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Monday, 26 July 2010

When More is Less

How the PMA Got its
Business Model Wrong (Part II)
By Richard Carreño
Junto Senior Staff Writer Bio
The year 2008 was not a happy time for the Phildelphia Museum of Art. The Wall Street crash resulted in almost immediate reductions in revenues and contributions and, even more troublesome, a significant drop in the museum's endowment, roughly $16 million in fiscal 2008. This toxic budget brew led to lay-offs, a salary cut for senior personnel, an increase of $2 in an individual admission fee, and, most nettlesome, the reduction of pay-what-you-wish Sundays from every Sunday to the first Sunday of the month.

As significant, the museum was still reeling from the unexpected death the year before of its 12th director, Anne d'Harnoncourt, who went into the hospital for a minor operation and never recovered.

Did I mention that Gerry Lenfest, trustee chairman, had also announced his retirement? This, the same Lenfest who was a multi-million plus annual donor to the museum and who was the board of trustees.

That was the gloomy welcome mat laid out for Timothy Rub, 58, who joined the museum as its 13th director.

Fiscally-speaking, the PMA wasn't a shadow of its former shadow, as once overseen by D'Harnoncourt and her budget guru, Gail Harrity.

Theirs was a quite handsomely profitable, yes, profitable, non-profit. Until the Wall Street bust, the late director and Harrity, the museum's chief operating officer, presided over a fairly robust, solvent institution which, according to then contemporary figures, showed a $2.7-million profit in fiscal 2008. In addition, net assets increased by almost $30 million from 2007 to 2008.

'The Museum raised a remarkable $97,416,079 in fiscal 2008,' Lenfest reported in the 2008 Annual Report, 'including $30 million from the City of Philadelphia for capital projects.'

Robust? Solvent? Yes. But the museum's fiscal soundness also relies on a lot of freebies.

For example, take that $30-million 'grant' that Lenfest referred to, slotted for, as Gail Harrity noted, 'historic improvements' to the museum's main building. Actually, it wasn't as much a 'grant,' or an altruistic gift, as it might at first seem.

When the museum moved to the Benjamin Franklin Parkway in 1924, its charter established city ownership of the new building. The museum was then its tenant. The $30 million? Call it just regular maintenance, an expense any conscientious 'homeowner' would budget.

Moreover, as part of its on-going annual financing, the city 'donates' an unrestricted $2.5 million and foots a utility bill of about $3.4 million.

No biggie. This arrangement is similar to the relationship shared by the Metropolitan Museum of Art and the City of New York. But with a catch.

Because the Met is also publicly funded -- as well as privately, of course -- its charter requires that museum admission be free. What free has actually meant over the years has been subject to much semantic parsing and controversy. But ultimately, it came down to the current admission fee policy -- pay what you wish, but at least a penny.

Theoretically, the Philadelphia museum should have been guided by a similar policy. But traditionally, it hasn't been held to the Met's standard. This, though even millions more pour into museum coffers from a half dozen other tax-payer funded agencies, not including the state's annual contribution, of course.

Last year, that totaled between $25-million and $50-million.

The city also kicked in $25-million to $50-million.

The Philadelphia Authority for Industrial Development was good for between $5-million and $25-million.

And special state cash infusions, like the $40 million donated last week by the state Redevelopment Assistance Capital Program. (Read, Governor Edward Rendell's cultural slush fund).

At the end of the day, this taxpayer money is, ahem, your admission fee. Are you reading me?

There's another significant difference between the museums' admission policies. Again, it has to do with the price of admission. No, not that admission. Rather, the 'price' museum trustees need to cough up to sit on the board.

At the Met, with the likes of Morgans and Rockefellers formerly deciding the museum's fortunes, expected, even demanded, annual gifts of $1 million or more -- much more -- were typical. They still are.

At the Philadelphia museum, in contrast, some trustees unbelievably now get away with paltry annual contributions, as defined in the annual report, of between $1,000 to $4,999. (To my mind, unless you've donated 20 Picassos under a irrevocable Will, nothing less that $1-million per annum will do).

In stark contrast, Lenfest, one of Philadelphia's great philanthropists, donated more $75 million in 2009.

The good news? Rub arrived just in time for a Welcome Wagon gift from Governor Rendell and Mayor Michael Nutter: an extension of the no sales tax on museum admission fees.