Symphony Financial Crisis Belied by Oppulent Looks

Many San Diegans assumed that the symphony’s financial woes were over when the orchestra moved into its renovated Symphony Hall in November. The physical evidence suggested opulence. The gilt trim and rose tones of the elegantly refurbished Baroque movie palace bespoke financial solvency.

Indeed, the capital campaign to finance the renovation and purchase of the Fox Theatre had raised nearly $4.7 million in cash and pledges.

But in truth the 76-year-old orchestra was carrying a staggering debt which, unless eliminated, could sound the symphony’s death knell. Regardless of the way things looked, the musical group was living day to day on the brink of fiscal crisis.

Last week the symphony hurtled over the brink into virtual, if not literal, bankruptcy. No longer able to meet its financial obligations, including staff and orchestra payrolls, the board of directors halted payments to all creditors and launched a crash fund-raising campaign. Should it fail to reach its goal, the orchestra will file for bankruptcy March 10 and shut down operations.

Despite last week’s announcement, symphony officials said, it still is not too late for the symphony to reach its financial goals, but the likelihood of that occurring decreases daily.

The symphony needs $2 million. A patron has offered to kick in $500,000 if another $1.5 million can be raised by March 10. Including the patron’s offer, the orchestra has raised $1.4 million, with approximately $600,000 to go.

At the root of the symphony’s troubles is a debt that has grown like a malignant tumor on the 76-year-old orchestra, steadily eating away at all donations, all funds raised, all tickets sold.

The acquisition of the Fox Theatre was intended to help wipe out the debt, but so far has failed to do so. The debt can be traced all the way back to 1975. “We balanced our budget that year,” said Laurie Waddy, an arts patron and philanthropist who was president of the board of directors then.

But in 1975 the board voted to move the orchestra toward major status. “We wanted to raise the quality of the symphony,” Waddy said. That meant extending the season and paying the musicians more.

As salaries began to rise, the orchestra was unable to keep income on a par with expenses. Each year’s deficit of about $200,000 was added to the preceding debt. By 1981 the carry-over debt was nearly $900,000. The symphony was on the verge of bankruptcy and almost failed to open its winter season.

The problem was the same as it is now: the orchestra spent the next season’s early ticket revenues as fast as they came in, with the result that seven months later it had no money to pay creditors or meet its hefty biweekly payroll.

Before the current season began, the orchestra had spent $1 million from advance ticket sales, money it desperately needs now to meet its payroll.

In 1981 the symphony restructured its debt, employing a revolving line of credit with a consortium of banks to help carry it through periods when the cash flow lagged. But it did not eliminate the debt, which continued to grow annually.

In 1983 the symphony decided to acquire its own hall as a solution to its fiscal plight. For nearly 20 years the symphony had rented and played in the Civic Theater. By purchasing and restoring the Fox Theatre, symphony directors, believed, they could offer something concrete for patrons to put their money into. It beat raising funds for annual operating expenses or soliciting money to retire the debt.

“Raising funds for bricks and mortar projects is the easiest kind of fund-raising; raising funds to pay off a debt is the toughest,” said M.B. (Det) Merryman, the symphony’s president.

Through the real estate expertise of its volunteer vice president, Blaine Quick, the symphony was able to buy, the entire “Fox Block” in 1984, then sell all but the theater for the same price. In the process the orchestra purchased the Fox Theatre for a bargain price of $500,000.

Wiping out the debt through acquisition of the theater was dependent on finding a donor who would pay $3 million in return for having the building named in his or her honor. The symphony’s capital fund-raising campaign for the hall set a goal of $6.5 million. That included the cost of renovating the hall at $4.75 million, the cut-rate $500,000 purchase price of the theater itself and an endowment fund.

But the capital campaign fell short. Last week Merryman said it raised about $4.7 million, but failed to come up with the big donor for whom the hall would be named. Had an individual or corporation contributed the $3 million, the total would have reached $7.7 million and the long-term debt could have been retired.

The capital campaign raised the $4.7 million in 18 months, despite having three different campaign directors. Jerry Kleinman, who had been the orchestra’s marketing and development director, was reassigned to the capital campaign in March, 1984. He was fired in October of that year, but not before $1 million was raised.

A local man with political connections, Carl Ludlow, lasted three months. General manager Richard Bass termed the choice of Ludlow counterproductive. “He had some excess political baggage” that hurt the campaign, Bass said.

Attorney Lynn Schenk, who also had major political connections, is credited with doing most of the fund-raising in the final seven months of the campaign.

“We raised two-thirds of the goal,” Bass said. “If we had had Lynn from the outset, we probably would have reached our goal. We were very, very close to at least two naming gifts, one of which is not out of the picture yet.”

The capital campaign focused primarily on known heavyweight donors and corporations, a fact which hurt when it came time to raise money for annual operations.

The symphony relies on contributions for 60% of its annual budget of $7.9 million. “There was a period when it would have been extremely counterproductive to go to the corporations,” Bass said of efforts to solicit operating funds. He admitted that corporate underwriting of concerts was markedly down this season, contributing to the difficulties the symphony has had meeting monthly expenses.