HEAD Arts Struggle Under, but Often Conquer, Crippling Red Ink : SAN DIEGO COUNTY

Suzanne Townsend wanted--no, expected--to receive a grant from the city’s Commission for Arts and Culture for the current awards cycle.

After all, her company, San Diego Performances, presented eight appearances by seven top dance troupes here this season, including the American Ballet Theatre, the Joffrey Ballet and the Martha Graham dance company.

The commission evaluated San Diego Performances’ grant application and rated it a 3 on a scale of 4--an average score. Then the commission recommended no funding, commenting that “San Diego Performances was a first-time applicant with a debt.”

Although some states’ arts councils almost encourage indebtedness for funding, it is not a requirement in California. The commission adopted a very inconsistent point of view with respect to debt and new applicants. The commissioners’ get-tough stance could have carried more weight had it been applied equally to all debt-ridden arts institutions.

However, the commission recommended funding for Installation Gallery, which has a $6,000 debt, the Gaslamp Quarter Theatre, with a $160,000 debt, and the La Jolla Playhouse, with a $703,000 debt.

Regardless of state policy decisions, the unpleasant reality is that debts are all too prevalent in the arts world. A survey of nonprofit theaters by Theatre Communications Group, a nonprofit theater-resource and consulting firm in New York, revealed that 55 of the 103 theaters surveyed ended last year in debt.

Symphony orchestras suffer the same incidence of indebtedness. Fifty-five percent of all orchestras in the country run deficits, according to a speech delivered Thursday at the American Symphony Orchestra League’s annual conference, held this year in San Francisco.

An average of 35% of the dance companies surveyed by Dance U.S.A. showed a deficit between 1983 and 1987.

Similarly, in the most recent Opera America survey, 35 of 100 opera companies polled carried a debt at the end of the 1986-87 season.

Though red ink may be a fact of life to arts institutions, for every debt-burdened organization another one has demonstrated how to eliminate a deficit. Their methods range from increasing contributions from board members to tougher management to buying equipment less often.

Since 1985, the La Jolla Museum of Contemporary Arts, the San Diego Opera and the San Diego Foundation for the Performing Arts dried up a sea of red ink totaling more than $1.5 million.

Last year, a lingering debt (which had peaked at $400,000 in 1986) threatened to choke the Foundation for the Performing Arts. The foundation, San Diego Performances’ chief rival, decided to bite the bullet and wipe out its $165,000 debt in mid-season.

“We could not continue as a viable organization without eliminating the debt,” said Fred Colby, the foundation’s director. “It was a millstone around our neck.”

How did they do it?

In December, the foundation canceled appearances by the Limon Dance Company and the Trisha Brown Company, two of four troupes scheduled for the remainder of the season. The foundation held a major fund-raising gala built around a February performance of the Kodo Japanese drummers and negotiated with its creditors to reduce the amounts owed, in return for paying them off within 30 days. Even though the Limon and Trisha Brown companies did not set foot in San Diego, the foundation paid them 75% of their fees--but avoided the expense of putting on those productions.

The plan worked. Two weeks ago, the foundation’s debt became history.

A five-year plan was a key element in the San Diego Opera’s recent turnaround. When managing director Ian Campbell came to San Diego in 1983, the opera was “producing too much product for too high a price. At the same time, it was facing a falling box office,” he said.

The company was presenting eight operas a year. By 1985, it had incurred a $750,000 debt.

“We had set ourselves up for a problem by a lack of a cohesive, long-range plan,” Campbell said. “We did not know where we wanted to go.

“It was a classic position of trading out of a crisis by using straight management principles. We decided nobody owed us a living.”

With an attitude that “tickets are not purchased, they’re sold,” Campbell cut the number of operas to four and diversified, offering special events such as the visit of Houston Opera’s “Porgy and Bess” and a series of recitals by celebrity singers.

Working closely with his board of directors, Campbell kept a tight lid on expenses for almost four years, cutting to “a volume of productivity which we could afford to fund,” he said. Meanwhile, attendance increased dramatically, from 72% in 1983 to 94% for the season just closed.

