Symphony Suffering Credibility Crisis in Its Fund Search

Many community leaders have been reluctant to help the San Diego Symphony stave off impending bankruptcy because of doubts that the orchestra has been or will be soundly managed, even if it survives the current fiscal crisis, government officials and businessmen say.

That credibility problem, fostered by the symphony’s repeated financial crises over the past 20 years, was widened by the symphony’s disclosure last week that it had not fully informed the public of its mounting fiscal woes for fear of dampening the enthusiasm generated by the purchase and renovation of Symphony Hall, which opened in November.

“There’s a problem of credibility and confidence in the symphony,” said Lee Grissom, president of the San Diego Chamber of Commerce. “A lot of business people are unwilling to contribute at this time because they have questions about how the money will be used.”

Mike Madigan, vice president of Pardee Construction Co., said the symphony, much like a politician, needs to be more than honest. It needs also to maintain the appearance of honesty, he said.

“The symphony may be absolutely right in their evaluation of the books as being well managed and well run,” Madigan said. “But there’s a public perception out there now that’s a concern. That perception has to be dealt with.”

Grissom and Madigan have taken to the front lines in the fund-raising battle, gathering business leaders together in an effort to raise a large portion of the $500,000 that symphony managers say they need by Monday if they are to avoid closing their doors and filing for protection under Chapter 11 of the U.S. Bankruptcy Code.

Their pitch has been this: Help the symphony now. Ask questions later.

As part of that approach, the chamber has obtained a commitment from symphony managers that the chamber and the City of San Diego will each be allowed to nominate two members to the symphony board’s finance committee, which reviews the organization’s budget and approves all major expenditures.

In addition, a chamber vice president, Max Schetter, joined two city officials this week in reviewing the symphony’s books with the orchestra’s auditors and top staff. Schetter said he came away convinced that the crisis is real and that the symphony is serious about obtaining financial guidance that would help avoid a repeat of the current scenario.

Still, Schetter said it is not clear whether the chamber’s efforts will be enough to persuade local businesses that their money will be safe with the symphony.

“We’ll find out when people vote with their pocketbooks on this issue,” Schetter said. “We’ll find out if the funds are forthcoming to offset the shortfall.”

Among the problems cited as damaging the symphony’s credibility are the following:

- Repeated financial crises. In 1968, 1981 and again this year, the symphony has teetered on the brink of bankruptcy.

“It seems like every seven years we have a plague of the locusts and every four years we have a symphony funding crisis,” Grissom said. “Some people have the feeling it’s as if they’ve been crying wolf for 20 years.”

- Excessive turnover in top management. The symphony has had 10 general managers in the past 15 years. The principal fund-raisers changed several times during the drive that raised $4.7 million for Symphony Hall but fell short of raising the additional $2 million needed to retire the symphony’s long-term debt. Former development director Jerry Kleinman was fired in late 1984 and replaced by Carl Ludlow. But Ludlow lasted only three months and was replaced by Lynn Schenk, a volunteer and member of the Board of Directors, who directed most of the capital campaign.

- An apparent lack of communication among the symphony’s managers. Ken Overstreet, the symphony’s development director, sent out about 1,000 fund-raising letters in February saying that $1.5 million had been pledged to the symphony on the condition that another $500,000 be raised to pay off the organization’s debts. As it turned out, Overstreet had not been told by board members that two of those pledges, totaling $1 million, had been withdrawn.

“I questioned it (before writing the letters) and said all I want to know is how much we have,” Overstreet said. “At that time it (the $1.5 million) was fairly firm. The letter was put into the computer, and in the interim things changed. I didn’t know it had changed until I read it in the newspapers.”

- A rapid increase in the symphony’s expenses, which outstripped the growth in the orchestra’s revenue. The symphony’s budget of just under $4 million in 1981 has increased to about $8 million this year, partly because of higher pay for musicians and a lengthening of the season. The orchestra generated annual deficits of $51,000, $285,000 and $137,000 in the three years ending in 1984. Audited figures are unavailable for 1985.

“They had a huge deficit of $1.8 million and had to carry interest on that,” said one symphony supporter familiar with the budget. “You didn’t have to be Phi Beta Kappa to realize that their budget was too high. It grew by leaps and bounds.”

Joseph Hibben, president of the San Diego Community Foundation, said the symphony’s fiscal managers would do well to emulate the success of musical director David Atherton, who has won praise for his impact on the orchestra.

“Atherton has given a great deal of discipline to the orchestra,” Hibben said. “That same level of discipline is required in the expenditures. We should get to the point where the symphony has no bill for which it doesn’t have the funds to pay.”

- Questions about the symphony’s handling of the current debt crisis. Although the debt threatening the symphony’s existence has been mounting for years, symphony board members and managers, persuaded that they could overcome the crisis, tried to use the excitement surrounding the new Symphony Hall to attract additional donations to cover the $1.8-million debt. After that effort fell short in November, the symphony continued to scramble behind the scenes until Feb. 25, when it disclosed that it had been operating near the edge of bankruptcy for two months.

City Councilman Mike Gotch said the symphony’s unexpected announcement put the city’s “political, civic and business leadership in a position we’re not comfortable (with) or thankful for, that is, ‘All of you bail us out.’ It could have been handled better.”

Despite doubts about the orchestra’s credibility, several of the corporations that made major contributions to the symphony’s capital campaign remain supportive. PSA’s communications director, Bill Hastings, said he has no doubts about the orchestra’s management.

“I’m confident they will solve the problem,” he said. PSA donated $100,000 to the Symphony Hall campaign, the largest amount it gave to any arts organization in 1985.

A Home Federal Savings and Loan Assn. executive suggested that the symphony’s debt and not its management was the problem. Home Federal donated $100,000 for Symphony Hall over a four-year period.

In dealing with the symphony, it is important “to avoid the challenges of hindsight,” said Dick Haack, Home Federal’s vice president and public relations manager. “What’s important is, here’s the problem facing us at this moment.”

Lincoln Ward, former vice president for Pacific Bell and a symphony board member, said he believed that talk of a “credibility problem” is nothing more than an excuse used by business leaders who do not wish to help the symphony.

“It’s a convenient way for some people to stay detached,” Ward said. “If they were really deeply concerned about the problem and spent time and got underneath the numbers and saw the tremendous job done in cost control and revenue generation, they’d satisfy themselves that there’s not really a credibility problem. Rather, there’s a cash-flow problem.”

Symphony president M.B. (Det) Merryman dismissed questions about the organization’s credibility.

“When you’re on the outside looking in there would have to be questions about the operation of any entity,” Merryman said. “For example, for those of us not on the inside of the Padre (baseball) operation, the events of the last few months in reference to management might seem unusual. I’m sure to someone sitting on the inside there are very obvious explanations.

“There are always going to be some people who are curious as to why one thing or another would happen.”

Contributing to this report were Bill Ritter, San Diego County business editor, and staff writer Ralph Frammolino.