ASO must slow tempo of annual debt

The Atlanta Symphony Orchestra's 2012-13 season brochure trumpets "magic moments" where "time stands still" and "your heart and mind are tuned only to the aching beauty and unbounded serenity of the world's greatest music."

But behind the scenes, as the ASO approaches the opening of its 68th season on Oct. 4 while facing increasingly dire finances, the tempo of tension is accelerating. The serenity of music-making, the brochure's purple prose aside, would appear in the process of meeting its bounds.

The city's largest cultural group, having run up $5 million annual deficits in recent years, is facing a daunting accumulated debt nearing $20 million. Operating and accumulated debts are endemic nationwide to an orchestral industry challenged by an expensive-to-produce art form and wracked by a multiyear recession. Still, Symphony management has resolved that the bleeding must stop and is amid increasing fractious contract negotiations with the committee representing its 93 musicians to replace the four-year agreement that expires at midnight Aug. 25.

Neither side wants a strike or lockout, but some of the cost-cutting options being deliberated are giving the musicians an ache different from the "aching beauty" of playing Beethoven, whose Violin Concerto is on the opening program. On the table: the possibility of trimming the orchestra's size, the musicians' weekly pay scale, the length of their contract season and their total compensation package. Not being considered, however, is slicing into the concert schedule.

ASO president Stanley Romanstein, brought in to confront the spiraling debt in 2010, acknowledged last week of negotiations, "I'm very disappointed that we have not made greater progress toward finding a solution to the significant challenges we face. I continue to believe that by working together we can find a solution that combines great artistry with a balanced budget, but time is running out."

Romanstein leaves little doubt about what's at stake: If labor costs can't be contained, he said, "At the end of the day, we're playing Russian roulette with the future of the Atlanta Symphony."

Daniel Laufer, president of the ASO Players Association, agrees that the orchestra is at serious crossroads. But he cautioned that the musicians are equally serious about protecting gains in the quality of the music-making and national esteem since music director Robert Spano arrived in 2001.

"As in everything else, it's easy to cut something down," the ASO cellist said, "but it's very difficult to rebuild it."

While the ASO administration declined to detail major issues in the negotiations, Laufer said last week that management is insisting on the equivalent of 12 weeks of musician furloughs — about $20,000 per player, per year — which he called "a draconian proposal."

The musicians have offered $1 million in concessions — a combination of cut positions, salary reductions and trims to health care premium sharing — while management is seeking $3.1 million, Laufer said.

"Management's response to the million-dollar-plus sacrifices the musicians have offered was simply to shrug and say, 'We have a long way to go,'" he said. "The musicians believe that the Woodruff Arts Center [the orchestra's parent organizations] and the ASO have a long way to go to demonstrate to both us and ASO supporters how they intend to maintain any semblance of this great orchestra while simultaneously cutting it off at the knees."

Financial challenges

The ASO's debt has been multiplying in recent years for multiple reasons, including:

The orchestra's revenues have grown at 4 percent a year over the last decade, but expenses have shot up by an average of 8 percent a year during the same period. Last year, the ASO brought in $40 million in revenues against $45 million in expenses.

"The recession certainly has played a role," Romanstein said. "But we have also in an effort to protect out musicians, because we love them and love their art, committed to contracts that were beyond our ability to pay. We have simply allowed ourselves to spend more in service of our art than we've been able to generate."

The beginning base salary for an ASO musician is $88,400. Typically in the classical music industry, accompanying compensation packages would include 100 percent health coverage, instrument insurance, pension contributions and extended paid vacation.

The ASO had counted on the $300 million state-of-the-art Symphony Center designed by Spanish architect Santiago Calatrava for a Midtown site along 14th Street near Peachtree Street to improve its fortunes through increased ticket sales and contributions.

With 1,748 seats, the current, and by all reckonings acoustically poor, Symphony Hall (opened in 1968) is one of the smallest for an orchestra of the ASO's size in the country.

The Woodruff Arts Center pulled the plug on the Symphony Center project in 2009 when pledges topped out at $114 million. An arts center master plan unveiled later that year called for a different hall (almost certainly one that will be less of an architectural statement than Calatrava's design) to be tucked into the Woodruff campus at Peachtree and 15th streets. However, fund-raising will not start until the economy rallies.

Like all Georgia arts groups, the ASO suffers from poor public funding for the arts, but the pain is more acute because of its size. Only $115,000 in county, city, state and national funding goes into the orchestra's $45 million annual budget.

"There are fabulous, fabulous arts here," Romanstein said of the Woodruff and Atlanta, "but it goes with almost no public support."

The ASO has made more than $1 million per year from three offshoots — Los Angeles-based SD&A Teleservices (which does telemarketing for cultural organizations nationwide) and Verizon and Chastain Park amphitheaters in Atlanta. But Romanstein feels there is a limit to how much such "entrepreneurial" efforts can contribute.

So management is turning to the musicians now for serious belt-tightening, the orchestra's president said, because, even with production and staff expense cuts during the past three years, it has been able to reduce its annual deficit only $1 million, from $6 million to

$5 million.

Salvation is unlikely to be found down other avenues: The ASO requires its 63 active board members (not counting its 30-member board of counselors and eight life directors) to contribute at least $15,000 annually, then requests other commitments that push the individual outlay closer to $25,000.

