Oct. 3 (Bloomberg) -- New York City Opera, created 70 years ago as the “people’s opera” because of its affordable tickets, filed for bankruptcy after years of declining income and a failed fundraising effort.
The nonprofit organization, which this year produced “Anna Nicole,” about the late tabloid celebrity, listed as much as $10 million in assets and debt in a Chapter 11 petition filed today in U.S. Bankruptcy Court in Manhattan.
The filing became necessary after the opera company fell short of an emergency fundraising goal of $7 million. The bankruptcy will protect the opera from creditors and provide a forum for negotiating debts and possibly selling assets.
The opera listed New York City Ballet as one of its biggest unsecured creditors, with a claim of $1.6 million, according to the petition.
The opera’s lawyer, Kenneth Rosen of Lowenstein Sandler LLP, said on Sept. 30 that the opera would be liquidated or possibly sold in court to another cultural or educational institution.
In an e-mail statement on Oct. 1, George Steel, the artistic director and general manager since 2009, said the company canceled its 2013-12014 season. “Anna Nicole” finished its run on Sept. 28. New York City Opera co-produced “Anna Nicole” with the Brooklyn Academy of Music.
“New York City Opera did not achieve the goal of its emergency appeal,” he wrote.
New York City Opera’s projected deficit for fiscal year 2012 was $44.1 million, although it had a balanced operating budget in recent years, according to the filing. The opera’s long-term structural deficit problems started in 2003, and it blamed its financial condition on a “troubled economy, decreased donations, and increasing pension obligations,” according to the filing.
Closing down would mark the end of a company established as the “people’s opera” by Mayor Fiorello LaGuardia that became a training ground for young talent that included Beverly Sills and Placido Domingo. It would also leave New York with one remaining major company, the 128-year-old Metropolitan Opera.
Cultural institutions and their donors suffered in the financial crisis that started in 2007, and as the economy recovered their donations went elsewhere, said Ted Gavin, a partner at the turnaround and restructuring company Gavin/Solmonese LLC in Wilmington, Delaware.
“The patrons of the arts in New York City voted with their dollars and gave their money to other organizations,” Gavin said in a phone interview before the bankruptcy was filed. “Do we have too many operas? Probably.”
Christopher Koelsch, the chief executive officer of LA Opera in Los Angeles, said New York City Opera’s closing doesn’t mean the biggest U.S. city can’t support two operas. Such institutions must be flexible, vigilant and “constantly making their case to their constituencies,” he said.
“I would argue in a city of New York’s size, cultural sophistication and resources that it would be possible to have two entirely vibrant and distinct opera companies,” Koelsch said in a phone interview before the filing. The bankruptcy is a good time to “pause and reflect on just how fragile some of these institutions are.”
The company last week posted an “urgent” notice on its website seeking donations to help raise $20 million, including $7 million it said it needed by Sept. 30 for the current season.
The remaining productions for this season were Johann Christian Bach’s “Endimione,” Bela Bartok’s “Bluebeard’s Castle” and Wolfgang Amadeus Mozart’s “The Marriage of Figaro,” according to the website.
The company sat out the 2008-09 season, while the New York State Theater (renamed for donor David Koch) was renovated. In late 2008 and early 2009, the board of directors used $24 million from its endowment to meet payroll and other obligations and hasn’t been able to repay it, according to the filing.
City Opera’s endowment totaled $5.02 million for fiscal year 2012, down from $9 million a year earlier and $55 million several years ago, according to the filing. The endowment lost $14 million during the stock market decline, the company said in the filing.
According to an accounting of New York City Opera’s financial collapse filed in the bankruptcy court, the opera company made a poor decision in the mid-2000s when it chose to increase the number of performances of standard repertoire “warhorses” to reduce costs and increase audiences.
“In fact the reverse happened: the annual structural deficit grew,” Rosen, the company’s lawyer, said in the filing. With that strategy, the opera found it “needed to attract new ticket buyers -- buyers who cost more in marketing dollars to attract and yet were unlikely to become repeat ticket buyers or donors.”
The opera also blamed an “increasingly crowded entertainment market,” including competition with the Metropolitan Opera, according to the filing. Other factors included the reduction in arts education, a nationwide decrease in arts journalism and opera presented for free on public television and radio.
In 2011-12, the last year for which results are available, ticket sales were $1.1 million, down 87 percent from 2005-06.
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