Statement

We are disappointed that the Orchestra has chosen to take this action. The only substantive issue under dispute is whether the contract runs through July 2026 or July 2027. The Opera has offered a good contract with wage increases through July 2026, but cannot extend commitments beyond that until solutions are found for our otherwise unsustainable economic model”. San Francisco Opera is at a point of complex inflection: a tale of two realities. On the one hand, audiences and donors are responding with great energy to the company’s clear and strong artistic vision. Ticket sales are increasing and we are selling out performances. Donations are increasing at levels both large and small, and very exciting numbers of new ticket buyers, subscribers and donors are supporting the company. But strong and growing ticket sales and donation levels are simply not enough to get us close to breakeven. As with many arts organizations, the fundamental economic framework of San Francisco Opera is at a breaking point and must be rethought. 

The economic challenge is simply due to the cumulative impact of decades of regular expense growth outpacing revenue growth, straining economic viability to the point where ticket sales only account for 14% of our revenue. Each year we must raise $2-3M more than the year before, just to cover yearly expense increases. This is not a ticket demand issue, not a pandemic issue, and not a donation issue.  Our annual donations exceed those of all but a few of the biggest arts institutions in the U.S. It is a fundamental expense issue. Over decades, this economic strain has led to an inexorable reduction in the number of operas we can afford to stage. We’ve also taken many other steps over the years to reduce expenses, while never sacrificing our commitment to artistic excellence.  This season we reduced from eight to six operas, but we are still out of balance with expenses exceeding revenue by $15M on a budget of $87M. 

In the short-term, we are closing this gap by drawing money from our endowment at the limits of what is permitted, but this is completely unsustainable going forward. We are taking out $15M more this year than is sustainable from two sources: i) $5M from an additional 2% draw (the maximum permitted) and ii) an additional $10M from a limited pool of funds without donor restrictions, also within the endowment. The endowment is a critical source of revenue for the Opera: the amount we take out each year – the “draw” – is now even larger than our ticket revenue.  It’s the ‘third leg’ of our revenue, along with ticket sales and donations.  The more we spend from the endowment each year, the smaller the balance from which we can take that annual ‘draw’ in future years, resulting in less revenue and the need for even greater cuts. Our endowment is like a retirement account for someone who is going to live forever: we must maintain it if we are to survive.  Taking 7% annually from a fund doesn’t work well for anyone for very long, whether it’s a retiree or an opera company.

San Francisco Opera is a company of extraordinary talents – people coming together from a wide range of artistic and technical disciplines to create transcendent artistry. Sustaining a world-class creative community is a major commitment of the organization, and we deeply value the 1,000 deeply talented professionals who come together to create each season of opera. We are working to find solutions that will allow the company to resolve a $15M annual gap between expenses and revenue, while at the same time keep the quality and quantity of opera high. We share the desire to have a stable financial future, but we must make major changes to our model if we are to attain that stability. Until those changes are resolved across the company, it is impossible for the Opera to enter into a longer-term agreement that includes major compensation guarantees. 

We have offered the Orchestra a two-year contract through July 2026. The contract proposal provides wage increases in each year, and significant enhancements to retirement packages. It does not take away anything from the Orchestra. In addition, the Orchestra and administration have collaborated to realize a major change to the Orchestra’s healthcare plans, which has resulted in major cost savings without a reduction of benefits. Those changes have already gone into effect, and we are deeply grateful to the Orchestra for their partnership in realizing these groundbreaking healthcare changes. 

At a time when the Opera, as with many arts organizations, is having to rethink its entire economic model, we are grateful we can offer a positive contract to the Orchestra with wage increases, albeit one we are funding by using unsustainable methods. The only substantive issue under dispute is whether the contract runs through July 2026 or July 2027. We simply cannot enter into a contract through 2027 while we work to craft a new economic chapter for the Company, and we appreciate the understanding of all of our employees, artists and patrons as we chart this new course. We cannot encumber the organization with multi-year commitments that we may not be able to fulfill. But, working together with the Orchestra, we are confident we can find a model that will allow for a longer-term contract in subsequent negotiations.