American Folk Art Museum Struggles Continue

Kate Taylor has a good article in the NY Times about the ongoing difficulties at the American Folk Art Museum in New York City.  According to the article, the museum is current in its debt payments to bondholders, but is falling behind in debt service payments required by the bond contract.  I assume that is some form of a sinking fund designed to accumulate funds to pay the debt off.  The museum borrowed $32 million through a New York State bond program and is having difficulties servicing the debt.  The Museum is now in the process of negotiating new debt terms.  Taylor states the operating expenses have declined, from $10.3 in 2009, $8.5 million in 2010 and is expected to be $7 million in 2011.  Visitors to the museum has seen growth which is a positive, but it is still far under expectations.

Taylor reports

Among the other cost-cutting measures, the museum has ceased publication of Folk Art Magazine, which went to members, and has begun publishing some of its exhibition catalogs only online. It also decided to stop leasing auxiliary office space on East 52nd Street.

Over the years attendance and revenue figures have fallen far short of the projections made while the new building was being constructed. At that time it was predicted that attendance would reach 255,000 a year by 2005 and generate $1.7 million in revenue.

Actual attendance was half that in 2005, and attendance today, though growing, remains at 160,000 a year. Admission revenue was $306,000 in the 2009 fiscal year, according to the museum’s draft financial statements.

The cost of operating the building, meanwhile, has been higher than expected, and the museum’s tax returns show that in recent years expenses have outpaced revenue. Net assets, which were $26 million in June 2002, had dropped to $3.1 million by June 2009.

One additional revenue source, Mr. Corelli said, may be the sale of the museum’s air rights to Hines, the developer of the planned Jean Nouvel tower on West 53rd Street. Hines has postponed the development of its building, however, because of conditions in the commercial real estate market.

To read the full article, click HERE.