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Minnesota Orchestral Association stands pat on leadership, reports $1.1 million operating deficit

MinnPost photo by Corey Anderson
The MOA on Wednesday reported an operating deficit of $1.1 million for fiscal year 2013.

Despite the silence at Orchestra Hall, the Minnesota Orchestral Association will make no leadership changes in the coming months.

What remains to be seen is if there’ll be any change in negotiating tactics with orchestra musicians.

That the MOA will stick with current leadership was the key development from the MOA’s annual meeting Wednesday, held at the Minneapolis Club. Annual meetings are routinely the time when leadership changes are made.

There are many — including 10 DFL legislators — who have come to believe that without a change of leadership, a settlement between the MOA and the musicians, who have been locked out for 14 months, will remain out of reach.

The legislators, all from the metro area, sent a letter to MOA board members earlier this week calling for the resignations of CEO Michael Henson, Board Chair Jon Campbell and past Chair Richard Davis.

But those calls for leadership change did not come from the MOA’s massive board at the annual meeting. It’s uncertain whether a change in negotiating strategy was even discussed.

Campbell will stay on as chair until a negotiated settlement is reached, an MOA spokesperson said.

The decision to stay the course, however, is not surprising. MOA leadership — and apparently the vast majority of board members — believe that it’s the musicians, not management, who have been unwilling to change.

In a statement, Campbell said: “We are hopeful that we’ve reached a point in negotiations where musicians will choose to join us in negotiating a compromise settlement that helps to address these financial issues and enables the players to return to concerts at Orchestra Hall soon.’’

That’s a variation of a theme that’s been a constant since the lockout began.

The MOA on Wednesday reported [PDF] an operating deficit of $1.1 million for fiscal year 2013. That is substantially less than the $6 million deficit from the previous year, when the orchestra actually was performing.

“The fact that the organization’s deficit is substantially smaller in a year without any performances indicates the degree to which this business model is out of alignment,’’ Campbell said in his statement.

Not surprisingly, the report tried to put a positive spin on the past year. For example, the report states that “two thirds of all donors, 68 percent, maintained their support of the organization, with contributed income totaling $5.7 million, compared with $8.2 million the previous year.”

Minnesota Orchestra summary of operating results

Year ending
Aug 31
2013
Year ending
Aug 31
2012
Revenue, gains and other support
Operating revenue
Ticket sales and service income$45$6,550
Tour revenue433
Other revenue(31)1,548
Total concert and other operating revenue148,531
Contributed revenue
Contributions and gifts2,5844,167
Oakleaf and St. Paul Fnd. distributions3,1083,066
Symphony ball958
Total contributed revenue5,6928,191
Contributions released from restrictions2,5964,367
Board-designated draws for operations3,6954,471
Total revenue, gains and other support$11,997$25,561
 
Expenses
Musician salaries and benefits$2,219$15,340
All other salaries and benefits5,6897,495
Direct concert expense4863,933
Tour expense482
Advertising and promotion6161,580
Symphony Ball327
Interest and financing550515
Negotiations and negotiations related885147
Repayment of grants previously
    received for specified purposes
1,073
General administration and facility operations1,5441,715
Total expenses$13,063$31,533
Net Operating Activities$(1,066)$(5,972)
(Rounded to nearest $000)

The other way of looking at that stat, of course, would be to note that donations were down by a third. The harsh question out of that would be what percentage of those donations will come back, assuming there is a settlement in the future.

In fairness, it should be noted that musicians attempted to paint an equally rosy picture of its accomplishments since the lockout began.

The report does acknowledge that there were concert costs even in a year in which there were no concerts.

For starters, the MOA returned a $961,888 grant to the Minnesota State Arts Board in the wake of the concert-less season.

The MOA also paid out $2.2 million for musicians salaries and benefits because usual salaries were paid for the first month of what the MOA calls “the work stoppage.” Those expenses also included unemployment compensation for musicians that was reimbursed to the state for the remainder of the fiscal year.

It appears that the word “lockout” cannot be found in the report. There also is no direct line showing how much was paid to the law firm Felhaber, Larson, Fenlon and Vogt, which is believed to be behind the lockout strategy.

One line — “negotiations and negotiations related’’ — shows an MOA expenditure of $885,000.

