Oil Slump Puts Damper on Party Scene

Lowdown on the slowdown: As oil plummets, Houston non-profits starting to feel the pain

Lowdown on the slowdown: As oil plummets, non-profits feel the pain

285 The crowd and venue Houston Grand Opera Ball April 2015
Last spring's Houston Grand Opera ball scored $1.3 million. Hopes are that it will do at least that well in 2016. Photo by © Gary Fountain

With stunted oil prices and the specter of a declining stock market, Houston's non-profit community, with few exceptions, is bracing for a challenging year ahead. Just how much muscle will be lost from the city's vigorous philanthropic scene is yet to be determined, but leaders in the field are far from positive.

"We know from talking with nonprofit organizations in Houston, that toward the end of October 2015 some organizations were beginning to feel this," notes Angela Seaworth, director of the Center of Philanthropy and Nonprofit Leadership at Rice University. "They were over capacity for service and donors were beginning to call in to reschedule or cancel pledges."

A typical example is Houston Children's Charity. While the November 7 gala raked in $1.4 million, gross revenues were down 10 percent from the previous year. "That's never happened to us," says executive director Laura Ward. "We lost four major tables and each of them with oil and gas related companies. And board members to boot."

With oil prices expected to remain low throughout the year, Ward notes that she is preparing for the grass roots non-profit's toughest year since its founding two decades ago.

Feeling the pinch

Seaworth says that there could be an impact on fundraising events in terms of a decline in attendance with individuals choosing to make a direct gift to the organization, rather than spend money on the extra costs of attending charity parties such as attire, babysitters, valet parking and the like.

"However, " she noted "socially-based fundraising events play a significant role in Houston's culture; therefore, this may not happen."

A number of organizations are already feeling the pinch. Bill Gilmer, director of the Institute for Regional Forecasting at the University of Houston, notes, "I recently talked to one of our fundraising groups at UH. When asked what this drop in oil prices had meant to them, the response was that donors were being very careful and sitting on their hands.”  

Gilmer adds that as the citywide decade of fast growth is coming to an end, the economic picture is changing.

"The slowdown that was confined to oil begins to spread in 2016," he predicts. "Expect a lot of retailers, apartment owners, restaurants, bars, hotels, etc. that have been saying, 'What oil downturn?' to now start sharing the pain. They will be paring back and reviewing the budget. Most of these won't be the serious, emergency budget reviews that oil producers are undergoing, but a a more general and wide-spread belt-tightening is now in store.”

Cautiously optimistic

As for non-event fundraising, the United Way is fully aware that lower energy prices will likely have an impact on the current campaign which concludes in March. But it is too soon to tell to what degree, according to Lynne Cook, assistant vice president of donor relations. She says that the non-profit is hoping to achieve close to the same monies earned in the last fiscal year.

Houston Ballet, however, is one non-profit that is feeling cautiously optimistic for the coming year as Angie Lane, chief development officer explains. "We’re on track to meet our budget goals this year, which increased from last year. We haven’t seen a drop off in giving – in fact, we’ve seen a modest increase."

This goes against the grain of typical giving patterns during economic shifts but could be a good sign for Houston. Seaworth points out that a national study shows that during tough times, people tend to increase giving to health and human service organizations and there is a drop in giving to cultural and arts institutions.

The donor viewpoint

Oilman/philanthropist Lester Smith is one who has shared the wealth throughout the city's energy boom. He warns that less giving could be the new norm.

"There is no doubt that Houston’s non-profits will feel the effects of the current oil slump . . . My giving has always been tied to the profitability of my business – and I know dozens of others who would say the same thing."

And he reminds that during the 2007-2008 "great recession," he and his wife, Sue, canceled one of their galas as they felt it insensitive to ask the community to support an event when so many people were in difficult circumstances. 

He notes optimistically that nothing is forever, "Houston has –  and will always be – an oil town.  Times are tough, but it will turn around.  It always does."