L.A. Opera gets $14-million emergency loan
Los Angeles Opera asked for and received a $14-million emergency loan from Los Angeles County on Tuesday to keep it afloat through the middle of next year.
The loan “is needed now, literally next week,” Stephen Rountree, chief executive of both the opera company and its landlord, the Music Center, told the Board of Supervisors at its Tuesday meeting. The company is $20 million in debt, Rountree said.
FOR THE RECORD:
L.A. Opera: An article in Wednesday’s Calendar about L.A. Opera getting a $14-million bailout from Los Angeles County quoted County Supervisor Zev Yaroslavsky as saying, “For all they have built up . . . this is almost no price for us to pay. We’ll make money on the interest rate, and we’ll save the opera.” In fact, it is not the county that will receive the interest payments; they will go to Banc of America Leasing & Capital. An article in today’s Calendar section has more details, Page D19. —
County supervisors voted 4 to 1 to approve the money, the first time the county has given such a loan to a resident company of the county-owned Music Center.
“I’m not happy that we’re in this situation, but what’s our choice?” said Supervisor Zev Yaroslavsky.
Because L.A. Opera is by far the most important tenant at the Dorothy Chandler Pavilion, he said, its failure “could set off a chain of events that takes down the Music Center.”
Rountree said that 23 opera trustees have pledged $30 million to stabilize the company’s finances after several years of overspending; the loan will be repaid as the money comes in over the next 2 1/2 years.
Some of the debt stems from the $32-million production of Richard Wagner’s “Ring” Cycle. The four-part “Der Ring des Nibelungen,” three of which have been presented this season, will be staged in its entirety May 29 to June 26 as the centerpiece of a regional arts festival.
More than 100 arts, cultural and educational institutions are taking part in the event.
The debt accumulated as L.A. Opera’s board members made interest-free loans totaling $19.6 million in 2007-08 and $10.9 million in 2006-07 to help meet bills, and the opera also tapped an $11-million line of credit from Bank of the West, paying about 5% interest.
“The opera was being very ambitious artistically, pushing the edges,” said Rountree, and its creative reach overtook its financial grasp.
The company had run short on cash, Rountree said, partly because “there was a failure to fully appreciate that they needed to put out $20 million of the $32 million for the ‘Ring’ Cycle two years in advance.”
County supervisors approved selling a special bond to cover the $14 million. In return, the opera will pay an estimated $2.1 million in interest over three years at a rate that’s expected to be about 5% when the bond is sold later this week but is not to exceed 5.5%.
The company will absorb about $70,000 in bond-issuance costs and make a single, lump-sum payment of the principal in January 2013. The opera’s county-owned venue, the Dorothy Chandler Pavilion, becomes collateral for the deal, under a complex new lease arrangement that obligates the opera to make interest payments.
Yaroslavsky, the board’s leading arts advocate, said the risk involved is “very minimal” and that letting the opera go under would be unthinkable.
“It’s an important artistic organization for our county,” Yaroslavsky said. “For all they have built up . . . this is almost no price for us to pay. We’ll make money on the interest rate, and we’ll save the opera.”
Supervisor Gloria Molina complained about the last-minute, emergency nature of the bailout request. “The solution at this point in time is the solution, but I think the problem could have been presented earlier,” she said.
Mike Antonovich cast the dissenting vote. Last July, he tried to short-circuit the “Ring” Festival of arts activities throughout the region. Antonovich complained that the festival would glorify the famously anti-Semitic composer, who was admired by Adolf Hitler.
“Many feel it’s going to be a loser, basically because of the person who is being honored,” Antonovich said, referring to Wagner.
About a third of the 9,000 four-opera subscriptions available to this spring’s “Ring” performances have been sold, Rountree said, which is considered a solid pace with five months to go.
In a statement issued from Milan, Italy, where he is appearing at La Scala, Plácido Domingo, the opera company’s general director, said he is “absolutely thrilled that the county of Los Angeles has recognized the important and prestigious role that a world-class opera company plays in our community.”
While prestigious, L.A. Opera is not amply funded. Its financial statements show that its investment reserves were just $14 million, and it had been forced to borrow heavily, even before the global economic meltdown that began in September 2008.
The company was also undertaking other new productions, which are more costly than repeating past productions for which it already has costumes and sets. “It might have worked fine, except for the crash in the economy” that reduced donations, led to less flexible terms from bankers and “somewhat softened” ticket sales, Rountree said.
The situation was comparable to the emergency that hit the nearby Museum of Contemporary Art about a year ago, when its finances ran aground after years of funding expensive exhibitions by drawing down a reserve fund that had once stood at $38 million.
Like MOCA, which has cut its annual budget from more than $20 million a year to $15.5 million, the opera has used layoffs to pare expenses, which had been running $55 million to $60 million a year. Rountree said he’s aiming for a reduction of $5 million to $10 million a year. The company still would have to raise about $20 million a year to balance its budgets, a target he considers sustainable.
Meanwhile, the staff has been pared from about 100 to 80, and special arrangements to cancel or postpone called-for increases in labor contracts with eight artistic and technical unions have saved $300,000 to $500,000. By January, when the opera plans to announce its 2010-11 season, its leaders will decide on possible reductions in the number of productions and their scale and how many performances will be given of each work.
Southern California’s operatic landscape was winnowed a year ago when Opera Pacific in Orange County, also launched in 1986, went out of business because it had failed to establish a broad-enough donor base to weather the downturn.
New York City Opera, a major company that is much smaller than that city’s dominant Metropolitan Opera, also has been buffeted by budget woes and investment losses, prompting concern for its survival.
The Washington National Opera, also led by Domingo, recently announced it had laid off eight employees and would reduce its programming to five productions next season, down from six now and seven a year ago. Since the recession hit, San Francisco Opera and even the Metropolitan Opera also have been forced to cut back.