Monthly Archives: October 2014

How to Cut $5 Million from the ASO Budget in One Easy Step

It took an open records request and a comparison of numbers across four different sources, but it appears that I have finally found out how much the Verizon Wireless Amphitheatre (VWA) costs the Atlanta Symphony Orchestra (ASO).  I have mentioned before that the financial statements available from the Woodruff Arts Center (WAC) are not clear enough to tease out the real costs related to the various activities of the ASO.  I pointed out that the funding model used for the VWA broke from the approaches used for other capital development projects that the WAC has undertaken and that it has resulted in a large financial burden for the ASO.  I have also already discussed the fact that there seem to be conflicts of interest among many on the WAC’s Board of Governors when it comes to the VWA and that these conflicts of interest may be preventing them from putting the ASO’s interests first when it comes to decisions relating to that property.

The Woodruff Arts Center leadership has repeatedly stated that the ASO has been running deficits for the past 12 years.  That coincides with the WAC’s incorporation of what appears to be a shell company, Encore Park for the Arts, and purchasing the land for the VWA from one of its board member’s companies, Cousins Properties.  In 2007, when the WAC issued the bonds for the VWA project, they held a credit rating of AA3 from Moody’s.  Since then, their bond ratings have been downgraded twice and, just last year, Moody’s issued a statement downgrading the WAC’s outlook, suggesting that another downgrade is likely.  The principal reasons given for this are the ASO’s accumulated deficits and the WAC’s accumulated debt.  It is hard to imagine that the debt from the VWA is not related to this — indeed, that is likely part of the reason why the WAC leadership retired that debt early rather than fund ASO operations.  But what about the costs of running the venue?  Does it pay for itself or is it a liability?  If you have been following the reports around this lockout or the one in 2012 then you probably have heard mutterings about the VWA being the real source of the ASO’s financial shortfall.  Is this true?

Right now, the WAC leadership are trying to close the ASO’s budget gap on the backs of the musicians.  Although they say that they’ve cut everything else that they could, there are many who question this.  Unfortunately, the WAC has been unwilling to release any financial documents; even the ones that they are required to make available upon request as a 501(c)3 non-profit organization.   This has made it very difficult to tell what the biggest expenses are for the organization.  To get around the WAC’s stonewalling, I have taken the liberty of making an open records request for their financial statements from one of the government agencies that has granted money to the WAC.  Even after getting these documents, though, it was hard to suss out the specifics of the ASO’s revenues and expenses.  It was necessary to review several different sources to pull it all together.

I was able to find how much it costs to run the VWA in the budget for a fiscal year 2015 (this season) application for funding.  It seems that it costs nearly $5.5m just to operate the VWA.  We can assume that the numbers budgeted for FY 2015 are similar to — if not smaller than –previous years since no major changes have been made to the VWA and the bond that financed it has been retired.

ASO Budget Breakdown from GA Council for Arts Application for Funding w-highlighting - CROPPED

Click to see full page

Figuring out how it may be paying for itself is a little tricky.  If we look at the WAC’s FY 2013 Form 990 then we see that Part VIII Section 6a lists total rental income for the whole of the WAC as roughly $1.4m.  Even if that were all from the VWA — which would not be the case since the WAC has a number of venues and meeting spaces that it makes available for rent — then it still wouldn’t cover the costs.  So how about ticket revenue from the pop concerts held there?  The figures from the ASO’s schedule of activities from the WAC’s FY 2013 Audit tell us that the ASO brought in nearly $14m from ticket sales in 2013.  If ticket sales for the Classical, Pops, and Holiday series of concerts were roughly the same as the amount that the WAC leadership stated in their FAQ for 2014, then $4m of those ticket sales came from orchestra concerts and $10m came from the ASO Presents concerts.  In the aforementioned schedule of activities from the audit, we can see that the cost of the ASO Presents “Popular presentations” were roughly $15m.  If we assume that $5.5m of that was the cost of running the VWA, then ASO Presents had net revenues of around $500k in 2013.*  Even if we pretend that all ASO Presents concerts were held in the VWA — which they weren’t since they also produce concerts at Symphony Hall and Delta Chastain Park Amphitheater — then that leaves a $5m deficit resulting from running the VWA.  Now, some small portion of that is probably covered by rental fees.  Some more will be covered by food and beverage vending and parking fees, but the schedule of activities from the audit only lists $5.1m in ancillary revenue and there is no way that all of that is generated solely from activities in an amphitheater that is only open part of the year.

