San Francisco Chronicle
Sunday, August 12, 2001
Front Page One
Chosen few get bulk of S.F.'s arts funding
Institutions flush with cash garner most aid while those in need struggle
By Todd Wallack

Like most major arts institutions, the San Francisco Symphony has long cultivated support from wealthy philanthropists such as oil heir Gordon Getty and discount brokerage king Charles Schwab.

In fact, the orchestra has quietly become richer in recent years than many of its well-to-do patrons, amassing $154 million in U.S. stocks, $13 million in foreign stocks, $13 million in cash and other investments.

But even though the Symphony's surplus funds far exceeded watchdog group's standards for nonprofits, it receives more than $2 million in government aid a year, one of the richest arts subsidies in the Bay Area.

As many smaller Bay Area arts and cultural organizations struggle to survive, the Symphony's multimillion-dollar government subsidy raises questions about whether public funding is going to the groups that need it most.

"When I see these concentrations of wealth (at other groups), I can't help but be a little envious," said Rod Gilchrist, director of the Cartoon Art Museum, which is trying to reopen after being evicted from its South of Market digs. "It's been a struggle for us."

While the city has earmarked $38,000 for the cartoon museum - it needs $500,000 to reopen - San Francisco maintains Davies Hall where the Symphony performs and rents it to the orchestra at a loss.

City officials peg that subsidy at about $1 million per year, even though the Symphony's net assets would allow the orchestra to operate for more than a decade without any outside donations or government grants.

Critics such as Jeff Jones, a San Francisco arts grant writer, have complained for years that public agencies give the lion's share of grants to established institutions already brimming with private money, while smaller groups risk going under.

"Need is never a question," said Jones.

Both city and state officials confirmed that they have never considered the Symphony's need for the government subsidies.

"I don't know anything about the Symphony finances," said Beth Murray, managing director of the War Memorial Performing Arts Center in San Francisco, which rents Davies Hall to the Symphony.

The city's Grants for the Arts program uses a formula based on budget size to distribute its $11.6 million. The larger the budget, the larger the grant. Last year, for instance, the Symphony received $889,000, the second-largest grant.

Kary Schulman, who runs the grants program, notes the funding comes from the city's hotel tax, so she says it is only fair that organizations that spark tourism and boost the local economy receive the largest grants.

"The Symphony employs hundreds of people, serves hundreds of thousands of people and certainly advances the city's national and international reputation," Schulman said.

Schulman also argues that government agencies couldn't give more money to smaller groups because that would leave them overly dependent on a single source of revenue. Some tiny groups receive 20 percent of their budget from the city, while the Symphony receives just 2 percent (not including the Davies subsidy).

The state California Arts Council considers several factors when making awards, including artistic quality and potential impact on the community, but not financial need. It awarded $138,373 to the Symphony last year, the most given to any group.

But SoundSafe, which is trying to help replace rock musician's practice space that disappeared amid the dot-com boom, said it was initially turned down for government funds.

"It's a crime," said Mark Rennie, a director for SoundSafe. "We deserve our slice of the pie."

San Francisco Supervisor, Gavin Newsom, who is sympathetic to SoundSafe's plight, helped secure $25,000 for the group in this year's city budget, a Newsom aide said. But that's still far short of the $4 million or more Rennie says is needed to buy a warehouse in San Francisco and convert it to practice space.

It is a far different story at the Symphony.

According to the Symphony's 2000 tax records, the orchestra has $220 million in net assets, and it took in $48 million more than it spent over the past three years. Even without the government subsidies, it still would have been left with more than $41 million in surplus funds.

But Symphony director Brent Assink insists that the orchestra couldn't survive without the government help. "It is out of the question," Assink said.

Assink said the extra money was earmarked for an endowment fund and couldn't be used for salaries or other normal expenses. "We are prohibited by law from spending it," Assink insisted.

Assink says the Symphony actually ran a deficit for most of the past decade and expects to have only a $15,000 surplus this year.

But, according to the Symphony's latest audit, $165 million is "unrestricted" by donors, meaning the board is free to use the money as it wishes.

