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Weathering the Financial Meltdown

September 29, 2009

Last November, as the economy came crashing down, San Francisco Opera General Director David Gockley stepped onstage before a matinee performance of La bohème and told the audience how the company was coping with the money crunch. Because the endowment had lost value and contributions could shrink, patrons would see “fewer and less elaborate productions” next season, said Gockley, who vowed nevertheless to maintain the highest artistic standards.

Like most arts organizations in the Bay Area and around the country, the Opera has had to do some serious belt-tightening. Its endowment, $135 million at its peak, had lost 20 percent of its value, ticket sales had declined slightly, and funders signaled they’d have less to give. Scaling back its 2009-2010 budget to $63 million from about $69 million last season, the company cut a planned November production of Benjamin Britten’s Peter Grimes, several encore performances of La bohème, and a family performance of Mozart’s The Abduction From the Seraglio. There will be fewer rehearsals and performances of the nine familiar works — among them Puccini’s Girl of the Golden West, Strauss’ Salome, and Wagner’s Die Walküre — in the Opera’s current season, which opened Sept. 11 with Verdi’s Il trovatore. Only 63 performances will be presented this season, down from 82 last year.

“We’re fully aware that people are living in a different economy right now, and their spending habits will be affected by that economy, and we’re planning for that,” said Michael T. Simpson, the Opera’s chief financial officer. He has projected a $3.2 million deficit for the current fiscal year.

The numbers may be bigger and more dramatic at the Opera, but other San Francisco classical musical organizations — large, medium, and small — are also being pressed by the worst recession since the Great Depression. With foundation and public arts funding contracting, many groups have cut administrative costs and, in some cases, trimmed their programming and touring.

Replacing Lost Income The San Francisco Contemporary Music Players, whose season opens on Oct. 5 with performances of works by John Harbison, Steve Reich, Edmund Campion, and others, is presenting five programs in its upcoming season, one fewer than last season. The group’s $380,000 annual budget is about $60,000 less than in 2008-2009, when it saw a 1 percent drop in ticket sales from the previous season, a 5.5 percent drop in donor contributions, and a 19 percent drop in foundation giving. The income picture is looking a little better this season, mainly because “much of our fund-raising was done fairly far in advance,” says Christopher Honett , the Contemporary Music Players’ energetic, new executive director.

“It was more important for us to have one less program and maintain the artistic quality,” says Honett. “Our audience is committed. We feel the best way to show our commitment is never to cut the quality of what we present.”

Most of the organization’s income comes from individual donors and grants. Like arts groups across the city, the SFCMP is getting considerably less this year from the City of San Francisco’s Grants for the Arts, which had to cut the size of its grants by about 25 percent because of a drop in hotel tax revenue. In addition, a private foundation whose name Honett preferred not to disclose informed the group it would be getting $10,000 less this year.

“That was a bit of a blow,” says Honett, adding that the organization ended the past fiscal year with a surplus. “We can deal with a few bad years and survive,’’ says Honett, who credits his predecessor, Adam Frey, with leaving the organization in good financial shape. He’s beating the bushes for donors, and talking to other musical groups about collaborating on projects that could yield interesting artistic results while at the same time saving money.

“We have to find new ways of doing things,” Honett says. “The upside of this crisis is that it’s forcing us to rethink how we’re doing things.”

Concertgoing on a Tightened Budget Like other organizations, the San Francisco Symphony is seeing a drop in the sale of full-package season subscriptions. Patrons are watching their dollars, being more selective, and cherry-picking the concerts they really want to hear.

“People are waiting, rather than precommitting,” says Nan Keeton, the Symphony’s director of marketing, communications, and external affairs. While sales of those pricier packages have been down about 5 percent, she adds, the Symphony is “making much of that up in single-ticket sales and smaller packages.”

