Listen to article \u2022\u00a00:00 min<\/p>\n
When art world veteran Daniel H. Weiss<\/a> took over the Philadelphia Museum of Art<\/a> in December, he quickly recruited a new team, including a chief financial officer and chief fundraiser. That team has begun to assess the museum\u2019s financial condition and what can be done about it.<\/p>\n The picture that is emerging is not a pretty one.<\/p>\n Preliminary figures seen by The Inquirer show that the museum ran a deficit of about $10 million on a budget of $76.5 million for the fiscal year that ended June 30.<\/p>\n That is on top of a deficit of $5.4 million for the year before, and leaders say the outlook does not promise to improve soon. For the fiscal year that has just begun, the museum anticipates the deficit will be comparable to last year\u2019s $10 million, but in planning the budget the museum has outlined the possibility that it could be as high as $15.9 million.<\/p>\n The shortfalls are the museum\u2019s largest in recent history, leaders say.<\/p>\n Weiss said the museum\u2019s financial situation is \u201csubstantial, but solvable.\u201d<\/p>\n \u201cI have no doubt that we will have a balanced budget in about three years,\u201d he said, \u201cbut we have real work to do to get there.\u201d<\/p>\n Financial pressures are not threatening the museum\u2019s ability to remain open, but the run of red ink cannot continue. The museum is covering the deficits by drawing on a pool of money that includes cash and reserves \u2014 sometimes referred to as quasi-endowment \u2014 whose use was not restricted by donors for any specific purpose. <\/p>\n \u201cThe way I would describe it is, we have a savings account for rainy days. We\u2019re spending it,\u201d Weiss said. \u201cWe need to stop doing that.\u201d<\/p>\n The museum\u2019s struggle to right its finances comes as it faces some urgent needs and considers the fate of key projects. Among the unsettled questions is how to pay for deferred maintenance to both the main building and the Perelman building, the annex to the north that was closed to the public during the pandemic<\/a> and never reopened. <\/p>\n The combined cost of work on the two buildings has a preliminary price tag of around $300 million.<\/p>\n As for a much sexier project, the museum\u2019s much-trumpeted expansion envisioned by architect Frank Gehry<\/a>: That will have to wait. Given the current challenges, the ambitious idea of carving out new spaces beneath the east terrace continues to be on hold; the timeline is uncertain.<\/p>\n \u201cIt is not, at this time, appropriate for us to be evaluating the feasibility of a very substantial new capital project which would be required to implement the Gehry plan,\u201d Weiss said. \u201cWe need to determine the priorities and sequencing of capital work that needs to be done. And over the long term, we need to figure out what this institution can afford in a sustainable way.\u201d<\/p>\n The famed architect died late last year.<\/p>\n The priority now is ringing the alarm that all is not well at one of the city\u2019s two largest arts groups (the other being the Philadelphia Orchestra and Ensemble Arts) and rallying support around a rescue plan.<\/p>\n Weiss said:<\/p>\n \u201cWe want to be transparent and we want to be accessible to people, and they have a right to know \u2014 it\u2019s their institution. But we don\u2019t want to do it in a way that turns people away. It\u2019s just an institution that needs repair. So how to tell that story is part of what we have to work on.\u201d<\/p>\n Ambitions despite deficit<\/p>\n The pool of money is finite, and the museum would like to stop tapping its reserves as quickly as possible. Instead of funding the deficit, it could be helping grow the nest egg.<\/p>\n Referring to what is being spent this year alone to cover the deficit, Weiss said:<\/p>\n \u201cThat\u2019s $10 million of assets earning at least 5% a year till the end of time we\u2019re foregoing. We\u2019ll never get that back.\u201d<\/p>\n And yet the museum does not expect to balance its budget this year or next.<\/p>\n \u201cWe anticipate getting within shouting distance of a balanced budget within three years. We don\u2019t have the luxury of taking longer,\u201d Weiss said.<\/p>\n Even as it struggles, the museum has not shelved ambitious projects. The idea of creating a new learning and engagement center on the north side of the museum is still very much in play, Weiss said. Design development for the facility could begin within a year.<\/p>\n Blockbuster exhibitions like the 1982 show of Nigerian art seen by 197,000 visitors or the C\u00e9zanne retrospective in 1996 that drew 548,741 are hard to come by, but the museum is working on a number of shows that it believes would draw 100,000-plus visitors each. <\/p>\n \u201cWe will have exhibitions that will be of very significant public interest that will draw large numbers that will be exciting and powerful,\u201d said Weiss, who declined to give specifics on the exhibits.<\/p>\n About the future of the nearby Perelman building, Weiss said the museum is searching for ideas.<\/p>\n On the one hand, the highly decorated art deco structure contains the library, art conservation studios, and administrative offices for which there is no space in the main building. On the other, the costs of operating and maintaining it are high. It is more building than is needed, and the location across two busy streets limits the number of visitors who will make the trip to reach it.<\/p>\n A revenue stream that\u2019s been flat<\/p>\n The museum\u2019s new leadership has analyzed finances from the last 10 to 12 years \u2014 a period that includes the pandemic, plus the periods before and after \u2014 and determined that the deficit is the result of a revenue stream that has not grown much, while expenses have.<\/p>\n \u201cFunctional revenue \u2014 contributions, admissions, membership, and earned revenue \u2014 has grown by only 0.3%, effectively flat,\u201d said Mitchell Wein<\/a>, the museum\u2019s executive vice president and chief financial and operating officer.<\/p>\n The museum has not fully yet developed a plan for reversing the trend, but is \u201cmodeling lots of scenarios and coming up with the best approach on how to do that,\u201d Wein said.<\/p>\n \u201cPart of this process is evaluating everything. Everything is on the table,\u201d Weiss said.<\/p>\n Reducing expenses in some areas will be considered, but that cannot be the only answer.<\/p>\n \u201cWe also know we need to focus on revenue generation and supporting the museum for the long term,\u201d Wein said.<\/p>\n But revenue from where?<\/p>\n Six keys to securing solvency<\/p>\n Ticket sales is one obvious place to look, but a big boost from admission is probably not in the cards. The museum once aspired to attract a million visitors a year, but that goal was floated before the pandemic, and the museum has not yet recovered its pre-COVID numbers. <\/p>\n This past fiscal year, the forecast called for 731,000 visitors; 672,753 showed up.<\/p>\n So the goal for next year has been adjusted down to 705,000, which the museum feels is more realistic. Attendance was 773,511 in the last full year before the pandemic.<\/p>\n