Quiet Concerns About Baltimore

The Baltimore Sun published an article by Tim Smith on 3/30/06 which reports that the Baltimore Symphony Orchestra used $27.5 million of their $90 million endowment to pay off outstanding debt…

The article goes on to report that $62 million of the remaining endowment funds will be transferred to a new trust overseen by an independent board of trustees. According to representatives from the BSO, the article reports that the organization will be left with an $8 million cash reserve in September after paying off all of their debts.

Of course, anytime an organization draws almost one-third of their endowment to pay off debts is a troubling signal. In general, the nonprofit world looks upon the practice with wrinkled brows; however, making that large of a draw into the endowment principal isn’t a bad thing in-and-of-itself. The Baltimore Sun article even quotes Henry Fogel, president of the American Symphony Orchestra League as saying “These are the steps I would take under the circumstances.”

Unfortunately, in Baltimore’s case the circumstances surrounding this unprecedented draw leave much to be desired. For example, the first thing an organization should do when drawing into endowment principal is demonstrate that they have a solid financial, operational, marketing, and artistic plan complete with publicly reviewed quarterly benchmarks in order to reinforce confidence in the organization. In Baltimore’s case, none of these components are present.

Regrettably, this aspect alone isn’t what raises my hackles. That came about when I read about the decision by the BSO board to place the orchestra’s venue, Meyerhoff Symphony Hall, into the newly formed trust.

This was precisely what the organization attempted to accomplish back in 2004 but the plan was scrapped due to the tidal wave of concern over unanswered questions regarding the membership of the trust’s overseers. Now, it appears that the plan’s original designers have their wish as the organization now transfers ownership of the venue to an unknown group of trustees.

Another unanswered question is how the organization plans to replace the investment income from the $27.5 million in the upcoming years. The $8 million cash reserve expected in September won’t take the organization very far if they don’t increase annual revenues and contributed income.

The Baltimore Sun article reports that the only assurances coming from the current executive leadership were found in remarks from interim BSO president W. Gar Richlin, who said he is “committed to balancing next year’s budget”. An admirable goal and one I wish him and the institution the best of luck with but the organization has quite a bit going against it right now, here’s a few of the highlights:

  • there’s no permanent executive leader and no word about where the organization is in the search process
  • many of the long time executive and mid level administrators “left” during former BSO president James Glicker’s brief tenure
  • there’s no music director until the beginning of the 06-07 season
  • a severely strained relationship exists between many members of the executive board and the musicians

I’m willing to bet that if things are going badly in Baltimore during next season, you won’t hear much about it until it’s too big to contain. However, if you want to find a way to measure the internal temperature, just watch the players. The more musicians you witness making “lateral” moves (meaning they audition for and accept positions in ensembles of similar stature) the more you can bet that things are beginning to melt down.

In the end, it’s all a great shame as Baltimore is one of those truly special places in the orchestra world. They have been an organization which has played beyond their pay scale for a number of years, they have the best sounding venue in the Mid-Atlantic corridor, they have a world class conservatory in the same town, the city is experiencing a full blown renaissance after years of depression, and they have a great deal of well established money in the metropolitan area capable of supporting the organization.

There is simply no good reason why Baltimore should have to weather such difficult times right now. The players have demonstrated a great deal of restraint by displaying their (cautious) support for the current interim executive leadership right on the heels of a very ugly labor dispute. As such, if the BSO board doesn’t come up with a solid plan of action and begin to fill in those revenue holes left by the drop in investment income, then it’s going to be a very bumpy honeymoon for Ms. Alsop and the BSO.

About Drew McManus

"I hear that every time you show up to work with an orchestra, people get fired." Those were the first words out of an executive's mouth after her board chair introduced us. That executive is now a dear colleague and friend but the day that consulting contract began with her orchestra, she was convinced I was a hatchet-man brought in by the board to clean house.

I understand where the trepidation comes from as a great deal of my consulting and technology provider work for arts organizations involves due diligence, separating fact from fiction, interpreting spin, as well as performance review and oversight. So yes, sometimes that work results in one or two individuals "aggressively embracing career change" but far more often than not, it reinforces and clarifies exactly what works and why.

In short, it doesn't matter if you know where all the bodies are buried if you can't keep your own clients out of the ground, and I'm fortunate enough to say that for more than 15 years, I've done exactly that for groups of all budget size from Qatar to Kathmandu.

For fun, I write a daily blog about the orchestra business, provide a platform for arts insiders to speak their mind, keep track of what people in this business get paid, help write a satirical cartoon about orchestra life, hack the arts, and love a good coffee drink.

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