Art Museum Financial Woes

A shortage of Ben Franklins.

This is not about art. In fact, it's not really about art museums. It's about money...and the lack of it...faced by art museums as they try to remain viable venues for the display of their art. So, I guess, indirectly, it is about art after all. When times are tough financially people suffer. They cut back--even the wealthy. They suffer financial losses as asset values plummet along with interest rates, annuities, stocks, bonds, pensions and virtually every other source of income. As someone once said, what should go up goes down; and what should go down goes up. It's a topsy-turvy world where even necessities get cut back and luxuries like art are among the first to suffer the worst. The most recent example of this was several years ago during what has come to be called "The Great Recession." Actually, even some seven or eight years later, some of the fallout from the financial woes suffered by art museums are still...well, falling out.


The Magnes Art Museum, Berkeley, California.

Art museums get in financial trouble for much the same reasons individuals, small companies, and large corporation do. It's not that attendance (income) falls off; or if so, usually only slightly. When it does, it's usually only for small, esoteric art museums with limited appeal in the first place, such as the Magnes Art Museum (above). No, most of the real problems boil down to bad timing. The desire to grow bigger and better under the false assumption (or blind faith) that the future will likewise be bigger and better. They borrow, beg, and build beautifully, proudly hoping to best the art museums at the next freeway exit. Then comes the big collapse. Payments on debt cannot be met. Fundraising suffers, budgets get cut, as do hours and personnel. Much-needed maintenance gets put off. Still the burden is too great. Talks ensue with creditors. Some museums simply close. Others merge, while others sell the very art assets that draw paid admissions in the first place. The Magnes in Berkeley, California, simply closed its doors, sold its building, and donated its collection of music, art, rare books, and historical archives to UC Berkeley.

Asian Art Museum, San Francisco

Somewhat larger in size and scope than Magnes, but with many of the same problems, the San Francisco Asian Art Museum simply picked the wrong moment to expand. They went $107-million in debt, acquired the old public library near city hall (above), remodeled the facility, then found they couldn't pay for it. Drastic contingency plans were made even as negotiation with J.P. Morgan Chase continued for several months. Eventually, a complicated plan was formulated for the doors to remain open with the city of San Francisco (which owns the building and the art inside) guaranteeing the debt even though the Asian Art Foundation would retain the primary liability in repaying it.

The Los Angeles Museum of Contemporary Art (L.A.MoCA).

Further south, in Los Angeles, the city's Museum of Contemporary Art (MoCA, above) faced a similar problem. The L.A. MoCA was financially weak from the beginning. Many of the growing number of MoCAs in cities around the country, have similar difficulties due to their physical size, huge operating expenses, and their appeal primarily to the "high art" crowd. L.A. MoCA had been eating into its reserve endowment just to meet operating expenses, which had grown to some $20-million per year, 80% of which was met through donations. That source largely dried up after 2007. Their reserve had fallen from $36.2-million to a mere $20-million in just two years. Despite this, the staff had risen from 150 to 200. Add to this the fact that the museum was trying to "grow out" of its financial difficulties by continuing its expansion plans to three exhibition areas, including one dubbed the "Temporary Contemporary." The museum had to close one gallery (saving 10%), intensified its fundraising, and then went begging to city government for more financial support. Some $45-million in donations helped ease the crisis. The budget was reduced by 25% to $16-million and new management was brought it. Still, the fate of the museum hangs by a thread much like an Alexander Calder mobile.

The Chelsea Art Museum, 556 West 22nd Street on the corner of Eleventh Avenue, New York, is no more. Hewlett-Packard currently occupies the building.

On the East Coast, in New York, the Chelsea Art Museum (above) simply closed its doors in 2011. The 30,000 square-foot museum housed the contemporary art work of Jean Miotte while providing new scholarship and research on L'Art Informel. Miotte’s collected works are conserved as a legacy for New York, where he kept a studio in SoHo since 1978. Lengthy financial difficulties led to the sale of the building. The collection is in storage while the trustees look for a new location, less costly, but hopefully still in New York City. Yeah...good luck.

