Dr. David DiChiera

Still singing for its supper: MOT takes down its debt

By Michael H. Margolin

Posted: Sept. 5, 2012 at 7:59 a.m.

DETROIT - Last year, a large deficit led to a brutal strike of the musicians which nearly capsized the Detroit Symphony Orchestra; on Aug. 7, the Detroit Institute of Arts sought a millage to support operations in the face of lost support from the state. This spring, another of the major cultural institutions faced a similar crisis. Dr. David DiChiera, general director of the Michigan Opera Theatre, talked about his campaign to resolve his company's debt in order to restore relative budgetary sanity:

David, during the spring season, you went before the curtain at each performance asking audiences to donate to retire an $18 million debt. How was the response?

Of course our appeal was much broader than the curtain speech(es) – but it was that appeal that was the most encouraging and most touching. We raised more than $1 million from curtain speeches conducted throughout our spring season. And, while I had the feeling that those who were about to enjoy the very art form that we are trying to save would be inclined, what surprised me is that I recognized very few names. We received gifts in all denominations, totaling $1 million.

At the recent deadline, MOT had raised 7 of the $8 million you said MOT needed. How much came from other sources?

$1 million from audiences
$2 million from the Michigan Opera Theatre board of directors
$2 million from foundations
$1.4 million from trustees and donors
$600,000 from corporations.

All told, the above was given in 2,000 gifts.

As I understand it, the debt was incurred in building the parking garage. How did the garage fit into MOT's plans?

The debt was incurred as a combination of the completion of the opera house and the building of the parking center. That said, the parking center was absolutely crucial to the sustainment of the opera house, since the development around the opera house absorbed most of the parking. It is necessary not only to provide parking for our patrons, but it provides parking for our chorus, stagehands and employees.

How much income does the garage generate for MOT?

Approximately $1 million per year.

Actually, you were shooting for $11 million, which was short of the $18 million owed. Explain the math?

The Preserve the Legacy Campaign was the result of our negotiation with the consortium of banks (Comerica, J.P. Morgan Chase, Bank of America, PNC) who agreed to reduce the $18 million owed to $11 million – with the proviso that we pay within six months of the agreement. The funds raised through the campaign were combined with a small mortgage on the parking center, which will comfortably service that debt.

In addition, the parking center provides additional revenue to serve the operating needs of the opera company.

So you reached a deal with the banks to pay off the loans incurred on the parking garage. How did you convince them?

The board, under the leadership of Rick Williams (R. Jamison Williams) worked with the banks to reduce the obligation.

Primarily, the banks agreed to work with us because of our history of financial responsibility. Through budgetary expense reductions, staff cuts and myriad difficult decisions over the past six years, our priority was to pay our financial obligations – with that, we had never missed a payment/defaulted on any of our loans – that pristine history, coupled with the commitment of our board and leadership to raise a great deal of money in six months, was enough to encourage the banks to reduce our obligations.

If the campaign fell short, would it have affected the upcoming opera and dance season?

No. The opera and dance season is supported by a combination of ticket sales and contributions.

Are the Detroit Opera House and MOT separate financial entities?

No, Michigan Opera Theatre owns and operates the Detroit Opera House.

Is the Opera House solidly funded?

Solidly funded? We are dependent upon the community – ticket sales, contributions, concessions. The budget is a combination of ticket revenue, rentals, concessions, etc.

Currently you rent out the house to other groups, such as the Nederlander's Broadway in Detroit. How much of that rental income is in the Opera House budget?

All of it – it is a consolidated budget.

You said that if this debt is retired, subscribers and box office sales can support MOT. Currently you produce four operas each season, recently cut back from five because of economics in our area. Would MOT return to five operas each season?

Ultimately our goal is to return to five operas, but since (paying off) the debt over the past several years has absorbed many of our financial assets, we need to first build our working capital, which will allow us to have more flexibility in terms of our annual expenses.

We will continue to depend not only on ticket sales(subscribers and single tickets), but on contributed revenue, as well.

CLICK HERE for information regarding MOT's upcoming season! Single tickets now on sale to 'Drama & Dance in the D'