Philadelphia Orchestra reports on 'a remarkable year'

Since the Philadelphia Orchestra exited bankruptcy more than two years ago, several key financial indicators have brightened. Obligations associated with the orchestra's Chapter 11 settlement have been paid off, income from concerts is growing nicely, and annual fund-raising is improving more than nicely.

"It was really a remarkable year," board chairman Richard B. Worley said at Monday's annual meeting of the Philadelphia Orchestra Association at the Kimmel Center.

As part of its recovery plan, the orchestra established a "bridge/recovery/transformation" fund, and fans have come to the rescue. Since the 2009-10 season, $69 million has been raised for the transformation fund, with $6 million more pledged (in addition to regular annual fund-raising). The support has been critical, as the transformation fund covers the gap between income and expenses. In other words, without it, the orchestra would have been running enormous deficits for each of the last several years.

"It's fair [to say] that the transformation fund has done its job incredibly well. The donor community has stepped up in the way we hoped it would," said Matthew Loden, the orchestra's executive vice president for institutional advancement.

But, as planned, that income line is diminishing, and leaders expect it to zero out within a couple of years. Which is why the orchestra is now at the beginning of an endowment campaign to help make up the difference.

"The endowment line tells the story that needs to happen next," says orchestra president and CEO Allison Vulgamore, referring to income that has held flat for several years. "Conceptually we want to be raising our money differently. We will encourage those who have been part of our transformation [to move] into the endowment campaign or into the sustainable fund-raising of the annual fund."

The orchestra ended its fiscal year Aug. 31 with a modest surplus, about $670,000 on a $39.6 million budget, orchestra leaders reported in pre-audited results presented at the annual meeting.

Other highlights of the orchestra's 2013-14 season, from both the meeting, and a separate interview:

In 2014, 100 percent of the board gave to the annual fund, with the largest amount ever collected - $2.6 million, said Loden.

The orchestra received a $1 million gift from a family previously unknown to orchestra fund-raisers, and took in $692,000 in bequests from others.

Ticket revenue is up, both because ticket prices have risen and because more people attended concerts - 160,000 tickets were sold to 84 subscription concerts in 2013-14, up slightly from 157,489 tickets sold to 79 concerts in 2012-13.

While a celebratory air surrounds this year's results, the numbers show that unless the orchestra institutes huge cuts, the need for a larger endowment is urgent. "We have so much, but we need so much more," said Vulgamore.

How much more? She says the board has not arrived at a figure. But when a reporter asked whether the endowment needed to be doubled, she said: "Yes. Because we've always been undercapitalized."

The market value of the endowments owned by and held for the benefit of the orchestra (excluding the Academy of Music endowment) as of Aug. 31 totaled $133.8 million.

"The conversations have happened around the need. Conversations have happened around a number. We won't be announcing a number for a public conversation until we have a conversation with the board," she said. "The board is focused on itself, we are focused on lead gifts."

To the board and others gathered at the annual meeting, she said: "We need those $25 million gifts - several, please."

Vulgamore was hired in 2009 and started her job in early 2010, as discussions were quickening about whether the orchestra should file for Chapter 11. The breathing room it now has comes from several improving numbers.

Concert revenue increased to $14.1 million in fiscal year 2014 (ending Aug. 31), from $11.4 million in 2010. Annual fund-raising in 2014 came to $11.8 million, up from $8.9 million in 2010 (and a dip to $6.6 million in 2012). The forecast calls for a large increase in annual fund-raising in the current year, to $14.7 million, to help support a substantial increase in the orchestra's annual budget, to $43.5 million.

Vulgamore's contract runs through December. She earned a total of $718,000 for the year ending Aug. 31, 2013, according to the orchestra's tax returns. She said she does not have a new contract signed, but expects one.

"I serve at the pleasure of the board. There hasn't been a formal signature, but I've re-upped in all my actions and they have re-upped in all of their actions. I really want to be a part of bringing this endowment money in. I want to feel that this was done with purpose, that the art prevailed, and part of what I did was to underpin it."

In addition, she expects a contract renewal with music director Yannick Nézet-Séguin, whose five-year contract expires in 2017.

"I think this is a year in which we're going to be renewing all of our leadership, including our leadership on stage," said Vulgamore. "I think we have the right people onstage and off."

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