"If you look at other nonprofit boards in Atlanta, we're asking more of our board than anyone else," Romanstein said.

Corporate giving (now at $3.5 million annually, less than the $5 million board members and other individuals contribute) has been set back by the recession. The ASO's growing debt is a deterrent to increased contributions, Romanstein said.

"What I've heard repeatedly from corporate and foundation officials is, 'We want to support the orchestra, we'll do more, [but] we need to see that you're being fiscally responsible. Stop the bleeding first,'" he recounted.

A national problem

Drew McManus, an orchestral consultant based in Chicago, suggested the ASO could lean on the Woodruff for rescue, at least for its most immediate problems.

"Debt management is the name of the game now" for major American orchestras, he said, adding that many ensembles, including the ASO, have no choice but to stall on bigger issues until the economy has recovered.

McManus said the ASO had the advantage of being a division of a 501(c)3 nonprofit, rather than being an independent entity like, say, the Philadelphia Orchestra, which resorted to the unprecedented move of seeking bankruptcy protection last year. The esteemed group was faced with a structural deficit of $14.5 million and what it called "rapidly dwindling operating funds."

The Woodruff indeed did cover the ASO's earliest deficits but told the orchestra it could not afford to continue when the loan total reached $5 million. The ASO since has borrowed nearly $15 million against the earnings on its endowment without touching its principal.

Romanstein said the draining of endowment revenues simply can't continue, especially since the endowment itself was "hammered" by the recession, its value falling from $98.5 million in 2007 to $73 million early this year.

The ASO leader said the Woodruff, which funds its orchestral division at $1.1 million annually, is unlikely to sweep in and banish its shortfalls. One reason is that it would reverse the long-term relationship between the parent organization and its unusually independent quartet of divisions, also including the Alliance Theatre, the High Museum of Art and Young Audiences.

"While they provide great advice and great support," Romanstein said, "what they've said to us is, 'Look, we respect your ability to make important decisions.' ...

"They've also made it clear that they are not in a position to come in and make the problems go away," he added. "That's within our power to do — our administration and our musicians and our board and our supporters can, indeed, solve the problem."

In truth, the Woodruff could use some help itself: While operating with an annual budget of about $100 million, it has carried an annual deficit in recent years of nearly $1.6 million.

All of these circumstances put further pressure on the ASO's ongoing contract negotiations with its musicians. The players have gone out on strike before, in 1996 when it took 10 more weeks to come to an agreement with management.

While acknowledging that "Frankly, nobody likes the choices we have to make," Romanstein said management must trim fixed costs, including payroll.

"It's like any business," said the ASO leader, who before coming to Atlanta ran the Minnesota Humanities Council. "You have to say: How many people can you afford to employ, and on what basis can you employ them, and how much can you afford to pay them in order to make sure that your organization thrives for years to come?"

It's an important question now, because compensation for the musicians totals $12.5 million against the $45 million budget (make that an overall budget figure of $28 million, if you subtract the ASO's non-classical business endeavors). Musician salaries have gone up 23 percent since 2006, a period in which staff salaries declined 1.7 percent, according to management. But it should be noted that the musicians modified their contract as recently as fiscal 2009 to accept a 5 percent, one-year pay reduction as part of across-the-board cuts.

ASO Players Association president Laufer, who served on the search committee that selected Romanstein in 2010, said the musicians, while wishing to help improve the orchestra's bottom line, have their own bottom line: They are resolute, he said, that they will protect against any cuts "destructive to what has been built here."

The cellist added that the "verdict is still out" on Romanstein's efforts to stabilize the ASO and called for "more creative solutions in the way our administration deals with our current problems."

Romanstein responded that the musicians are by no means being asked to play solo in shouldering the burden of the ASO's troubled finances but instead to be a part — albeit a large one — of a shared solution involving many stakeholders.

Noting that the ASO will celebrate its 70th anniversary with its 2014-15 season, its president said, "My job is not to get us to the 70th anniversary. My job is to make sure we're still here for the 100th anniversary and that we have an artistic future that's absolutely as bright as our artistic past."

ASO'S 2012-13 SEASON

Barring a musician's strike or lockout, the Atlanta Symphony Orchestra's 86th season is set to open on Oct. 4, with maestro Robert Spano leading the ASO in performances featuring violinist Midori playing the Beethoven Violin Concerto.

Other highlights of the Delta Classical Series at Symphony Hall:

Jan. 10-12: Spano will lead the orchestra in the world premiere of a clarinet concerto by Atlanta School of Composers member Michael Gandolfi, written for principal clarinet Laura Ardan.

April 4-5: World premieres from Marcus Roberts (a piano concerto featuring Roberts and his trio) and ASO bassist Michael Kurth.

May 9-11: Principal guest conductor Donald Runnicles leads the ASO in Beethoven's Triple Concerto featuring Spano on piano, concertmaster David Coucheron and principal cello Christopher Rex.

Information: 404-733-4800, www.atlantasymphony .org.

Decade of debt

The Atlanta Symphony Orchestra's accumulated deficit is projected to reach $20 million by end of fiscal year 2013. Here's how the debt has grown.

2003: $1.1 million

2004: $1.1 million

2005: $1.8 million

2006: $2.8 million

2007: $4.2 million

2008: $5.1 million

2009: $9.3 million

2010: $12.6 million

2011: $15.5 million