The Philadelphia Inquirer covers the current financial woes of the Kimmel Center for the Performing Arts (login required, try BugMeNot to get one). The multi-venue cultural complex in Philadelphia opened in December 2001 to much fanfare (and much financial squabbling).
On top of lower ticket sales, sluggish fundraising, and under-budget operating fees (such as the per-ticket surcharge), the Kimmel is also saddled with another financial burden that’s less common among cultural facilities — a big chunk of debt. Says the article:
Part of the financial drain is long-term debt. The Kimmel took out a $30 million loan to help bridge the gap between the time pledges to its construction campaign were made and the time they were fulfilled. But only $3 million of the loan has been repaid, and each year the debt costs the Kimmel about $2 million in principal and interest payments….
In response, the center is cutting 11 percent of its staff, the president is taking a 10 percent salary cut, the gift shop is closing, public access to the facility has been limited, and plans for summer performances have been cancelled.
Long-term debt is a tricky business, especially for a business that doesn’t cover its costs through revenue. But, given the scope and scale of the new breed of cultural facilities, such debt can be the only bridge to get these critters built (are you paying attention Dallas?).
The significant individual donations required are lured through multiyear pledges (glory and honor now, pay later), even though invoices on the brick, mortar, granite, steel, and glass (and the assembly thereof) are due immediately. And the capital fundraising hurdle is so daunting, new facilities sometimes choose to forgo an additional operating endowment, despite the massive operating costs that await them when the ribbon is cut.
Of course, the challenge comes in cutting back expenses, building revenue, shouldering the principal and interest payments, and still fulfilling a mission that’s compelling to the various funding streams that support you (individuals, foundations, governments, etc.).
Here’s hoping the Kimmel (and other newer facilities in similar straits) can find that balance.
