By statute (Ohio Revised Code Section 3383), “Ohio cultural facilities” include facilities for the public presentation of visual and performing arts, museums for the presentation of science, technology and transportation, local historical facilities, and facilities for education and training in the arts and design.
When cultural facilities projects receive appropriations in the capital improvements bill, they are designated as being funded by state bond funds or by General Revenue Funds (GRF). All projects assigned to the Ohio Cultural Facilities Commission must satisfy a series of state standards before the appropriated funds can be released. These standards vary based on whether the project is for construction (bond-funded or GRF) or planning (i.e. feasibility study).
Standards for Bond-Funded Construction Projects at Cultural Facilities
While not a complete list, the following is a brief overview of the standards for bond-funded cultural facility projects. For a more in-depth description of the standards and procedures related to bond-funded cultural facility projects, please refer to our Cultural Facility Project Sponsor Resource Guide.
- The property must be used for the presentation or making available of "culture" to the public, as defined in statute;
- The project sponsor must be a 501(c)(3) organization incorporated in Ohio or an Ohio governmental entity (usually a city or county government; see statute);
- The cultural facility must present cultural programming to the public for the term of the bonds issued to fund the improvements, normally 15 years;
- If the project is a local historical facility or if the property is listed, or qualifies to be listed, on the National Register of Historic Places, sponsors must submit to the Commission project manager copies of the plans and specifications they submit to the Ohio Historic Preservation Office for review and comment, and any related correspondence;
- The owner of the property may not enter into any mortgages or allow any liens to be placed on the property without the Commission's concurrence;
- Coordination is required when the project sponsor leases the cultural facility from a third-party owner of the property. Although the property owner does not need to be a 501(c)(3) organization or governmental entity, the property owner must acknowledge and enter into legal agreements that allow the Commission to continue to use the facility for the provision of culture to the public, even if the lease between the owner and the project sponsor is terminated. This is typically accomplished through the use of a Non-Disturbance and Estoppel Agreement. The lease must also allow the project sponsor to extend the term of the lease beyond 15 years in case the bonds are refinanced;
- The project sponsor must demonstrate regional support in the form of local matching resources. At a minimum, the local match must be equal to $1 for every $2 of funding provided by the state. (Typically, the local matches are much higher than the minimum.) The match must represent funds that will be used for the current improvements project, and depending on the project’s circumstances, may be satisfied by the following:
- Certification of cash on hand or in a capital fund account. (If funds in an endowment are used as the match, the principal must be invested, and only the annual earnings used);
- Written fundraising pledge letters or pledge cards signed by donors to your capital campaign;
- Documentation that local or federal grants have been fully approved for the project, and are not subject to other, still unmet, qualifications;
- Verification of the site value through property tax statement, appraisal, or a property insurance certificate stating the site's value;
- The project sponsor must demonstrate, through a project financial review, that it possesses adequate resources to fund the project (or phase of the project, if applicable) in its entirety. A project is "fully funded" when the project sponsor can demonstrate that the funds to pay for all hard and soft costs of a project have been raised. “Raised” means written pledges from credit-worthy entities, written funding commitments from governmental entities and/or written guarantees and/or cash receipts, or a combination of these to the Commission’s satisfaction. If lines of credit, loans, or local bonding, and/or other bridge financing or other cash flow mechanisms are utilized, they are acceptable only if they are backed by written pledges and/or written guarantees from credit-worthy entities, and/or written funding commitments from governmental entities, or a combination of these;
- The project costs that must be fully-funded include, but are not limited to design, construction, land acquisition, environmental assessment and remediation, exhibits, furniture, fixtures, equipment, construction management and other professional service fees, legal fees, marketing, start-up operations, operating endowments, utilities and other start-up costs. It should be noted that not all of these costs may be eligible for reimbursement from the funding appropriated to the project through the Commission;
- Adequate funding is additionally based on the idea that the project sponsor can:
- show a positive cash flow during the construction period;
- demonstrate that capital project debt is not financed by projected revenues from future operations; and
- verify that any loans and lines of credit are backed up by written pledges or legally binding written guarantees for the full loan amount;
- The project sponsor must demonstrate that the organization will have an open and operable facility for the duration of the Commission agreements. To do so, a representative of the project will be asked to certify — as accurate to the best of his or her knowledge — a business plan that includes an operating pro forma or equivalent, that projects revenues, expenses and debt service (if applicable) and detailed written explanations of the assumptions used to determine the dollar figures;
- In addition, those cultural facilities receiving bond funds for construction projects must enter into legal agreements with the Commission:
- Cooperative Use Agreement —Because the state’s capital appropriations are financed through long-term bonds, the Commission must maintain a long-term interest in the facility. The Commission will need to enter into a Cooperative Use Agreement for the facility and site for 15 years or more. Through the agreement, the state agrees that the local project sponsor controls the facility operations. The Commission does not involve itself in the day-to-day operations of the facility, but instead relies upon the project sponsor to do so;
- Construction Administration & Funding Agreement—The Commission's statute allows qualified project sponsors to serve as construction administrators, providing additional flexibility for the project sponsors. When an organization can successfully demonstrate its capabilities to the Commission, it will receive approval for local administration. A Construction Administration & Funding Agreement is then entered into with the Commission. The agreement includes details regarding construction services and the local sponsor's responsibilities. If local construction administration is not requested or not granted, construction administration is handled by the State Architect's Office;
- After the above standards are met, the Commission releases funds to project sponsors on a reimbursement basis for locally administered projects. On the occasions that a project is administered by the State Architect's Office, the Commission pays contractor invoices directly. At the beginning of a state administered project, all construction funds over the state appropriation must be transferred to the state treasury before contracts can be signed with any contractors.
Standards for GRF-Funded Construction Projects at Cultural Facilities
GRF-funded construction projects at cultural facilities are subject to fewer standards than those receiving bond funds. Primarily, these standards include:
- The property must be used for the presentation or making available of culture to the public, as defined in statute;
- The owner of the property must be a 501(c)(3) organization incorporated in Ohio or an Ohio governmental entity (usually a city or county; see statute);
- The project sponsors must demonstrate regional support in the form of local matching resources. At a minimum, the local match must be equal to $1 for every $2 appropriated by the state. (Typically, local matches are much higher than the minimum.)
Normally, one basic agreement is entered into for these projects:
GRF Grant Agreement—This document provides descriptions of the work, payment, and performance terms.
It is important to note that the state’s budget constraints have resulted in cultural and sports facilities projects being funded exclusively with tax-exempt bonds in the last several capital bills. It is unlikely that GRF funds would be appropriated for a cultural facilities project in the current funding climate.
Planning Projects at Cultural Facilities
Sometimes communities receive appropriations for planning and feasibility studies. These projects can be assigned to the Commission.
However, because bond funds are intended for capital improvements that have a long useful life, GRF grant agreements are the preferred funding method for planning situations.
Standards for GRF-funded cultural facilities planning projects are greatly simplified—project sponsors only are required to enter into a GRF grant agreement with the Commission.
