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Volcano Theatre’s Ross Manson, left, and Ravi Jain, right, of Why Not Theatre.Fred Lum/The Globe and Mail

For the past two decades, there have been two small companies in Toronto devoting themselves to creating new Canadian operas: Tapestry, and Queen of Puddings Music Theatre. But then, this winter, Queen of Puddings announced it was closing shop.

"I felt sick to my stomach," says Tapestry artistic director Wayne Strongman. "There isn't any particular pride in saying Tapestry is the only company doing this. I have longed for context for our work. … It would be so much easier for us if there were other companies."

At Tapestry, the 64-year-old Strongman has been grooming his successor, the 32-year-old Michael Mori, so that the company he founded in 1979 will continue when he eventually retires. At Queen of Puddings, on the other hand, co-artistic directors Dairine Ni Mheadhra and John Hess decided they had achieved what they wanted and were done. They declined to be interviewed for this article but say in a statement on their website: "The end of our season in August 2013 feels like a very natural artistic ebbing point, and thus feels like the right moment to close the company. We want to conclude in a year like this, which is full of artistic pleasure, highlights, and fulfilment of our goals, with continued financial stability due to a deficit-free track record."

It's an unusual decision, but some people in the performing arts think it is the braver and better route, if a new generation is going to rise.

"Younger companies are really starved for funding these days," says Ross Manson, the founding artistic director of Volcano Theatre, who is in his late 40s. Increasingly, Manson debates with colleagues whether, when the time comes, he should not follow the lead of Queen of Puddings or Daniel MacIvor, who closed his da da kamera company in 2007. It's not that Mheadhra, Hess or MacIvor have stopped working, it's just that they have stopped taking operating grants from the arts councils.

"If I decided to walk away from Volcano," Manson says, "all the funding would go back into the pot."

After a burst of nationalist arts-institution building from the 1950s through 1970s, many of the smaller artist-led performing arts companies in the country were founded by single visionaries in the 1980s and 1990s. The successful ones get operating grants year after year, while the arts councils' budgets are mainly stagnant.

"Where does a senior artist transition to, so a mid-career artist can move and a younger artist can move, so we are not just trying to kill each other's empires?" asks Ravi Jain, the 33-year-old artistic director of the cross-cultural Why Not Theatre. "The problem is the grandfathering of operating funds. These companies got in in the 1980s when the [artists] were in their 20s and 30s and the existing companies weren't showcasing their work. They have accumulated a lot of money. Even if we get in we are getting a small slice of the pie."

The arts councils are acutely conscious of the problem. The Canada Council for the Arts stressed stability in the 2000s, explains Roger Gaudet, head of the theatre section: That meant groups that won operating funding usually got it renewed every year. Now, the council is trying to figure out how to encourage a new generation when it doesn't have any extra money at its disposal. It has set aside 8 per cent of its $22-million budget for theatres' operating grants for the cause, establishing a $220,000 fund for newcomers only, and also telling juries for existing funds they must allocate certain percentages to groups that are not incumbents. Often those small targets will be reached by making a few big cuts to a handful of established groups, rather than cutting across the board.

Still, many incumbents are uneasy at the idea that arts infrastructure should simply be jettisoned to make way for youth. When Daniel Brooks resigned last year as artistic director of Necessary Angel theatre company to return to freelancing, the company did some soul-searching on this topic, and polled 50 people in the community.

"We knew we had to keep it going: There was a groundswell," said Necessary Angel board chair Leonard McHardy. The company was founded in 1978 by Richard Rose as the vehicle for his directing projects; when he moved to the Tarragon Theatre in 2002, it fulfilled the same role for Brooks. The community felt very strongly that its model of promoting theatrical creation without being tied to a subscription season needed to be preserved, McHardy said. Now, mid-career director Jennifer Tarver is getting her kick at the can.

Similarly, at Tapestry, Strongman and Mori feel the company's work developing artists who can create and perform new opera cannot be abandoned: Through various projects, the group employs about 60 different artists every season.

"If you compare Queen of Puddings to Tapestry, there is a strong argument when somebody's goals have been achieved, they hang up their coat and say the money can go to someone else," Mori said. "But Tapestry is the training ground for artists. … If Wayne just retired and closed it down, the mentorship and training would be hugely missed. How would we cultivate the next generation?"

Nobody thinks that there is one solution for all companies, and many younger artists feel the amount of administration required to create a company that is eligible for operating grants is just a burden that interferes with producing work.

"Underneath it is the whole question of institutionalizing art making," said Billyann Balay, director of granting programs at the Ontario Arts Council. "When you talk to new-generation artists, they are deeply questioning the model, and that's healthy."

Studying the issue of generational change, the Ontario Arts Council has been working on a scheme whereby a company such as Volcano would become a fiscal sponsor for a company such as Why Not Theatre, so the newcomer would not need to set up its own board and administration.

That proposal, however, has not come forward rapidly enough to suit Why Not's Jain. He's tired of waiting, and this year, for the first time, has decided it's worth applying to all three levels of government for operating funding. "Gandhi said you have to be the change you want to see in the world: I figured I would take the money and make more work and bring in more artists."

If he gets the money, that is; right now, he's still waiting to hear whether the cheque is finally in the mail.