Latest from Philadelphia bankruptcy crisis: it's Catch-22

Latest from Philadelphia bankruptcy crisis: it's Catch-22

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norman lebrecht

February 02, 2012

The orchestra has filed a request to leave the bankruptcy protection programme. It needs to raise $160 million and cannot attract new support while the threat of liquidation looms. However, the court cannot let it loose again as a trading entity until it shows signs of solvency.

So it’s deadlock.

Meantime, the manager is on a one-month contract and the musicians are taking flight. Here’s Peter Dobrin again, totally on top of the story.

 

Comments

  • Robert Fitzpatrick says:

    I seem to have struck a nerve with the post below under the rubric concerning the departure of Nitzan Haroz, principal trombone. The Phila Inquirer has not yet published this in the on-line blog (sent at 5 AM today Phila time). Maybe they don’t like the word “merde.” But, I think it has to do with the $50M Annenberg gift in 2003 which is under serious discussion because of the bankruptcy. I shall leave it to you, Norman, whether to follow up on this, Perhaps there are factual mistakes which escape me, No need to publish any of this. Just sending it FYI.

    Does anyone really think that Nitzan WON’T get tenure in LA? He will not be back in PO. Filling one principal chair per year is difficult, not because of the lack of talent, but because of the complicated process. Filling 5 or more similar positions within one or two years is both an artistic and an administrative challenge especially at the beginning of the tenure of a new Musical Director (which POA has not had since 2008!). The people who give the really big bucks to POA are often NOT members of the Board. It was Gerry Lenfest and Christoph Eschenbach who convinced the late Leonore Annenberg to give that famous $50M which came with a no-bankruptcy string attached; one wonders what the final outcome of that discussion will be. The governing body is really the Executive Committee; sometimes loud voices (where will they go?) win out over deep pockets. Depth of talent and pockets is not the real problem with POA; it’s the need for leaders with a vision both artistic and financial. Hopefully YSN will inspire them all……Merde, Yannick, as they say in French before entering on stage! (Because it’s bad luck to wish performers good luck)

  • It says something about the paper thin nature of America’s classical music cultural life when the move of a trombonist from one orchestra to another causes such a commotion. American has about 18 fulltime, year-round orchestras, while Germany with a quarter the population has 132. America is the only developed country without a comprehensive system of public arts funding. And not surprisingly, it is the only developed country in the world where an orchestra with the stature of Philadelphia has gone bankrupt. When will Americans read the hand writing on the wall and join the rest of the world with a public funding system?

    • Robert Fitzpatrick says:

      When? Never. An orchestra is the expression of its own local community. The POA situation speaks volumes about old Philly money which doesn’t even live in the city. The post-war Berlin Philharmonic is the vibrant expression of the most exciting city in Europe in a country that is probably the most boring politically. Government support helps them but doesn’t make Berlin Phil the standard that all others try to emulate. Vision was putting that fabulous, modern hall 2 steps from East Germany and “the Wall” in 1963!!! Herbie vonK had lots of faults (to put it mildly) but he was an artistic visionary. That’s what’s lacking in the USA in most cases. We need a musical Bill Gates, Steve Jobs, or Mark Zuckerberg to light a fire under the posteriors of the musical establishment. I’m an optimist. Our time will yet come….

      • If never (concerning public arts funding,) then our orchestras are going to die. Period. So we might as well pull our heads out of the sand and develop a public funding system like all other developed countries have long had. It will take a long time, and in the meantime, these problems will continue. How long will Americans keep banging their heads against the wall.

        Bill Gates, Steve Jobs, and Mark Zuckerberg all demonstrate that money and vision are closely related. If we want visionary arts organizations, we have to develop a funding system that works. The Berlin Phil is the highest paid orchestra in Germany and has more solid funding than any US orchestra. Same story with the Vienna Phil, Gewandhaus, and Conzertgebouw which are all more visionary than American orchestras. Our orchestras have the artists who could create vision, but they don’t have the resources. Vision does not evlove when you have to constantly look at the bottom line. In the arts, looking to the bottom takes you to the bottom. And that will always happen with our funding system.

