Is it a sign of the times or simply one company's faulty business model finally collapsing?

That's what many in the Silicon Valley arts community are asking after San Jose Repertory Theatre -- an old-school arts organization in a tech hub, with a dwindling audience and a mountain of debt -- announced Wednesday that it was shutting its doors and filing for bankruptcy.

Even though the 34-year-old Rep had been in financial straits for some time, the last act of the city's flagship theater took some by surprise.

"It's hard to look at that beautiful building downtown and know that the Rep isn't there anymore," said Phil Hammer, a longtime board member who worked alongside his wife, former Mayor Susan Hammer, to raise the profile of the company. "It's very distressing. This is too big a city to not have a world-class theater."

Others say they saw the writing on the wall and warn that the rest of the Silicon Valley arts community better see it as well. They say the Rep was indicative of an arts company that no longer fit in its marketplace. San Jose needs to find its own artistic voice, they say, and stop trying to compete with San Francisco, with its high-society donors and deep pockets.

"I am so done with people comparing us to San Francisco," said Connie Martinez, head of Silicon Valley Creates, a nonprofit focused on improving local culture. "The sooner we feel comfortable in our own skin and use the power of the arts in service to the community, a lot of these big issues will go away. It's when you try to be something that doesn't necessarily fit who we are that people get nervous."

As Martinez put it, "We're more like Austin than Boston" -- referring to the Texas techie community that found its artistic niche with a thriving music scene. Maybe San Jose's voice, she said, rests with more modest arts institutions, such as San Jose Stage and City Lights, small companies with low overheads and loyal volunteers. Even Opera San Jose, a company that seems traditional in many ways, has remained in the black for decades under the direction of Irene Dalis because it never overreached. Its budget is a mere $4 million, compared with San Francisco Opera's $70 million.

But some of the Rep's problems were the company's alone. It had a history of living beyond its means and struggled to pick programming with impact. Recent shows, from the arcane classic "Doctor Faustus" to the outsourcing comedy "Disconnected," flopped. Some say the aspirations of the Rep to be a regional powerhouse were unsustainable.

"It was a fight from the get-go," said Hammer, for whom, along with his wife, the venue is named. "But we were willing to fight that battle because we believed it was a noble cause."

All the factors may add up to an identity crisis. The architecture of the company's 535-seat blue-cube of a theater, built in 1997 with city funds, was sometimes more distinctive than the shows within its walls.

"You have to know who you are and what your audience wants," said Cathleen King, executive director of San Jose Stage. "If you don't keep your finger on that pulse, you're lost."

That could be one reason Rep subscribers plummeted from a peak of 15,200 in 2002, a star-studded season that featured starring turns by Holly Hunter and Lynn Redgrave, to 5,500 this year. And as donations also dried up, the company couldn't dig itself out of its debt, which included the $1.8 million it owed the city from its 2006 bailout. It bounced from one cash crunch to another.

The irony is that many Bay Area theaters have been thriving during the recent economic uptick. San Francisco's American Conservatory Theater, Berkeley's Aurora Theatre and Berkeley Repertory Theatre all recently opened additional stages. Even the much smaller Cal Shakes was able to raise almost $700,000 at its spring gala.

Unable to tap into that kind of wealth, the arts in the valley always seem to be on the edge. Ballet San Jose has weathered many fiscal storms. American Musical Theatre went under in 2006. Even the stalwart Opera San Jose is now projecting a $700,000 shortfall. While the company has a hefty $3 million cash reserve, the red ink remains a cause for concern.

"The news about the Rep hit me in the gut. I can't stop thinking about it -- it's very depressing," said Dalis, soon to retire as head of Opera San Jose. "I was born here and I have always dreamed of making this a cultural mecca, but now I fear that will never happen. I fear for the future of the arts in San Jose."

Smaller groups may be more nimble in a crisis. But Dalis, who cut her teeth at New York's Metropolitan Opera, can't bear the thought of watching the city's cultural scene devolve before her eyes.

"I have fought long and hard to try and bring a big-city sophistication to my hometown," she said. "I would hate to watch us turn into a cluster of amateur troupes."

Others say it's time to recognize the disconnect between new money and old culture.

"The big donors don't have enough interest in the arts in San Jose," said philanthropist John Michael Sobrato, after whose family the Rep's auditorium is named. "That's a fact, because that wealth was generated in tech and they are just interested in other things."

That's why Sobrato, who has donated more than $1 million to Rep over the years, supported the theater's shuttering. It was time to stop tweaking a broken business model and wipe the slate clean, he said.

"AMT died and that was a big loss, but it got reincarnated as Broadway San Jose," said Sobrato. "At the end of the day, we still have musicals in San Jose."

And in the long run, he added, "Maybe we need to rethink the arts in San Jose."

Contact Karen D'Souza at 408-271-3772. Read her at www.mercurynews.com/karen-dsouza, and follow her at Twitter.com/karendsouza4.

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Patrick Tehan/staff
San Jose Repertory Theatre closed Wednesday. The news "hit me in the gut. I fear for the future of the arts in San Jose," says Irene Dalis, head of San Jose Opera.