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Phila. Orchestra needs $15 million

Faced with a dire financial crisis, the leadership of the Philadelphia Orchestra plans to pass the hat among fellow board members for an emergency bridge fund to help carry it through the next two seasons. The proposed goal is $15 million.

Faced with a dire financial crisis, the leadership of the Philadelphia Orchestra plans to pass the hat among fellow board members for an emergency bridge fund to help carry it through the next two seasons. The proposed goal is $15 million.

The orchestra is running a string of large deficits - $3.3 million for the fiscal year ended Aug. 31, and a projected $7.5 million for the current year - and has maxed out its line of credit.

"Unless we, individually and collectively, provide critical financial support in the next several weeks, there is danger that our effort to fix and transform the orchestra will falter," incoming board chairman Richard B. Worley wrote in a four-page memo to the board. "Without financial stability, we will continually be forced to devote our energy to triaging short-term financial crises, making long-term sustainable change more difficult. We cannot shrink our way to a better future."

The situation will be discussed Wednesday at the orchestra's annual meeting. Worley said last night that the board must approve any fund-raising campaign.

In the meantime, the music will continue undiminished. Tomorrow, even with its own finances in disarray, the orchestra will give a concert at the Mann Center to benefit the survivors' fund of the Philadelphia Fraternal Order of Police lodge. Children's concerts start today. College students will fill Verizon Hall on Wednesday night in a free performance of Berlioz and Saint-Saëns. On Thursday afternoon, the orchestra pays tribute to its greatest benefactor, Leonore Annenberg, with a memorial program at the Academy of Music. And next Saturday night, the actor Alec Baldwin helps the orchestra open its season officially by narrating Copland's Lincoln Portrait.

New chairman Worley and his wife, Leslie Anne Miller, have committed $2 million toward the $15 million bridge fund, and longtime orchestra friend Carole Haas Gravagno has pitched in $1 million.

"In both cases, our second-year pledges are contingent upon the orchestra's ability to raise enough money to navigate the next two years," Worley wrote. "Neither Carol[e] nor we wish to invest these sums just to keep the musicians on stage for a couple of extra months."

Interim administrative leader Frank P. Slattery Jr. declined to discuss the matter before Wednesday, an orchestra spokeswoman said.

Reasons are manifold

The reasons for the crisis are manifold, but most immediately, in the last season, the market value of the orchestra's endowment took a dive (roughly proportionate with declines in endowments at peer organizations), and attendance in Verizon Hall dipped to a precarious low of 80 percent of capacity.

The poor ticket showing means an easy $3.5 million slipped through the orchestra's fingers - revenue that could have been captured without incurring any additional expenditures.

But lower earned and endowment income is only part of the problem.

In his letter to the board, Worley said the orchestra's annual fund-raising ranked 12th among U.S. orchestras and was "less than one-half the average for the five largest orchestras."

Therein lies the looming question - both for new figures, such as Worley and any incoming president, and orchestra loyalists soon rotating back onto the board: Does the board, not to mention the larger orchestra family of supporters, have the means and will to keep on giving to what traditionally has been one in a handful of America's most ambitious, artistically admired, and visible orchestras?

Or will the orchestra have to ratchet down the quality and scope of activities to fit the lower level of support apparently available to it?

These issues formed the core of a report prepared by orchestra consultant Thomas W. Morris and presented to the board at a special meeting in May at the Union League, according to some in attendance. Morris declined to speak about the report.

'A sense of urgency'

Worley said the board left the meeting "sobered, but with a sense of urgency and resolution to restore the governance and financial health of our beloved institution."

Morris recommended that the orchestra establish an oversight task force, including members of the community who are not on the board, to provide advice, particularly in fund-raising.

The drive for an emergency bridge fund is also apparently related to the recruitment of a new orchestra president. The search began a year ago after James Undercofler announced his decision to step down and, in recent months, has focused on one candidate - an executive from a smaller but respected orchestra.

"An outstanding candidate emerged as our unanimous choice," said Worley. "We are actively engaged in continuing discussions with that individual. To succeed in our recruitment, we will have to provide more clarity about our willingness to support the orchestra in the immediate future. Candidates of the caliber that we have considered want to work with, and for, a board that is determined to succeed."

Discussions about the need for an emergency bridge fund began when Undercofler was president, but the matter has recently gathered urgency. This season's $3.3 million deficit on a $45 million budget - on the heels of last season's $2.1 million deficit - comes despite a year of budget cuts:

The orchestra's 2009 European Festivals tour was canceled on Undercofler's watch.

The staff was cut 30 percent, and administrators took a pay cut, while musicians agreed to postpone a pay increase and made other concessions.

Lower fees were negotiated with guest soloists and conductors.

Chief conductor Charles Dutoit made a $50,000 contribution to the orchestra's annual fund.

Still, the pace of deterioration in finances quickened. The orchestra has reached the $10 million limit in its line of credit, and, Worley reported, the group has only $4 million remaining in unencumbered endowment (that portion that does not come with stipulations from the donor about how it may be spent).

"The unencumbered portion represents our last cash reserve," he wrote, "and further reductions in it would compromise our ability to pay our bills."

The bridge fund would, in theory, allow breathing room to set a new institutional course.

"Time and money will allow us to hire a CEO with substantial industry experience, attract an exciting new music director designate, develop and begin to implement a productive and comprehensive strategic plan designed to rejuvenate the institution's future, grow our earned and contributed revenue, and negotiate a contract that is consistent with a return to structural balance.

"The stakes couldn't be higher. This fund is as or more important than any previous undertaking."