        And as you note, a funding system that makes the Philadelphia orchestra something like an elite, cultural country club for Philadelphia Mainliners will inevitably destroy it. Time for fundamental change, folks.

    • Greg Hlatky says:

      Grand. Instead of an ineptly-managed, artistically-adrift organization that squanders its donors’ money, Philadelphia can have one that squanders public money. How is that an improvement?

      • The Philadelphia Orchestra is not ineptly managed or artistically adrift. It just doesn’t have enough money to do its job right. In 2001, the Mayor’s office of Philadelphia published a report noting the city had 14,000 abandoned buildings in a dangerous state of collapse, 31,000 trash-strewn vacant lots, 60,000 abandoned autos, and had lost 75,000 citizens in recent years. These are the conditions that destroy orchestras, and similar situations are seen in many other cities across the country. Detroit is an especially notable example. Americans look at everything but the truth when dealing with the problems with their ochestras. This lack of social responsibility is seen in both our lack of a public funding system, and in the destruction of our cities. No other developed country has problems even remotely like these.

  • Linda Grace says:

    Fitzpatric sez: Depth of talent and pockets is not the real problem with POA; it’s the need for leaders with a vision both artistic and financial.
    In the Philadelphia orchestra leadership, amongst other items, “vision” would have meant actually paying the pension fund as it came due rather than sliding by it and waiting until this day of reckoning.

    • Will any amount of vision make up for the inherent weaknesses in our funding system?
      Look at all the institutions that have gone bankrupt in recent years: the New York City Opera, the Boston Opera, and the orchestras in Detroit, Syracuse, Hawaii, Albuquerque, Kansas City, San Diego, Louisville, Colorado Springs, Denver, the Florida Symphony, San Jose, among others. Did the lack vision?

    • Robert Fitzpatrick says:

      OMG, Linda. It’s nice to know that somebody is paying attention. The vision you (we) mention is probably better described as honesty. I nominate you for the Board of POA. I know at least one member of the orch who will vote for you (and a lot more, me thinks). We both know that this situation is desperate but not hopeless. I desperately hope for the best as Yannick takes to the podium.

  • Michael Comins says:

    The annual dues to the AFM Pension Fund was LESS than the legal fees spent so far on the bankruptcy. This is all about abrogating contractual obligations to musicians (seen as employees) negotiated in good faith over many years of bargaining because Board Chairs (usually bean-counters from the financial world) simply don’t think that employees are entitled to defined benefit pensions. Apparently, there is no realization among them that they are destroying this priceless organization that they are supposed to be the caretakers of.

    • Robert Fitzpatrick says:

      As someone working for a school who went from a defined benefit to a a defined contribution pension plan about 12 years ago and is now retired (since 2009), I can affirm that I am in total control and will NEVER have to deal with a downgrade of my pension funding if the employing institution goes belly-up. There is not a non-profit org in the USA today that can continue to support a defined benefit pension plan. I agree that the POA situation is a bad faith attempt to get out of past obligations. But there are ways to make this work without preciptious withdrawal from the recently negotiated entry (about 8 years ago) into the AFM plan. Ed Rendell, as mayor of Philadelphia in the 1990s, would have locked them all in a room and no one would leave (or survive) unless they came up with a plan to save the orchestra, the musicians’ salaries and pensions, and the once golden reputation of the Philadelphia Orchestra. Philadelphia and its orch need that kind of leadership today.

    • Robert Fitzpatrick says:

      Your point about the legal fees is excellent especially when one of the law firms has a POA Board member as a partner. And to think that they claim to have a signed a conflict-of-interest disclaimer.

      • Michael Comins says:

        I have to disagree about the efficacy of defined benefit plans. The orchestras of NY, Boston, Chicago, S. Fran.and LA not only still have them, but at least in Boston’s recent negotiation have actually increased payout. A recent USA Today article pointed up the fact that administering defined contribution plans costs more than defined benefit plans. Of course, the added charges are money in the pockets of money mangers (the bean counters again) and born by individual pensioners instead of by management. Most egregious in this situation is the reduction in future payments to those already on pension. FYI, the POA had its own internal pension before opting to transfer to the AFM’s pension.

