BRADENTON, Fla. - The Atlanta Symphony Orchestra's recent labor agreement is credit positive because it enables the Woodruff Arts Center to reduce operating deficits, according to Moody's Investors Service.
The symphony division is a driving factor in the center's weak overall financial performance, analyst Dennis Gephardt said in a Nov. 14 comment.
A new four-year collective bargaining agreement was reached Nov. 6. The Grammy-winning ASO had been locked out since Sept. 7, postponing nearly two dozen concerts and delaying the 70th anniversary season opener until Nov. 13.
"Like many performing arts organizations, the ASO's earned and contributed revenue has not kept pace with expense growth," said Gephardt. "The new contract provides near-term relief that will lower ASO expenses."
The symphony is the largest operating division of the nonprofit Woodruff center, which also includes an art museum, theater, and youth education divisions. ASO contributed $40 million, or approximately 40% of the center's revenue, in fiscal 2014, while the symphony ran a $2.5 million deficit.
Moody's assigns an A2 rating with a negative outlook to the Woodruff center's $188 million of outstanding bonds.
The new contract maintains the number of symphony musicians at its current complement of 77 in 2015, and includes a commitment by management to use its best efforts to increase the number to 81 in 2016. The agreement also calls for gradually increasing the number of musicians to 88 players by the end of the fourth year.
Under the deal, total base compensation for musicians will increase in the 2% range annually after the first year, though the result will be lower than the peak of $7.8 million in 2011. The projected deep decline in base compensation to $4.7 million in 2015 reflects a reduced number of workweeks because the musicians were not paid for a period after the prior agreement expired, Moody's said.
Under the new contract, in addition to base compensation relief, the ASO will benefit from a reduction in employee benefits such as defined benefit pension contributions that are calculated based on salaries, said the rater.
The new contract should also reduce the symphony's health care premiums by requiring musicians to participate in a high-deductible health plan.
"We expect the center's operating performance to improve, however, the improvement will likely be gradual and a move to strong operating performance is not expected in the next three years," said Gephardt. "Taken together, the various elements of the new ASO contract support, but do not guaranty, a return to operating stability."
"The financial plan requires a sharp increase in fundraising, but the endowment spending from the funds raised will only yield gradual increases in revenue," he added.
