To the May 22 letter writer who questioned whether recent increases in the stock market will affect the Minnesota Orchestra’s negotiations, it is important to understand the depth of the financial issues facing our organization.
The orchestra’s endowment is $90 million less in value than was projected when the board signed a contract with the musicians back in 2007. This significant gap was created by the enormous market drops of 2008 and 2009 — and was then exacerbated by our reliance on the endowment to honor the costs of that five-year contract through a recession.
Endowments are based on the premise that taking a conservative draw (typically 5 percent) allows the principal to grow and maintain purchasing power forever. If you begin eating into that principal, however, you quickly lose not only the purchasing power but the original value of the gifts made to the endowment — and, in our situation, no amount of short-term market gains would be able to make this up in time to avoid the depletion of the orchestra’s endowment by 2018 under the terms of the musicians’ 2007 contract.
The Minnesota Orchestra is committed to living within the parameters of a responsible endowment draw. If we continue to take larger draws to fund a contract that is beyond our community’s reach, we will soon have no endowment to rely on and, more importantly, no great orchestra to celebrate.
Bryan Ebensteiner, Eden Prairie
The writer is vice president of finance for the Minnesota Orchestra.