Field Museum faces several financial challenges
BY DAVID ROEDER Business Reporter December 21, 2012 6:52PM
The Field Museum in Chicago, Ill., on Tuesday, December 18, 2012. | Andrew A. Nelles~Sun-Times Media
Updated: January 24, 2013 6:38AM
The elephants will remain. Nobody is evicting Sue the Dinosaur. And the mummies can continue to rest in peace — albeit on public display.
The Field Museum is facing a financial squeeze, but don’t think in terms of jarring change in the way it operates. If all goes well, its status should remain assured.
Its roughly 25 million specimens mark it as one of the premier collections for natural history worldwide, and for Chicagoans it’s been a hometown treasure since its 1894 opening in the afterglow of the World’s Columbian Exposition.
The museum, however, is worrying about its finances. To understand why, think of the Field as a family with a huge old house to maintain with credit cards nearly maxed out and less income at its disposal.
Its home in Grant Park dates from 1921. While it has been modernized and expanded in recent years, the work has left it with a debt level that has drawn cautionary words from the bond-rating agencies Moody’s and Standard & Poor’s.
They’ve essentially warned that the museum shouldn’t be going back to the bond market anytime soon, although their ratings on the debt are still top-grade, said Jim Croft, Field’s executive vice president and chief financial officer.
The museum is running a deficit of about $8 million a year. That figure includes a line item that looms large in Croft’s world — depreciation. It’s how businesses and institutions account for the longterm change in an asset’s value. Machines need replacing, buildings need work and, in the museum’s case, exhibits need updating.
Depreciation most recently has cost the Field about $12 million a year. It’s a large chunk for an organization with annual revenue of about $68 million.
Croft said executives want to cut $5 million a year from operations. How to get there will be the subject of conversations with the museum’s staff of 525 through the first half of the year, he said.
Croft said while some layoffs might occur, none is planned now.
“There’s a certain feeling of uncertainty now [among the staff] but our commitment to research and collections is not going to change,” Croft said.
The rest of the deficit Croft hopes to make up with fund-raising. No capital campaign has been laid out but a few facts make clear its likely scope.
The museum has an endowment of around $295 million. It was as high at $320 million a few years ago before the recession took its toll, although Croft said the investments since then have recovered well.
Following a conservative policy of withdrawing less than 5 percent of the funds each year, the museum now relies on the endowment for $14 million in annual operating funds. Croft wants to increase that by around $4 million, which necessitates asking donors for $100 million in an added cushion.
The museum’s budget has these other issues:
† Chicago’s tax base: The museum gets operating funds from the Chicago Park District. Declines in property valuation can reduce that support, which has recently ranged from $5.8 million to $6.2 million per year.
† Debt: Paying it off costs more than $8 million a year. The museum owes principal of $167 million on bonds that don’t mature for years, although it has whittled down that amount.
It also has a $20 million line of credit. Croft said $5 million has been borrowed against it.
† Attendance: Museum attendance in most places is flat, and the Field’s tends to be 1.2 million per year, increasing only in years of blockbuster exhibits. Croft said no hikes are being considered in general admission fees, although charges for special exhibits might rise slightly rise.
† Pensions: The Field has an old-fashioned defined benefit pension for its employees, something many private employers have rejected because of cost. Its annual tab for Field is about $2 million.
Croft said the museum’s board has kept the pension as a valued benefit for the staff but will re-examine the matter again in 2013.
At some point, the financial problem becomes a communications problem. As Field President Richard Lariviere told the Sun-Times editorial board, his institution needs to be better at conveying the enduring value of its work and holdings.
Lariviere said that “for all of my experience in the philanthropic world, it is rarely the case that you can motivate people to make significant gifts if all you are doing is asking them to help you balance the budget.
“We have to balance the budget and then tell them the story of why this place is so important to them.”