One of the most important facets in the opera’s financial turnaround was a major change in philosophy for its board of directors, Campbell said.

In Campbell’s first year with the opera, donations by the 35-member board totaled $30,000, with one member contributing $20,000 of that, he said. For the 12-month period ending this month, contributions by the 35 board members amount to more than $300,000, he said.

The La Jolla Museum of Contemporary Art ultimately made quick work of a longstanding debt that by September, 1986, had grown to more than $400,000. A member of the museum’s board of trustees offered her colleagues a challenge, said Anne Farrell, the museum’s development director.

“She would make an $885,000 gift, with the proviso that her gift go into the endowment fund, if the board would raise a matching gift,” Farrell said. “It inspired the rest of the board to come up with the matching money.”

In fact, the board overshot the goal, raising $960,000, part of which was used to eliminate the crippling debt and part of which created a cash reserve for the museum.

Creating an endowment and a cash reserve are at the core of the San Diego Symphony’s recovery program, established after its canceled 1986-87 season. Like the opera, its directors have taken on an increased role. For the fiscal year that ended Sept. 30, the symphony board contributed more than $800,000 of its $5.7-million budget. That budget was increased this year, to begin raising the salaries of orchestra musicians, who are among the lowest-paid in the country.

Among the resources that symphony Executive Director Wesley O. Brustad has consulted is the National Arts Stabilization Fund, which encourages a businesslike approach to management. Established by the Rockefeller, Ford and Andrew W. Mellon foundations in 1983 as a grant-making agency, the NASF offers a strong prescription to ailing cultural institutions.

“Our objectives are to get the community to understand what it takes to run arts organizations that are serious about their artistic mission and to begin to put in place standards not only of prudent and efficient management but of giving,” said Marcia T. Thompson, president of the fund. “Most organizations just look at income and expenses. But very few use the techniques of business.”

The fund, with headquarters in New York, stresses the importance of tracking the balance sheet and using the relationship of assets to liabilities to forecast an organization’s capacity to meet current and long-term obligations.

The fund goes into communities where there is a consortium of donors from the business, government and charitable sectors eager to provide the cultural institutions with financial stability. The fund puts up a third of the money needed and the community raises two-thirds for the projects, which run at least five years.

The Old Globe Theatre used a businesslike approach as well to resolve its debt. The directors and staff of the Old Globe made “a conscious decision” not to immediately retire a $750,000 obligation, incurred after an arson fire in 1978 destroyed the original Globe, said managing director Thomas Hall.

Faced with the challenge of raising $6.5 million to rebuild the Globe, the theater took almost a decade to pay off the $750,000.

Rather than a formal fund-raising campaign with high-profile events, the Globe chose to eliminate its debt by cutting costs and increasing its usual sources of revenues.

“The first couple of years the deficit was unbearable. A good bit of my time and the business manager’s time was devoted to making sure we had enough money to pay the bills in a reasonable time,” Hall said.

To cut costs, the Globe slowed salary increases and extended the life of equipment. For instance, it would replace a truck after eight or nine years rather than every three or four years, Hall said. Production budgets were sliced, requiring more creative ways to design and build sets. “Any kind of expansion was looked at in careful terms so we would not be spending more than we were taking in,” Hall said.

Perhaps the most bitter pill the Globe had to swallow was reducing the number of performances of Shakespeare, its most sacred icon. Producing Shakespeare--with the attendant large casts--had always been an expensive proposition. But the Globe’s debt and the development of San Diego’s theater scene helped shape the decision.

“We cannot be all things to all people,” Hall said. “If we had continued to do the magnitude of classical work we were doing, it would have increased the debt. We also felt there was a lot of Shakespeare being done around the city and in very competent productions.”

Today, the Globe still carries a $400,000 construction debt from a second fire, which burned down the festival stage in 1984. But it accepts debt as part of the recovery and growth process.