Opera à la Enron?
Armed with a fresh MBA, he came to Houston in 1970 and took a struggling little company from near obscurity to the dizzying heights of international acclaim. But after 32 years, some curious accounting practices and complicated compensation packages, the organization is facing a $3 million shortfall and is talking layoffs.
No, it's not another Enron/Ken Lay story. It's the story of David Gockley and Houston Grand Opera, one of the most revered, socially connected and critically applauded arts institutions in town.
Granted, most arts organizations in town have been hit by flood, terror and Enron, but HGO is in particularly dire straits.
"We will be the walking wounded unless support comes out of the woodwork," says Gockley, the general director of HGO. Gockley was already helming HGO in the '80s when the oil bust hit Houston. "It was pretty grim in '85, '86 and '87," he says. Is it that bad now? "I really think it is." Gockley admits that revenue projections for the opera's current fiscal year are running under by 12 percent. That's $3 million out of an operating budget estimated at about $21 million.
The organization already has taken steps to cut $1.5 million from the current budget. Gockley says that includes reductions of $600,000 for the free Miller Outdoor Theatre series next year, $200,000 for the Opera Studio program for young talent and another $200,000 in regular season performances. "Like cutting back on Sunday matinees," he says. If "squeezing" the staff doesn't work, Gockley says, layoffs will loom.
The budgetary bind follows what Gockley calls six months of a "gathering storm." First there was Tropical Storm Allison, then the terror of September 11, not to mention the national recession, the on-again, off-again merger of Compaq and the collapse of the house of cards known as Enron. Gockley even blames downtown street construction and closures: "I think psychologically it keeps people away from downtown."
Opera woes contrast with relatively upbeat outlooks for other major Houston arts institutions. Art Kent, spokesman for the Houston Symphony, says that organization has rebounded from the outside calamities. "We are doing remarkably well. We had a great six months; we are playing to almost full houses," Kent says. "There's not a single ticket left for the Johnny Mathis Pops concert."
That strong assessment comes from a group that for years bore the brunt of a multimillion-dollar debt and was hard hit by Allison's floodwaters, losing its offices and music library and suffering severe damage to its concert hall.
Right down the street, the Alley Theatre also reports rainbows after June's rains washed away its small theater in June. Spokeswoman Jennifer Garza says the Federal Emergency Management Agency denied it $4 million for repairs, "so we had to do it all in private donations." She reports the organization is very healthy, having surpassed the $1 million mark in ticket sales for A Christmas Carol in December.
Gockley speculates that the subject matter of the season may have affected attendance for people weary of disasters and downturns. That may have "caught us with too heavy of a season," he says. There was a Wagner piece last fall; among the recent productions have been Eugene Onegin and Of Mice and Men. "People don't want to see migrant workers shooting each other in a Dust Bowl atmosphere," he says.
John Steinbeck's depression-era tale, however, is also being told over at the Alley. "Of Mice and Men is doing very well," says the Alley's Garza. "We are well over our ticket goal." With the same story and same traffic and parking problems, one difference is ticket prices. Opera, one of the most expensive art forms to mount because it is so multidimensional, needs higher single-ticket prices. The singing version of Steinbeck costs an average of $65 to $80, while admission is $45 for the best seats to see it just being acted out over at the Alley. Even a two-for-one promotion by HGO last month failed to fill all the seats.
Gockley will go with lighter fare next season. HGO will substitute a world premiere of The Little Prince for a postponed Mark Adamos work based on Lysistrata. The Merry Widow will romp in place of the contemporary opera Dead Man Walking.
Offstage, the opera will save $103,000 in salary costs after the surprise resignation of general manager James D. Ireland last month. When Ireland arrived three years ago, HGO gave him a ten-year loan for $150,000 to buy a house here. Gockley says Ireland recently paid back the money. Gockley says he's paid off the $80,000 loan HGO made him in 1991 for his own home purchase.
The perks of a loan from an arts group can seem small in comparison to the $1.7 million bonus snared by Museum of Fine Arts director Peter Marzio (see "What's Wrong with This Picture?" by Jennifer Mathieu, January 17). Harry Pinson, HGO board vice president for development, says loans or perks are needed to compete with the private sector -- even though the ranks of Fortune 500 CEOs don't seem heavy with career opera veterans.
"Anytime you run a first-class organization you have to compete for talent, either in front of the footlights or behind them," Pinson says. "If we can't pay salaries, we try generous benefit packages, cars and other stuff we do."
According to the organization's most recent tax returns, Gockley made $341,227 annually. Pinson refused to comment directly on the loans, calling them "private personnel matters." However, the Internal Revenue Service says compensation to directors and employees over $50,000 is public information.
"Nonprofits can lend money," says Kenneth Vargas with IRS media relations. "But the law says it has to be at normal market value." HGO's tax returns mention the loans; they don't report specifics such as interest. "They do not have to show the details," laughs Vargas, "and they'd be really hard to find in the company's finances."
Compared to most other Houston arts organizations, HGO is also somewhat unique in its structure. While hardly rivaling the far-flung complexities of Enron, the opera has strangely divided itself into four separate nonprofit corporations: HGO Association Inc., HGO Endowment Inc. (which boasts a nest egg of $46 million), HGO Guild Inc. and HGO Productions Inc.
As long as someone keeps up with the paperwork, there's nothing wrong with multiple entities. Most performing groups do have a separate support guild, and some have a separate nonprofit structure for their endowment, although many do not. The opera is the only one to create a separate corporation, HGO Productions Inc., for tour productions. It was set up as "an accounting vehicle for touring Porgy and Bess," Gockley says. "Like Nixon in China, that's one of several new and nontraditional operas HGO is famous for producing." Gockley says that entity is basically defunct, and IRS returns show no activity in it.
To help the main opera budget bounce back, Gockley is banking on the addition of the world premiere of Saint-Exupéry's The Little Prince to attract critical attention and box office dollars next season.
HGO also reached out to laid-off Enron workers with an offer to extend their season subscriptions to next season for free. Gockley himself, in a recent interview, had been watching the congressional hearings on Enron's collapse.
"It is the most shameful day in Houston history," he says. But Enron, however tragic, is the stuff that operas are made of. If Gockley could just put Ken Lay on stage to music, well, it could be bigger than Nixon in China.
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