The new (now former) American Folk Art Museum on West 53rd Street,
New York, next to the Museum of Modern Art.

Ever since its founding in 1961, the American Folk Art Museum has had a rocky past, torn between expanding and survival. In the beginning it had no permanent collection and no building to house it in any case. It was a museum devoted to temporary exhibits, which gradually grew in size and importance in the 1990s to include African American, Latino, and in 1998, contemporary or "outsider" folk art (defined as being self-taught). In 1989 the Museum got its first permanent home at 2 Lincoln Center opposite Lincoln Center for the Performing Arts. Following that, in 2001, they opened a new main branch location on West 53rd Street (above) near New York's Museum of Modern Art (MoMA). The problem with all this was that the museum's trustees were overly optimistic, expecting their yearly attendance to reach 255,000 by 2005. Instead, they hovered around about half that figure, and even today, total only about 160,000. The expected $1.7-million in revenue never materialized, while at the same time, the museum watched its net assets plummet in value from $26-million in 2002 to a mere $3.1-million in 2009. To top all that, the museum lost its most valuable work, a version of Edward Hick's Peaceable Kingdom which had been on loan to the museum while being used as collateral on a loan by its donor. The donor defaulted. The bank collected the painting. Worse still, the operating costs on the museum's new midtown home were higher than expected. The museum had no choice but to sell the building to the Museum of Modern Art (which plans to demolish it and enlarge its own facilities). The American Folk Art Museum remains open at its Lincoln Center location.

The ancient Corcoran Gallery of Art, Washington, D.C.,
just four blocks from the White House.

One might guess from all this that only relatively new and relatively small museums have fallen victim to such economic hard times. If so, one would be guessing wrong. No less venerable an institution than Washington, D.C.'s 150-year-old Corcoran Gallery was forced to transfer it's entire 17,000 piece collection to the National Gallery of Art several blocks down the street on the National Mall. The Corcoran's problems were more than just financial. The Gallery had something of an identity crisis. It couldn't decided whether to be an art school or a museum; and in the process, it didn't fulfill the either role effectively. Student enrollment fell as the gallery's attendance figures sunk to an abysmal 85,000 visitors. In the meantime, it's deficit soared to $7.2-million out of a budget of $31-million. Consequently, the gallery's school of art was merged with nearby George Washington University which will take over the outdated museum facilities for classroom space. The court-ordered disposition involved the transfer of some $2-billion in assets. The Corcoran was founded in 1869.

The Detroit Institute of the Arts.

Vincent van Gogh Self-portrait.
Saved from the creditors.

And finally, there's Detroit. I wrote about the financial woes of the Detroit Institute of Art nearly two years ago. Here's an update. As discussed before, the museum's problems were, for the most part, not of its own making. The City of Detroit owned the museum, lock, stock, and barrel, except for donated works (which, fortunately, make up the bulk of its collection). The total monetary value of the museum's holdings runs into the arbitrary billions (estimates as high as $8.5-billion). Those works purchased with city funds are estimated by Christie's Auction House to be worth $454-million to $867-million, with a van Gogh self-portrait (right) alone worth up to $150 million. That's the jackpot which had creditors' mouths watering. To prevent possible sale of the city-owned works, municipal and museum negotiators developed what has been called the "grand bargain." Under the recently approved plan, the museum would raise $100-million for its portion, nine private foundations pledged $330-million, and the state of Michigan would contribute $350-million for a total of $820 million in order to guarantee municipal workers' pensions. In return, the city of Detroit would transfer its portion of the collection and the building to the non-profit entity that already operates the museum. Needless to say, creditors hated the plan, many of whom came forward with offers from other parties to buy the artworks for sums higher than Christie's appraisal. In May, 2014, Detroit emergency manager, Kevyn Orr, asked Detroit automakers to add $195-million to make the grand bargain stronger. The eventual settlement did not force the DIA to sell any of its art.