In May, KUSP reached a financial tipping point that prompted a recommendation by the KUSP board, at the KUSP annual membership meeting, to consider selling the station. This announcement prompted a series of community meetings and extensive email contact to the board. Virtually all communications received expressed strong support for preserving KUSP as a locally owned community institution.

In the spirit of wanting to preserve KUSP as an independent station and long standing cultural institution, Community Foundation Santa Cruz County and Arts Council Santa Cruz County convened a group of community leaders to complete a review and analysis of KUSP and provide recommendations to the KUSP board on steps that can be immediately taken to preserve KUSP. The participants in the group are attached to these recommendations. The group was given the name of the Community Leadership Planning Group (CLPG).

Based upon its analysis, the CLPG does believe that KUSP can not only survive, but can be developed into a viable and vibrant community institution. The audience for the station is increasing and membership revenues have improved over the past year. While these trends reflect the continued hard work of the staff, under difficult circumstances, the ability to “save” KUSP is very much dependent upon the board taking decisive and immediate action to address the very pressing financial issues that have existed for some time and threaten to take KUSP dark, and most likely lead to a sale of the station to pay the existing debts. Absent clear action by the board, as reflected in the following recommendations, KUSP will not survive with the continued level of losses the station incurs each month.

In collaboration with Public Media Company, the CLPG prepared an initial 3-year budget (the “Budget”) covering July 2015 through June 2018 that incorporates the recommended changes in staff, programming, governance, and development. The Budget indicates that net income from operations1 could be reduced from a deficit of $78,000 in FY2014/152 to a deficit of $57,000 in FY2015/16 and to a surplus of $7,000 in FY2016/17, followed by a surplus of $150,000 in FY2017/18. It should be noted that, during the transition period of August 2015 through December 2015, these projections assume a decrease in membership to factor in any potential negative impact on the KUSP audience as the organization goes through programming and staffing changes. Additionally, no significant major donor or foundation support was incorporated into the Budget to be conservative. See the accompanying Excel file for more information on the Budget analysis.

The CLPG has developed a set of recommendations for the board reflecting a set of priority actions that the group believes must be taken to guide KUSP through this critical period. The CLPG recommendations to the KUSP board will, from the CLPG perspective, enable the station leadership to more fully and carefully plan a financially and organizationally viable future for KUSP that reflects important and sustainable content and community engagement components.

While all of the recommended areas are important, the most pressing and critical decisions facing the KUSP board are financial. Absent immediate action to address the financial issues the station will not survive, even with the recent generous anonymous donation of $100,000.

These recommendations primarily focus on a five month interim operating period for KUSP. This interim period will be focused on the following primary goals:

1. Address the immediate financial issues for KUSP.
2. Develop a strategic planning process that will carefully examine and build a viable longer term operating plan for KUSP including a focus on content planning, research and development.
3.  Create a near term major donor appeal reflecting the interim and longer term planning.
4. Engage in a process of board and overall governance development.
5. Create an overall staffing plan, job descriptions and an evaluation of the staffing needs and skill sets that will best contribute to the successful implementation of the longer term operation plan and vision for KUSP.
6. Build a stronger engagement with and integration of the clearly strong community support for KUSP into the on-going operation of the station. Included in this is the idea of building stronger relationships with other businesses and organizations within the service area of KUSP.
7. Overall the goal of this three month transition period will be to create financial stability and build a longer term sustainable organizational, staffing and programming model that keeps KUSP as a vital and dynamic community resource.

Financial recommendations

Background

KUSP has been consistently losing money from operations for a number of years. Historically the station has sold assets and borrowed money to cover the gap between expenses and revenues. Despite the sale of assets, the continued losses and borrowing have built an accumulated debt and liabilities of approximately $870,0003. KUSP lost approximately $213,000 in fiscal year 2012/2013 and $175,000 in 2013/2014. The current losses through May are approximately $70,000 (through 11 months in this fiscal year). The losses this year were reduced through the benefit of a one-time bequest of approximately $153,000 in December. Absent that bequest KUSP would most likely have run out of operating cash the first quarter of 2015. At the end of April KUSP had approximately $160,000 in cash, of which $50,000 was restricted (tied to grant sources). KUSP could owe approximately $66,000 in staff severance and vacation costs (in addition to the total outstanding debt balance).

