Pennsylvania Academy of Music gets OK to use restricted endowment money to pay operating expenses - LancasterOnline: News

Pennsylvania Academy of Music gets OK to use restricted endowment money to pay operating expenses

Former benefactors try to block move

Print
Font Size:
Default font size
Larger font size

Posted: Tuesday, June 29, 2010 11:43 pm | Updated: 6:27 pm, Wed Sep 11, 2013.

A bankruptcy court judge's ruling Tuesday was music to the ears of Pennsylvania Academy of Music officials.

The judge allowed PAM to use money in a restricted endowment to pay operating expenses, a move that lets the academy keep operating.

Judge Jean K. FitzSimon permitted the action despite the opposition of the academy's largest benefactors.

At the end of a hearing in Philadelphia that ran more than four hours, FitzSimon let PAM spend a portion of the endowment, with the amount to be negotiated.

PAM attorney Jacques H. Geisenberger Jr. proposed that the academy be allowed to spend up to $100,000.

That was considerably less than the up to $250,000 PAM initially sought.

Attorneys representing the U.S. Trustee's Office, the state Attorney General's Office, and benefactors Paul and Judy Ware said they would not contest it, according to Geisenberger.

"This will certainly get us through the end of July. That's the critical period," Geisenberger said.

Dr. Thomas F. Godfrey, PAM's interim executive director, said the judge allowed the spending to give the academy's recently installed leadership more time to stabilize the organization.

"She thought we should be given a break to continue our work," Godfrey said.

PAM last week asked to use some of its nearly $1.3 million educational endowment to meet a missed June 15 payroll of $62,000 and pay other bills over the summer.

The restricted endowment funds scholarships for students attending PAM, concerts at PAM and other activities.

PAM said it had missed the payroll after the cost of leaving its North Prince Street building in the wake of its May 31 lease termination was higher than expected.

The nonprofit academy warned that it would be unable to retain its work force if it missed the payroll for its 13 salaried faculty and 10 hourly support staff, spelling the end of the academy.

But by using the endowment to help meet its summer bills, the academy argued, it would have a financial bridge to the fall.

That's when its regular enrollment of 300-plus students (and their tuition checks) comes back.

With the judge's decision Tuesday, PAM officials were optimistic that the payroll checks would be cut in a day or two, preserving PAM's work force.

The judge instructed PAM to file weekly reports detailing its spending and income.

PAM's bid to tap the endowment was opposed by Ware, a former PAM chairman, and his wife, Judy.

They have donated an undisclosed amount to the endowment and untold millions to PAM.

Ware left the academy board last summer.

In a two-page filing, the Wares asked FitzSimon to deny the academy's request, saying the request "contains no supporting evidentiary" material.

The Wares also said PAM "has a significant history of ongoing financial problems" and contended that it will not be able to present an acceptable bankruptcy reorganization plan.

The Wares' attorney, Susan P. Peipher, could not immediately be reached for comment late Tuesday.

Geisenberger believed that as little as $30,000 of the endowment would be used to meet the June 15 payroll.

He said PAM has some cash on hand and received about $13,000 in previously pledged donations this week.

"We're going to try very hard not to spend the endowment," Geisenberger said.

PAM filed for bankruptcy May 27 to resolve a lingering debt of about $125,000 and collect long-unfilled pledges of $1.2 million.

As it tries to find a solution to its financial troubles, PAM also is searching for a new home.

Having lost its Prince Street building after defaulting on the mortgage, PAM has secured temporary space for this summer.

The PAM board was scheduled to vote Tuesday night on a potential new location for the fall.

Assuming the board agrees on a future location, a move would be subject to negotiating a lease with the site's landlord, Godfrey said.

tmekeel@lnpnews.com

More about

More about

More about