Cultural organizations in financial exigency: Philadelphia; New Orleans; etc.

In preparation for a forthcoming article, recently I interviewed Dan Biederman, the person who led the revitalization of Bryant Park in New York City starting in 1980--he continues to manage the park and now helps other communities with similar projects--and he was talking about his approach, which is heavily programming focused, but also on laying out the cost to program and operate the space and to secure commitments to funding for future years.

Without having "funding in the bag" for future years, such projects are much more likely to fail.

20% of the $150 million cost of a new facility for the National Museum of American Jewish History was covered by debt.

That comes to mind concerning recent reports about the bankruptcy of the National Museum of American Jewish History in Philadelphia ("National Museum of American Jewish History files for bankruptcy protection," Philadelphia Inquirer) and the problems experienced by the Southern Rep Theatre in New Orleans ("Southern Rep Theatre lays off staff, cancels show amid financial shortfall," New Orleans Times-Picayune).

The former Rose de Lima Catholic Church was converted into a cultural center, with Southern Rep Theatre taking on the main church building as its presentation theater ("Southern Rep finds new home in former church," NOTP

In both cases, the organizations expanded to new facilities, taking on considerable debt in the process, as well as significant increases in annual operating costs, without having secure funding commitments in place to cover the increased costs going forward.

Loans are bad for nonprofits because debt service payments are large and never ending. The first thing I thought of when reading about the NMAJH were my written criticisms of the DC Cultural Plan draft and its discussion of how to fund the arts through loans. Most arts organizations don't generate net profits after operations.  Therefore it's difficult to come up with the payments for debt service.  Recommendation to rely on loans is setting up arts organizations for failure.

The DC area has plenty of examples of arts organizations that didn't have the money to pay off loans and either shut down (Artisphere, various theatres) or restructured (Historical Society of Washington, Signature Theatre, Source Theatre, Lincoln Theatre).

But there are plenty of examples around the country, especially among Opera Companies and Symphony Orchestras. Baltimore's Symphony has gone through wrenching changes because of funding shortfalls ("The BSO's financial situation was much worse than most people realized, documents and interviews reveal," Baltimore Sun).

Philadelphia's Please Touch Museum also went through bankruptcy a few years back over the same kinds of issues ("Out of bankruptcy, Please Touch Museum maps the future," PI).
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Projections for revenue increases in the new facility are usually too rosy.  One of the problems is that such plans typically rely on projections that significantly overstate future revenues from ticket sales at the larger facility and contributions going forward from patrons and philanthropic organizations.

So it makes sense for groups to tamp down such expectations, and raise more money in advance both for the capital program, and for endowments towards operations.

The need for community-wide arts funding systems.  "A comprehensive list of funding sources for arts and culture" discusses methods for community-scale approaches to arts funding, for both capital and operations.

According to a PI editorial, "What’s at stake for Philadelphia’s cultural institutions goes beyond brick and mortar," the City of Philadelphia is moving towards a more comprehensive approach to cultural planning and funding. From the article:

The Greater Philadelphia Cultural Alliance, an advocate for 460 arts and culture organizations in the region is preparing a new, five-year strategic plan for members to increase funding and audience-engagement, and boost the diversity and inclusiveness of
programming. Separately, the William Penn Foundation has given the city a $250,000 planning grant for the first-ever comprehensive, citywide inventory of Philly’s historical and cultural assets. Creating the inventory was among the recommendations of Mayor Jim Kenney’s Historic Preservation Task Force, which the foundation also supported. Local residents will get a chance to weigh in about historically significant places and cultural spaces in the communities where they live; this will help neighborhoods facing real estate development pressures to preserve what matters most to the people who live in them.

Need for ongoing monitoring of the economic health of local arts and culture groups.  Although almost more importantly, a kind of "cultural observatory monitoring operation" is necessary alongside such efforts, with the ability to step in as needed when problems occur (a number of smaller groups in Philadelphia, not necessarily nonprofits at times, but still important contributors to cultural production, have failed over the past few years).

In fact, recognizing that kind of need was how I got interested in cultural planning to begin with:

-- "Cultural resources planning in DC: In the land of the blind, the one-eyed man is king," 2007

Technical support organizations can help.  Separately, Philadelphia has CultureWorks, which calls itself a "management commons" serving as a fiscal agent and management systems provider for small cultural organizations, thereby increasing the individual group's likelihood of success.

A similar example, but focused on nonprofits more generally is the Nonprofit Incubator of Resources for Human Development.

WRT CultureWorks as a management commons, I've suggested similar kinds of organizational scale and support for parks (see item #6) and libraries, and for DC's Advisory Neighborhood Commissions ("Neighborhood capacity building and leveraging the power of proximity and networking).

The idea with parks and libraries is rather than force every little park or library to have its own separate legal group, have the master group take on those responsibilities while creating an "affinity group" structure to provide local residents with the ability to support their neighborhood sites, without those people having to take on "organizational plumbing" matters like getting nonprofit legal status.