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THE SCOOP | TSO's Annual Report Shows They're More Fragile Than We Think

By Michael Vincent on December 5, 2017

“The TSO needs rigorous, meticulous renewal, not earth-shattering revolution,” says Gary Hanson in TSO’s 2016/17 annual report.

(Photo: Malcolm Cook/TSO)
Peter Oundjian (2016) (Photo: Malcolm Cook/TSO)

The Toronto Symphony isn’t looking for an “earth-shattering revolution.” That was the message from Gary Hanson, Interim Chief Executive Officer of the Toronto Symphony Orchestra yesterday at their Annual General Meeting.

As evidenced in TSO’s annual 2016/17 report, they are instead, content with simply balancing their books and keeping their head above water.

The TSO’s annual 2016/17 report shows a telling age of anxiety for Toronto’s premiere orchestra. After an analysis of a drastically different annual report format, which reads like a cross between an article and a concert program, we’ve decoded the accountant jargon to what we believe is an accurate picture of the TSO at their fiscal year-end on June 30, 2017.

Money From Heaven

To get up to speed, it’s important to recall that last year that the TSO averted an operating deficit of between $4–$6M at the last minute, somehow ultimately coming out with a surplus of $831,540.

The miraculous turn around took us a while to figure out.

The secret turned out to be a new variation on an old trick — the creative use of their foundation to cover cost overruns, all the while making it look like they didn’t use their foundation at all. Last year, the TSO’s Foundation ultimately stepped in with a $4.9M injection that bailed them out of a catastrophic year of losses. They also used a historical musical instrument collection to make a $5M reduction in accumulated debt. It was a practical, yet short-term solution.

With that trick already used, this year, the orchestra pulled a different rabbit out of their hat — a $7.5M Canada 150 grant from Canada Heritage (an estimated $3.6M of which was applied to the 2016-17 fiscal year) to assist in bridging the gap with the Foundation injections. The gap would have been an estimated $5.8M. This effectively allowed them a year’s repose from having to cannibalize the foundation again, and also reduce the required yearly contributions from the foundation.

Why the shortfalls?

The simple explanation is a combination of lower margins from ticket sales, extra touring costs, and the recognition that they can’t keep dipping into foundation every year.

Revenue from ticket sales was down, while production costs continued to rise. Subscription and tickets were down slightly by 1.6% from $8.6M in 2016 to 8.5M in 2017.

Production costs increased by 6.4 % from $18.3 M to $19.6 M. The steep cost of touring to Israel set the TSO back over $1.9 M this year, which we can only speculate must have been a point of contention in the board, which last year saw half of its members abruptly resign.

Other cuts

To make ends meet this year, the TSO cut administration expenses by nearly 20% ($3.6M in 2017 from $4.4M in 2016). Marketing expenses were also slashed by a whopping 27.5% ($3.3M in 2017 from $4.6M in 2016).

These cuts show a trend and new direction which Hanson describes in detail. “The plan involves restoring net operating revenues, slowing the growth of fixed expenses, and increasing annual renewable fundraising — and doing so simultaneously”.

This new four-year plan is, in effect, a formal declaration to solve the TSO’s ongoing revenue problem, which they are now looking square in the face.

Anticipating this year’s shortfall, the TSO will be launching a new “Transition Fund”: a massive campaign which is asking the public to donate an additional $12M over 4 years to get themselves out of the hole they found themselves in — mostly through overspending and debt accumulation. In exchange, the interim CEO is promising a sustainable operation over this period.

Going back to the quote above, it sounds less like a “rigorous meticulous renewal”, and more like a desperate earth shattering bailout via crowdfunding.

An extra point worth mentioning is that the TSO’s annual report did not show any cash at year-end, year-over-year. Are they really zeroing-it out in reducing bank indebtedness? Or is this a factor related to how the TSO choose to structure their bank accounts, which doesn’t show up in their reporting?

Pain points and the path forward

While this year marks the third year of being in the black, the TSO is clearly very worried. Like all annual reports, they show an organization’s pain-points, which for the TSO, seems to be a struggle for long-term sustainability in a market that sees audiences wanting higher quality concerts, top-shelf soloists, and bigger, flashier productions, all the while keeping tickets prices in line with competitive live entertainment.

In a city the size of Toronto, the TSO are at an advantage here — yet what is troubling is that they are still struggling to find a sustainable path forward. One thing is for sure, we’re rooting for them.

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Michael Vincent
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Michael Vincent

Michael Vincent is Publisher of Ludwig Van. He publishes regularly and writes occasionally. He has worked as a senior editor over fifteen years and is a former freelance classical music critic for the Toronto Star. Michael holds a Doctorate in Music from the University of Toronto.
Michael Vincent
Follow me
Michael Vincent
Follow me

Michael Vincent

Michael Vincent is Publisher of Ludwig Van. He publishes regularly and writes occasionally. He has worked as a senior editor over fifteen years and is a former freelance classical music critic for the Toronto Star. Michael holds a Doctorate in Music from the University of Toronto.
Michael Vincent
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