels and r estaurants. They are valuable assets. We cannot let them deteriorate or else they will lose their value. We need to maintain and operate them efficiently, with proper maintenance, so they can make money for the Foundation or they can retain their value if we decide to lease or sell them in the future.
The good news is that these efforts, and your hard work, improved our financial performance by more than $ 10.4M over the past two years.
13
During these past two years, we also r einvested in our core educational mission, to the extent we were able to do so because of our financial constraints. We introduced new and innovative programming in the Historic A rea – a Kids Dig, new Nation Builders, ox cart rides, the Playbooth Theatre, “Journey to Redemption” and much more. These efforts helped r everse a seven year decline in ticketed visitors -‐-‐ and you may have seen yesterday’s Virginia Gazette stating that visitation is up 1 0% this year. After years of neglecting basic maintenance, such as painting our Historic A rea buildings, we’ve eliminated the backlog. And our donors r esponded to this r enewed focus on the core mission. We significantly increased both our number of donors and the amounts donated. Our Annual Fund set a new r ecord last year for gifts r eceived. We were able to r aise the dollars needed to finally expand our Museums, thanks to the generosity of our passionate donors. This is substantial progress, and we should all feel proud of what we've accomplished. But as substantial as it is, it is not enough given the size of our financial challenge. We are still spending far too much money on our internal operations. W e are still losing far too much money with some of our commercial
14
businesses.
So, we have to move beyond incremental steps in order to preserve our commitment to our core mission. W e have to fundamentally r estructure the Foundation. What does that mean?
14
Well, first of all, it m eans that there are no simple, easy solutions to the financial situation we find ourselves in. I wish there was an easy answer – but there isn’t. It m eans that doing better to the tune of $ 10.4 million in financial improvement over the past two years is not enough. It simply won’t get us where we need to be. It m eans that unless we take more decisive action, we will drain our endowment. It m eans that while our donor base is growing, no single donor is going to give us $100 million. It m eans that while we can and will market CW aggressively, we cannot expect a return to the days of 1 M ticketed visitors anytime soon. It m eans that there is no taxpayer bailout on the horizon. Budgets are tight in Richmond and W ashington. And, as you know, we r eceive no annual state or federal dollars. This is why I strongly oppose a new admissions tax and increases in the meals and hotel taxes that would make our task even more difficult. It is why we explored the possibility of r aising r evenue by placing a fence around the Historic A rea. It is why tomorrow I will be formally asking the City, and York and James City counties for temporary tax r elief.
15
Having thought about this issue with the senior team for much of the past two and a half years, having carefully studied our situation, having consulted with leading outside experts, and having talked with many of you in this r oom, in the local community, on the Board, and among our donors, I’ve concluded that there are r eally only two options going forward.
16
One option is “Stay the Course.” This means that we continue to make incremental changes and hope that we can stabilize our finances. But hope is not a plan. W e’ve tried incremental change for the past two years. We know that this option will r esult in continued layoffs and the steady elimination of popular programs -‐-‐ death by 1 ,000 cuts. But what Stay the Course r eally means is this. It means we continue to drain the endowment. It means that we r un out of money, and Colonial W illiamsburg no longer exists – not decades in the future, but within the next decade. Actually, within the next few years. I know for many of you the financial information you’re seeing today comes as a surprise. It may even seem unimaginable. But the numbers don’t lie. Staying the Course will r esult in mission failure, gradually at first, but then inevitably.
17
But there is another way forward. O ption #2 offers us a different future. During the past six months, the senior leadership team worked tirelessly to develop a plan for success, which I presented to the Board in A pril, and which the Board endorsed unanimously. Importantly, members of the Rockefeller family who have served as Colonial W illiamsburg Trustees, and who have given so generously to the Foundation over the past decades, publicly support this option. I call it: Back to Basics. This pathway places the Foundation on stable financial footing so we can r ededicate ourselves to our core educational mission. Over the past two years, we have done everything we could to make the situation better, and we’ve shown improvement. But unless we take more decisive action, and take it now, we will drain our endowment.
18
Here is what our endowment would look like under each of the two options I‘ve mentioned. I think the choice is clear. If we implement this plan, we can stop bleeding the endowment and allow it to grow again. If we implement this plan, we can stop the cycle of job cuts and program eliminations and r each financial stability by 2 019. If we implement this plan, we can r einvest in our people and programs. If we implement this plan, we can save the Foundation.
19
Before I share the plan’s details with you, I want to ask you first to pause for a moment and imagine: What could we accomplish at CW if we solved our financial problems? A few weeks ago I met with our r ecently established Compass Team made up of employees from across the Foundation. W e brainstormed about what we would like CW to do, or do better, or stand for. Without our current financial constraints, how could we rededicate ourselves to our core mission? Here are some of the ideas they came up with: • More and better programs in the Historic A rea • More costumed interpreters • Child day care for employees • Summer camps that teach history • More affordable ticket prices to allow more families to come and visit with us • And my favorite: Helping lead a national conversation about citizenship and civic engagement I am sure that you can think of many more. The point I am trying to make is that financial stability would allow us to think big again about our core mission, even to dream about what we do here, how we tell our stories, and how we can make the guest experience even more memorable. Here are two big ideas I want to announce and commit to today. Each one is
20
consistent with r ededicating ourselves to our core educational mission -‐-‐ and my desire to invest in our dedicated employees.
20
First, I plan to double the number of teachers we bring to CW next year and continue to expand our Teacher Institute to bring teachers from underserved communities to learn with us. This will be a fundraising priority for me, and for Jim Thomas and his team going forward. Second, I want every single costumed interpreter in the Historic A rea to r eceive a professional certification from the National A ssociation for Interpretation. Ted Maris-‐ Wolf has been working with the National A ssociation to develop a customized training program for our interpreters which will be starting in the next few weeks. This isn’t cheap. But investing in our interpreters is the smart, r esponsible thing to do. I will personally r aise the money to fund it.
