Council Debates Letter of Credit for Symphony

As a last-minute reprieve for the bankruptcy-bound San Diego Symphony, the City Council has discussed extending an unprecedented letter of credit to the orchestra so it can borrow money to cover its operating deficit.

Four council members and a San Diego Chamber of Commerce official said Wednesday the letter of credit has been discussed as a “last resort” if private fund-raising efforts this week are not enough to erase the symphony’s $1.8-million debt. The symphony has said it will file for bankruptcy Monday morning if it does not raise the funds.

Councilman Mike Gotch said Wednesday he expected the City Council to be called into an emergency meeting to consider the letter of credit between now and Sunday night.

If the council were to wait until the last minute, he said, council members could be deliberating the symphony’s plight while the orchestra plays its last scheduled performance--an all-Beethoven concert--several blocks away.

Gotch said he believes there will be a call to assemble enough council members and approve the letter of credit before the final curtain. “The symphony has asked that by the conclusion of the final performance on Sunday, it have funds or the letter of credit from the city,” said Gotch. “They want the patrons on Sunday and the musicians to know if they have a reprieve.”

Acting Mayor Ed Struiksma, however, said late Wednesday he has no plans to call the special meeting.

“As of tonight, I have no intentions of calling a special meeting,” said Struiksma. “There is nothing in the works . . . The push is on the private sector.”

But interviews with four other council members and Lee Grissom, chamber president and one of the business leaders spearheading the recent flurry of symphony fund-raising, indicate the idea has been discussed in some detail. While they have not determined an amount for the letter of credit, Grissom said, it would be extended for only four months.

“The City Council does not want the symphony to go under,” said Grissom. “As a last resort, I think they’re willing to step forward and extend a line of credit which would allow them (the orchestra) to exist for a few more months.

“But it’s not a gift, it’s a loan, and the symphony’s effort will have to continue at the pace it is now operating or I think the City Council will withdraw its support and the symphony will go under on July 1, when the line of credit is withdrawn.”

Grissom said he would not know if a special council meeting were necessary until sometime today after reviewing fund-raising efforts.

In addition to Gotch, council members Judy McCarty, Gloria McColl and Abbe Wolfsheimer said they had all been approached by colleagues or businessmen recently to discuss the letter of credit.

Typically, a letter of credit is issued by a bank, guaranteeing that a business or individual has enough money in its account to pay a debt.

While council members, including Gotch, say they do not want to use city funds directly to bail out the symphony, the letter of credit would allow them to pledge tax money as collateral if the orchestra then sought a loan elsewhere to pay all or portions of its $1.8-million operating deficit. Grissom said it would be solicited with the strict understanding that it was a stop-gap measure.

Some council members, however, expressed concern Wednesday that the letter of credit could leave the city liable if the symphony defaulted on the loan.

“There is (some risk), and I feel (the symphony management) needs a very good talking to,” McCarty said. “They may need to make some changes in management. If the city helps them out and it doesn’t work out, our neck is on the line.

“The way I look at this letter of credit is (like) a father co-signing a loan on a car for a son and saying, ‘Son, I’m counting on you to make the payments,’ ” she said.

“What we would be doing is getting them more time to raise the necessary funds. That’s the point. And if we can see that they are making progress in raising the funds, and (there’s) a very good chance of being able to raise them, then I would be supportive.”

However, symphony board President M.B. (Det) Merryman said Wednesday he knew nothing about any proposed letter of credit. He said “no discussions” have been held with council members.

City Atty. John Witt said extending a letter of credit would be tantamount to the city giving money to the symphony outright.

“Any time you’re giving the credit of the city, it’s the same as giving money, I think,” said Witt. He said the council will probably have to freeze the amount specified in the letter in a separate city account.

Witt said the city can legally extend the letter of credit or even give the symphony the money. “Our initial thought on that is yes, it’s a public purpose to save a cultural institution, or support a cultural institution.”