Philadelphia Orchestra's bankruptcy filing creates a global shock

Posted: April 19, 2011

The Philadelphia Orchestra's decision Saturday to declare bankruptcy has drawn worldwide attention, from both major news outlets and niche readerships.

"Philadelphia - it's the worst outcome," wrote popular London music blogger Norman Lebrecht. "It foments uncertainty across musical America."

Former Gov. Ed Rendell, who began stumping for the orchestra's move to the Kimmel Center as mayor, said he didn't think the news was a black eye for the city as long as the orchestra continues its schedule, which it says it will.

"Nah, I don't think it matters if the orchestra continues performing. If they stopped performing, that would be something different," he said Monday. "I think everyone understands . . . that the country is going through tough times, and individual and corporate giving is significantly reduced. Virtually every orchestra everywhere is dealing with the same issues."

The Philadelphia Orchestra Association's Chapter 11 claim is set to debut Wednesday in U.S. Bankruptcy Court, Eastern District of Pennsylvania.

Judge Eric L. Frank, a veteran bankruptcy specialist with a long local history, has been assigned the case of the orchestra as well as its related businesses, the Academy of Music and Encore Series Inc., which operates the Philly Pops.

Principals involved with the claim estimate it will take months to settle, with the orchestra's emergence from bankruptcy expected near the end of the calendar year.

"The most recent situation is the most complicated and challenging I think they have ever faced," Mayor Nutter said Monday. He said he would be taking "an appropriate and active" role in helping to execute the recovery plan, including making visits to potential donors.

"This is a very, very important issue to the city, and we're going to focus on this because the Philadelphia Orchestra is vitally important to the spirit and lifeblood and quality of life in Philadelphia and the Philadelphia region," Nutter said.

The move's shock value is high both because of the ensemble's prestige and history, and because Philadelphia's is the first major U.S. orchestra to declare bankruptcy - at least in recent memory, and, say industry veterans, perhaps ever.

Could the kind of concessions from musicians being sought here spread to the rest of the country? Are orchestra managements talking to each other and playing out respective strategies in tandem?

"Of course. It would be naive to think that managers don't share information and have discussion among themselves in the same manner as musicians," said Christopher Durham, director of the symphonic services division of the American Federation of Musicians.

Still, he said, there are "wonderful examples of orchestras who have not just survived the recent economic turbulence but have grown. These include Los Angeles, San Francisco, San Diego, Dallas, St. Louis, Nashville, New York, and Cincinnati. Even among these institutions, where there have been economic concerns in the past, funding has come forward to bring them back to financial stability. The New York Philharmonic's recent announcement that it raised nearly twice its original endowment goal of $50 million is testament to the importance of culture and its dedicated professional management team."

Facing cash-flow problems, the Philadelphia Orchestra's 75-member board Saturday voted for bankruptcy as a way of seeking a clean slate on certain contractual agreements - specifically citing its obligation to the musicians' pension fund and a rental lease with the Kimmel.

Kimmel president Anne Ewers answered that shot across the bow with an uncharacteristically public response.

"We have already accepted substantial reductions in the orchestra's rent obligations to the Kimmel Center this fiscal year. Moreover, we have communicated to the orchestra board that we stand ready to discuss their request for further accommodations."

However, she continued in her prepared statement, "extending such accommodations would present challenges for us. The Kimmel Center has already experienced the stress, difficulty, and hard choices of achieving its own financial stability, and we appreciate what the orchestra has confronting it. The Kimmel Center is willing to discuss further hard choices, to be part of a sustainable and comprehensive long-term solution for the orchestra."

As Rendell put it: "That's robbing Peter to pay Paul. What good does that do? That's not much of a solution."

When the Kimmel opened in 2001, it was a new home for the orchestra, but also a fund-raising competitor. The orchestra and the Kimmel raise money annually from many of the same philanthropists.

Early Kimmel leaders referenced the "rising tide" theory of philanthropy - the greater the need, the higher the response from donors. Now the sotto voce imagery being used in the arts community evokes a local atmosphere with only so much oxygen - that is, money.

Rendell, however, adheres - though conditionally - to the idea that there is enough corporate and philanthropic support to adequately fund both the orchestra and the Kimmel: "If the economy returns to pre-2008 levels, I would think so."

He acknowledged the decision by the Pew Charitable Trusts - his frequent funding partner when he was governor - to not participate at this time in a multistage recovery plan in which the orchestra aims to raise about $160 million over five years.

"I was disappointed in Pew. I know foundations don't like to give operating support, but these are very, very difficult times. It would seem to me that this is something the foundation and corporate community should support."

In addition to reconsideration of the Kimmel's contract, bankruptcy offers management an opportunity to negotiate a new labor contract with musicians under the supervision of the court. Management has sought the elimination of the players' current defined-benefit pension plan, but has not said publicly whether the plan would be replaced, and, if so, with what.

Musicians say they have already given concessions, and have proposed more that, if adopted, would save millions in operating costs. An orchestra spokeswoman Monday said the association would have no comment.

"From 2008 until the present, we made concessions in free overtime and extra services, as well as a salary freeze valued at $12 million by the association," said players' committee chairman and cellist John Koen. For the contract currently being negotiated, "our most recent proposal would save $25 million over the next 31/2 years" in pension and wage concessions, he said.

Before the bankruptcy vote, management had hoped that musicians, if not supporting the move, at least would not oppose it publicly.

The obstreperousness with which the players voice their opposition now hinges in part on what plays out in Bankruptcy Court, their lawyers say. They have pledged not to strike as long as the association does not seek to impose a new contract with terms they consider untenable. The court would have to approve such a move.

For now, Koen said, "the musicians are going to play concerts with the utmost of our ability, and the association will sell subscriptions and raise money to meet the financial challenges, so we can all wend our way through the bankruptcy process together."

In a letter to the board, music director designate Yannick Nézet-Séguin echoed Koen, saying, "We need more than ever to stay as close as possible to each other. . . . I believe in this orchestra, I believe in its bright future, whatever it takes to get through this difficult time."


Contact music critic Peter Dobrin at pdobrin@phillynews.com or 215-854-5611. He blogs at www.philly.com/philly/blogs/artswatch.

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