If you’re like me — and I know that I am — then you are wondering why the WAC hasn’t idled the VWA to save money instead of idling the orchestra since the operation of the orchestra is a major part of the WAC’s core mission: they’re the Woodruff Arts Center, not the Woodruff Venue Management Center, after all.  For that matter, it may be in their best interest to sell it off or even give it away like the Community Foundation for Greater Atlanta did with the 14th Street Playhouse when it was dragging their finances down during tough times.  We also have to ask why the WAC has seemingly obfuscated the financial burden that the VWA represents to the organization.  Could it be because there are three people on the board of Governors who have financial interests that have directly benefited from its construction?  Could it be because it sells booze provided by Douglas Hertz’s company?  Could it be some other, less nefarious reason?  Are they just incompetent?  There’s no way to know: it took four different documents just to tease out these numbers and the WAC leadership has shown that they are not willing to give us the real numbers.

Personally, I hate the idea that my donations are going to run an amphitheater that has nothing to do with the classical music concerts that I hold so dear nor the educational programs that do so much for the Atlanta community.  Even if the lockout ends tomorrow then we, the donors and subscribers, need to demand that these questions are answered.  If the current leadership of the WAC cannot act in the best interests of the subsidiary arts organizations that they purportedly serve then they need to be driven out.

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* The WAC has stated that net revenue from ASO Presents concerts totaled $2m in FY 2014. The discrepancy between that number and the one that I have calculated is likely due to ASO management increasing the number of ASO Presents concerts dramatically in FY 2014.

Interest in Conflicts of Interest

In a previous article, I wrote about some possible conflicts of interest related to the Verizon Wireless Amphitheatre.  The land was purchased from Cousins Properties and Duke Realty and, I’ve since discovered, Duke Realty also was contracted to build it (see note).  It is worrisome when the leaders of a non-profit benefit financially from the non-profit organization that they are charged to lead.  Donors and grantors do not like to think that they are paying to line a private individual’s pockets when they are trying to support the mission of an organization.  That’s why I was so disappointed in what I found when I took a closer look at the Woodruff Arts Center’s (WAC) Forms 990.

Since 2008, non-profits have been required to disclose any business transactions involving interested persons (i.e. people in the organization that may face a conflict of interest in performing their duties).  This would include any of the trustees and would absolutely include anyone on the Board of Governors.  The WAC’s 2012 Form 990 lists four such business transactions with trustees.

Conflict of Interest List

Unfortunately, this list is incomplete.  Contained within the form 990 itself is another major business transaction: $461,494 paid out to Coxe Curry & Associates for consulting services on fundraising campaigns.  Phil Jacobs, the Nominating and Governance Committee Chair of the WAC Governing Board, is a senior consultant at Coxe Curry & Associates.  That’s a pretty glaring omission that left me wondering if there could be any others.

Fundraiser Payments.crop

Douglas Hertz, the chair of the Board of Governors, is also the CEO of United Distributors, which is an alcoholic beverage distribution company.  Is that where the WAC gets their alcohol?  I’ve noticed that a lot of the new programming at the WAC has involved alcohol, such as the Friday Night Lates at the High Museum of Art or the Atlanta Symphony Orchestra’s Soundstage Lounge.  Does this benefit Hertz?  Similarly, Paul R. Garcia, the board’s Vice Chair, is the president of Global Payment Systems.  Which payment system does the WAC use?  I’d normally assume that the WAC uses other vendors since neither of these potential conflicts of interest are listed on the form 990 Schedule L but, because the Coxe Curry & Associates relationship wasn’t disclosed, I now have my doubts.

As I was looking into the affiliations of the WAC Board of Governors, I stumbled over the fact that there is a second person on the Board of Governors who had connections to Cousins Properties.  I mentioned before that Larry Gellerstadt, III is the CEO of Cousins Properties.  It turns out that Lynda Courts, an at-large member of the Board of Governors, is the wife of Richard Courts, II, who formerly served on the board of Cousins Properties and who, along with other members of his family, is a major stock holder in the company.

Of course, this wouldn’t count as a conflict of interest since the WAC bought the land for the VWA back in 2007, before this kind of transaction would need to be listed on a form 990.  And maybe we could just assume that something that far in the past wouldn’t matter to decisions regarding the VWA now, right?  But that’s not the whole story.

