Decatur Celebration's success generally relies on beer sales and perfect weather.

That's the simple analysis of the finances of the annual August downtown Decatur event after an unprecedented release of Celebration's financial records from 1990 forward.

"In general," said Kevin Chapman, Decatur Celebration board secretary, "I've always heard the term 'cash cow' in connection with Celebration. Board members have admitted they've come on with that misperception. Once they come on, they have that changed.

"I think it's good to be going public with some of this stuff. We are being open about everything. There's no reason to hide anything. Some people have that perception, but that's never been our intention."

Celebration's finances have come under renewed scrutiny after an early-April news conference at which event producer Fred Puglia said, "We need $80,000 in underwriting" and "there is not enough in our rainy day fund to stage 2009."

Three weeks later, Decatur Memorial Hospital bought the event's title sponsorship for $80,000. After a week of public criticism, DMH restructured the agreement and released the title sponsorship but still endowed the event with $40,000.

Generally, about half of the event's income has come from beer and wine sales. Income in those areas dropped to near-record lows last year.

The fewest beer and wine tickets ever, just shy of 51,000, were sold last year. Ticket sales for beer and wine have dropped more than 50 percent from a 1991 high of just under 110,000. In addition, last year's soda sales income was the second-lowest since 1990, the lowest coming in 2000, which was was the year that started the six-of-seven years of budget shortfalls.

Playing the odds

Decatur Celebration is more expensive than it's ever been.

The event began in 1986 with a $75,000 budget. This year's budget will approach $800,000.

That increase has been offset by increased sponsorship money, just more than $90,000 in 1990 and almost $250,000 last year. But the event income, which comes from beer and soda sales, commissions from food and arts vendors and the carnival, has not matched the increase in cost of entertainment and staff.

Event income was just shy of $300,000 in 1990, and just over $350,000 in 2007.

Dealing with razor-thin margins has just become a fact of life for Celebration, Chapman said. The event needs everything to go right to meet its budget.

"It's based on it being absolutely perfect," Chapman said. "I think we just keep on hoping it goes perfect. We'll play the odds. I always thought that was the difference between this event and something like SummerStart. It's traditionally pretty dry the first weekend in August. You don't know what the weather will be the last weekend in May.

"We've batted around the idea of rainout insurance, but that's really too expensive. So what we do, in effect, is self-insure."

Those gambles have missed the majority of this decade. Five of Celebration's last eight years have been negatively affected by weather, by heat (2001 and 2002) and rain (2000, the "worst weather ever" storm in 2003, and last year).

"Last year is a perfect example," Chapman said. "We had a two-hour drop, and it hit at the worst time. Last year, we had rain early Saturday evening, and crowds were late getting down. Beer sales on Saturday generally start picking up at 6 and peak at 10. We clipped off two hours of sales last year. On a good night, we might gross $20,000 an hour. If you lose two hours, that's $40,000.

"It's always some little thing, and it's usually weather. We don't want to run and cry 'wolf' because of two hours of rain. But with the accumulation of the last six budgets, we're a little more concerned about the future."

"If we hadn't had that (rain) happen" last year, Celebration general chairman Mark Scranton said, "we'd have broken even."

Expected vs. unexpected

So a 12-month operation acquires the majority of its operating funds over three days in August, and the largest part of that income is derived from beer and wine sales. Chapman and others connected with Celebration talk often about "saturation," the point at which the maximum number of people have come to the event and spent the most money they're going to spend.

Perhaps, they suggest, that point has been reached with beer and wine sales. Prices have increased seven times in the last 17 years. In 1990, a beer cost $1.50. Last year, the price was raised to $3.75.

The last price increase that did not result in a significant drop in sales was 1998, when beer and wine tickets went from $2 to $2.50. Increases to $2.75 in 2000, $3 in 2002, $3.50 in 2005 and $3.75 last year have resulted in a drop of almost 50 percent in sales.

There are no plans to raise prices this year.

"As we raised the price," Chapman said, "the sales dropped. I don't know if we ever get that back."

Everything costs more than it did 10 or 15 years ago. Chapman's talk about the finances often swings on relatively minute numbers, $1,000 or $2,000 in the context of an $800,000 budget. But those items add up.

In 1997, entertainment acts cost $220,000, while administrative expenses - salaries, offices, equipment and music rights licenses, among other things - were $184,000.

