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Center Theatre Group headed for fifth straight budget deficit

Center Theatre Group's Michael Ritchie and Edward Rada say they expect a $500,000 loss. As the nonprofit's nest egg shrinks, it needs a fundraising push.

June 12, 2013|By Mike Boehm, Los Angeles Times
  • “Spring Awakening” was a good draw at the Ahmanson Theatre in 2008 as the recession arrived.
“Spring Awakening” was a good draw at the Ahmanson Theatre… (Jay L. Clendenin, Los Angeles…)

By some measures, L.A.'s Center Theatre Group is the busiest nonprofit stage company in the nation — and it's the biggest by far outside Manhattan. But now this theatrical giant is in serious need of more than a little help from its friends.

The 2012-13 fiscal year that ends June 30 is expected to yield the fifth consecutive splash of red ink since mid-2008 for the company that runs the Ahmanson Theatre, Mark Taper Forum and Kirk Douglas Theatre.

Artistic director Michael Ritchie and managing director Edward Rada said in a recent interview that they expect a $500,000 loss — after four years in which deficits totaled $15 million, or $3.76 million a year.

Center Theatre Group: In the June 13 Calendar section, an article about Center Theatre Group's finances gave two different figures for the post-recession drop in average performances per season at the Mark Taper Forum. The correct figure is 21%, not 27%.

Ritchie and Rada said their strategy in recent years has been to tap a once-substantial nest egg to avoid deeply compromising the quality and quantity of what CTG's audiences see on stage. But Ritchie acknowledged the approach can't continue much longer, and a major fundraising push is needed to rebuild the company's reserves.

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Using its stages to mount about 15 to 17 plays per season, CTG has remained busy, selling more than 500,000 tickets a year since 2008-09, when the recession hit. Even so, the company has struggled.

Investment losses and spending to fill budget gaps had winnowed its reserves by a third since mid-2008, leaving little wiggle room. As of mid-2012, all but $4.2 million of CTG's remaining investments were in a $38.4-million endowment its board had resolved not to touch.

Despite those difficulties, "overall we're sound financially," Ritchie said. Thanks to the nest egg, "we were able to weather for a time the financial downturn" and its repercussions for ticket sales and donations. "We'll be able to come out of it and to grow."

He said the company will try to make its 50th anniversary in 2017 a fundraising landmark as well as a chronological one.

"I think the board, and the rest of our donor base, will see that as an important moment," said the artistic director, who has led the company since taking the reins from founding artistic director Gordon Davidson in the summer of 2005. "We'll be announcing the campaign at an appropriate time, and it will be successful."

A number of CTG's productions continue to do well at the box office, especially at the 2,064-seat Ahmanson, which mainly features touring Broadway shows. The chronic deficits don't appear to reflect an operation that's tanking, but one for which a series of moderate reversals have added up.

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In the four years starting in mid-2008, CTG's average annual performance revenues — box office plus "ancillary" earnings from its shows, such as concession-stand sales — were 6.8% below the four pre-recession years, adjusting for inflation. Meanwhile, average expenses rose 4.8%. Inflation-adjusted contributions were 1.1% smaller, on average, than in the three years preceding the recession.

The chronic financial problem child of the L.A. arts scene is the Museum of Contemporary Art, which damned the torpedoes during the go-go mid-2000s and allowed spending to run full speed ahead despite a skein of budget deficits. The California attorney general later found that MOCA "did not meet [the] standard" for preserving nonprofit endowments that's set out in state law.

CTG's financial reports tell a different story. Between mid-2008 and mid-2012, it cut annual spending from $56.8 million to $48.9 million, adjusted for inflation — a 14% drop that Rada said included layoffs and a two-year wage freeze.

CTG suffered its worst deficit, $5.5 million, during 2011-12. Ritchie said the board had anticipated a $2.5-million deficit at the start of that fiscal year, but it ballooned, largely because a planned revival of the musical "Funny Girl" at the Ahmanson collapsed when CTG's producing partners backed out.

Stephen Eich, a veteran theater manager who's now an independent consultant after years of overseeing business operations for the Pasadena Playhouse, Geffen Playhouse and Chicago's Steppenwolf Theatre, said that running nonprofit theaters has become a much more difficult game, financially, since the late-2000s downturn, which continues to hit middle-class and low-income ticket-buyers much harder than the well-to-do.

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For theater managers, he said, "it's an ongoing challenge to find a way to keep your head above water financially, and at the same time have some risk, so you don't lull people to sleep" with safe and predictable play selections.

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