        • Robert Fitzpatrick says:

          There’s no question that in Candide’s “best of all possible worlds” an employer provided defined benefit plan with no contributions from the employee is the most beneficial to the retiree and the easiest to administer. That assumes the good, long-term financial health of the employer. Yes, I know that POA had it’s own internally funded pension plan (defined benefit) and they joined the AFM pool in a failed attempt to relieve the pain. The POA bankruptcy is about three issues: the benfits, the salaries, and the Kimmel Center rental agreement. The POA is not bankrupt (yet) but poorly managed with no long-term strategy. NY Phil has just signed a new 2 year contract (very short by today’s standards) to put off the inevitable decisions on their benefit plan, The new CEO will have to sort it out in 2013-14. Then there’s the question of employer paid health insurance for non-profits. I agree with another commenter here that government help would be great if only in the areas of retirement and health insurance. There is no question that Boston Symphony is among the healthiest performing arts organizations in the USA. May it continue!

          • Michael Comins says:

            “The POA is not bankrupt (yet) but poorly managed with no long-term strategy.” And there lies the real crux of this situation. Declaring bankruptcy with money in endowments and ownership of the Academy was slimy in my book. The following are my comments in this month’s NYLocal 802 ‘s monthly journal Allegro:

            Re: the Philadelphia Story

            While what has been done to this fabled orchestra is certainly outrageous, I must ask where the musicians’ leadership was during this struggle? As wonderful and together as this ensemble is onstage, offstage it is fractious with younger players just out of Curtis and other music schools glad to belong to the orchestra regardless of contract cutbacks, while a small group of longtime players was solidly against ratification. Firm leadership from the orchestra’s committee, its attorney (she is also ICSOM’s attorney) and its Local 77 President might have changed the outcome. A strike authorization vote should have been taken when news of the imminent bankruptcy first surfaced. Sadly, this leadership seems to have been lacking.

            The POA’s chair of the board withheld his own $5 million donation until after declaring bankruptcy and must have asked other large donors to do the same. Upon assuming the chairmanship in 2009, he stated publicly that the defined benefit pension plan was not to his liking and had to go. Since bankruptcy wasn’t filed until April 2011, there should have been ample time to rally the troops and prepare to fight this disgraceful act.

            In ratifying this atrocious contract, the orchestra’s musicians have accepted a 20% cut in salary from the last year of their former agreement (never achieved because of a giveback freeze), a 35% cut for subs and emeritus players, an attrition of 10 musicians that might be restored sometime after this 4-year contract expires and a defined contribution pension plan that they can invest for themselves. Their basic salary is now below that of Minnesota, Cleveland and Washington, DC. Further, realizing it or not, they have negatively impacted all AFM musicians vested in the AFM-EPF. The Fund’s chances of recouping all of the POA’s unfunded liability are slim to none.

          • Robert Fitzpatrick says:

            Agreed on all counts especially the use of the word “slimy.” I too fear the ripple effect on other orchestras from the likely POA withdrawal from the AFM pension plan. Concerning the eager Curtis graduates (and new members from other fine schools), that’s what the Board in counting on. “Let the “artistes” leave, we will just replace them with eager and cheaper young talent.” Yes, the factions within the orchestra haven’t help the leadership void but there is enough blame to go around in Philadelphia including Board, management, performers, government, and even the rather apathetic public. They could be the first major orchestra to disappear….after 112 years, it’s come to that. I heard them for the first time in September 1959 and the last time was here in Paris in September 2011. I wonder who will be on stage the next time……

  • William Osborne, I agree with you. And many of the professional American orchestras (I mean, the few full-time that exist) are keeping their financials an in-house secret. Indeed, for every one candidate who receives a job in the US, hundreds upon hundreds of applicants are turned away. And on top of that, if an organization can hire you as a temp, they will continue to do so, rather than offer full-time employment. I would send any serious player to Germany for graduate studies and beyond.