Cousins Properties owns a little under 20 acres of land across the street from the VWA.  Interestingly, they sold it in 2008 but then bought it back in 2010.  As of the time that this story was published, if you look at the VWA website then you will see that it mentions plans for a phase II development of Encore Park.  Do you  think that it would be a safe bet that this phase II would find its home on the 20 acres of land across the street from Phase I?

Making things look even worse is that the WAC seems to have formed a shell corporation to purchase the property for the VWA in the first place.  The actual deeds for the land show that it was purchased from a company called Encore Park for the Arts, Inc rather than directly from Cousins Properties.  Encore Park for the Arts bought the property from Cousins Properties in 2003.  It is worth noting that Thomas Cousins, himself, was on the board of trustees of the WAC at that time.   I took the liberty of looking into the State corporate filings for this company and it turns out that its principle address is 1280 Peachtree St, the same address as the WAC.  Further, the officers of the company are all officers of the WAC.  Indeed, Hepner is CEO of both organizations.  This company was incorporated in 2002 for the express purposes of developing Encore Park and has always been in the control of the WAC and its board.  Until 2010 it was registered as a 501(c)3 and, in its last form 990 from 2008, it lists an advisory board made up solely of people with the WAC as their address.  Oddly, it is still registered as a not-for-profit with the State of GA even though the IRS revoked its 501(c)3 status in 2010 for failing to submit forms 990 for three consecutive years.  That means that they stopped filing forms 990 after Cousins Properties initially sold off the plot of land across the street.

Why does the WAC have a shell company that bought the land for the Verizon Wireless Amphitheatre (VWA) three years before it was officially acquired by the Woodruff Arts Center (WAC)?  Is it just a coincidence that the ASO started running deficits when it was incorporated?  If it existed solely to raise funds for the project, why does it still exist?  And why is it still registered with the State of Georgia as a non-profit even though its 501(c)3 status was revoked by the IRS in 2010 due to failure to submit forms 990?  Is it just a coincidence that the WAC’s board began reorganizing to put substantial power of governance into the hands of the CEO of Cousins Properties around the same time that they repurchased the property across from the VWA?

There may be a good explanation for all of this and I’d love to see the WAC release information that explains what is going on.  Unfortunately, despite stating on their Forms 990 that financial statements and their conflict of interest policy will be made available upon request, they do not seem to  be responding to any requests for this information.  I said in my previous post that the optics were bad; this time, I’m saying that something smells rotten.  The WAC Board of Governors is made up of 18 members, of which 4 have definite conflicts of interest and there are 2 others who might also benefit from WAC expenditures.  It seems almost as though having a potential conflict of interest is considered a positive thing when the Board of Trustees elect the Board of Governors.  The WAC has a lot of questions to answer and donors, grantors, and any public entity who has underwritten their bonds need to demand answers.

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*NOTE* The Woodruff Arts Center has removed the original presentation to which I had linked. Click HERE for more information.

How Not to Finance an Amphiteater

A lot of people have talked about whether or not it made sense to pay off the debt for the Verizon Wireless Amphitheatre at Encore Park (VWA) early when those funds could have been used to support the general operating budget of the Atlanta Symphony Orchestra (ASO). There are arguments worth considering on both sides of that issue, but what I haven’t heard anyone mention is why the debt exists in the first place and what it says about the folks currently in charge of the ASO’s future.

The land acquisition for and the construction of the VWA began in January of 2007. At the time, as the Woodruff Arts Center (WAC) management keeps helpfully pointing out, the ASO was running a deficit. It was also running a fundraising campaign to build the (now scrapped) Atlanta Symphony Center. While one might think that management might want to finish the existing fundraising campaign or try to do something about about the deficit before taking on such a large project, they jumped at the opportunity to build the new Amphitheater. There had been discussions about it for years and, for some reason, they apparently felt that it couldn’t wait any longer.

The VWA was projected to cost $35m to build. That’s pretty good compared to the Symphony Center’s projected costs of $300m or the High Museum of Art’s expansion that had cost $130m just a few years before. It’s even better when you consider that it was expected to increase the ASO’s annual budget from $30m to $50m. (How much of that budget increase would go to running and maintaining the facility rather than funding the ASO’s primary mission has never been clear in any reports or financial documents that I’ve been able to find, but it sure does sound impressive.)

