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Utah Symphony & Opera officials have used private donations to cover more than $3 million in operating deficits since its merger two years ago, part of a growing reliance on contributions to keep the organization going.
In a recent letter to US&O patrons, CEO Anne Ewers said the deficits have been covered by a "cash reserve" created at the time Utah Symphony and Utah Opera merged in July 2002. However, an Ernst & Young financial study done in anticipation of the merger said only about $630,000 would be needed to cover transition costs when the two groups merged, and that the cost would be covered by "special transition gifts." No mention of other cash reserves was made in that report.
Ewers, who declined to be interviewed, responded in writing that the cash reserve comes from an anonymous bequest "realized shortly before the vote to merge. The funds were received in October 2002."
Ewers sent another letter to CEOs of orchestras and operas in the United States recently, stating that "at the time of the merger, we created a cash reserve to handle any financial uncertainties during the first years of our new organization. The cash reserve covered our [2002-03] deficit of $1.7 million and our [2003-04] deficit of $1.6 million." (Ewers has since corrected the 2002-03 deficit to $1.8 million.)
US&O's earned income suffered after the merger as paid attendance for operas and concerts declined and spending went up. Audits show that last season's performance revenue (from ticket sales and fees) for Utah Symphony & Opera was $3.7 million - lower than the $4.2 million earned by Utah Symphony alone in the year leading up to the merger. (Figures exclude other earned income from rentals and investments.)
Ewers' letters indicate that the Deer Valley Music Festival, which began last summer, did not incur deficits, because of one-time startup gifts. Again, the operating budget looks much different. An event analysis sheet from US&O shows the festival took in about $300,000 in fee and ticket revenue, but cost $600,000 to produce.
The reliance on gifts that cannot be relied on from year to year makes financial management less predictable. And, compared with national averages, US&O's earned revenues are low in relation to its total budget.
Speaking for the Utah Symphony musicians, associate concertmaster Gerald Elias said management should focus on vision and quality, in these difficult economic times, and should have followed the merger by "doing what you do best, not format changes, new activities and anything untested and untried."
Citing public support voted on through Salt Lake County's Zoo, Arts and Parks tax, Elias noted that "the community is the number one investor in the Utah Symphony, and we want to do right by them."
While the economic climate of the 2002-03 season continued to be challenging for America's orchestras, fewer reported operating deficits than in 2001-02, according to the American Symphony Orchestra League. And, there were additional signs of improvement. The average deficit for America's 1,200 orchestras decreased 22 percent from 2.7 percent of total expenses in 2001-02 to 2.1 percent in 2002-03. By comparison, US&O's 2002-03 operating deficit was about 10 percent of total expenses.
Classical season attendance increased by about half a percent nationally. Although total attendance at all orchestra concerts declined slightly in 2002-03, it was still higher than a decade ago. US&O's attendance declined more than 20 percent between the time of the 2002 merger and last month. The good news on the national music scene is offset by concerns about graying audiences and rising costs for administration, production and health care. A recent article in Time magazine notes that some orchestras have had to cut pay, eliminate positions or shorten their seasons.
A consultant's report by Thomas W. Morris, commissioned by US&O management and musicians, says US&O has an "underlying financial crisis [that] has been masked by reliance on major gifts." Morris concludes that "financial solutions [are] not possible without organizational solutions."
On Feb. 24, US&O's board adopted a financial recovery plan and charged an oversight recovery task force to look into management problems, as suggested in a consultant's report by Morris, who was hired by management and Utah Symphony's musicians. The report calls for a redefinition of Ewers' role in the organization, and for the establishment of a "formal review process of CEO."
Ewers told The Salt Lake Tribune she is determining her future role at US&O, and that she has the agreement of task force chair Patricia Richards and Richard Horne, who chairs the human resources committee on US&O's board. Horne, Richards and board chair Frank Joklik were not available for comment Saturday.
Richard Kessler, chief executive director of the Center for Arts Education in New York and past director of the American Music Center, said that the trustee boards of not-for-profit groups such as US&O have legal obligations because of their groups' 501(c)3 tax status.
"Though the CEO serves at the pleasure of the board, the board has certain responsibilities," Kessler said. "It is up to the board to keep an eye on the budget, cash flow and spending, and the board should be evaluating the performance of the CEO." However, CEOs are involved with board recruitment, by-laws and board maintenance, creating what Kessler calls "a complicated dance."
The public became aware of US&O's financial troubles when Utah Symphony musicians, who have been playing without a contract since last August, contacted the news media, saying they believed US&O was "in crisis." The musicians have said they will accept a two-year freeze of their salaries, which, at a base pay of around $57,720, are lowest among full-time orchestras in the United States.
The financial recovery plan adopted Feb. 24 assumes, but does not stipulate, that musicians salaries will remain flat. Its success depends on US&O's ability to cut expenses deeply while improving attendance and fund raising. There is little room for unexpected expenses.
In her letter to patrons, Ewers pledges, "We will halt the decline in ticket sales and fund raising this season and we are poised for attainable increases next season."
Marketing and development staff problems occasioned by the merger and "anger and disillusionment over [the] merger" contributed to the declines, according to the Morris report. Ewers' letter says those problems are being solved by current staff in place since last May. But how did two of Utah's most successful and treasured arts groups lose their audiences?
Ewers has taken responsibility for unsuccessful decisions such as visual enhancements to symphonic masterworks not designed for them; loss of the orchestra's Finishing Touches series; and moving some Saturday night concerts to afternoon, and says she is returning to proven formulas from the past. But some of those decisions had far-reaching effects.
Moving some Saturday night Masterworks concerts to Saturday afternoon displeased buyers of the Utah Symphony's 18-concert Masterworks series, many of whom gave annual donations in the $1,500 range and/or volunteered for the organization as part of a "Conductor's Circle." Supporters who simply bought tickets to attend concerts and operas were lost when a telemarketing campaign - recently reinstated - was discontinued after the merger. Though many stalwarts still attend and donate, unease with the merger persists.
Salt Lake Tribune reporter Catherine Reese Newton contributed to this story.