Entertainment expenses rose $45,000 to $265,000 by last year, while by 2004, administrative costs leaped $61,000 to $245,000. (They've dropped slightly and flattened since.) The administrative increases are due primarily to hikes in insurance rates. Insurance was first offered to Celebration employees in 2000.

The last increase in pay Puglia received was in 1998.

"People were kind of hard on us for not being upfront about the losses sooner," Chapman said. "While I agree that we could have been publishing our financial data before now, the string of losses that the festival experienced were usually due to items beyond our control. Seems like we always ended the festival saying, 'Well, if it weren't for this, we would have been fine, and we won't have that next year.'

"Weather plays a big part. Unexpected cost increases and repairs do as well. I guess we didn't see the need to run to the public and ask for more support, at least to the extent that we did in our news conference, because we had rain a couple of years, or because we had electrical wire stolen one year or any of the other one-time events that happened in that stretch.

"Increased costs like entertainment or marketing or administration are things that we can somewhat plan for. The items that were killing us were things that we couldn't plan for."

Gauging success

Even those in the public who didn't perceive Celebration as a "cash cow" had little idea about budget shortfalls for the majority of this decade. Some of that perception comes from the closing-night pronouncements from Puglia, who regularly paints a rosy picture about the event.

"At the end of the weekend," Chapman said, "you guys will go up to Fred and ask him how things went, and he'll always say 'great.' The truth is, we don't know at that point. We don't even know when the board meets the week after the event. Too much needs to be sorted out.

"By the time we've figured it out, we don't want to call a press conference to talk about how much money we've lost, especially when we almost always can point to one thing that happened and made a difference."

By its very success, Chapman says, Celebration has become a victim of expectations and hyperbole.

"Fred tends to gauge the success of the festival on crowds and feedback," Chapman said, "not so much on the bottom line. In a way, that's true. Looking at the crowd on a Saturday night, one has to wonder how on earth we can't be making money hand over fist.

"So the attendance is still there. The festival still works. People still come down and spend money. Sponsors still give money. Hundreds of people still volunteer their time for the event.

"Looking at the big picture, the festival is still a major success after 22 years. It just becomes a bigger challenge every year to make sure it stays that way."

Board responsibility

Even as the bad economic news mounts, Chapman remains confident.

"I can remember when the rainout fund was $400,000," he said. "Now, we have to be more frugal with our money. We're challenged to find sponsors who can provide some in-kind service and to find more volunteers.

"We still want to do the best we can to cut expenses in other areas. Those are board decisions, and they're an ongoing thing. Right now, our show sign clocks" � the clocks at each stage that designate the next show time � "need to be redone, but maybe we don't do them all at once."

Decatur Celebration itself is well-established enough for much of it to run on auto-pilot, but it still needs to be funded, and that's where the board needs to show its creativity.

"The majority of the board meetings are brain-storming," Chapman said

Chapman insists the board is being responsible financially.

"I've looked at this for 16 years. I don't know an easier way to make the festival solvent. Some of us with financial backgrounds have a theory about the event. People come down with $50 in their pocket to spend. If we double the price of everything, we still only get that $50. We've reached the saturation point."

"We recognize that we're at the saturation point for the festival, and any additional funding has to come from outside the norm, things like bingo and the circus and the Spring Fling. It's all kind of just a shot in the dark. We don't have a track record with those events."

Scranton acknowledges those kinds of events are outside of Celebration's true strengths, but he nevertheless sees a benefit in them.

"It's too bad we have to spend time to put other things together," he said, "but on the other hand, that's something else we can bring to the community."

"If the board comes together and helps generate revenue through sponsorships," Puglia said, "then we'll be healthy. It's all numbers. We're watching every expense."

The event, all believe, is safe for the immediate future.

Chapman doesn't see an end to the event in sight.

"If we do things with vision," Scranton said, "we'll still be here five or 10 years down the road."

"I think as long as there's $100,000 in the bank," Chapman said, "there will be an event. We'd either borrow money or go to the sponsors.

"I think it can continue indefinitely. It's going to require some continuing fiscal management on the part of the board, and continued support of the public: the sponsors, the volunteers and the attendees. I think the formula does work."

Tim Cain can be reached at timcain@herald-review.com or 421-6908.