21
We can create a r emarkable future for CW, a better future. But only if we have the financial stability that allows us to dream big. If we are going to r ededicate ourselves to our core educational mission, then it means that we can no longer do everything the way we did it in 1 976, or 1 986 or even 2 006. When our commercial businesses continue to lose money year after year, we can’t just keep them because we’ve always done it that way. We can’t continue with business as usual. Every dollar we spend to subsidize an unprofitable commercial business is a dollar we could, and should, be dedicating to support the Historic A rea, our educational programs and the Museums.
22
So we have examined every single unit across the Foundation to see where we could save money or grow r evenue. No department, division or program has been immune. This starts with the O ffice of the President. Since I began in 2 014, we have frozen salaries and we have fewer Vice Presidents than before. The r eason for this comprehensive approach is precisely to avoid having to do this again in the near future. O ur plan to stabilize the Foundation’s finances will get us out of the cycle of layoffs, gradual decline and death by 1 ,000 cuts. O ur plan can achieve financial stability by 2 019. Let me give you one example of necessary cost r eduction.
23
The Kimball Theatre has not been profitable from at least 1 999. This past year, the Kimball lost $ 782,000. For that amount of money, imagine the number of museum exhibitions we could stage, the number of teachers we could bring to CW, the number of historic sites we could r enovate, the number of Historic A rea programs and costumed interpreters we could add. I love the Kimball theatre; I know many of you do, as well. But we will be closing it on July 6 , after we fulfill our commitments for July 4th, and we will explore all future options. Our goal has to be saving the Foundation hundreds of thousands of dollars that can be r edirected to our core educational mission.
24
If our future focus is going to be on the core educational mission, what does that mean for our commercial businesses? We only have three options: i. Sell the businesses. ii. Run them better ourselves, or iii. Outsource our businesses to someone who can r un them better for us
25
After much deliberation and consultation, we believe that outsourcing offers the Foundation a way to r un certain of our businesses more profitably. So I am announcing today that the Foundation will be outsourcing our golf operations, all of our r etail stores, much of facilities and maintenance operations, and the management of our commercial r eal estate. Once we’ve finished here this morning, there will be meetings of each division where supervisors will go into details and answer specific questions about how we will move forward. But I want to assure you that as we’ve entered into the outsourcing agreements with these vendors, our #1 consideration was that our employees be treated with r espect and with dignity. After a series of tough negotiations, I have r equired each vendor to retain every single qualified employee in these four areas for at least one year. These employees now can decide if they want to work for these vendors. If they decline, they will r eceive a CW severance package, along with an unprecedented menu of outplacement services. But even if these employees decide they do want to work for these third parties, they will still r eceive the same severance package from CW.
26
Regrettably, some employees in other departments will leave the Foundation.
No one likes to see a colleague or a neighbor lose his or her job. It’s upsetting. It’s painful. This is why the Foundation is offering an extraordinary level of assistance for those employees who are leaving us. W e will do everything we can to make this transition less difficult. Every employee leaving the Foundation will r eceive severance -‐-‐ one week’s pay for every year of service with Colonial W illiamsburg, up to a maximum of 2 6 weeks. In addition, employees who are leaving the Foundation in June will r eceive an extra month of their current health care benefits; in most cases, insurance coverage will last through the end of July. It is common practice to either stop coverage immediately or end coverage at the end of the current month, but extending coverage was the r ight thing to do. Finally, CWF has brought in Lee Hecht Harrison, a national leader in the HR field, to help our employees find the next stage in their careers. W ith Lee Hecht Harrison’s assistance, CWF will offer a 3 -‐month, onsite Career Center offering personalized daily coaching, including: (1) Resume writing workshops;
27
(2) Interviewing strategies and techniques; (3) Building and effectively communicating your experience and skills; (4) Connecting you with prospective employers and r ecruiters The Foundation cares about its employees -‐ those continuing with us, those who will be working for an outsourcing firm, and those who are leaving. Despite the Foundation’s financial challenges, we have gone the extra mile to help our employees. W e have tried to do what is r ight, for our employees and for the Foundation. As one final example of this, as part of this r estructuring no costumed interpreter will be leaving the Foundation.
27
Ladies and gentlemen: We now have a plan to save the Foundation. We want to do this once. We need to continue telling America’s enduring story. Throughout this process, I have thought a great deal about the impact these changes will have on our colleagues who are most directly affected today. But I have also thought long and hard about my r esponsibility to all of our other employees, to our community, to our donors, to our mission. We must make these difficult decisions because there are no easy answers and time is not on our side. Because as difficult as these decisions are, it would be far worse for the future of the Foundation, and everyone who works here and who cares passionately about it, if we did not take bold action today. Because ultimately, doing nothing or continuing business as usual would mean the
28
end of this special place and our mission. It would mean the end of the vision that Dr. Goodwin and Mr. Rockefeller shared over 9 0 years ago. None of us here today, and none of our hundreds of thousands of supporters around the country, want to see that future. None of us is willing to accept it. This is a very tough day. They don’t get any tougher. If there was any other way to save the Foundation, I would eagerly have taken it. But there isn’t. For the first time in years, we now have a detailed, comprehensive plan – and an opportunity – to r eturn the Foundation to stable financial health by 2 019. A nd to imagine a much brighter future. O f all the information you’ve heard today, that is the one I want to leave you with: For the first time in years, we have an opportunity for sustained success. Now we need to seize it.
28