The Philadelphia Orchestra, counted among the world's most renowned symphonies for most of its 111 years, is plotting steps toward financial harmony after filing for bankruptcy protection, even though it has no outstanding debt and an endowment of $140 million.
As a judge in U.S. Bankruptcy Court plans hearings in coming months on the petition, orchestra leaders argue that it's perilously low on cash. They're getting little sympathy from the musicians, who say their bosses simply haven't reached out to the right donors and have put them in the line of fire.
"There's a real fear because of the uncertainty about the future," said cellist John Koen. "There are people who have been invited to audition in other places, or have won auditions in other places, or have been offered teaching positions, but are holding off to see what's going to happen here."
While orchestras, museums and performing arts centers nationwide have been feeling the pinch amid the recession, the Philadelphia Orchestra also suffered from a gap in leadership for the past several years while it sought candidates for vacant positions - now filled - for a permanent board chairman, chief executive and music director.
Long ago dubbed the Fabulous Philadelphians, the orchestra was the first to appear on national television in 1948, the first American orchestra to tour communist China in 1973, and the first to stream a concert over the Internet in 1997. Its hundreds of recordings include the soundtrack to Walt Disney's 1940 film "Fantasia," which helped popularize symphonic music in the U.S.
It gained international renown under conductors Leopold Stokowski and Eugene Ormandy and is generally counted among the "Big Five" American orchestras, along with New York, Boston, Chicago and Cleveland. But struggling with dwindling attendance and donations, shrinking endowment income, pension costs and rent prices at the Kimmel Center for the Performing Arts, it became on April 16 the first major U.S. orchestra to seek Chapter 11 bankruptcy protection.
In court documents, Chairman Richard Worley also blamed the economic recession and an aging audience not being replenished by younger patrons amid an "increasingly crowded entertainment market."
Management said it was facing a $14.5 million shortfall on a $46 million budget and would run out of cash by June. A hearing before U.S. Bankruptcy Judge Eric L. Frank last week allowed the orchestra time to reorganize its finances and its short- and long-term future without canceling the concert season.
It has no outstanding debt and an endowment of $140 million - $120 million from the orchestra and $20 million from the Academy of Music concert hall, which it owns. The endowment funds are restricted by various donors for specific uses, or to be held solely for interest income, and are off limits for general operating expenses, chief financial officer Mario Mestichelli said.
The musicians largely object to the Chapter 11 filing, which also seeks a new collective bargaining agreement with the musicians' union and relief from millions of dollars in contributions to their pension fund. The players question the assertion that the endowment is untouchable and argue management failed to explore all avenues before resorting to extremes.
"The board has been focused on their inner circle, the wealthiest people who are inside their comfort zone," said Koen, chairman of the orchestra board's musicians committee. "There's a big middle ground of people who could easily give $5,000 or $10,000 on an annual basis and they're not even being asked."
Chief executive officer Allison Vulgamore acknowledged that fundraising outreach has been difficult because of earlier cuts to the development staff and said the orchestra plans to hire more people soon to find new people willing to donate.
"The heavyheartedness comes from the treasure we know we hold," she said. "No one would like to attach this process to the orchestra, but this is a means to a greater end."
Koen said many of his colleagues worry that the bankruptcy will tarnish the orchestra's reputation and hurt its ability to attract and keep its "star roster" of players.
Yannick Nezet-Seguin, slated to become the Philadelphia Orchestra's eighth music director in fall 2012, said in a statement that he has faith in the orchestra's future and will do "whatever it takes to get through this difficult time."
Possibilities include a residency in China, a series of dates at the orchestra's beloved former home in The Academy of Music, performances at historic Longwood Gardens in the Philadelphia suburbs, concert operas, a broader repertoire to attract new audiences, and program guides for audiences to follow in real time by text or tweet. Marketing materials are getting more user-friendly and outreach will intensify online and elsewhere.
The Pew Charitable Trusts, one the area's most generous and consistent benefactors to local arts causes, "has determined that they will not entertain a request for support of the Philadelphia Orchestra at this time," a spokeswoman said in a statement. Pew, which generally does not provide operating funds to organizations without balanced budgets, has given the orchestra about $8 million over the past decade.
Mestichelli said the organization hopes to emerge from bankruptcy by the end of the year.
Named as debtors in the filing are the orchestra, the Academy of Music, which the orchestra still owns; and its affiliate Encore Series Inc., which presents the Peter Nero and the Philly Pops concert series.
The organization has endured hardship before and survived, and Vulgamore said she is confident that the reorganization is the first step on the path to a reinvigorated orchestra.
"The orchestra has survived a 'save the symphony' campaign in the early 1900s, it has survived a couple of world wars and a depression," Vulgamore said. "This is a path that we believe gets us to a new future that has sustainable funding underneath it."