Judge OKs Philadelphia Orchestra’s labor deal

Even though its new four-year labor contract with musicians will compel the Philadelphia Orchestra Association to raise $5.9 million more than it had anticipated, the association Wednesday sought approval of the pact from U.S. bankruptcy court.

Hearing no objections, Judge Eric L. Frank said he would approve the deal.

"We're pleased that the court granted the motion, and we're thankful to our musicians," association chairman Richard B. Worley said. "This is a very, very important step in this road toward recovery and emergence from reorganization. We have additional issues to deal with, but this is very big and very important."

"We didn't achieve as much as we wanted," lawyer Lawrence G. McMichael said of negotiations with musicians, "but we achieved as much as we could."

The contract's acceptance does not end the association's six-month-old Chapter 11 case.

The Pension Benefit Guarantee Corp., the federal agency that insures pensions, has not approved the proposed termination of defined-benefit pension plans. Talks continue with the Kimmel Center over changes in the lease agreement and relationship with the orchestra.

Perhaps most nettlesome are the aggressive legal maneuvers of the American Federation of Musicians and Employers Pension Fund, which contends that a portion of the orchestra's endowment was mischaracterized as restricted, and is therefore available to satisfy the claims of creditors, of which it is one.

The bankruptcy case will likely continue for months.

"I think we're two-thirds done. There are a few bumps in the road, but I think we'll get there," McMichael told the court.

Musicians will take significant cuts under the terms of the new contract, which takes effect Tuesday. The ensemble will shrink, salaries are cut by 15 percent, and retirement income is reduced by an undetermined amount.

The pay changes will alter the orchestra's traditional ranking against its U.S. peers, moving it from the top five to near the bottom of the next five.

Comparing the old contract (including a raise that was scheduled but never realized) with the new, McMichael said the first three years of the contract would save the association $10 million a year, with an $8 million savings in the fourth year.

"I'm not going to tell you the musicians are thrilled, but the news of settlement was very well received in the Philadelphia community. We can go to significant seven-figure donors and say we solved the problem and did it without bloodshed."

Donors, he said, were uncomfortable with the risk factor of a pension funding plan in which the association was responsible for increasing its contribution to underfunded pension funds to meet the obligations of a defined benefit. The new plan is a defined-contribution plan.

With that uncertainty removed, McMichael told the court that administration and musicians could go out "hand in hand" and seek donations.

In recognition of musicians' displeasure over the new deal, the judge, with a wry smile, said that perhaps "side by side" was a better characterization.