The Gallo Center for the Arts kicks off its second season tonight with a black-tie gala -- and lots of red ink left over from its inaugural year.
The center, the showpiece of downtown Modesto since its opening in September, finished its first season $2.9 million in the red and expects to run operating losses for the next three to four years.
Center officials say the shortfall was not unexpected, though it was considerably higher than their $845,000 projection from last August.
Still, Gallo Center officials consider the first season a success. More than 150,000 tickets were sold for events ranging from symphony concerts to Broadway plays to multicultural events. And the information gathered about who attends concerts was used to help shape the season that opens tonight with sold-out performances by Bernadette Peters and Jakob Dylan.
"We knew there was going to be a shortfall," said Ron Emerzian, chairman of the center's board of directors. "Each year, we're going to try to reduce that until we break even."
Officials said they expect this year's operating deficit to be about $2 million.
The Gallo Center's parent organization, the nonprofit Central Valley Center for the Arts, is covering the shortfalls. That group has $6 million on hand and $4 million in pledges, treasurer Lou Friedman said.
The Gallo Center's first-year experience doesn't appear to be unusual.
Camille Spaccavento, marketing director for the Mondavi Center for the Performing Arts in Davis, said it's not unusual for venues to have shortfalls in their first few years.
"It's pretty common in the industry," she said. "You know it, you plan for it, you make your financial decisions based on it."
A financial summary provided by Dave Pier, the Gallo Center's executive director, shows construction bond payments and depreciation on the building accounted for more than half of the first season's loss.
The center budgeted $6.5 million its first year; instead, it spent a little less than $9 million. It earned about $6 million from contributions, ticket sales, interest from its endowment and rental fees.
As the center enters its second season, ticket prices don't appear to be increasing. The center's second season includes family-oriented shows with tickets that cost $10 to $35, and elaborate Broadway performances at $85 for the best seats.
"We're getting accomplished what we wanted," Emerzian said. "Our goal is to give quality entertainment, diverse entertainment and affordable entertainment for the entire region."
Center officials are adjusting fund-raising programs to earn more money for operating expenses. They're also preparing to apply for more grants, including ones for which the center was not eligible until it opened, such as from the National Endowment for the Arts.
The center's "Friends" program attracted more than 300 donors who contributed $150,000 in the venue's first season.
Friedman said corporate sponsorships are picking up, too, despite the difficult economy.
The center has $290,000 in cash sponsorships for its second season, up from $225,000. Those sponsors also are giving about $400,000 through in-kind contributions, such as radio advertising.
Primary debt is bond
A construction bond the center took out in 2004 remains its primary debt. The center owes $13.6 million on the bond. It paid $650,000 in interest and about $200,000 in principal on the bond during the first season.
A Bee review of other West Coast arts centers last year showed that some struggled to pay off their construction bonds. One, the Hult Center in Eugene, Ore., took 16 years to retire $18.5 million in bonds.
The Central Valley Center for the Arts and Stanislaus County unveiled the $40 million Gallo Center a year ago, featuring the 1,250-seat Mary Stuart Rogers Theater and the 444-seat Foster Family Theater.
The county contributed about $15 million, the state gave a $1 million grant, the city of Modesto gave about $1 million for street improvements and the rest was paid for by the nonprofit that manages the center.
Two of the largest donations -- $10 million from Gallo family foundations and $5 million from the Mary Stuart Rogers Foundation -- built an operating endowment for the center. Interest from that money is to keep ticket prices down and attract top- caliber talent.
Friedman stressed that taxpayers aren't being asked to pay down the arts center's operating shortfall.
"It is being made up by the private donors to the center," he said.
The center is in the midst of a year-end audit. It plans to disclose the results in October to the Stanislaus County Board of Supervisors and to post the audit on the center's Web site.
Pier said the center tried to book more country and family acts for its second season. It scheduled fewer classical concerts, leaving those for the four resident companies that hold concerts at the Gallo Center, such as the Modesto Symphony Orchestra.
One of them reported a banner year. Townsend Opera Players drew 2,000 to 2,500 people to shows at the Gallo Center, up from 1,000 to 1,500 in years past.
"What the Gallo Center has done is raise everybody's expectations in the community," said Matthew Buckman, executive director of Townsend Opera Players. "Our ability to put on better shows and attract audiences has increased."
Bee staff writer Adam Ashton can be reached at email@example.com or 578-2366.