There has been a focus in the public discussions on the NPR cost, with the mistaken assumption that the cost of NPR programs was the primary contributor to the KUSP programming costs and the budget deficit. This is not true, the major portion of the programming costs (about 2/3 of the cost) are attributable to programming staff and the balance to program acquisition costs. In June KUSP received an anonymous gift of $100,000 in an effort to allow time for evaluation and reorganization of the station. The board must address the issue of monthly losses if KUSP is to remain viable as an independent community radio station.

1. Reduce expenses during an interim (5 month) operating period. KUSP must cut expenses to avoid continuing operating losses.
   •     KUSP should reduce staff to the following positions:
     1.    Manager
     2.    Development Director
     3.    Operations Director
     4.    Underwriting sales
     5.    Part-time on-air host
     6.    Part-time Bookkeeper
   •    Shift from produced programming to national programming services to account for on-air staff cuts.
   •     Consider a limited use of volunteers during this interim period in addition to an increased use of programming from outside program producers (NPR, PRI, APM and others).
2. Reduce any other possible direct operating costs including occupancy or other non-staff costs.
3. From the recent donation, set aside the full amount of the staff severance and vacation obligation into a dedicated account that will be used only for that purpose. Continue to contribute on a monthly basis to this account for the additional obligations incurred each month.
4. Provide a weekly cash position statement to the board that projects income/expenses andremaining cash balances.
5.  Complete an agreement with NPR that addresses the outstanding debt and plans for payments going forward. Negotiate a lower monthly cost payment for broadcasts for FY2015/16.
6.  Reach an agreement with the grant sources for the approximately $50,000 in restricted funds in an effort to see, given the current circumstances, if those funds can be repurposed for general operating support.

Board and Governance recommendations

The success of these efforts to rebuild KUSP and create a viable and sustainable community station is dependent on a strong governance and board model for the station. Following are recommendations designed to create a strong governance body for KUSP.

1. During the transition period (30-60 days), engage an interim management consultant to work on a day to day basis with the staff and to provide reports and evaluations of the transition progress, staff and key milestones/deliverables to the full board on at least a biweekly basis.
2. Undergo a board/governance evaluation. This can be done by an outside entity and there are resources for doing this on a pro-bono basis (Stanford Law Clinic could be a resource for a governance overview).
3. Identify and set up a board training process, with a particular emphasis on financial responsibility.
4. Clarify expectations of the board and of each individual member of the board.
5. Develop clear reporting responsibilities coming from the staff to the board and from the board to the Community Advisory Board, Foundation members and ultimately to the subscribers and KUSP supporters.
6. Better utilize the Community Advisory Board by focusing the work of the board more closely on program planning and testing, fundraising and development, and by inviting some or all of the CAB to a joint meeting with the KUSP board once or twice a year.
7. Create needed committees on the board. Examine the scope of responsibility for key current committees, including the personnel committee, audit committee and finance committee.  During a transition period it might be helpful to bring in outside advisors to work with these key committees.
8. Over the next year identify and engage an outside entity that can monitor the financial status of KUSP and the reporting of the financial status to the board.
9. Identify and recruit people with specific skills onto the board including financial, legal, fundraising and overall governance.
10. Complete a review of the overall voting and election structure for KUSP. Currently the board is elected by Foundation members who are mostly members because of volunteer or programming roles. This structure should be reviewed to determine if it supports the ability of KUSP to change or if the voting structure tends to support the status quo on the content side for KUSP.  If the board determines that changes make sense a set of recommended changes in the bylaws should be developed for the Foundation members. One option might be simply to empower the Board to directly elect a limited number of members to bring specific skills (accounting, legal, etc.) onto the board.
11. Review the audit procedures and reporting to the board.

Staff Recommendations

The financial recommendations reflect a reduction in the current KUSP staff. The CLPG recognizes the significant effort and hard work of the KUSP staff under challenging and difficult circumstances. The staff recommendations, in line with the board recommendations, are focused on how to build the strongest possible organizational components with the staff skills required to build KUSP for the future. The two key positions in building a strong transition for KUSP will be the position of manager and development director. Both of these positions must make very strong contributions to, and lead, the transition changes, community outreach and fundraising efforts. CLPG recommends that the board consider using an interim consultant during the transition period (see number 1 above in the board and governance section).