There was, of course, one glaring difference between the other two projects and the VWA that might make someone pause before diving in: it wasn’t going to be funded primarily through grants, donations, and sponsorships. There would be no grand fundraising campaign specifically for this project before it was built like the exceptionally successful one for the High’s expansion. Yes, the Robert W. Woodruff Foundation did kick in $5m and Fulton County and the City of Alpharetta each gave grants of $1m for the project, but the remaining $28m — 80% of the costs — would come from bonds issued by the WAC. Whereas the High’s expansion was completely funded by the time it opened to the public, the VWA remained a financial liability until its bond was paid off this past fiscal year. The debt and its financing costs were on the books for half of the 12 years of deficits that upsets WAC leadership so much.

Now, if you are like me — and I certainly am — you’re wondering why this project is different from all other projects. Why couldn’t they take their time to secure the funding in advance of starting the project the way that they did with all of the other capital construction projects that the WAC has undertaken in the past? Wouldn’t that be the responsible thing to do? Moody’s sure seemed to think so in 2009 when they downgraded the WAC’s bond rating.

I don’t have an answer to why the ASO/WAC leadership believed that they absolutely had to start this project when they did. I was, however, surprised when I found out where the land for the project came from: Cousins Properties and Duke Realty. You’d think that having Larry Gellerstedt, III, the CEO of Cousins Properties, and Howard Feinsand, who was then Executive VP of Duke Realty, on the board of trustees would mean that the land would have been donated. Indeed, both companies have been regular donors to the ASO. But, no, the WAC had to buy the land, although Duke Realty did hold onto the property for a few extra years and discount it for the WAC.

It certainly raises an eyebrow that it was the bond that was issued in part to fund that particular purchase that was paid off early. It’s also funny that two of the folks on the board of governors who are so concerned about the ASO’s deficits would have been involved in selling the land to the ASO that helped create the leverage ratio that Moody’s cited when they downgraded the WAC’s outlook from stable to negative last year. Maybe it’s guilt from being part of the rash decision to go ahead without first establishing funding that drives their hawkish stance on balancing the budget. Maybe it’s just plain foolishness. Perhaps they just don’t realize how this looks.

Honestly, I don’t see any particular evidence that there were shenanigans involved. Heck, Gellerstadt didn’t even join the board until 2009 and Feinsand didn’t come on board until 2010. That said, Thomas D. Bell, Jr. was on the board at the time of the sale and he was the CEO of Cousins Properties until 2009, at which time Gellerstadt took over for him both at the company and the WAC board of trustees.

One does have to admit admit that it can sometimes seem better to do business with a board member and donor than with some company that will take your money without giving you a dime back. That said, one also can’t help but wonder about the ability of some of the leadership at the WAC to make rational decisions with the ASO’s best interests in mind if they were willing to support taking on this debt during a period that the organization was running such problematic deficits.

Right now you have at least two people on the WAC’s board of governors who represent interests that are responsible for a big chunk of the ASO’s debt and who also seem to have favored paying down that particular debt early rather than funding the orchestra’s upcoming season. On top of that, you have Hepner giving away revenues from the sale of the 14th St Playhouse to an organization on whose board she serves because it’s “the right thing to do,” all the while refusing money to the musicians to feed their families or cover their medical costs even though a talk-and-play strategy clearly would not have bankrupted the organization. The optics on this are awful and it’s hard to have faith in that kind of leadership. The WAC needs people in positions of governance and management who patrons and donors can trust to put the mission of the WAC before their own interests and, frankly, I don’t think that they have that now. It’s time for a change.

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This post originally appeared on Save Our Symphony Atlanta’s Facebook page HERE.

A Muddy Mess

I’ve recently been struck by the opacity of the WAC’s financial statements. As you probably know, the Woodruff Arts Center (WAC) is the parent organization that includes the Atlanta Symphony Orchestra (ASO), the High Museum of Art, the Alliance Theatre, and Young Audiences. Because they do not have separate forms 990 — there is only the one filed by the WAC — the detail on the individual divisions is somewhat limited.

I was hoping to find some information on ticket sales after Romanstein’s announcement that attendance wasn’t a problem so I checked the ASO’s friendly (to management) guide to the lockouts found on the ASO web page, to see if there was any mention of it. Here’s what I found:

“The costs associated with producing and marketing these same concerts were nearly $22 million.”

