Minnesota Orchestra board posts $1.1 million deficit

More than a year into a bitter musicians' lockout, the Minnesota Orchestral Association Wednesday announced a deficit of $1.1 million.

That's lower than many people expected in a fiscal year where the Minnesota Orchestra presented no official concerts.

Still, it shows the organization's business model is broken, board chair Jon Campbell said in a statement. The orchestra, he noted, lost $6 million last fiscal year when the orchestra was performing.

Orchestra management argues it needs significant cuts in musicians' salaries to keep the orchestra sustainable.

Minnesota Orchestra President and CEO Michael Henson said he remains hopeful they can reach a deal with the musicians, who have been locked out for 14 months during a bitter contract dispute. "We are obviously looking for a concessionary contract," Henson said. "We have always been ready to negotiate and compromise and I think our results show that we all need each other."

Musicians negotiating committee member Tim Zavadil is suspicious of management's argument. In the past, Zavadil said, the orchestra's board has strategically revealed financial results to help board arguments at specific times.

"We cannot forget the meeting minutes that revealed what their strategy would be four or five years ago," he said. "They would decide to show balanced budgets for two years and then decide to show deficits for two years. There is still the element of trust that needs to be addressed here."

Zavadil said he's still getting up to speed on the details of the report, but keeps coming back to the same question.

"How did the leadership manage to spend $13 million while producing no concerts?" he asked. "And still run a deficit of over one million dollars?"

The financial report includes money spent on administrative costs, salaries for staff members who remained on the job, and unemployment benefits for those who are locked out.

Critics of management, including the musicians, blame management for the Minnesota Orchestra's financial problems. Indeed, a group of 10 state lawmakers called for Henson's resignation on Tuesday, along with that of Jon Campbell, and past Board Chair Richard Davis, who is leading the management negotiating committee.

The lawmakers did not get their wish. Instead, Henson said he would stay and Davis and Campbell would remain in their roles until the orchestra has resolved its negotiations.

Henson said the board decided there were advantages to maintaining a continuity of leadership through the contract talks. He declined to react to specific allegations made by the lawmakers.

"I think that it is important that we actually get beyond any letters," he said, "And that we all sit down and constructively work together to find a solution."

The orchestra association received $5.7 million dollars in donations in fiscal 2013, down from $8.2 million the year before, according to the financial report released Wednesday at the orchestra's annual meeting. However the MOA's endowment grew by almost $10 million due to strong investment returns and new donations.

Management attributed much of the $1.1 million shortfall to the fact it moved the Symphony Ball, the organizations single largest fundraiser into the 2013-2014 fiscal year. The event raised about $700,000.

The orchestra also returned a state Legacy Fund grant of close to $1 million as the performances it was meant to fund did not occur.