1. Complete a detailed evaluation of staffing needs for KUSP.
2. Based upon the overall needs now and moving into the future, create detailed job descriptions for proposed station staff positions.
3. Complete a thorough evaluation of the KUSP management team in light of overall skills, needs and key required combinations of staff to carry KUSP through this transition and into the future operating and programming model for KUSP.
4. Consider engaging an outside source for the overall evaluation of the staff needs and individual staff evaluations.
5. Evaluate staff compensation and benefits packages to make sure KUSP is offering the overall compensation needed to hold and recruit the key staff with the staff skills sets required.

 KUSP clearly has strong support in the community. Many public meetings in the past two months have reflected a strong expression of support for KUSP as a treasured community resource. During the transition period (five months) an important component of the planning will be to build options and models to more fully engage the community in KUSP at all levels, from the board to fundraising, events, partnership and programming.  Some general recommendations to accomplish this goal are:

1.  Complete a more detailed exploration of community radio models that successfully engage community volunteers in key areas of governance, fundraising and programming/production while at the same time maintaining financial viability and consistency in programming.
2. Look at new technologies (podcasting, streaming, etc.) as options to further engage, train and distribute diverse community content.
3. Develop options for recruiting and training younger and more diverse volunteers and producers into KUSP.
4. Identify and develop fundraising opportunities that more fully involve volunteers.
5. Actively pursue conversations, partnership and collaborations with other community groups, nonprofits and businesses within the coverage area of KUSP.
6. Create a plan to build a more welcoming environment for more active community involvement in KUSP. This could include having “community engagement” in job descriptions; a transparent method for vetting volunteer suggestions; etc.

Programming

KUSP has increased its audience over the past year. The key questions for KUSP are what content focus is needed to continue to build audience and how, from that audience, to grow revenues (from memberships, major donor work and underwriting). A key part of this proposed transition period should be a careful assessment of the current competitive landscape and the best options for changing or refining the programming to enable KUSP to be successful and financially viable. To accomplish this analysis the CLPG would recommend the following steps:

1. Consider hiring an outside program consultant to make recommendations on programming – looking at news, news/music or primarily a music focus.
2. Create a survey of donors/subscribers to assess the interests, likes and dislikes of current members, subscribers or contributing listeners (not to be confused with Foundation members).
3. Look at options for completing a larger market survey to identify needs, interests and current listening habits of key demographics in the market. The goal of this survey would be to more fully understanding the competitive needs and gaps in the market that KUSP could address.
4. Assess the feedback coming from the public planning process over the past two months and fold that feedback into the assessments completed in 2 and 3 in this section.
5. From the information gathered refine or change the KUSP programming –with a goal of launching any changes by early 2016.
6. Coordinate a communications plan to ensure that this information is provided to the public on timely and on-going basis.
7. Maintain engaged and open communications both in the planning process and on an ongoing basis with the public to provide consistent feedback and evaluation of new programming options.

The ability of KUSP to survive will be largely dependent upon cutting operating costs near term, the KUSP board adopting a viable interim operating plan, and then using this interim plan as a basis for a fundraising appeal to major donors. The position of station manager and development director are critical in leading a major donor/capital campaign effort and those key skills should be a primary consideration in evaluating current staff in these positions or in recruiting new staff for these key leadership positions.

The overall goals of building an effective fundraising effort should be:

1. To raise money to fully retire the current debts of KUSP, with a priority focus on the current loans (in the total amount of $277,225), to pay the transition operating costs and to build reserves or an endowment for KUSP. The near term (5 month) fundraising goal for KUSP should be in the range of $350,000 to $500,000.
2. The second stage of the fundraising should focus on an appeal to the listeners and members of KUSP to support this transition of the station and support the longer-term stability of the station’s operation.
3. The fundraising planning should identify options to more fully build on the strong support coming from the recent KUSP public meetings.
4. The KUSP leadership should create a longer term (3 year) major donor and capital campaign to build an endowment for KUSP that can support the development and creation of new content, volunteer engagement and training, and active utilization of new distribution technologies.

Footnotes: 

1 Includes depreciation expense.
2 Management forecast for FY2014/15 year end
3 As of May 31, 2015, liabilities include $275,000 in notes payable and $483,000 in accounts payable

KUSP Community Leadership Planning Group