Counting on being "too big to be allowed to fail"

Two high-profile arts non-profits on the East Coast are right now engaged in a familiar sort of public brinkmanship, with a distinct odor in both cases of "save us from ourselves."

Having worked in big-city regional non-profit theater myself I was quite startled to learn that the Paper Mill Playhouse in New Jersey is on the verge of collapse. (I'm actually familiar with a couple of the principals involved, since both the departed CEO and the current managing director were hired away in recent years from major Chicago theater companies.) The Paper Mill has long been a poster child for robust successful suburban repertory theaters; twenty years ago they led the nation with a whopping 45,000 subscribers.

So the state they've fallen to is pretty startling: fewer than 20,000 subscribers now (which is a far more drastic falloff than the general national trend), and a budget for the current season which depended on increasing annual fundraising by almost $3 million in one gulp. They're now in so many words daring legislators to let the "official state theater of New Jersey" collapse, with perhaps predictable results.

There's nowhere near enough information in the media coverage to be clear on how this situation came to pass for Paper Mill, but a quick glance at their tax returns on Guidestar does support what Playbill wrote, that "the board at Paper Mill has either not had the ability to get outside contributions or has not seen the need due to the once-high subscribership." It's hard to see that as anything but seriously negligent in a society where per-capita individual contributions for the arts quintupled after inflation from 1964 to 2004.

Meanwhile in Miami, the mammoth Carnival Center for the Performing Arts which opened to huge fanfare only last October is apparently already in financial free-fall. The thing appears to have been a financial Potemkin village actually: a half-billion dollar multi-facility arts complex that opens with zero endowment? For which the pro formas assumed operational profitability from day one? Almost no onsite parking (in South Florida??), and the operating budget didn't include the cost of stagehands? Surely no one with any experience running an actual arts center (or a service-sector business of any kind) was in charge of the planning on this thing.

All the bailout scenarios being discussed are fairly gruesome but they include at least one that's fairly innovative: blackmail the city's major newspaper. Quoting from that article in the area's business newspaper: "The Miami Herald...has a contract to sell its land around the center for $190 million, but the unsold land's value would plummet if the center shut down. Because the land's value soared about $180 million as the center rose nearby with the Herald's strong editorial push, the paper could protect its holding by handing the center, say, 10% of the gain the center caused." The paper does seem to have been covering the center's problems reasonably bluntly, anyway. And what a fine mess it is.

Donating while bankrupt: addendum

Back in November I wondered whether it's really fair that someone who has filed for bankruptcy should be allowed to continue making charitable contributions. This tightly-reasoned piece is persuasive: it isn't. Senators Obama and Hatch should drop the idea.

Bankruptcy: should non-profits get to be first in line?

A current tempest in Washington DC was started by a federal judge's ruling that some people filing for personal bankruptcy can't keep making charitable contributions before a bankruptcy court decides how much their creditors will get. The judge's logic is being interpreted as an unintended consequence of the 2005 revision of U.S. bankruptcy law, which was already widely seen as basically a giveaway to the credit card companies who everybody loves to hate. Sens. Orrin G. Hatch (R-Utah) and Barack Obama (D-Ill.) have quickly proposed legislation that would allow individuals in bankruptcy to continue giving to churches and charities; that bill has passed the Senate and is now before the House.

I was surprised to learn that a 1998 law had specifically allowed people in bankruptcy to exempt up to 15 percent of their annual income from creditors for tithing or charitable donations.
So the narrow issue is simply whether Congress with the 2005 law actually meant to undo that provision or not.

Nobody involved seems willing to face the broader question, namely: what all should someone who is availing themselves of the modern legal privilege called "bankruptcy protection" be allowed to hold back from that process? Bankruptcy is after all not a natural right but a highly-progressive social contract: our society agrees to impose undeserved losses on creditors so we don't have to have debtors' prisons and so that families that are hopelessly ruined financially can get a chance to start over. That's a concept which the U.S. pioneered and is rightly proud of (like the independent professionalised not-for-profit sector actually), and bankrupt families already get to keep their home and some other things safe from creditors and that's a good thing. So is writing another annual check to a favorite non-profit really fair to the parties about to be legally deprived of piles of money which they had voluntarily lent?


P.S. No doubt the preachers and their politicians will make this a religious-liberty issue (and Senator Obama climbs down into a similar rhetorical gutter with his absurd poverty straw man in that article linked above). But if we're gonna get biblical here then that columnist makes a valid counterpoint: the Bible, like every major holy writ that encourages tithing, also does not speak highly of failing to repay debt.