That sounded odd because I remembered a much higher number listed under expenses on the forms 990 that I had read earlier. I looked back at the FY13 filing and found that they had listed $51,506,092 under expenses for the ASO.

Of course, we know that the ASO division of the WAC has two venues associated with it: Verizon Wireless Amphitheater at Encore Park and Delta Classic Chastain Park Amphitheater. Plus there are the expenses associated with ASO Presents. So if the friendly little guide is only talking about concerts then, hey, maybe less than half of their annual expenses result from the cost of fulfilling its mission by putting on the concerts. Surely the additional $29.5 million dollars of expenses bring in revenue to support the ASO’s primary mission. Right?

So I looked a little deeper and saw that revenues listed on the form 990 for the ASO totaled $22,469,024. Now that’s only going to reflect ticket sales and facility rentals because donations aren’t included in regular revenue. That’s a little strange since that’s roughly the cost of putting on the regular season concerts. What’s more, the expenses column exceeds this amount by enough that there is no way that any expenses, beyond the cost of putting on the regular season concerts. are bringing in more money than they are costing.

Surely they aren’t directing donations, grants, and sponsorship dollars that are ostensibly geared toward supporting the operations of the orchestra to secondary projects that are, themselves, supposed to be bringing in money to support the orchestra? Looking back at the friendly (to management) guide on the ASO website, it says that there are $18m from Orchestra-related revenue sources (donations, WAC support, and interest from the endowment) and an additional $2m dollars from the net revenue of the ASO Presents concerts.

The numbers from the Form 990 are from the season that began with the previous lockout (2012-2013), but if we assume that revenues didn’t decline sharply under Romanstein and that the cost of putting on concerts was the same, since this past season would have been conducted under the same contract as the previous one, then we can only come to the conclusion that there are serious revenue shortfalls coming from non-regular season concert activities.

So now we are left with some pretty serious questions: Where is the disconnect in these numbers? Does the additional $30m reflect the cost of running the Delta Chastain and Verizon Wireless venues? If so, do we know how much of the $22.47m revenue comes from these?

The ASO’s guide says that there is $18m from Orchestra-related revenue sources (donations, WAC support, and interest from the endowment). ASO Presents is contributing $2m.

So are they allocating expenses of $29.5m related to non-orchestra related activities wholly on the ASO and only $2m worth of the proceeds from the same? And wouldn’t only a portion of the ASO Presents proceeds come from the other two venues since some of the concerts are held in Symphony Hall?

Has anyone done a cost-benefit analysis to see if it makes sense to continue running these ancillary functions? Would it make more financial sense to idle or liquidate some of these assets? And how much of the donor, sponsor, and grant money that was designated for the ASO has been directed to these non-orchestra related costs?

We know about the donations that were designated for paying down the remainder of the bond for the Verizon Wireless Amphitheater, but what other funds have been redirected away from operating the orchestra? And of those funds that were directed away from the orchestra operations, where did they come from and what were they originally intended for?

Have the donor development operations of the WAC/ASO been focused more finding funding for non-orchestra related projects than to support the primary mission of the orchestra?

With so many questions and so few answers, we only have the FY13 Form 990 and the possibly misleading numbers from the friendly (to management) guide from the ASO’s webpage so there is no way for us to find out what revenues came from what sources and where they went.

If I were a large donor or grant maker then I might be uncomfortable at this point allocating funds to the ASO since there really doesn’t seem to be any way of knowing where they go. Perhaps there is a good explanation for these numbers — expenses for education programs probably aren’t included in the cost given for putting on concerts, for instance — and maybe they make better information available to the grantors and large donors, but for now there is no way for us to know what is really going on.

Personally, I’d like to believe that there is nothing nefarious going on, but it is getting harder and harder to trust ASO and WAC management.

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This post originally appeared on Save Our Symphony Atlanta’s Facebook page HERE.

Where Is the Marketing?

One of the things that drives me nuts about the ASO is that they don’t seem to market the individual concerts at all to people who aren’t already engaged with the ASO. I think about the packed houses for Joshua Bell or Yo Yo Ma and know that most of the people attending are there because they’d like to go to a concert and know that those names mean that it will be a good show. The same goes for the more recognizable pieces of music, such as Beethoven’s 5th Symphony. I’ve never really seen any meaningful attempt to inform people about the various other soloists who come to town. Can you imagine an Atlanta audience not giving a enthusiastic (even for Atlanta audiences) standing ovation to Nadja Salerno-Sonnenberg after seeing her vivacious, kinetic playing? Can you imagine someone who is excited about Beethoven’s 5th not getting a charge from the scherzo from Dvorak’s 9th? If they like Dvorak’s 9th, how about Smetana’s Ma Vlast? Why isn’t the marketing team making this kind of info easily available to potential audience members?

