Faced with a financial squeeze due largely to the cost of its massive expansion and renovation project, the Cleveland Museum of Art wants to divert income from art-acquisition funds in its endowment to help pay for the construction.
CLEVELAND—Faced with a financial squeeze due largely to the cost of its massive expansion and renovation project, the Cleveland Museum of Art wants to divert income from art-acquisition funds in its endowment to help pay for the construction. On Aug. 25, attorneys for the museum filed papers with the Probate Court of Cuyahoga County seeking permission to deviate from the wills of wealthy donors who died decades ago. Museum officials want to divert up to $75 million in income over 10 years from two funds in the museum’s endowment and from two outside trusts managed for its benefit. Proceeds from all four funds are normally restricted to the purchase of artworks.
Museum officials emphasized they’d like to use income—not principal. And because they don’t plan to draw the maximum amount of income from the art purchase funds, the museum would still have plenty left over for the art market. Last year, for example, the four funds in question were valued at $182 million, and generated roughly $16 million in income available for art purchases.
In its filing, the museum argues that if the original donors were alive, they would approve the request. And the probate court has ruled in favor of such a plan before: In 1955, apparently the only other time in Ohio history that a similar request was made, the probate court granted the museum permission to make a similar temporary divergence from the restrictions of three of the four funds it would like to tap now. Ohio Attorney General Richard Cordray supports the museum’s request, as do officials of Key Bank, which manages the two outside trusts. The museum further argues that it makes no sense to keep buying art that has to be kept in storage. The goals of the expansion are to expand gallery space by 41 percent and to add more room for storage and conservation—objectives which are in line with the mission of the museum and the intent of the charitable funds it wants to direct toward the building project.
Museum officials said the money would help narrow the gap between the $350 million cost of the expansion, designed by architect Rafael Viñoly, and the funds raised for the project so far. It would also help the museum retain its AAA Standard & Poors bond rating and keep interest rates low on a $90 million tax-exempt bond issued by the museum through the Cleveland–Cuyahoga County Port Authority in 2005. The museum enjoys an excellent credit rating, in part because of its wealth. Its endowment totals an estimated $558 million—down from the $810 million it was worth two years ago. Income from more than half of the total may only be used for operating expenses.
As for the Viñoly project, the museum is in a bind. Since 2002, it has raised $212 million for construction—no small feat in a city ranked among the poorest in the nation—but it still needs $138 million. Museum officials are confident they can raise the total, but not within four years. Extending the deadline for completion beyond 2013 and slowing or temporarily halting construction won’t help because it would only add to the final cost.
Museum director Timothy Rub, who will leave Cleveland later this month to become director and chief executive officer of the Philadelphia Museum of Art, said he sees no conflict between diverting the art-acquisition funds and the ethical guidelines of the Association of Art Museum Directors. Rub also said he sees no parallels between the temporary use of income from endowment funds and the recent deaccessioning of artworks to pay for operating expenses at institutions including the National Academy Museum & School of Fine Arts, New York. “The benefits of continuing the project and getting it up and done well is and should be the museum’s highest priority,” he said.
Ford Bell, president and CEO of the American Association of Museums, told ARTnewsletter, “We commend the Cleveland Museum for engaging the key stakeholders, seeking permission from the Attorney General and talking to the trustees. They have really gone the extra mile to get approval to do this right. In general it makes all of us a little nervous when money is spent in a different way than what it was originally intended for. We’ve been impressed with the way they went about it in an open way and did their due diligence.” Bell also confirmed that the museum had contacted the AAM beforehand to discuss the matter and says that using the income from acquisition endowment funds for the construction costs “does not violate any ethical standard” of the association.
In an e-mail to ARTnewsletter, Janet Landay, executive director of the Association of Art Museum Directors, said the organization was also contacted by the Cleveland Museum of Art regarding its proposal. “The museum subsequently provided us with a copy of its court filing and we are now in the process of reviewing it,” Landay wrote.
Copyright 2013, ARTnews LLC, 48 West 38th St 9th FL NY NY 10018. All rights reserved.