  • Regarding Mr. Comins’ last comment, we should remember the Philly situation evolved in the context of the Detroit debacle. The musicians there struck and accomplished almost nothing. Long-term projections show that Philly won’t be able to pay its pension fund. The money is not there, and strikes do not raise funds. In fact, they make it more difficult. Philly was very smart in not turning the situation into a contentious and unproductive strike.

    This isn’t to say that the musicians aren’t being screwed. They are. What has happened is an outrage, but a simplistic blame-game doesn’t reveal the truth of the situation. In the final analysis, it is our funding system that has repeatedly caused these problems. Now these problems have reached the top with Philly and the NYCO and everyone is suddenly squawking, even those this situation has been evolving for decades.

    It could be true that the younger players might accept less pay, but there are also people like the first trumpet receiving $300,000 per year – which is ridiculous if one considers how many great trumpeters are out there. We see how self-serving our funding system becomes. We have a few very good arts organizations in a few financial centers where the wealthy live, while the rest of the country often remains culturally impoverished. The big city wealthy service themselves luxuriously with 300k trumpeters while letting the rest of the country go to hell.

    To its credit, America is becoming a country where a neo-feudalistic system of arts funding by and for the wealthy no longer works. What has happened with Philly, Detroit, and the NYCO is going to become a trend for top organizations, not just the regional ones. An interesting case is Miami.. The orchestra there folded and the city hasn’t had a professional orchestra for years – and in a city with a metro population of 5.5 million. Cleveland’s regular season in Miami has turned it into something like a scab orchestra.

    Eventually the smug musicians of ICSOM will get off their high horses and realize they too need to become involved in working toward a comprehensive public funding system like all other developed nations have long had. Unfortunately, this will not happen until there is a lot more pain. And that pain is coming.

    • Michael Comins says:

      Comparing Philly to Detroit is like comparing apples to autos. Detroit kept its AFM defined benefit pension and did not declare bankruptcy, albeit with far less funding than Philly. Apparently, Philly’s board had more than enough funds to pay a bankruptcy law firm (whose principal partner is on the board) costing more (so far) than annual dues to the AFM Pension Fund. There is one sure comparison to be made between Philly and NYCO – atrocious management going back many years. Ormandy and “Bubbles” Sills are surely turning in their proverbial graves.

      Philly’s principal trumpeter is not the only principal player in a major orchestra earning 300k or better – why pick on him? Further, he is rumored to be one of their principal players leaving for greener pastures, putting the lie to the Philly board member who smugly asked, “where are they going to go?”

      Arts funding begins with arts education early in school. In today’s US society that’s the lowest thing on the totem pole. Unfortunately, comparisons between us and other developed nations seem futile. Today’s Repub candidates want to cut funding altogether with their mantra about the “deficit.” ICSOM and its parent body AFM ARE involved in trying to increase or at least save what little funding exists here. Neither group could be called smug.

      • The issue isn’t just one year’s worth of payments to the pension fund, but rather the payments for many years to come. And the issue isn’t similarities between Detroit and Philly, but rather the differences created by not striking (though there are in fact important similarities in the overall situation.) The trumpeter would not be leaving for greener pastures, but for far less pay as a professor in Georgia. And ICSOM and the AFM have not been especially active advocates for arts. They should be doing far more, but they have smuggly left this work to others. Now they are paying the price. We are both on the same side, but we can only make progress if we are factual.

  • I take your word for it, Mr. Osborne, that more pain is coming. What must it feel like for out-of-work Florida orchestra musicians to watch the Clevelanders move in? And how about New York City free-lance musicians? Are they not “qualified” to perform operas and ballets in the pit?

    As a wise colleague of mine in L.A. said, “Most of us are getting fewer slices of a diminishing pie.”

  • Bankruptcy marks the beginning of one’s financial breakdown. But the good news is that bankruptcy is avoidable. You can take some actions to prevent yourself or your business from becoming insolvent. One way to avoid this is to talk to your creditors and get to an agreement with them on how you will settle the bill or to consider debt consolidation.

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