Three years after the $83 million endowment campaign to support Charlottes new museum district ended, collections on pledges are lagging by 25 percent.
And, according to new projections, when the final money arrives, it will be about 6 percent short of what was promised. Already, $5 million in pledges largely from people or businesses no longer in Charlotte are considered uncollectible.
That means Discovery Place and attractions of the South Tryon Street arts district Mint Museum Uptown, the Bechtler Museum of Modern Art and the Harvey B. Gantt Center for African-American Arts + Culture are getting less money this year to pay to operate their buildings. As part of the campaign, a $56 million endowment was to be created to ensure they would have help meeting operating costs such as security, janitorial services and utility bills.
Two key factors are to blame for the shortfall, said Robert Bush, interim president of the Arts & Science Council: Payments have slowed on some pledges because of the recession. And some major pledges received late in the campaign are structured to pay off over a decade, meaning the final money wont flow in until 2023.
It means there is less principal for investment earnings.
We had projected at this point about $80 million in payments and earnings, Bush said. And were just about at $60 million. We dont have everything wed thought we would have.
While some of the museums recognized as early as 2011 that the yield from the facilities endowment money for security, janitorial services and utilities would fall below projections, the scope wasnt known until three months ago.
For institutions counting on using endowment money to help pay their bills, the news was another calamity in an era of dwindling resources.
Launched in 2006, the $83 million endowment was aimed at providing a long-term income stream for uptown museums, particularly those in the Levine Cultural Campus on South Tryon Street the Gantt, Bechtler, Knight Theater and Mint. A big part was the facility endowment of $56 million, which would help offset the operating expenses.
That arrangement was established when Charlotte and Mecklenburg County agreed to use tax money including an increase in rental car fees to pay $159 million for building the cultural campus.
In exchange, arts backers would raise money for the endowment to free the city of maintenance costs, which it pays for other entertainment venues it owns, including the Blumenthal Performing Arts Center and Time Warner Cable Arena.
But collections for the endowment have lagged since the campus came to life in 2010.
On May 8 at the Foundation for the Carolinas, which administers the endowment and manages investment of its money, institutions were given new estimates of how much the endowment would pay. They were below the projections made when the drive began, in large part because of the nations deep recession and its effect on pledges and the investment portfolio.
Some would get millions less than expected.
As we learned more about the endowment, it confirmed what we had suspicions about, said Toni L. Freeman, chief operating officer of the Mint. It is not going to generate the amount we had anticipated.
Recognition took time
Scott Provancher, a fundraising consultant and former president of the ASC, said problems with the endowment became apparent over time, such as the $5 million in pledges that were voided.
We didnt anticipate that high a pledge write-off, he said. It turned out there were significant pledges in there that wouldnt be fulfilled. No one was anticipating that.
Another problem sprang surprisingly from the early success of the campaign. About $50 million was invested when the stock market crashed in late 2008, pulverizing value and dividends over succeeding years.
Assumptions made during healthy economic times envisioned the investments paying 6 percent, which could be added to the principal during the campaign and grow the base. Now, long-term assumptions of dividends are lower.
Then, big-money pledges came in at the end of the campaign, cutting the time they could draw interest.
In April 2010, philanthropists Leon and Sandra Levine rode to the rescue of the sputtering campaign, which was $20 million short. Through the Leon Levine Foundation, they pledged $15 million, which was joined by a $5 million pledge by Duke Energy chief executive Jim Rogers through the Duke Energy Foundation as a tribute to the Levines generosity.
But it will take longer for the bulk of that money to attract interest because, for example, the Levine pledge comes in installments over the next decade.
Provancher said the complexities of the endowment emerged over time. By this spring, when the stock market settled and the depth of no-show pledges was known, new projections were made.
When you look back on the whole process, you wish youd communicated more, even if was to communicate that we didnt know, Provancher said. In some folks minds, there was some silence that they took as maybe us knowing something but not telling them. We were just figuring it out.
Impact on Tryon Street
This year, the endowment is expected to yield about $700,000 for the Mint. By 2024, that payment is projected to be about $972,000 annually.
But even now, the Mint must find money elsewhere to cover operating costs. For example, museum security is budgeted for $522,000 this year, and the museums utility bills run about $600,000 a year. Money from the endowment cannot be spent on operations at the Mints Randolph Road campus. About 70 percent of the Mints expenses are for its uptown building, Freeman said.
