Last Sunday, the Baltimore Sun published an article by Paul Adams and Tim Smith which reports that in order to manage their planned $12 million deficit, the Baltimore Symphony is considering selling their performance venue; Meyerhoff Symphony Hall.
According to the Sun article, here are the details for the plan:
“Under the scenario presented, [a] new nonprofit subsidiary would pay $30 million for the Meyerhoff and pass the money – minus a roughly $700,000 transaction fee to the bond underwriters – to the BSO. The BSO would use approximately $12 million of the proceeds to cover its deficit, while the remaining $17.3 million would be placed into a new endowment and invested conservatively.
The deal could hinge on whether a professional appraiser values the Meyerhoff at $30 million or higher. English said the board received an informal, “back of the envelope” opinion from a professional appraiser that pegged the building’s value at more than $30 million.
The preliminary proposal also calls for the BSO’s existing endowment of approximately $78 million to be transferred to the new subsidiary. The subsidiary would control the endowment, but the BSO would hold a 51 percent majority of the seats on its board.”
Based on these nebulous details provided by the BSO, this proposal generates far more questions than answers.
1. Who is this new “nonprofit subsidiary” that is wiling to pay $30 for the Meyerhoff?
The BSO does not provide any information in the article to answerer this question and it’s fair to assume that they would have to divulge this information if this idea ever gets out of the planning stages (not to mention build confidence and support among patrons).
2. Why does the BSO endowment need to be transferred to this nonprofit subsidiary?
What purpose does this serve? Will the orchestra have even less control over how they can use those funds? Has the endowment been managed so poorly over recent years that the BSO doesn’t deserve to have ownership anymore?
3. Who are the bond underwriters that will receive this $700,000 transaction fee and who will be responsible for appraising the value of the Meyerhoff?
There are already too many conflict-of-interests and abuse of nonprofits by people using them for personal gain. When will the identity of the bond underwriters be divulged; before, after, or never? Then there’s the uncertainty around issues of looking for an appraiser that is willing to value the Meyerhoff for $30 million. Did everyone just forget the problems the NJSO has gotten itself into regarding dubious appraisals of the Axelrod string collection?
4. Where’s the plan to recover from debt?
There has yet to be any substantial details released regarding any sort of short, mid, or long term plan to make the BSO solvent. Sure, the $29,300,000 (what’s left over after the transaction fee) can be used toward paying off the existing debt, but the remaining money goes right back into the pockets of the nonprofit subsidiary that just gave it to the orchestra in the first palce.
How will that added endowment principle be used to maintain the world class status of the orchestra?
Is this really all that “innovative”?
Throughout the article, several individuals were quoted as calling this plan “innovative”.
Both Jack McAuliffe, chief operating officer for the American Symphony Orchestra League, and Arthur Brooks, an associate professor of public administration at Syracuse University were quoted in the article as calling this plan innovative.
But the idea or implementation of selling a concert hall has popped up on more than a few occasions over the past years. Most recently, the Pittsburgh Symphony hung a “For Sale” sign in front of Heinz Hall at the end of last season.
And although it’s never a bad thing to think outside of the box, where’s the good in the Baltimore Symphony selling off its largest capital asset and handing over ownership of its endowment to some other nebulous nonprofit entity?
Will the BSO still receive complete control over rehearsal schedules and their use of Meyerhoff if the orchestra continues to bleed red ink? Will they still be able to retain control over what other non BSO performances are presented at the Meyerhoff or does programming come under control of this new “nonprofit subsidiary” as well?
Last April I interviewed the new BSO President James Glicker about his plans for revitalizing the BSO. At the end of the article I wrote the following passage:
” there’s also the problem with how [the BSO] plan to pay for these new initiatives. Where is the money going to come for all of these new programs and refurbishing projects?
One source is certainly finding new donors, another would be to cut back on Baltimore’s bloated administrative middle management, but it seems there are other plans already in motion. On April 2, 2003 the orchestra musicians agreed to postpone a scheduled pay increase due to the orchestra’s serious financial problems that reportedly saves the orchestra over $3 million by the end of the 2004-2005 season.”
The Baltimore Sun article reports:
“BSO officials said they wanted to make sure they had a new musicians’ contract in place and the board’s preliminary approval for the plan before spending potentially thousands of dollars on legal fees to analyze the financing arrangement.”
So there was something in motion back then, unfortunately it wasn’t the sort of plan which would really allow the BSO to get out of debt and remain a world class orchestra.
By losing ownership of their two most valuable non-artistic assets (Meyerhoff Hall and the endowment), and lowering the musician’s base salary the BSO may well run a strong risk of watching that artistic status they’re worked so hard to achieve over the years slip away.
And that’s not very innovative at all.