More troubled news coming from the New Jersey Symphony Orchestra. Annual operating debt combined with a questionable instrument collection purchase has conspired to put the NJSO in a position where they have apparently opted for an arts administrator’s version of the Hail Mary pass: a massive withdrawal from their endowment…
An Associated Press article appearing in the 07/17/06 edition of the Philadelphia Inquirer describes the NJSO’s plan. Reportedly, the orchestra is taking approximately $3.1 million from its endowment and transferring it to a separate endowment which officially owns the string instrument collection. Afterward, that endowment plans to sell the NJSO 10% of the collection, which the orchestra plans to sell to interested buyers willing to lend them back to the orchestra for performances.
If the reports are accurate, this risky endeavor is just the latest in a string of perilous actions undertaken by the organization as a result of purchasing the instruments from Herbert Axelrod. For example, while suffering under the debt incurred from the instrument collection purchase, the NSJO had to scale back on a number of concerts they performed resulting in lower earned income and public exposure. To help compensate for that revenue gap the musicians accepted substantial salary and working condition concessions in their latest round of collective bargaining negotiations. Now, their situation has degraded to such a point that they are apparently looking to sell off some of those instruments in order to ease some of the debt incurred from purchasing the instruments in the first place.
>From an analogous point of view, it’s as though a bachelor purchases a vintage high performance luxury car to help attract women only to discover that he can’t afford the cost of gasoline and insurance. As a result, he decides to look for people to buy pieces of the vintage car with the hope that they’ll let him continue to use them so he can still attract women. Do you see the dilemma?
The decision to draw on a third of their endowment is decidedly a big gamble. Of course, drawing on an endowment in and of itself isn’t a bad thing but only under a distinct set of parameters. That issue was discussed in more detail in an article about a similar decision by the Baltimore Symphony’s board a few months ago so I won’t hash over those points in detail again.
Nevertheless, there are some intriguing parallels between Baltimore Symphony and the NJSO. For example, they are both slowly surrendering ownership and/or control over capital possessions, in Baltimore, it’s their hall and in New Jersey it’s the string collection. Additionally, it has been reported that both organizations are hoping that lowering their debt by drawing on their endowments will help attract a new executive administrator.
Will the decision pay off? Only time will tell.
There’s more to examine here from a dynamic point of view but I’ll wait until tomorrow to cover some of that as the popular WNYC radio program Soundcheck with John Schaefer will cover the issue today during a brief segment. The program begins at 2:00p.m. ET.