“Utah Symphony and Utah Opera: a Merger Proposal”

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“Utah Symphony and Utah Opera: a Merger Proposal”
Financial Strengths and Weaknesses of the Utah Symphony Before the Merger The financial state of the Utah Symphony before the merger was grim. It was understood by the symphony’s chairman of the board, Scott Parker, that the situation was getting worse. This was aggravated by the downturn of the economy and the event of 9/11. However, even before the economic downturn and 9/11, the symphony was very close to a deficit situation (Delong & Ager, 2005). Scott Parker assumed the chairmanship to try to mitigate the situation. The average endowment or contributions for a Group II orchestra like the Utah Symphony is $8.8 million in FY 2001-2002. The endowment for the symphony is considered in the top end within its group. To be able to accumulate more than the average Group II orchestra is a financial strength. In January 2002, the total endowment for the Utah Symphony was $10 million. At the same time that the symphony is above the average orchestra within its group, it is also spending substantially. Artistic costs constitute the major expense category of expense for the orchestra (see Table 1). The symphony does not own its facilities. The building that houses the offices and the Abravanel Hall where the symphony performs are owned by the county. Most of the symphony’s cash (+90%) is allocated to orchestra and development (fund-raising) staff salaries, benefits, and payroll taxes. The orchestra musicians are unionized with annual salaries of $50,000 to $85,000. This is considered “too high given the size and status of the symphony” (Delong & Ager, 2005). Having a higher salary is advantageous in attracting quality musicians but this also becomes a financial weakness. Since the orchestra musicians are covered by a collective bargaining agreement, wages cannot be adjusted. Their salaries are set in collective bargaining agreements signed by both labor and management representatives. Per collective agreement the symphony is to receive wage increase of 12.9% in 2002 and 6.8% in 2004. From a quick observation, the orchestra musicians’ salary seems to be increasing more rapidly than those of a for-profit organization. The economic difficulties being faced by the symphony orchestra is not reflected in the collectively bargained wage increases. The existence of collective bargaining in a not-for-profit organization causes a financial weakness for an organization like the Utah Symphony. The cash balance for FY 2000-2001 was $116,308 and the expected balance at the end of FY 2001-2002 is $2,042 (see Table 1). This is a financial weakness. Even with its above average endowment amount, Scott Parker acknowledged that the symphony has been unsuccessful with its capital campaign (Delong & Ager, 2005). The symphony relies on the annual ZAP (zoo, arts, and parks) contributions which is not guaranteed to carry on. Table 1: Utah Symphony Operating Statement

| Historical FY 2000-2001 | Projected FY 2001-2002 |
Revenues and Contributions | | |
Performance Revenues | 3,836,513 | 4,516,308 |
Government Grants | 3,124,999 | 2,904,312 |
Contributions | 4,460,268 | 5,080,040 |
Investment Income | 817,505 | 910,013 |
Guild Income | 155,434 | 110,001 |
Other | 3,829 | 243,000 |
Total | 12,398,548 | 13,763,674 |
Expenses | | |
Program | 10,447,382 | 3,337,968 |
Management & General | 670,832 | 612,705 |
Fund-raising | 1,164,026 | 217,702 |
Other | N/A | 474,672 |
Total | 12,282,240 | 13,761,631 |
Surplus/Deficit | 116,308 | 2,042 |
Performance revenues earned by individual symphony orchestras ranged from 23 to 77 percent of their performance expenditures in 2000 (Flanagan 2008). In a nutshell, the symphony orchestra must make up for the negative profits. It must attract significant non-performance revenues in order to survive. Symphony orchestras receive grant support from various levels of government. However, government grants have been declining. Government...
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