Sunday, September 16, 2012

Sacramento Opera, Philharmonic near decision on merger - Sacramento Bee

Merger talks continue between the Sacramento Opera and the Sacramento Philharmonic, with a decision likely as early as November.

The two arts nonprofits, both of whom have seen their share of financial difficulties recently, have been meeting bimonthly with a consultant to discuss the merits of a merger, said Jane Hill, interim executive director of the Sacramento Philharmonic.

"We're in the thick of it," said Hill.

The talks have included looking at similar mergers that happened in Dayton, Ohio, and in Utah as possible models. A key issue is whether a merger in Sacramento would mean creation of a new organization or whether one entity would be subsumed into the other, Hill said.

"I would say the boards will make some sort of a final decision in November," Hill said. "Our thought is that we would want that to happen and be in that process so that in January of next year we could be openly planning a 2013-14 season as a dual entity."

The merger exploration has progressed to the stage that the Sacramento Philharmonic has slowed down its interview process for a new executive director to replace Hill.

The idea is to allow the option of recasting its search for someone qualified to lead both the orchestra and the opera company should a merger happen. The executive director search committee now includes two board members from the Sacramento Opera.

The Sacramento Opera did not respond to The Bee when contacted for this story.

At first glance, the merger seems a logical step for both organizations. They share the services of the same orchestral musicians, both have been led by Sacramento Philharmonic music director and conductor Michael Morgan, and both rent office space in the same midtown building.

And both have experienced financial pressures that brought them to the brink of closure.

The Sacramento Opera was forced to cancel most of its 2011-12 season and laid off most of its staff because of an $85,000 budgetary shortfall. The Sacramento Philharmonic threatened closure in May if it did not raise $150,000.

Both returned with the support of the community and a new roster of donors, although their returns also saw a reduced presenting role.

The two organizations are hoping that other mergers may set a possible road map and mark potential pitfalls in consolidation.

One merger being looked at occurred earlier this summer, when the Dayton Philharmonic, Dayton Opera and Dayton Ballet combined to become the Dayton Performing Arts Alliance.

Talks between the three organizations started in 2010 when the Dayton Philharmonic had a $250,000 deficit. In 2011, the three undertook an eight-month merger study that led to development of a business plan. That plan resulted in dissolution of the three boards and creation of a 39-member board for a single entity that operates on a budget of $7.6 million.

"I wish that Dayton was serving as a model because they've had a lot of financial support for their transition," Hill said. In Dayton, some loans to the organizations were forgiven, and a major donor kicked in $500,000 contingent on the merger taking place.

Hill is doubtful that a merger in Sacramento would spur the same level of donations, given the Sacramento region's less-than-stellar track record of philanthropy. Hill has consistently cited soft giving from the corporate community as a reason for the orchestra's recent troubles.

In Dayton, the alliance is structured so that each of the three entities has retained its identity and roster of donors.

It was not a totally smooth transition, since staff was cut at all three organizations â€" something Dayton Performing Arts Alliance CEO Peter Helfrich did not want to make permanent.

"We found you can cut your way to a balanced budget for a year or two, but you can't cut your way to success," he said.

"While economic challenges got our discussions in Dayton started, we quickly realized that what was really intriguing was the potential artistic opportunity the merger presented," said Helfrich.

"It was a chance to collaborate in new ways, planning our seasons side by side, that had not been possible before," he said. "We saw funding opportunities as well â€" from sources local, regional and national that would have not been interested in us in our old models."

In 2002, the Utah Symphony and the Utah Opera combined. The merger of the two Salt Lake City organizations proved controversial and was cited as contributing to annual deficits that were not reversed until the 2006-07 season.

Current executive director Melia Tourangeau, who came on board in 2008, said that such mergers should never be seen as "magic bullets" for financially struggling companies.

"The thing is, when you combine forces there are some initial savings â€" but it's kind of like a one-time savings," Tourangeau said. "To think merging two organizations is going to necessarily solve all of your financial problems? That's not a smart way to go into it."

In Utah, the benefits have come in the larger footprint that the combined organizations allows, which opens up more opportunity to secure funds.

"On the development side it's good in that you have a lot to offer as far as sponsorship opportunities and broader base of support is concerned," she said.

"On the marketing side one advantage is we have a bigger infrastructure from which to serve our patrons. We're able to offer them a lot more flexibility â€" because our patrons can move in and out, from opera to orchestra and orchestra to opera, and if you miss one you can trade into the other."

Even though the merged organization is 10 years old, it still faces big challenges in staying financially viable.

"The merger has provided us a bigger lifeboat in this economic recession. We've been able to rally the support of this community around helping us get through this difficult time," said Tourangeau. "But, did the merger create a financially sustainable organization? I would say â€" not necessarily."

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