Joe Bunker, a San Francisco certified public accountant who concentrates on nonprofits, said nonprofits sometimes park unrestricted contributions in a "board-designated endowment" when they run a surplus, but the board is free to pull the money out of the fund later so it can be spent. It is different from a traditional endowment, where the money is legally walled off.

The Symphony audit does not specify the amount of the assets actually walled off in an endowment.

Assink later conceded, "The bulk of out unrestricted net assets technically and legally can be spent."

But Assink said it's important to keep the fund intact and growing, so it can generate investment income into the future. Assink said the revenue is key to keeping ticket prices from rising.

Several nonprofit watchdog groups said they discourage donors from giving to organizations with such large unrestricted reserves, because other nonprofits usually have more pressing needs.

The Charities Review Council and the National Charities Information Bureau (which recently merged with the philanthropic arm of the Better Business Bureau) both recommend that available assets should not amount to more than double an organization's annual budget. The Symphony's unrestricted assets amounted to nearly four times its budget as of Aug. 31.

"It would be a shame if a museum had to close its doors because another group would rather sit on its money," said Daniel Borochoff, president of the American Institute of Philanthropy.

Not all watchdog groups agree. A Baltimore advisory group called National Arts Stabilization contends that most arts groups don't have nearly enough savings and recommends those organizations set aside two to five times their annual budget in an endowment.

Symphony officials also point out that other top orchestras boast similarly impressive reserves.

To keep pace, Assink vowed to "single-mindedly and aggressively" work to increase the size of the orchestra's assets, waving off the watchdogs; objections.

"People support the San Francisco Symphony … because they believe that our music transforms their lives," Assink said in a letter to the Chronicle. "Not because of financial ratios or statistics."

Symphony documents also suggest that at least one insider could benefit from the orchestra's investments. A footnote in the Symphony's latest audit said the board pledged to invest $2 million in a venture capital fund whose general partner is directly related to a board member, an apparent conflict of interest.

Assink said the orchestra's investment committee approved the transaction, but he declined to identify the board member, the venture capital fund of the members of the investment committee.

"I don't know why they wouldn't give you that information," said Robin Reynolds, a spokesman for Deloitte & Touche, the Symphony's auditor.

Reynolds said the auditor flagged the conflict, as required by accounting rules, but did not investigate it propriety. "Our job is to note it," Reynolds said.

The audit also indicates that the Symphony spent $642,148 on investment advisory fees last year, but Assink would not identify the recipients. He also wouldn't say what companies the Symphony invested in.

Watchdog groups said both the conflict of interest and the secrecy surrounding its investments raise red flags.

"Most charities are very open, not only about how they spend money but how they invest it," said Bennett Weiner of the BBB's Wise Giving Alliance. "The question is why are they reluctant to disclose the information."

The Symphony wouldn't explain. "We just don't," said spokeswoman Karen Ames.

Elite arts' salaries

Here's how the leaders of some of San Francisco's elite arts organizations are compensated:

* San Francisco Opera's outgoing general director, Lotfi Mansouri, last year received $390,703 in salary, a $55,000 bonus, a generous travel allowance that included at least two European trips, a leased BMW and a retirement package that will pay him $100,000 a year.

* San Francisco Museum of Modern Art's executive director, David Ross, earned $393,900 last year. The museum also loaned him $763,000 at zero interest to buy a home.

* San Francisco Ballet's artistic director, Helgi Tomasson, earned $298,300 in 1999, at least $100,000 more than his counterparts at other major ballet companies in Seattle, Boston, New York (the American Ballet Theatre) that year.

* San Francisco Symphony's longtime executive director, Peter Pastreich, received $298,736, plus $102,257 in benefits, in 1999, even though he retired 7 and one half months into the fiscal year. A spokeswoman said he helped out as an on-call consultant later in the year.

* San Francisco Symphony's Grammy-winning music director, Michael Tilson Thomas, received about $1.3 million for 19 weeks of work in 1999, or close to $17,000 per concert.

In case you were wondering, the typical Major League Baseball player earned $750,000 that same year, or roughly $4,300 per game for a full 162-game season.