Budapest's Palace of Arts is big and brash, but is it a burden too?
4.4.2008 - Sandor Laczko

Budapest's Palace of Arts may have taken a grand name for itself but in this case "Palace" is not an overstatement. The dramatic building sits on the banks of the Danube River just on the edge of the city centre. If you were to fill all of its venues at once it would hold the population of a medium size town. It's big, it's brash and according to some it's a burden on Hungarian cultural life because of its great costs. In this report from Sandor Laczko in Budapest we hear how this Palace of Arts introduced Hungarians to the Public-Private Partnership.

“It is too luxurious for us but it is good” – that is how the largest circulation Hungarian broadsheet paper Népszabadság summarised a report by the National Audit Office – a report critical of the final costs of the Palace of Arts. On the positive side, the auditors pointed out that the infrastructure of the building is world class - it received an international real estate development award in 2006 and the number of visitors exceeds projections.”

However, the report states that the overall construction cost is going to be 66.6 billion Forints, some 260 million euros, more than originally planned. The reason is that when the construction was completed in 2004, the government and the private investor, TriGránit Holding, decided to change the original plan and introduce a public-private-partnership. This means that instead of purchasing the building over five years, the state would lease it over 30 years - together with a full maintenance and management service. Smaller annual instalments but a much higher bill overall. András Csonka is the deputy CEO of the Palace of Arts company responsible for organising programs in the institution:

“The fee paid by the government this year is 6.5 billion Forints and we have a budget of 2.4 billion. Everybody in the cultural sphere sees that’s a huge amount and this is why other theatres, concert halls and cultural houses don’t get enough money. But it’s not true. If they think about this in another way that when the Hungarian government decided to create, to develop the Palace of Arts, it has its own expenses, a development fee, this is an investment, this is absolutely something else.”

This view that the quantity of funds going to the Palace of Arts does not cut into resources for other cultural programmes in Hungary is not shared by many. Cultural analyst Marcell Sebők:

“The outcome of this investment is, I think, rather disadvantageous for the short and the long run, as well. The main problem is that there is a huge burden on the budget of the Cultural Ministry, a 30-year commitment. For the sake of comparison, if we consider that the National Cultural Fund has more or less the same amount of money annually, it’s a rather disadvantageous construction.”

The analyst believes that even if you take only the amount given to the Palace of Arts for organising events, this is also disproportionately high.

“It’s a state-sponsored institution. Of course, they have a big variety of programmes from the children programmes to the so-called high cultural events. A big problem is that there is no sign of having a strategy and a vision how to spend this huge amount of money. It is a mixture of valuable and very questionable projects, I think, and the problem is the size and quantity of this money is much bigger as opposed to other institutions. There is no chance for a real competition. It’s a luxurious way of spending money, instead of financing projects, financing programs, via visible and transparent application procedures.”

The Palace of Arts is Hungary’s first Private-Public-Partnership for a cultural project and this form of funding has not proven popular with the public. But economists argue this option should not be disregarded when planning future projects. They believe that if market rationality is a priority - instead of political considerations, as happened in the Palace of Arts project, the format does have a future – even in cultural projects.