Music Center plaza renovation may require taking on additional debt, report says.
Despite a wrenching economy, the Music Center hasn’t abandoned an ambitious renovation plan centering on the Dorothy Chandler Pavilion and also involving the large outdoor plaza between the Chandler Pavilion and the Mark Taper Forum, according to a financial analysis issued Wednesday by Moody’s Investors Service.
The reported cost, “upwards of $250 million,” more than doubles the previous, 3-year-old estimate of more than $100 million, which included only the Chandler Pavilion.
The Moody’s report says the new estimate covers “various large-scale construction and renovation of buildings, performance spaces, the outdoor plaza and office space,” to be incurred “over the next several years.” To finance those improvements, the report says, “management notes that the Music Center may take on up to $100 million to $150 million of additional debt,” with donations and county funds to cover the rest of the upfront costs.
Responding to a Times inquiry Wednesday, the Music Center did not make officials available for questions, instead issuing a brief prepared statement:
“Renovation of the plaza, the Pavilion and construction of a new office structure have been in our plans for several years. . . . We continue to be in search of funding to proceed with one or all of these projects. But the economic climate is not hospitable. At the present time, we do not have any funding in place and have no set timetable for moving ahead. It remains our hope and desire to renovate the plaza and Pavilion within the next decade.”
Early in 2008, before the financial meltdown that year, Music Center President Stephen Rountree had laid out a timetable in which renovation of the Chandler Pavilion would have proceeded in small stages over four summers, followed by a major overhaul that would have required shutting down the hall in 2013. L.A. Opera, the Pavilion’s main tenant, has long wished for expanded backstage facilities, and the hall’s acoustics come in for continual criticism and were a crucial selling point for the nearly $300-million construction of Walt Disney Concert Hall as a home for the Los Angeles Philharmonic and Los Angeles Master Chorale.
The Music Center is the private, nonprofit organization that operates the Pavilion, Disney Hall and Center Theatre Group’s Mark Taper Forum and Ahmanson Theatre. The resident groups pay rent to the Music Center, which serves as a landlord providing maintenance and security while also running a large arts education program and presenting a dance series and coordinating rental use by outside groups.
Moody’s made its report after analyzing the Music Center’s finances and longer-term plans for an update of its rating on $27.2 million in bonds the organization issued in 2007 to pay the bulk of a $30-million makeover of the Mark Taper Forum that was finished in 2008.
Moody’s reaffirmed the A3 rating and “stable” outlook it attached to the tax-free Taper bonds when they were issued. The A3 rating means Moody’s considers the bonds an “upper-medium grade” investment; the rating is seventh on a scale of 10 rankings that qualify as “investment grade” bonds, as opposed to the riskier “speculative” category for borrowers Moody’s considers more likely to default.
Among the Music Center’s financial strengths, Moody’s found, are its “strong relationship” with Los Angeles County, which provides about 40% of its annual revenues, and “robust annual philanthropic support” that covers 21% of the budget. Annual donations average $25.5 million and reached $27.7 million in 2008-09, Moody’s reported.
On the downside, Moody’s characterized the Music Center’s $26.9 million in reserves as “limited.” Most threatening to a solid bond rating, it said, would be “weakening of . . . support by the county” and “sustained weakening of gift revenue.”