Sadly, we don’t have much in the way of arts journalism in this town and even less devoted specifically to classical music, so we aren’t getting previews of most of these concerts beyond a blurb from Lois Reitzes on WABE. Gresham and Atlanta Music Critic have a lot to offer but they mostly write about things after they happen and their target audience is already familiar with their subject matter, which isn’t a good substitute for marketing to inform potential audience members about what is being offered. As good as Ken Meltzer’s program notes are, they aren’t marketing material, they aren’t that easy to find on the website, and they aren’t available far enough in advance to sell series tickets. It can be hard for the general public to find out what’s going on in classical music in this metro despite having a scene large enough to include several professional, semi-professional, and amateur orchestras and chamber ensembles spanning the entire metro area and venues that bring in some incredible acts that are frequently featured on national radio. The season brochures are pretty and have a lot of easily digestible information, but it doesn’t build excitement for individual concerts and, if I didn’t already know enough to find the soloists, conductors, and pieces of music that I will enjoy, I’d not find it to be terribly helpful. Beyond that, they mostly go out to people who are already going to concerts, which might help a little in subscription sales but does nothing to build new audiences.

Where is the marketing? Where are the commercials making a trip to Symphony Hall rank up there with going to an expensive restaurant or buying a diamond for trying to impress your date? Where is the ad telling me that if I liked Beethoven’s 9th that I’ll enjoy Brahms’ 1st? I can find out more about the Atlanta Opera’s upcoming concerts from the side of a bus than I can find out from most of the ASO’s ads that I see or hear in any medium that isn’t mailed directly to me as an existing customer. For that matter, I tend to be able to find out more about what’s going on at the High or Alliance Theatre from ads around town than the ASO. Admittedly, there’s more going on in an ASO season than there is in the rest of those organizations, but that doesn’t mean that they can’t focus on a few concerts that would otherwise fly under the radar to help build new audiences and help those who only come for one or two concerts of familiar music with familiar soloists find more concerts to attend.

The fact that it is more challenging just means that we need marketing professionals who know what they are doing and we need management at the top that will challenge them to get the word out. That’s where Romanstein and Hepner have truly failed: no business can sell something if their potential customers don’t know about the product and they haven’t done much to educate the public about their product. Yes, they have tried some new things in marketing (e.g. suggesting BYO packages or ASO Go!/introducing the musicians to the public, which is probably helping the Musicians garner support during the lockout moreso than developing new audiences) but, as Pruitt points out so well and my own experiences confirm, they clearly haven’t done anything different enough from the same-old-same-old to reach people and stop the decline in ticket sales and donations. I find myself wondering if they are working from actual marketing research and, if not, why they haven’t set aside part of their budget to hire a top-notch firm that actually knows enough about the product to do a study of it. The ASO cannot thrive under management that fails to enthusiastically engage potential new customers; no amount of bean counting and benefit cutting will change that.

For my own mental well-being, I prefer to think that it is incompetence and not part of some nefarious scheme to degrade the symphony orchestra that I love so dearly. Hepner’s business experience is in managing the corporate finance division of Wachovia (which failed shortly after she left due to poor financial investments, I might add). Client development for that kind of work is very different than donor and audience development for the arts (if she had to deal with it at all in an organization that large with so many specialized departments). She’s not selling a promise of financial returns or good financing costs anymore but a promise of an enjoyable and meaningful encounter with the arts, which any salesperson will tell you is much more difficulty and requires a good understanding of how people do and want to enjoy the product and, also, a very good understanding of the product itself. Romanstein’s work with the MN Humanities Center, similarly, failed to provide him with the kind of experience that would be required to evaluate the efficacy of an arts-producing organization’s marketing program. His PhD in musicology should provide him with the understanding he would need of the product that the ASO sells, but the kind of business networking that he would be used to is, again, radically different than selling people on attending an orchestra performance.