The Symphony’s endowment, whose value Keeton declined to discuss, took a 25 percent hit when the stock market tanked. (The Symphony draws about 5 percent of the endowment as income.) And its annual fund raised about 1 percent less than the previous year. Still, the organization remains on solid financial footing. The annual budget of $63 million hasn’t shrunk, and, more important for patrons, the Symphony — whose season opener Sept. 9 featured pianist Lang Lang playing the Prokofiev Concerto No. 3 — has not had to trim its programming at all.

Instead, it responded to the downturn by cutting administrative costs, freezing salaries, and drastically reducing the use of consultants, temporary workers, and all but essential travel. The holiday-season lunch was downsized to a reception. The newsletter went online. “We have to be a lot more efficient on the back end,” Keeton says.

The Opera, too, has made major administrative cuts: Salaries and benefits were frozen or reduced, saving the company about $1 million. “It’s been a tough season for us,” says the Opera’s Director of Communications and Public Affairs Jon Finck. The Opera, too, is seeing a small decline in subscription sales, as cautious patrons buy more single tickets.

Although some of the productions this season may be less grand and lavish, Finck says, “I don’t think it will have any negative effect on the public. I don’t think most people will notice. David Gockley has said that he’s committed to presenting the finest artists in the world, first and foremost.”

Silver Linings Meanwhile, things are looking up at San Francisco’s Philharmonia Baroque Orchestra, which recently hired Peter Pastreich, the former, longtime executive director of the San Francisco Symphony, as its top dog.

“I would never say the recession hasn’t affected us, but it has not put us in a position where we can’t play the music as well as it should be played, or do the things for the community we should,” says Pastreich, who runs an organization with a $3.35 million budget.

“By and large, the orchestras that are having real trouble are the ones which have big endowments. If your endowment loses $30 million, and you’re taking 6 percent [out of it annually], $1.8 million went out of the budget this year. You can't just ask somebody for that. Our endowment was about $1.5 [million]. We lost a couple of hundred thousand dollars. We take 5 percent of the endowment. We lost $10,000. That’s not nothing, but we can make that up. ... There are times when you’re better off in a rowboat than an ocean liner, because you’ve got more maneuverability.”

Philharmonia Baroque, which opened its fall season Sept. 10-15 with concerts around the Bay Area featuring Steven Isserlis playing the Haydn Concerto for Violincello in C Major with Music Director Nicholas McGegan’s original-instrument orchestra, saw its total ticket sales drop 5 percent in 2008-2009, to the 2006-2007 level. But according to Marketing and PR Director Sasha Hnatkovich, tickets for the current season have already outsold last year and could even surpass the previous year’s.

While some donors have reduced their gifts because their investments are down, “Other people are being more generous than they were because they believe we’re important to the community and to their lives,” Pastreich says. The orchestra is playing the same number of Bay Area concerts it usually does, though its touring schedule is less extensive and less expensive. Last year it was invited to play at Carnegie Hall and also performed at Cornell University; this year it goes to UC Davis and Disney Hall in Los Angeles.

“We expect to be more aggressive in 2011-2012, out there with a tour and looking for dates,” says Pastreich, who downplays the effect of recession. “When we start doing a lot better with ticket sales and fund-raising, I’m not expecting to give credit to the end of the recession, any more than I want to blame the recession for any problems we’re having.”

Despite the financial pressures facing San Francisco Contemporary Music Players, Honett expresses the kind of optimism that’s essential to running a nonprofit arts organization, a tough row to hoe even in the best of times. “The arts will survive. They always survive,” Honett says. “We just have to find new ways to help them survive. There are options out there we haven’t even thought of yet.”

Jesse Hamlin has written for The San Francisco Chronicle and other publications over the past 30 years on a wide range of music and art, covering jazz musicians and symphonic conductors, sculptors, poets, and architects. He has also written for The New York Times, Art & Auction and Columbia magazines, as well as liner notes for CDs by Stan Getz and Cal Tjader.


2 items: Opera San José which has up till the past season has operated in the black for every yea of its existence, saw some red ink, but is still doing well.

Not "Lohengrin" but "Die Walküre" is the Wagner presentation this year by SFOpera.