UC Berkeley to Go Ahead With New Museum Despite Budget Woes

UC Berkeley vows to build museum despite finances

Phillip Matier,Andrew Ross

Even as financially strapped UC Berkeley is preparing to raise tuition 8 percent next fall, it has pledged to spend as much as $20 million in campus funds to help build a $96 million art museum.

Just where $20 million will come from, however, remains unclear - with campus spokesman Dan Mogulof saying only that it will depend on what pot of money is available when the time comes.

Mogulof insisted, however, that there will be "no tuition, no student registration fees and no state-allocated funds used."

It's been more than a decade since the 40-year-old, bunker-like UC Berkeley Art Museum and Pacific Film Archive on Bancroft Way was declared seismically unsound.

In 2001, the university dismissed the idea of a $70 million retrofit as being more costly than it was worth.

Instead, officials decided to build a replacement museum on a university-owned site in downtown Berkeley, and four years ago picked hot-shot Japanese architect Toyo Ito in hopes of attracting major donors.

However, as the economy tanked, so did the museum's fortunes.

When the museum found itself $100 million short of its fundraising goal, planners said goodbye to the $11.8 million they'd already spent - and opted for a more modest makeover of the old UC printing plant on Oxford Street.

The problem is, the university has pledges for only about half the $96 million needed to build and furnish the new museum.

And while UC Berkeley Vice Chancellor Frank Yeary insists the university has a robust fundraising effort in place, last spring he told the UC regents that the school was prepared to kick in as much as $20 million if donations came up short.

Campus officials cite a range of possible funding sources - everything from investment and endowment income to various campus programs that generate revenue.

"Ideally, money for such an activity would be primarily from private philanthropic sources," Academic Senate Chair Fiona Doyle said when asked about the university's $20 million pledge.

But then Doyle, who is an engineer, added, "I don't feel it's my place to tell (art department) colleagues ... that their own intellectual areas aren't as valued as others. ... I would need a lot more information to comment."

Meanwhile: The San Francisco Asian Art Museum is vowing to keep its doors open, despite the absence of a deal to end a financial crisis that has threatened to send the Civic Center institution into bankruptcy.

A letter of credit from lender JPMorgan Chase backing the museum's $120 million loan is set to expire Dec. 21. If that happens, the Asian Art's loan payments could skyrocket beyond the museum's ability to pay and its insurer could be hit with tens of millions in losses.

City officials plan to meet with all the parties this week to try to break the impasse.

"We are working to get this resolved," Mark McLoughlin, the Asian Art's chief finance and operating officer, said Friday. "The museum is not contemplating anything other than staying open for business and a vibrant future."

Let's hope so.

This article is from: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/11/21/BA4N1GETOH.DTL#ixzz16gQNqtgc

San Francisco's Asian Art Museum Fights For Financial Survival

Money Woes Threaten Museum

San Francisco's Asian Art Showcase Is Latest Institution Stressed by Soft Economy

Brian Frank for The Wall Street JournalSan Francisco's Museum of Asian Art is facing a severe financial crisis as a result of the weak economy and rising loan payments. 

SAN FRANCISCO—The Asian Art Museum here is facing a financial crisis, the latest—and one of the largest—in a string of museums to suffer from problems amid the weak economy.

Officials of the Asian Art Museum, which showcases more than 17,000 artworks from Asia and has an annual operating budget of about $17 million, are currently negotiating with J.P. Morgan & Co. to keep loan payments from increasing, said the museum's chief financial officer, Mark McLoughlin. The difficulties date back to a 2005 refinancing of more than $100 million of debt that eventually drove loan payments sharply higher.

Mr. McLoughlin said the museum has hired a bankruptcy lawyer to negotiate with creditors, though he added that the institution doesn't plan to declare bankruptcy.

A lawyer for J.P. Morgan declined to comment on the matter.

The Asian Art Museum's troubles come as many museums face financial hardship because of the weak economy. The Magnes Museum in Berkeley, Calif., said earlier this year that it couldn't afford to stay open, and would donate its collection to the University of California. In New York, the Chelsea Art Museum may fold after its founders' company declared bankruptcy and the museum's collection was put up as collateral for a loan. Other museums are cutting staff and operating hours.

A survey earlier this year by the American Association of Museums found that in 2009, more than 30% of large museums like the Asian Art Museum reported "severe or very severe stress," due to problems like declining contributions and withering stock-market investments.

The Asian Art Museum is one of the more prominent institutions to be hurt. The museum is regarded as a premier Asian art institution and was built largely around a collection donated by Chicago businessman Avery Brundage. In 2000, the museum sold $107 million of bonds to help it move to its current building, near San Francisco's City Hall. Italian architect Gae Aulenti updated San Francisco's old public library to house the collection, which includes one of the oldest known Chinese Buddha sculptures.

For the Asian Art Museum, donations and income from visitors have remained healthy, Mr. McLoughlin said. But after refinancing the fixed-rate debt in 2005 to a variable-rate loan, the bond's insurer, MBIA Inc., had its credit rating downgraded in 2008 during the financial crisis.

That caused the museum's loan interest to skyrocket, at one point hitting 9%, Mr. McLoughlin said. The museum temporarily fixed the situation by getting a letter of credit from J.P. Morgan assuring that the bonds were a safe investment. That letter is set to expire on Dec. 21, Mr. McLoughlin said, raising the prospect that the museum's payments could rise.

If it does, the museum's debt payments could rise.

"The Museum's current financial predicament far eclipses any downgrade of MBIA's rating," said a spokesman for MBIA in an email. He said the insurer is "optimistic that the City and the Museum will be able to successfully address the multitude of problems facing this great institution."

In the spring, Mr. McLoughlin said, the museum hired Los Angeles bankruptcy litigator Bruce Bennett to negotiate with large creditors. Mr. Bennett didn't respond to a request for comment.

Even in a worst-case scenario, Mr. McLoughlin said, the collection and the building itself would be safe from creditors. That is because both are owned by the City and County of San Francisco, so in the event of a bankruptcy filing, creditors could only go after about $70 million of endowment money and minor assets owned by the museum's foundation, Mr. McLoughlin said.

Write to Justin Scheck at justin.scheck@wsj.com

This article is from: http://online.wsj.com/article/SB10001424052748703374304575622951057940936.html?mod=WSJ_ArtsEnt_LifestyleArtEnt_4