What we have, I think, are two people who are in the wrong jobs but who are not clever enough to understand that fact. The collective backgrounds of the constituents of the WAC governing board doesn’t help things very much, either, in regards to providing the kind of insight needed to guide the executives in their duties. Setting aside the bashing of the fools who childishly decided to throw the musicians — and their own raison d’etre, I might justly add — out when they didn’t get their way, the financial shortfalls in question go back well before any of these jokers had any meaningful control.

And these shortfalls really are a problem at the WAC: we can’t pretend that they aren’t after Moody’s downgraded their bond rating from A1 to A2 in 2009 and the rating outlook downgrade from stable to negative last year. But, that said, notice the “A” is still in there. It would still be in there if they were downgraded to A3. All three of those ratings are in the Prime-2 range, which is actually pretty good for an arts organization of any size in this economy. People used to running a bank or real estate firm might not be used to considering anything below Prime-1 to be a worthwhile investment, but when a business is out to develop social and cultural returns rather than financial returns on investment, it’s a little different.

The WAC could have some bonds rated as Prime-1 — even AAA — with the backing of the city or county, which is something that they have had for some of their specific-purpose bonds for capital improvement debts in the recent past (including, I think, the bonds for building the Verizon Wireless Amphitheater, which would make paying them off less desirable than paying down their other outstanding bonds with the lower ratings, though I think that the outcry would be even louder if money for the ASO went to general WAC bonds rather than an ASO-specific bond). While it would be great if the City of Atlanta, Fulton County, or the State of Georgia were to guarantee all of the bonds issued by their largest arts organization, it’s unlikely to happen and, frankly, it’s not necessary. An A1 or AAA bond rating is great, but not absolutely necessary to keep financing costs to a reasonable level if there is a long-term sustainability plan. That said, if they had a true long-term sustainability plan then they wouldn’t have been given a negative outlook. The truth is, the kind of urgency that would necessitate heavy-handed negotiation tactics simply isn’t there; it’s just that they don’t have any idea how to get where they need to be without degrading the quality of the very product that they are supposed to be selling.

Of course, we all know that a long-term plan to reduce the debt would do more for them than shooting themselves in the foot by reducing the quality of the orchestra and, thus, the music and their customers’ experience. The ASO may lose money, but it also brings in an order of magnitude more than either the High or the Alliance Theatre and the WAC won’t look good if they end up cutting their overall budget in half just to balance the books. Shrinking isn’t a particularly good way to ensure donor and sponsor confidence. The past few years under Romanstein have shown that he cannot formulate a long-term plan to get out of debt and, since Hepner came on board just before the previous lockout, they haven’t even tried to develop one that would leave the WAC as strong as it has been up to this point. I think that it is clear that they lack the vision to do so.

There are two ways to deal with growing debt: control costs and raise revenues. What the current leadership team has shown is that they have ideas regarding how to do the former but not the latter. It is their job to do both and, as such, we can clearly affirm that they are not doing their respective jobs well. They simply have no idea how to sell some of the greatest art on the planet. Every time someone who has even a remote interest in attending a classical music concert within the Atlanta Metropolitan Area shows that they didn’t know what an amazing orchestra they have in their own backyard they are providing prime evidence that the WAC/ASO leadership has failed.

This problem has developed from years of a kind of mismanagement and short-sightedness that will take true visionaries to correct. Romanstein and Hepner have now twice shown very publicly that they cannot offer this kind of vision and direction: first by their ham-fisted, childish negotiation techniques and secondly by not holding up their end of the bargain from 2012 and showing that they could actually raise the money that they promised to raise to compliment the concessions by the musicians. This lockout is the third strike against their credibility as competent leaders.

To renew Romanstein’s contract after he failed so miserably to deliver the promised funding shows that the WAC’s leadership cannot be trusted to provide the kind of oversight that a world-class orchestra with financial problems needs. Such failure speaks to the need to replace Hepner, as well. If our valiant and brilliant world-class musicians can stay unified and strong throughout this ordeal, I do not see how the WAC can possibly continue effectively with Hepner and Romanstein still in charge. Simply put, the credibility that they’ve already lost with us will be lost to their less musician-sympathizing donors. My hope is that, when the ASO and the Musicians come through this, they — and the rest of the organizations under the WAC roof, as well — will find themselves with the kind of leadership that they need and deserve.

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This story originally posted in two parts in response to a blog post by Brenda Pruitt posted by Save Our Symphony Atlanta’s Facebook page HERE and posted by Save Our Symphony Atlanta HERE.