But overall, the tone of this report was upbeat — and filled with the conviction that it’s the board and management that’s “in the right.”

A letter to the board members signed by Campbell and CEO Henson ended on an upbeat tone:

“When a settled contract is in hand, we must travel down these paths (building audiences, etc.) without delay to ensure a thriving Minnesota Orchestra and classical music art form in the 21st Century. We hope fervently to be able to begin that journey soon.”

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Comments (24)

  1. Submitted by Jon Kingstad on 12/11/2013 - 02:58 pm.

    Questions

    Maybe everyone else in the community knows the answer to this. But my question is: who are the “members” or “shareholders” or whatever you call them of the MOA? In other words, who has the vote to elect the board and/or management? Or is this Board a group of self-perpetuating individuals who have obtained a seat and a vote by a large donation to the endowment or other fund? Also what happens in a year, two years, or five years and the MOA doesn’t have a concert with the “Minnesota Orchestra”? I get the impression this impasse go on indefinitely.

    • Submitted by David Assemany on 12/11/2013 - 03:40 pm.

      Voting members

      Jon, my understanding of this issue by reading the by-laws is this: The board selects the voting members, and the voting members vote on the board. I could be misreading the by-laws though, I am not a legal eagle. The by-laws can be found on the SaveOurSymphonyMN.org website under the menu item called “resources”

    • Submitted by Sarah Nagle on 12/11/2013 - 07:03 pm.

      Yep, it’s self-perpetuating

      And previous board members just joined again – so much for “new blood”.

  2. Submitted by Amy Adams on 12/11/2013 - 03:01 pm.

    So, how big will Michael Henson’s bonus be this year?

    And what exactly are you drawing on the endowment for, MOA?

  3. Submitted by Mark Carter on 12/11/2013 - 03:24 pm.

    Pops galore!

    “When a settled contract is in hand, we must travel down these paths (building audiences, etc.) without delay to ensure a thriving Minnesota Orchestra and classical music art form in the 21st Century. We hope fervently to be able to begin that journey soon.”

    Translation: – lots of dreadful pops, with full use of the new 1 million dollar sound system. And by the way Mr Campbell, 1 million dollars will buy you a very third rate sound system for a space that large. That will fit right in with the rest of your operation.

    Mr Campbell, you are now irrelevant. Anything you say will now be taken down and used in evidence against you. We will find away to do without your crew. We have to.

  4. Submitted by Michael Wunsch on 12/11/2013 - 04:08 pm.

    Unfortunately, the MOA is literally accountable to no one

    The current articles of incorporation under which the MOA operates (last amended in 1990-91) leave the board of the organization accountable to no one: http://eyesonlife-ginahunter.blogspot.com/2013/11/the-minnesota-orchestral-association.html

    At this point, I think that it is abundantly clear that the MOA is controlled by individuals who are not open to any feedback or any participation from the broader community; who are not interested in any solutions other than the ones that they propose; and who are not interested in any agreement with the musicians that requires actual compromise.

    I understand that Jon Campbell would not want to admit that he has made a mistake; few people do. The tragedy is that it is clear that the current leadership – Jon Campbell, Richard Davis, and Michael Henson – do not have a vision of excellence in classical music and are not concerned about maintaining a vibrant orchestra for this region. They have destroyed the Minnesota Orchestra brand, alienated patrons and donors, repeatedly dismissed their world-class conductor and musicians as dispensable, and lost an alarming number of musicians to other ensembles and lost their music director. All this, and the overhead costs of the MOA are staggering: $13 million in the last fiscal year without a single concert produced.

    The solution here is to turn the endowment and the hall over to the musicians, who inspire people with their dedication to their art and with their vision of excellence in classical music outreach and performance. As long as Henson, Davis, and Campbell control the MOA, there is no future for that organization. Even if the MOA were to obtain an agreement with the musicians, the organization would still be in a death spiral; too many patrons have been alienated by the organization’s misleading statements and general lack of accountability.

  5. Submitted by Richard O'Neil on 12/11/2013 - 05:35 pm.

    Wow!

    Ticket revenue $6.6 Mill; Musician salaries/wages 15.3 Mill. That says it all.

    • Submitted by Michael Wunsch on 12/11/2013 - 06:49 pm.

      ticket revenue from FY 2012

      Richard, you should be aware that the low ticket revenues from FY 2012 are part of this standoff.

