The Gallo Center for the Arts is digging out of the red.
A combination of spending cuts, increased revenue and two major donations helped pull the nearly 3-year-old venue out of perennial deficits.
After its first season, the downtown Modesto center spent $2.9 million more than it earned, a loss covered by the nonprofit group that manages the venue.
The loss was expected, but it threatened the center's reserves and stood out against a $13.6 million construction loan that still must be paid off.
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With a recession dragging down nonprofit groups statewide, questions emerged about how long the center could sustain deficits.
"It's the cash loss that I worry about," Gallo Center Chief Executive Lynn Dickerson said. "I want to make sure we don't draw down on our reserves more than necessary."
Last year, Gallo Center leaders announced they would record a $1.6 million loss this season. Dickerson said Tuesday that the arts center would now break even.
She credited two major gifts from three donors: a $1.5 million challenge grant from E.&J. Gallo Winery and the Rogers Family, and a $1 million gift from Dan and Denise Costa that is earmarked for low-income students and to underwrite the costs of low-income young people performing at the Gallo Center.
The center already has generated an additional $200,000 from the challenge grant, Dickerson said.
"Without those three big gifts — the Costa gift, the Gallo gift and the Rogerses' — we would still be in the red," Dickerson said. "Three years from now, we're still going to have to work hard to keep our costs down. We're always going to have to rely on donors."
The center brought in additional ticket revenue by doing grass-roots marketing, booking more group sales, and instituting discounted senior and student rush tickets.
The center laid off four employees in 2008, reducing the staff to 20. It instituted a wage freeze that is still in place. The center reduced expenses on food and beverages to artists, Dickerson said.
Operating expenses in the 2009-10 season, which ends in June, are projected to be $6.9 million. Dickerson anticipates cutting an additional $1 million, according to a budget the center submitted to the Stanislaus County Board of Supervisors.
"We really pay attention to every dollar we spend because every dollar we spend is a gift from someone," Dickerson said. "We are good stewards of the money entrusted to us."
Although the center is breaking even on a cash-flow basis, it still shows a projected $1.4 million deficit in the budget report. That is largely because of annual depreciation costs for the building, not because of an operating deficit, said Bryan Branco, the Gallo Center's finance director.
The arts center submits a budget to the supervisors because the county owns the building. The county dedicated $15 million toward the $40 million venue.
Bee arts writer Lisa Millegan can be reached at email@example.com or 578-2313.