Much uncertainty amid Kimmel Center's lease talks with orchestra

Posted: March 26, 2012

Each spring for the last decade, Philadelphia's largest performing arts importer has unveiled what's in store for next season: world music, jazz, superstar pianist Lang Lang, or, when times were flush, the widely worshipped Vienna Philharmonic.

So far this spring, however, except for announcing its lucrative Broadway series, the Kimmel Center for the Performing Arts has been silent on plans for 2012-13. The Kimmel has a season penciled in, leaders say, but for now, completion of its own presentations must wait as negotiations over a new lease agreement between the Kimmel and its largest tenant, the Philadelphia Orchestra, reach a critical point.

What's at stake, according to several sources who have been briefed on the talks, is the question of whether the Kimmel can continue as a full-fledged arts center with an artistically independent presenting arm, or whether it will be reduced to being a rental facility for resident companies while letting its halls on open nights to commercial entities such as Live Nation.

Philadelphia Orchestra president Allison B. Vulgamore has made her preferences known.

"We can either have a world-class orchestra and a regional performing arts center, or a regional orchestra and a national performing arts center," Vulgamore said in a November article in Philadelphia Magazine. "There isn't enough money for both. And I didn't come here to run a regional orchestra."

An orchestra spokeswoman said the article quoted Vulgamore accurately.

Not surprisingly, arts center chairman Paul A. Tufano doesn't see it that way.

"I don't think the community needs to make a choice between the two," he said in a recent interview. "I think we should strive to keep both."

Already, the orchestra's bankruptcy has been a big challenge to the Kimmel. Among other consequences, in fiscal year 2011, rent that the orchestra failed to pay to the Kimmel, plus other expenses related to the bankruptcy, cost the Kimmel $1.4 million, creating an unexpected $450,000 splash of red ink on its 2011 balance sheet.

Talks with the Kimmel are the only item standing between the Philadelphia Orchestra Association and its filing of a reorganization plan that would begin the process of exiting bankruptcy. "Once that is resolved, we'll file a plan within about a week," association lawyer Lawrence G. McMichael said.

While stumping for the arts center in the late 1990s, Mayor Ed Rendell and others insisted the city's philanthropists would support both entities. Stephanie W. Naidoff, then head of the center, called it the "rising-tide theory" - support would rise to meet the need. That Philadelphia needed an artistically ambitious center was an argument for loosening the purse strings of some donors who had not committed to the project in its previous incarnation - a stand-alone concert hall for the orchestra.

Now, however, the conversation is turning back to the need for a consolidated entity, and a partial or complete merger is one possible outcome. Encouraged by the William Penn Foundation, the orchestra and Kimmel have tapped Drexel University president John A. Fry to facilitate talks exploring a merger. Last year, with a financial incentive from the Pew Charitable Trusts, Drexel and the much-smaller Academy of Natural Sciences blended aspects of their operations.

Fry did not respond to requests for an interview; a William Penn spokesman said the foundation had no comment. Tufano described the foundation's role as "facilitator."

Asked about Vulgamore's comments regarding the Kimmel's future, a spokeswoman referred questions to Philadelphia Orchestra Association chairman Richard B. Worley, who said: "I don't think the POA board really has a view about the mix and scope of the Kimmel Center's activities. We have more than enough to deal with ourselves.

"The article accurately quoted Allison. I believe those were her personal views. The POA board itself would not suggest a path for the Kimmel Center. It has a strong and capable board, more than competent to navigate its own future. Personally, my wife and I have long been supporters of the Kimmel Center. We believed in its original vision and we hope that it will be able to accomplish as much of that vision as possible."

He suggested merger talks would depend on the outcome of lease negotiations. "We are extremely hopeful, and whether and to what extent there will be further discussions, continuing discussions, is to be determined. There is no commitment on whether the Kimmel Center and orchestra will consolidate, but that has not been the focus in these discussions."

Talks have centered on rent and scheduling protocols - which organization gets first dibs on booking the halls - according to proceedings in U.S. Bankruptcy Court and other sources. The orchestra currently pays about $2.3 million a year in rent to the Kimmel - just slightly more, adjusted for inflation, than it used to cost it to occupy the Academy of Music, which it still owns. The Kimmel has already signaled that it is open to a considerable reduction in rent, according to two Kimmel board members.

Less money for the Kimmel means hindering its ability to present concerts it considers important to its artistic profile, such as the touring orchestra, but which require corporate or other underwriting to cover the standard industry gap between ticket revenue and expenses.

"If you keep cutting the rent, then you are not actually running two separate businesses," former Kimmel president Janice C. Price said. "Their financial destinies are clearly so intertwined that merging the organizations becomes a strong option."

Before the Kimmel's opening in late 2001, presentations of touring orchestras, leading world music figures, recitalists, and others were sporadic. Price used the word disturbing to describe the prospect of a Kimmel without its own curated season. "They would effectively be changing the purpose of the place retroactively," she said. "Many donors decided to give their money to build it with the understanding that these presentations would occur."

The orchestra's bankruptcy has created difficulties for organizations beyond the Kimmel. The Mann Center for the Performing Arts found itself collateral damage in the bankruptcy when it recently applied for a grant from the National Endowment for the Arts and was told it was ineligible because the NEA does not fund organizations in Chapter 11. The Mann is not in Chapter 11, but because the grant for which it was applying was in support of Philadelphia Orchestra performances at the Mann, it was told it would not meet NEA requirements, Mann leaders said.

An NEA spokeswoman confirmed the policy regarding not funding organizations in Chapter 11 but said the agency would not comment on a specific organization's eligibility to apply for funding.

Also awaiting resolution are lease agreements with other Kimmel resident companies. A rent concession granted to the Opera Company of Philadelphia expires in June, according to that group, and talks are reopening.

The orchestra's bankruptcy and the unpaid rent to the Kimmel have been particularly galling to the arts center, which has in its decade of existence successfully paid down tens of millions in debt, launched a new arts festival, improved the acoustics of Verizon Hall, and is embarking on a series of substantial renovations to revenue-producing spaces such as the rooftop garden and restaurant.

Worley declined to offer an opinion on what the arts center's mission should be.

"This is important stuff," he said. "There are important discussions occurring in what is a very challenging environment for both of us."


Contact Peter Dobrin

at 215-854-5611 or pdobrin@phillynews.com.

Read his blog at www.philly.com/artswatch.

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