Artistic company spending down its endowment to stay afloat, which has auditors concerned

PMG FILE PHOTO - The outster of General Manager Christopher Mattaliano is one of several problems facing Portland Opera.

The abrupt departure of longtime Portland Opera director Christopher Mattaliano last month followed financial struggles that have raised eyebrows at the Oregon Department of Justice and sparked the nonprofit's board to launch an aggressive remake of the Opera's operations and image.

As a result of the Opera's new focus, Portlanders can expect more productions like they saw this year — like "As One," the coming-of-age tale of a transgender youth, as well as "In the Penal Colony," a story about capital punishment that opened last week.

The push to become more relevant is part of a larger effort to make Portland Opera a more prominent voice in Portland's art world and, along the way, boost the company's flagging financial fortunes.

Records show the board of the nonprofit, which was founded in 1964, last year tapped its endowment at a level that state law considers fiscally questionable — for $1 million in operating funds in late October, intended to get the nonprofit through early March of this year.

Board leaders defend their financial oversight as appropriate and the endowment spending as necessary, but say a new strategic plan hammered out with an outside consultant will bring a new "austerity" to Portland Opera — as well as a new, more relevant sensibility that appeals to more Portlanders.

"It's a work in progress. We need to balance the budget," said board member Gregory Hinckley. "We will."

Mattaliano, who oversaw Portland Opera for 16 years, announced his departure jointly with the organization, saying he'd chosen to move into an artistic advisory role partly as a result of the strategic plan.

He did not respond to a Portland Tribune request for an interview about Portland Opera's future and his tenure. But some opera fans say the changes are both welcome and long overdue.

"This change has been coming for a long time," said Rodney Mazour, past president of the Portland Opera Guild, a separate organization that played a key role in founding the company more than 50 years ago. He says the Portland Opera has for too long focused on an old-fashioned model of exclusivity rather than inclusivity.

"I would say that this is a clear watershed moment," he said.

The opera board will vote on the strategic plan, forged with the help of the local consulting firm The Metropolitan Group, on Wednesday, Aug. 7.

PMG FILE PHOTO - Offering classics and fan favorites like 'La Boheme' can keep the seats filled, but Portland Opera still is operating on deficit spending.

High and low notes

For Portland Opera, it will be the second attempt to reset in five years. The previous one was the 2014 shift to a summer schedule called the Summer Festival.

Portland wasn't the first city to pursue the idea, some insiders say. But regardless, it was a failure, and the number of subscribers plummeted.

"We were beginning a transition to a new operating model that would allow us to reduce operating costs while continuing to produce world-class opera," wrote the Opera board's then-president, Kay Abramowitz, in a September 2016 letter to the Oregon Department of Justice charitable activities unit, addressing questions about Portland Opera's financial health. "The change to the new model and the lower-than- anticipated contributions have made it even more difficult to balance our budget."

Peter Bilotta, former director of development for Portland Opera, points out that Portland is not alone.

"Just about every major regional opera company in North America has been facing the same challenges that Portland Opera has, for really the last 15 to 20 years. You know, everything from changing audience demographics to just ... the very expensive model of producing," he said, adding that in smaller cities the challenges are greater. "One of the biggest challenges is that major regional centers like ours, companies are expected to produce at a very, very high level of quality, but don't have the support of the community and the level of ticket prices needed to actually pay for that quality of opera."

Whatever the reason, Portland Opera has tapped its endowment — part of which was generated by a joint fundraising effort with the Oregon Symphony and Portland Art Museum more than a decade ago — to help make up the balance. The endowment typically runs around $8 million — about the same as Portland Opera's yearly expenses.

The board withdrew $1.12 million from its endowment between 2014 and 2016, and last October authorized tapping it for $1 million more— well above the 4% cap that some nonprofit experts recommend and also above the 7% level that Oregon state law considers "rebuttably imprudent."

Essentially, "rebuttably imprudent" is a statutory yellow light for nonprofit boards.

PMG FILE PHOTO - Generally speaking, staging a major piece like Verdi's 'Rigoletto' costs an opera company $1 million.

The board reported its endowment spending to Oregon DOJ, inviting comment. On Oct. 26, 2018, state lawyer Susan Bower responded with concern.

"As your letter notes, the organization has made extraordinary distributions from its endowment for the past few years. I certainly understand the difficulties the organization faces, but of course, have some concerns about whether this trend will simply continue."

Board members say they are confident in the future.

Board president Curtis Thompson framed an aggressive vision for Portland Opera to follow the Oregon Symphony's lead in becoming a more visible and relevant member of the Portland art scene.

And Gregory Hinckley, who also is a board member, said Portland Opera has enough assets thanks to its real estate holdings to make the transition.

"It has a financial runway to work on its audience problem," he said.

One consequence of Portland Opera's new plan?

Mattaliano's successor may be only an artistic director, not an executive director, and may not be permanent, Thompson said.

The Tribune asked Thompson if it is fair to infer that Mattaliano's departure was related to his $253,000 yearly salary and the new austerity?

"I think it's more fair to say that the elements of the strategic plan that are being implemented, those are really what's driving all the change, and Chris resigning and going into artistic direction. That's the main driver of this change," he said.

"I'm really happy we did it," Thompson added. "And I'm not into going back into time and looking at what mistakes were made — though you can learn from these mistakes."

Upcoming season

The Portland Opera's 2019-20 season begins Oct. 25 with "Madama Butterfly" and continues with "An American Quartet," "Bajazet," "Big Night Concert," "Pagliacci," and "Three Decembers," ending in July 2020.

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