O.C.’s Arts Center Has Fallen on Hard Times : Culture: The economy lag and the Mideast are blamed for its ‘most difficult year,’ the facility’s president says.

The Orange County Performing Arts Center is having its “most difficult year” since its 1986 opening, its president says, encountering $1 million in losses at the box office and fund-raising problems.

Troubles in the economy and the Mideast situation are “having a combined negative effect,” said Center president Thomas R. Kendrick, who added that the facility does not have the financial reserves to continue over time “without basic changes.”

These will include focusing more attention on people making smaller donations and those occupying the cheaper seats.

In addition, he said, some institutional soul-searching is under way.

“We have reduced programming,” he said. “We have cut next year’s budget to this year’s level . . . we’ve made changes in our marketing and we’re clearly moving to try to explain our need, and get it out to the public.”

And although other arts groups in the county generally do not report signs of a slowdown among donors or at the box office, the current tightening clearly represents a turning point for the Performing Arts Center, which was hailed at its 1986 opening as a signal that Orange County at last had emerged from Los Angeles’ cultural shadow. The opening also drew national attention to the fact that the county’s arts patrons had been able to build and operate a $73-million facility entirely with private funds.

Kendrick said that recessionary pressures first were felt as early as January, with slower-than-expected subscription sales for a ballet series.

A hiring freeze was instituted in April. But the real crunch came at the box office in early August, when Iraq invaded Kuwait. A well-reviewed Australian Ballet engagement did poorly, as did a series of money-losing presentations during the autumn.

Five of the Center’s 65 full-time staff positions have not been filled, and Kendrick says he does not rule out layoffs if the economy continues to sag. Previously announced plans for a second theater have been moved to the back burner.

Kendrick remains disinclined to broaden Center programming to attract a wider audience, however, saying he does not want to book popular programs at the expense of high culture events.

The Center, he said, “was built to present ballet, opera, symphony and musical theater. It was not built to be an entertainment facility, purely, for pop acts. If it were, it would cost a third or less as much. It should be used for what it was built for.”

Prompted in part by the summer warning signals, the Center commissioned Mark Baldassare, an Irvine-based pollster, to survey Center subscribers and the general Orange County population, focusing on their likelihood to support the Center financially.

While support for the Center and its programming was strong among the 300 subscribers and 500 county residents polled, according to the survey, there were a number of disturbing findings for fund-raisers. One-fourth of the Center’s subscribers and half the residents surveyed believe--erroneously--that ticket prices alone cover all performance costs. Thirty percent of subscribers and 45% of general residents believe that the privately supported facility receives governmental support.

It is important, Kendrick said, “to get everybody out there that we can reach to understand our need, our basis of financial support and our case. . . . We perhaps have not been as effective as we need to be in getting that message out.”

He also said there is a special need to pay attention to small donors now, because the survey indicated that there are “a large number of people that we have not contacted who would be willing to donate at least to the under-$100 level.”

As outlined by Kendrick and in documents submitted by the Center to the Internal Revenue Service, the Center’s fiscal and programming philosophies make it especially sensitive to changes in the economy.

Although construction was privately funded, $2.5 million in building pledges are still outstanding, and after four years of operation, there are substantial renovation, repair and maintenance costs looming, Kendrick said.

And of the $65 million pledged to the Center’s endowment fund, a mere $3.3 million is in hand, yielding $230,000 per year in interest, the only portion available for use.

At the same time, the Center--which, unlike some facilities, has no revenue-producing parking or restaurant--has considerable administrative costs.

Nearly 10% of the Center’s $22.8 million in 1989 expenses went to staff salaries, pension-fund contributions and other employee benefits. This includes $309,075 for Kendrick and his wife, Judith O’Day Morr, the Center’s general manager, a combined salary/benefits/expenses package that places them among the highest-paid arts administrators in the country.

Twenty-five other employees each were paid over $30,000. The Center also reported $285,049 in professional fund-raising fees.

Even with the extraordinary tickets sales that the Center has recorded in the first four years of operation, substantial support from the private sector is needed to keep the facility afloat. In 1989, for example, $2.9 million in contributions, gifts and grants was needed to pay operating costs.

Several members of the Center board of directors agree that the economy has been cause for concern.

“The recession is affecting our fund raising as it is everything else,” said Roger W. Johnson, the chairman of Western Digital Corp. of Irvine and the Center’s vice chairman for development, “(but) there’s a broad base of support out there for the Center.

“I don’t see any big disaster,” Johnson added. “We’re still in the giving plan of people, even though people are giving less. . . . We see a lot of people being afraid.”

Developer Kathryn G. Thompson, a member of the Center’s executive committee, said “there’s no question that the economy is not as robust as it was last year,” but added that she still expected fund-raisers to “come very close” to reaching their goal.

Although the Center itself is tax-exempt, and many of the groups that the Center presents receive public support, founders frequently boast that the facility has never sought or received any governmental funding.

“It is a point of pride,” Kendrick stressed.

But in light of recent setbacks at the box office and the tightening economy, even this is changing. Rather than a shift of philosophy, Kendrick said, it is “just a recognition of fact” that the Center’s executive board has discussed.

“The fact that we do not have government funding does not mean that we’re opposed to it,” Kendrick said. “We have no source of government support available to this Center. If there were a significant source of government support, we would obviously investigate that.”

Kendrick acknowledged that this change in philosophy may have come too late, since there isn’t much public money around these days for new recipients.

On the programming side, high culture events at the Center reflecting the tastes of its backers--ballet, symphony and the opera--often carry built-in losses. In the case of the Center’s ballet series, these losses (budgeted as “subsidies”), routinely run into six figures, even when they sell out.

If the Center has a “cash cow,” it is its distinctly middle-brow Broadway musical series. But the number and quality of national companies and proven hits varies from season to season.

Both the ballet and the Broadway series are supported largely by subscriptions. However, single ticket sales--which are sensitive to reviews and other factors--provide the critical margins of profit or, in subsidized performances, what Kendrick calls “positive variances.”

Some patterns in the downturn of the economy are reflected in the Center’s ticket sales. In the residential real estate market, homes at the upper end of the spectrum have been less affected by the slump; at the box office, the more expensive orchestra seats and those in the first tier continue to sell well to subscribers, while sales in the second and third tier are lagging.

“What you’re talking about,” Kendrick said, “is discretionary spending here,” and as little as a 10-point drop in attendance over a year’s time can translate into a $1-million to $1.5-million drop in income.

Nonetheless, Kendrick stressed that he plans no substantial change in the Center’s programming mix. One of his strongly held programming philosophies--his antipathy to pop music--has not been affected by the downturn.

A few contemporary pop acts have been presented by the Center, though the emphasis has been on such off-the-cutting-edge performers as Vic Damone, Diahann Carrol and Andy Williams. In a recent Jazz series, Harry Connick, Jr. and Michael Feinstein outdrew Ella Fitzgerald, Kendrick said, selling out and producing small profits without any subsidy. Saxophonist Branford Marsalis is scheduled to appear in this series.

But “there are many, many pop entertainment facilities in California--more than anywhere else in the country, or the world. It makes no sense for this one to be used that way, and there is a need for what this Center is trying to present. . . . It is fallacious to say that there is any potential revenue out there for pop entertainment.”

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