The
Virginia Symphony, a Norfolk treasure, a regional asset, has
defaulted on a loan.
The
Symphony owes $250,000 to the Norfolk Economic Development Authority,
a political sub-division of the state, which loaned the money to the
Symphony in 2014.
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| What would he say? |
The
loan agreement was signed April 29, 2014, by the Authority and the
Virginia Orchestra Group, trading as the Virginia Symphony.
The
agreement says the Symphony must pay the loan in two installments, at
5.5 percent interest, July 31, 2014, and July 31, 2015.
Since
the loan is in default, the Symphony must pay past 12 percent
interest on the $250,000, according to the agreement.
In
April, Authority chairman Jerry Robertson told his board members that
the Virginia Symphony Orchestra “is in default of its outstanding
loan with the economic development Authority and has not made any
attempts to repay the loan amount.”
The
present loan was to bolster the Symphony's cash flow and pay for some
of its liabilities, according to the agreement. The Authority loaned
the Symphony $500,000 a few years ago. The amount was repaid.
Robertson
proposed that a committee composed of board members and staff work
with the Symphony to repay the loan.
In
June, the Authority's legal representative, William Nusbaum, said the
economic development authority could bring legal judgment against the
Virginia Symphony Orchestra to try and collect on the judgment,
according to the Authority's June 3 meeting minutes.
Robertson
and board member Kim Brown suggested, instead, that the committee
formed in April renegotiate with the Symphony.
The
Virginia Orchestra Foundation is the financial conduit for the
Symphony. The non-profit listed assets of $4.96 million and no
liabilities on its tax return for 2013 at the beginning of the year
and $4.75 million in assets and no liabilities at the end of the
year. This is the latest year for which data are available.
Pledges
and grants dropped from $727,502 at the beginning of the year to
$330,960 at the end of the year, the most significant drop in
funding.
Investments
dropped slightly, from $3.86 million at the beginning of the year to
$3.8 million at the end of the year.
Notes
and loans rose from $175,000 at the beginning of the year to $408,342
at the end of the year, according to the tax filing.
Symphony
staff who negotiated and approved the loan are gone.
Eric
Borenstein, who petitioned the Authority for the loan, departed the
Symphony last December.
Borenstein relinquished his position as
President and CEO of the Symphony Oct., 2014, yet remained as a
consultant until December of the same year to advise on the selection
of his replacement.
Brad
Kirkpatrick, who signed the loan agreement, is now the interim executive
director of Habitat for Humanity of South Hampton Roads. Kirkpatrick,
the Symphony's chief operations officer, left the Symphony Nov.,
2014.
The
Symphony issued a press release Jan. 29, 2015, announcing the
appointment of Karen Philion as the Symphony's president and CEO.
Neither Borentsein, as Philion's predecessor, nor Kirkpatrick, as the
Symphony's former COO, were mentioned in the press release.
A
Symphony board member, who remains anonymous, has agreed to buy the
outstanding debt for $150,000, according to people familiar with the
situation.
This
sets a bad precedent. Other non-profits may see this as a chance to
dismiss their financial obligations, hoping a benefactor will rescue
them while they delay their debt.
The money the Authority loans is generated by fees on bonds it approves.
The Authority disburses the fees as loans or grants to other
non-profits and small businesses in the city.
The
Authority has approved bonds for Sentara Healthcare and Bons Secours
for new hospitals and medical centers.
The
Authority is hardly an altruistic organization. The decisions of
board members are based on the economic benefit to the city. They
weigh the pros and cons of each request.
Even if a fraction of the loan is repaid, there's still an unpaid balance of $100,000, which the Authority will write off.
Even if a fraction of the loan is repaid, there's still an unpaid balance of $100,000, which the Authority will write off.
Refusing to pay is irresponsible. The default is even more irresponsible. The
Symphony should honor its obligations.
What do you think?