The Fabular Philadelphians

It’s tangential to the main story, but in trying to get to the bottom of the Philadelphia Orchestra’s filing for Chapter 11 bankruptcy protection, it’s not totally ungermane to remember a particular sticking point in the Orchestra’s 1996 strike:

A rejected back-to-work proposal brokered by Mayor Rendell’s office in September would have defused a key issue in the walkout: the musicians’ claim that mismanagement has led to a host of fiscal problems that now make it difficult to agree on a new contract.

As spelled out by Mr. Rendell’s chief of staff, David L. Cohen, the plan called for a blue-ribbon panel to review the performance of the orchestra’s management, while the musicians returned to the Academy of Music stage and talks continued on other issues.
….
Unfortunately, the board’s response to the offer only underscored how prickly the issue is. Mr. Kluger hit a note more high-handed than conciliatory, saying the orchestra board will not surrender “its responsibility for evaluating administrative effectiveness to either musicians or any outside third parties.”

(“Bad Play: City Pays for Error by Orchestra Management,”, Philadelphia Inquirer, October 8, 1996)

At least in public, board and musicians are keeping the rhetoric purposefully cooler in 2011, but, indeed, the Orchestra’s Chapter 11 petition reads much like a cautionary tale of administrative effectiveness or lack thereof, paragraph after head-scratching paragraph. Pension obligations have dominated much of the speculation around the orchestra’s move, and, sure enough, paragraph 31 spells it out:

POA’s frozen defined benefit plan for musicians and its active defined benefit plan for staff are underfunded by an estimated $21.8 million. To address the underfunded status of these plans, POA will be required to pay out an average of $2.18 million of cash payments annually from FY 2011 to FY 2020 above and beyond the cash expenses in the main operating budget.

The petition pretty much assumes that the Orchestra is going to pull out of its contributions to the American Federation of Musicians’ pension fund, a move that will trigger an estimated $23 million penalty payment. Perspective: an amount double that penalty payment—$46 million—would be just about enough endowment to cover an extra $2.18 million a year in perpetuity. No organization snaps their fingers and comes up with a $46 million endowment contribution, but remember that the private pension plan was frozen back in 2004—this day of reckoning has been approaching for a while. And I would be intrigued to see more details on the Orchestra’s lease agreement with the Kimmel Center, which more than doubled their annual occupancy costs, even as the Orchestra still owns the old Academy of Music hall (a hall they lease back to the Kimmel Center for the nominal sum of a dollar a year). Like a scaled-down version of the Detroit Symphony and their $54 million in concert-hall debt, a not insignificant chunk of the Philadelphia crisis seems to stem from real estate dealings.

It’s easy—and pessimistically entertaining—to indulge in armchair orchestral management second-guessing. The fact of the matter is, the Philadelphia Orchestra is in a bad spot. Maybe Chapter 11 really is the only way forward. But if the board finds themselves in that corner, it’s a corner they let themselves get backed into, which does get back to the dilemma that Joseph Kluger so moustache-twirlingly articulated back in 1996—the musicians audition; the board doesn’t. The relationship between board and players in Philadelphia has a history of poison—not just the 1996 strike, but the 2001 appointment of Christoph Eschenbach as music director, an appointment the players felt was, to an extent, imposed on them. Given that the players had already voluntarily re-opened their collective bargaining agreement for a package of givebacks to ease the bottom line, the bankruptcy filing is hardly going to improve those relations, especially considering that the prospects of an organization crying poor while sitting on an endowment somewhere between $116 million (according to the petition) and $140 million (according to press reports), restricted or not, are both legally iffy and a P.R. challenge.

One last thought: if there’s one bit of rueful comedy to take from the Orchestra’s Chapter 11 filing, it’s the overall beleaguered tone of the thing, the board’s weariness at regarding this financial sinkhole, day in and day out. It’s at least partially acting, of course, an attempt to paint as bleak a picture as possible for the very particular audience of the U.S. Bankruptcy Court for the Eastern District of Pennsylvania. But no orchestra makes money, has really ever made money. Consider this journalistic lede—

Virtually no major opera house or symphony orchestra in the world expects to pay its own way next season or in the forseeable future

—then consider that the assessment comes courtesy of Howard Taubman, writing in The New York Times in 1948. From a financial standpoint, big musical organizations are machines designed to lose money. They’re almost like capitalist performance art. Which, given the free-market ethos that evermore saturates every corner of society, means that the really interesting story is not the fact that the Philadelphia Orchestra—or Louisville, or Honolulu—has filed for bankruptcy, but the fact that the vast majority of American orchestras have not.

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