Baltimore’s Lyric arts center still faces a difficult road

Federal funds will help, but the venue was struggling even before the pandemic

The Lyric Performing Arts Center just got thrown a $3.4 million life preserver, a stroke of good fortune ensuring the financially battered institution will survive, at least for the near future.

But all a life preserver does is help wearers stay afloat. It doesn’t prove the rescue boat is on its way.

So, the $3.4 million promised by the federal government in mid-July — funds amounting to roughly half of the Lyric’s operating budget — is cause for celebration. The Shuttered Venue Operators grant from the U.S. Small Business Administration means the concert hall can pay its bills as it begins its fiscal year and prepares to once again welcome live audiences. But the one-time grant isn’t a permanent solution to the serious financial woes that existed long before the beleaguered 127-year-old institution was upended by the COVID-19 pandemic.

Lyric officials, however, are certain they have a plan to restore the organization to solvency for virtually the first time in the 21st century, a plan to bring high-profile performers to the stage and increase revenues while cutting costs. When officials in late 2019 hired the venue management company ASM Global to run The Lyric, they outsourced the financially risky business of booking and presenting shows.

“We are very confident the future of The Lyric is bright and strong,” said Jonathan Schwartz, executive director of The Lyric’s foundation. “Our financial house is in order. We will be here for years to come.”

An analysis of public documents reveals The Lyric lost money for 13 of the past 20 years, with deficits ranging from $63,771 in 2002 to $2,078,160 in 2020, when the pandemic closed venues statewide in March. Earlier this year, following an ugly public spat, a prominent Baltimore philanthropic family rescinded a promised $300,000 donation the institution desperately needed.

As recently as Jan. 18, 2021, auditors issued an ominous warning to the Lyric Foundation

Jonathan Schwartz, executive director of Lyric Foundation Inc., maintains that the performing arts institution’s future is bright. KIM HAIRSTON/BALTIMORE SUN

Inc., the nonprofit organization operating the concert hall. The institution was in such dire financial straits, auditors concluded, it might lack sufficient funds to remain in business into 2022.

The audit noted the Lyric Foundation incurred a loss of more than $2 million for its fiscal year ending June 30, 2020, and cumulative deficits for the four prior years exceeded $2.8 million.

“As a result,” auditors concluded, “substantial doubt exists about the Foundation’s ability to exist as a going concern” into 2022.

Auditors wrote that The Lyric’s survival depended on its ability to recover from COVID-19, the success of its arrangement with ASM Global, and continued financial support from government agencies and private donors.

“There can be no assurances the Foundation will be successful in accomplishing its objectives,” reads the audit prepared by the Timonium accounting firm of Nardone, Pridgeon & Co.

It was a worrisome forecast for fans of the 1893 concert hall famed for its acoustics, the hall that’s hosted such icons as tenor Enrico Caruso, composer Sergei Rachmaninoff, aviator Amelia Earhart and attorney Clarence Darrow.

Stephen Palmer, president of The Lyric’s board of trustees, said the audit’s doomand-gloom findings aren’t unusual during a pandemic.

“I’ve seen dozens of audits with those kind of write-ups during COVID-19,” said Palmer, a senior vice president at PNC Financial Services Group. “They’re questioning the sustainability of major entities from universities to hospitals. If we didn’t think The Lyric was sustainable, we wouldn’t be here.”

Questions about The Lyric’s financial stability arose after theater officials became involved in January in a dust-up with descendants of Arthur and Patricia Modell. At stake was the final installment of a 10-year, $3.5 million gift.

The Lyric wanted additional financial pledges from the Modell family in exchange for keeping the names of the former Baltimore Ravens owners on the building. Family members said that was never part of the deal and held back the $300,000 in protest.

At their request, the Modells’ name was removed from the tan brick facade in March.

But even the Modells’ money wouldn’t have reversed The Lyric’s nearly unbroken, eight-year financial slide. That string of deficits was shown in a Baltimore Sun analysis of 20 years of the Form 990 that tax-exempt organizations must file annually with the IRS.

The sole exception was the 2018-19 fiscal year, when The Lyric saw a $221,839 profit thanks to a $570,535 insurance reimbursement for a water main break. Had The Lyric not received that one-time payment, it would have incurred a $348,696 deficit that year.

The Lyric covered its losses each year by borrowing money, with cash infusions from a tiny endowment (the balance was recently less than $250,000) and through occasional windfalls. One year, a generous creditor forgave a $500,000 loan.

Schwartz said most deficits occurred before he became the organization’s executive director in 2018.

“I can’t comment on what happened in the past,” he said. “We’re focused on moving forward.”

The Lyric hasn’t been really flush since the three-year period ending June 30, 2012, when surpluses totaled more than $9 million. Those years coincided with a $14 million capital campaign to expand the stage and renovate outmoded systems.

At the time, theater operators predicted the changes would allow the institution to begin booking the big-name acts drawing sizable audiences to competing venues.

“With a larger stage and modern stage technology, we will be able to bring to Baltimore bigger, more sophisticated productions in a safer and more economically efficient manner,” former Lyric board President Edward J. Brody said in a 2010 news release.

If those long-overdue renovations had never been made — at the time crew members used sandbags to raise and lower scenery — Schwartz said The Lyric would have lost even more money than it did.

“The upgrades were critically important and will be vital to our success,” he said. “To not have done them would have been terribly detrimental.”

Overall, the 990s paint a picture of an institution that puts all of its fiscal eggs in one basket.

According to Americans for the Arts, nonprofit cultural groups typically derive 60% of total revenues from ticket sales, hall rentals, concessions and other forms of earned income. About 30% is made up of donations from corporations, foundations and individuals, while the remaining 10% is provided by taxpayers in the form of government grants.

But 90% of The Lyric’s revenue for the fiscal year ending June 30, 2020, was made up of earned income — a bit more than $3.5 million. Donors contributed $88,000, or 2.3%. Government grants totaling $303,000 accounted for 7.7% of The Lyric’s revenues.

(This fiscal year will be an exception due to the $3.4 million federal grant — a one-time boon.)

Financial analysts urge arts groups to safeguard their institutions’ economic health by developing diverse revenue sources.

“Put on shows. Rent out your hall. Conduct classes. Have a gala,” said Brett Ashley Crawford, chair of the arts & entertainment management master’s degree program at Carnegie Mellon University in Pittsburgh. “Cultivate a wide range of individual donors, corporations and foundations so you aren’t just relying on your board members to give you money.

“If you can, have a restaurant on the premises,” she said. “The more diverse revenue streams you can have while still fulfilling your mission, the easier it will be to ride out these crazy times.”