Mr. Joffrey, a bad businessman?

By Sheri Candler

In several articles on the film, a point keeps being raised that the Joffrey Ballet’s financial collapse in the late 1970s must have been caused by Robert Joffrey’s poor business skills. The company had arisen out of the ashes of the Harkness Foundation break in the mid 1960s and things were seemingly going well during the early and mid 70s. So what happened?

I recently spoke with the former executive director of the company from 1978-1981, Henry Young, to see if he could shed some more light on what was happening in the arts world at the time. A full podcast interview is coming up in a few weeks with Mr. Young, but here is a short transcript where he speaks about the arts funding situation in the 1970s. The picture he paints of stretched Federal assets and the overdependence of American arts organizations for funding from those assets sounds quite familiar to the situation going on in our country right now where ballet companies are paring down or liquidating or aggressively stepping up their own fundraising efforts from private enterprise or generous individuals.

Remember, at the time, the Joffrey Ballet as well as many other ballet companies were receiving sizable grants from the Ford Foundation starting in 1963 when the Foundation gave $2 million to New York City Ballet and almost $4 million to their School of American Ballet. It was a Ford Foundation grant, secured by Alex Ewing, that allowed Robert Joffrey to restart his company again after the split with Harkness.

“The cause was a very rapid change in funding sources and levels of giving.  In the first instance [of financial collapse], we know it was Rebecca Harkness. The second is far more subtle and, in a way, not really obvious.”

“Discussions began at the Ford Foundation regarding social investing through a program that would become know as Program Related Investments.  As part of the Tax Reform Act of 1969, a legal definition of PRI was established and the Ford Foundation Trustees moved to set aside an initial $10 million of Foundation assets for  PRI’s. In 1968, Foundation staff were presenting proposals to the Trustees not on the basis of past performance, but rather they made the case that the social needs revealed by the turbulent ’60′s required extraordinary response.  Basically, they wanted to spend at a rate faster than the [established] earn/spend formulas of the foundation grant making and PRI loans were a way to accomplish this. Initially, Trustees did not look on this idea favorably, but over time they were convinced it would allow the Foundation to stretch its assets.”

“Clearly, the Foundation did not have nearly enough cash to meet all the demands on its agenda, so Program Related Investments were a way around this.  Within two years, Ford was into many new areas from cattle feeding and steel joist manufacturing to public television stations for equipment set ups.  But of course, some of the enterprises failed.   There were amazing successes as well, probably the most prominent was the Harvard Community Health Plan launched with a five year loan of $600K.”

“To my recollection, I think Ford had over $53 million in PRI’s.  Between 1968-70, 58 REIT [Real Estate Investment Trust] funds were formed.  Most funds used a modest amount of shareholder equity (think Ford Foundation as a share holder) matched with a very large amount of borrowed funds and this was all going to short term loans for mostly office tower development.  For the REIT world, assets ballooned from $1 billion in ’68 to $20 billion in the early 70′s.  But as the Office overbuild and economy for office space weakened in  1973, REIT’s found that debt leverage worked both ways (SOUND FAMILIAR?), and non performing loans became stunning.  As a result, share prices for REIT’s collapsed in 1973 by 21.8% and another 29.3% in 1974.  Ford was  making PRI loans on the anticipated rates of return of 12% and reality was not possible with these kinds of share losses. The result was a directive to the Program Divisions making actual grants to cut and cut fast.”

“So the NY City Center Joffrey’s 3 year grant in 1973 was suddenly revised from $350,000 a year  to $175,000,  then to $0.00.  At the time, the national small gift average for direct mail was $22.  Not that anyone thought that was a suitable direction for fundraising, but to put a fine point on the difference of large scale and small scale fundraising it would have required 3,500 new donors at $100, JUST to offset the loss of that grant.”

“Of course there were other things were going on too, but for Joffrey, BAM [Brooklyn Academy of Music], Pennsylvania Ballet, etc. this was their first experience of the bubble burst.”

The recession that happened from 1973-75, an ambitious repertoire of larger scale productions such as Petrouchka and Parade, the turbulence from City Center management which resulted in a loss of backing in 1975 were all contributing factors to the financial instability of the company and much of it out of Robert Joffrey’s control. Obviously, this complicated topic couldn’t be deeply explored in the confines of a 82 minute film, but it is worth mentioning here. It wasn’t so much that the grants were not replaced because of negligence. More likely they weren’t replaced because grant funding had been severely cut.

Remember to check out our podcast with Mr. Young when it is live and check out all of our other interviews with Joffrey alumni under Media>Podcasts in the navigation bar at the top of this page. 

 

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