While the museum is expecting a balanced budget this year, the Mints board has authorized administrators to reach into reserves if necessary to cover costs. Complicating the picture at the Mint is a major exhibition, Inventing the Modern World: Decorative Arts at the Worlds Fairs 1851-1939, which opens Sept. 22 and occupies two floors of the Mint Uptown and requires additional security staffing.
To economize, the Mint has cut hours and closed on Tuesdays beginning this month.
As part of the overall cultural fundraising drive, the Mint was promised $1.8 million for capital expenses. But that was to come from the end of the drive, assuming all the pledges came in. At the meeting at the Foundation for the Carolinas, it was confirmed that the $1.8 million was not expected to be paid.
Cushion at the Bechtler
Next door at the Bechtler Museum, economy moves are also in effect. This year, to save $15,000 on security, the museum trained four part-time docents to watch over the collection while interacting with visitors in the galleries.
Because it opened in 2010 at the depths of the recession, the museum has always been conservatively budgeted, said Christopher Lawing, vice president for programming and research. We started out lean. We had to, he said. Many staff members have multiple areas of responsibility.
It didnt spend $700,000 of its endowment allocations as a safety net against unexpected costs. It is working to find more sponsorships and members, he said.
Its amount from the facilities endowment this year is about $160,000, down from an expected $250,000. This year the Bechtler has budgeted $215,000 for security, maintenance, janitorial and utilities.
Now in its fourth year, the Bechtler is entering a period in which it becomes eligible for certain government grants and will be able to seek other grants and support when it becomes accredited, as expected, by the American Alliance of Museums this fall.
Feedback from visitors and members, Lawing said, indicates they are eager to see the museum grow and add services. We could really grow and expand if not for these financial headwinds, he said.
Concerns at the Gantt
Across the street, the Gantt is getting $172,000 from the endowment this year. Originally, it had been expected to get $250,000.
It takes us close to $300,000 to operate utilities, security, those kinds of things, said David Taylor, the centers president.
Now, the Gantt is re-evaluating its operations and looking for efficiencies.
I dont want to tell people we dont have the full level of security, but those kinds of things are impacted, Taylor said. One way the Gantt saves on security is through technology. Guards carry iPads that are connected to security cameras. They can see around the building, not just the area theyre in.
Taylor doesnt think the Gantt will cut hours like the Mint, but said he couldnt rule it out. As bold and painful as it may be, it may still be something we might have to do, he said.
Changes for Discovery Place
North on Tryon Street, Discovery Place has not taken any endowment money yet, but that will change this year.
As part of the deal to establish the endowment, the city of Charlotte has cut its support for operations at Discovery Place by a third each year for the past three years. This will be the first year without the city helping on utilities, cleaning and security costs.
John Mackay, president of Discovery Place, said the museum wanted to build up its portion of the endowment and potential earnings from the larger principal by leaving it alone as long as possible. This year, the museum is planning to take $650,000 for operational costs. Last year, those expenses were about $737,000, he said.
By leaving money in the endowment, Discovery Places principal has grown from about $11 million to $13.6 million.
Discovery Place has built up healthy reserves, Mackay said, in part because of income from major exhibitions in recent years, including Body Worlds, Dead Sea Scrolls and Pompeii.
Were doing OK, Mackay said. But the question is, what does the future look like with the overall decline in philanthropy? We need to look out two or three years and really need some answers on the malaise in the giving side.
This year, the states support for the museums grass-roots science fund which does science- and math-related programming for students across the region fell from $500,000 to $261,000. Before the recession, the museum got up to $1.4 million annually for programming from the ASC; that figure has fallen by about a third to around $913,000, he said.
Studying larger picture
Mackays concern about the future is the focus of a task force looking at long-range solutions to plunging financial support for arts and cultural institutions. Organized by the ASC, the Cultural Life Task Force will spend the rest of the year examining cultural fundraising in other cities, looking for ideas to raise more money here.
Even while support declines for cultural organizations, community expectations remain high. A 2013 ASC Cultural Vision Plan found that 65 percent of Mecklenburg residents believe that arts, science and history programs contribute to the communitys quality of life.
Without question, this community seems to respond to the arts and culture as being valued, said Kathleen Jameson, president of the Mint Museum. My concern is that there is a disconnect with investment.