      Leading up to labor negotiations, the management of the MOA reduced the number of concerts that they produced, leading to “black weeks” where the musicians were paid to do nothing. Ticket sales per concert remained steady but overall ticket sales (and ticket revenues) declined due to the reduced number of concerts.

      This reduction in ticket revenues occurred at the same time that Cleveland – a peer orchestra that pays its musicians more, performs more classical concerts, and serves a much less economically vibrant region – posted sharp increases in ticket sales and ticket revenues. Cleveland accomplished the increase in ticket revenues through innovative programs designed to broaden their audience and bring families and young people to classical music performances.

      The MOA revealed in its minutes that it deliberately planned to present balanced budgets while raising funds for hall renovations and then planned to present sharp deficits immediately thereafter in anticipation of labor negotiations. The reduction in number of concerts offered in 2011 and 2012 – an obvious drain on the finances – is consistent with the desire to present sharp deficits. In this case, it had its desired effect, by shocking readers with the disparity between ticket sales and musician salaries. I would challenge you to consider that the non-musician salaries and other overhead expenses of the MOA are even more shocking.

      • Submitted by Hiram Foster on 12/12/2013 - 06:01 am.

        “The MOA revealed in its minutes that it deliberately planned to present balanced budgets while raising funds for hall renovations and then planned to present sharp deficits immediately thereafter in anticipation of labor negotiations.”

        What management missed is that wages are set by the market, not by the way managers keep their books.

      • Submitted by Paul Udstrand on 12/12/2013 - 09:31 am.

        Yeah, why…

        Why is there so much overhead? I thought they paid no rent on the Hall itself so why does it cost so much to produce those concerts? It would be interesting to see a breakdown on those costs.

    • Submitted by Sarah Nagle on 12/11/2013 - 06:58 pm.

      And how about $7.5 million

      for “other salaries”? That’s a lot of overhead. I think that says more.

  6. Submitted by Neal Gendler on 12/12/2013 - 12:00 am.

    Board size?

    I don’t know the size of the MOA board, which Doug calls “massive,” but I find it difficult to believe that it could be w/o dissent. Surely, people who agree to serve on the board have at least a mild interest in music, and at least a few must truly love the orchestra.

    It would be very interesting to see board minutes and learn of the discussions and the votes. Are there no defenders of excellence on this board? Have no members resigned in disgust? (If any have, I can’t recall reading about it, although maybe I’m just forgetful.) How could an orchestra association attract board members who appear to have so great a love for edifices and so little regard for the excellence for which people come to the hall?

  7. Submitted by Steve Titterud on 12/12/2013 - 12:43 am.

    How can $ 5.7 million for “other salaries and benefits”….

    …be justified in a year when the MOA did SO LITTLE – really, NOTHING – to present the Orchestra to this community, when the previous year it cost $ 7.5 million in that same category to produce $ 6.6 million in “ticket sales and service income” ??

    What is all this dead weight producing ?

    And why would the MOA think these “other salaries and benefits” are critical to keep on board at a time when they are producing NOTHING ?

    What is the real purpose of the MOA, in the mind of the board and its leadership ? Their public assertions appear to be a load of crap, in light of the figures above.

  8. Submitted by Paul Udstrand on 12/12/2013 - 08:44 am.

    Well well

    No concerts and they still have a million dollar deficit. Obviously those who have been working (on what we do not know) to the tune of $6 million this year have not taken a substantial cut in THEIR wages compared to the musicians. Just eyeballing it it looks like management lost 14% of their compensation while the musicians lost 70+%. If management had taken the 25% cut they offered to take they would have come out in the black.

    Furthermore one of Hiram’s constant claims appears to be mistaken. The claim is that concerts lose money for the orchestra but the numbers from 2012 demolish that claim. In 2012 the concert revenue was $7 million and the concert expenses were $4.5 million, so they actually made money on the albeit shortened schedule as far as the concerts were concerned. No wonder they still rang up a deficit in the absence of concerts.

  9. Submitted by Paul Udstrand on 12/12/2013 - 09:09 am.

    Just to recap:

    1) Management drew down the endowment to make the orchestra look more financial stable than it really was for two years prior to the lock-out. This helped them get the $50 million they wanted for renovations.

    2) Having gotten those renovations management changed course and decided that drawing from the endowment was not acceptable practice for paying it’s obligations to the musicians. They continued drawing from the endowment in 2013 in order to pay management.

    3) Management locked-out the musicians in the middle of the contract period. Suddenly the contract they’d signed two years previously when they were convincing everyone that they orchestra was in good financial condition was no longer viable.

    4) The musicians union has appeared several times to negotiate an end to the impasse, and the musicians have in fact already agreed to a cut in salary. The musicians have also agreed to and attempted to organize binding mediation. The musicians have agreed to further cuts in compensation.

    5) Management has rejected attempts at mediation and keeps re-submitting it’s original contract as if it’s a compromise. Management has called for negotiations, and the musicians have responded to that call. The problem is that management refuses to actually negotiate or compromise once they get to the table. They simply demand the musicians accept the new contract.

    MOA’s claims that they’re waiting for the musicians to join them at the bargaining table are disingenuous at best, misleading at worse. Sure, they sit at the table but they’re not waiting for negotiations they’re waiting for the musicians to sign the contract they’ve been demanding.

    • Submitted by Hiram Foster on 12/12/2013 - 10:55 am.

      Contracr expiration

      “Management locked-out the musicians in the middle of the contract period.”

      According to the Musicians’ website:

      “The contract between the musicians of the Minnesota Orchestra and the Minnesota Orchestral Association expires on September 30, 2012.”

      • Submitted by Paul Udstrand on 12/12/2013 - 11:29 am.

        I stand corrected

        Thanks Hiram, I’ve been mistaken about this all along and apologize. However, it’s still a lock-out.

  10. Submitted by Paul Udstrand on 12/12/2013 - 09:21 am.

    Donations will continue to fall

    After another 12 months of zero concerts you can expect donations drop even more in 2014. Management obviously plans to keep the orchestra locked out until the current contract expires completely at which point they’ll have more freedom to hire replacements. The problem is that by that time the MOA brand will be complete toast and financial solvency regardless the musician’s pay package will probably be impossible. They will have gone from having a world class orchestra with attendance problems to a mediocre orchestra with zero attendance. It will be more difficult to attract new donors or increased public subsidy and it will be difficult to convince lost donors to come back. This is a death spiral pretending to be a bail-out.

  11. Submitted by Larry Schluter on 12/12/2013 - 11:39 pm.

    What Do The Musician’s Want

    We haven’t heard from the musicians lately. What do they want to get this settled? It appears they are more interested in playing their outside concerts that trying to reach an agreement.

    • Submitted by Paul Udstrand on 12/13/2013 - 08:34 am.

      What?

      Larry, please…

      The musicians have met with management 10 times, they are well represented here on the comment boards, and they have a very extensive and informative website. This meme that MOA is trying to promote is simply disingenuous, if you’ve actually been following this at all you know better.

    • Submitted by Steve Titterud on 12/13/2013 - 10:27 am.

      In order to hear them, you have to listen .

      They are working in survival mode to save the Orchestra as an institution. It is an existential effort.

      Do you support their effort, Larry ? Or would you rather see the Orchestra re-formed as a group of younger, cheaper musicians, a la Henson, Davis, et. al., along with that marvelous lapdog, the MOA’s Board ?

      The MOA is seeking to destroy the Orchestra. What they say matters little alongside what they have done & continue to do.

    • Submitted by Karen Sandness on 12/14/2013 - 09:55 am.

      For one thing, they have been willing to take some salary cuts,

      but they are adamant about removing the changes to work rules, which, among other things, place artistic control in the hands of the Board and Management instead of in the hands of the Music Director and turn the Orchestra into a band-for-hire for the private events of the 1%.

      Note that the Board NEVER talks about the work rules in its public statements. It’s always all about the money, and the Board and its supporters like to make it seem that the dispute is entirely due to “greedy musicians” who “don’t understand market forces.”

      Yet note that the during the lockout, the musicians, the guest conductors, and the guest soloists have been willing to produce concerts of artistic merit while making less money.

      That should tell you something.

  12. Submitted by Hiram Foster on 12/15/2013 - 09:30 am.

    Work rules are kind of a complicated subject. But they are fertile field for negotiation. My guess is that management very much wants to increase productivity, and that this is an area where labor might find it possible to give ground.

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