Why the Parkway Barnes will fail

The making of a disaster: The new Barnes and its financial projections

Gillman: Dubious assumptions.
Gillman: Dubious assumptions.

On July 3, if all goes ill, the Barnes Foundation in Lower Merion will close its doors for good after 86 years, and, in about a year's time, will reopen for business in the white elephant on the Ben Franklin Parkway designed by Tod Williams and Billie Tsien.

What happens next?

According to Philadelphia's civic boosters, Philadelphia will become a "world-class" tourist destination, money will roll in over the barrel and, in due time, Albert Barnes will cease turning over in his grave, having realized his error in stashing his incomparable collection of post-Impressionist art away in the wilds of Merion.

But, seriously, what will happen?

Curiously enough for such a major venture— Philadelphia's largest civic makeover in a century—no public study of the revenue potential (and costs) of the new Barnes, nor any environmental impact statement, has been conducted. Both of these evaluations are required by law, but, hey, it's Philadelphia.

The Barnes itself commissioned a revenue study but has never released it. However, its director, Derek Gillman, published a summary version of it about a year ago in the Inquirer that indicated its major assumptions. My friend Tom Freudenheim— formerly assistant secretary for museums at the Smithsonian— and I crunched Gillman's numbers and published our findings recently in the Los Angeles Times. Herewith a less circumspect version of what we found.

Gillman's estimates

Gillman estimates that the annual cost of operating the Parkway Barnes will be slightly more than twice as much as Merion, which he gives at $5.5 million. Let's call it $12 million, which also happens to be the cost estimate given in the Barnes Foundation's petition to move the collection eight years ago. Of this sum, according to Gillman, 60% ($7.2 million) will come in attendance-based revenue (tickets, parking, special events, etc.), 20% (or $2.4 million) from endowment earnings, and 20% (another $2.4 million) from private gifts.

Let's begin with the endowment. To earn $2.4 million a year at, say, 5% (which precious few investments bring these days), the Barnes would need a $48 million endowment. Let's round it to $50 million, the sum Judge Stanley Ott recommended the Barnes raise in granting permission to move the Barnes in 2004.

To meet the anticipated expenses of running the Barnes when and if it opens for business next year, such an endowment must be in place and operating now. But the Barnes has made no announcement of having raised $50 million in endowment funds. In fact, it's made no announcement of having raised any such funding at all. So how big a hole is that in the Barnes budget to begin with? Anything up to $2.4 million.

What private gifts?

As for private gifts, raising $2.4 million annually from private donors is another steep hurdle. Since the Barnes took over its own fund-raising from the Pew Charitable Trusts in 2006, it has announced a total of $12 million in gifts—but those are building funds, not operating funds, and even those funds are still far short of the $50 million needed to finish the Parkway Barnes. Only the Pennsylvania taxpayer has come (albeit involuntarily) to the rescue, to the tune of $47.45 million from the state's famous $100 million stealth appropriation to move the Barnes in 2001.

In other words, the Barnes has yet to demonstrate the slightest capacity to raise private funding on a continuing basis. It failed do so in 2006, when times were still flush; it's doubly unlikely to do so in the midst of a prolonged depression.

The likely shortfall here? Again, anything up to $2.4 million.

Alice in Wonderland

The biggest hole, though, lurks in the largest revenue assumption— that 60%, or $7.2 million, which will supposedly come from attendance and ancillary services. It's here that we really enter Derek in Wonderland territory.

The American Association of Museums (AAM), which keeps tabs on such things, estimates the typical share of museum revenue coming from the gate at 15-20%, with a maximum upside of 25%. That's a third to a quarter of Gillman's 60% projections. Where do his numbers come from? No idea, really, but when the Barnes made its original revenue projections for the new Parkway museum in 2004, it put the gate percentage at 33%— an unrealistic figure itself, but barely half of Gillman's present assumptions.

Let's suppose the Barnes could actually take in 20% of its revenue needs from the gate, the high end of the AAM's own average. This forecast is no doubt optimistic, because the Barnes won't have the traveling exhibitions that other museums rely on to goose attendance; it won't even be able to rearrange its own collection, since its display is fixed by court order.

A goal quietly dropped

But let's cut Gillman a break (he needs one). At a 20% revenue share, the Barnes will take in $2.4 million. That leaves $9.6 million to be found from endowment and annual fundraising.

If we pursue Gillman's model and assume that an equal share is to come from each source, that means the endowment will have to turn over $4.8 million annually, and gifts a similar figure. Thus Gillman's original 60-20-20 model, with reality factored in, appears as a 20-40-40 model.

Some evidence exists that the Barnes anticipated that the heavy lifting would have to be borne by endowment and private giving. In 2006, the Barnes announced that it was setting out to raise not a $50 million endowment, but $100 million. The plan was quietly dropped a few months later, and the $50 million goal was reinstated. As I've noted, the Barnes has yet to announce that it has raised any endowment at all.

Best-case scenario

If we again generously assume that the $50 million goal can be reached at some point, then revenue from the gate ($2.4 million) and revenue from endowment (another $2.4 million) will leave $7.2 million to be raised annually by private giving. In this case— the best case that can be made for the Barnes— the scenario is not Gillman's 60-20-20 revenue model but a 20-20-60 model: the Gillman model stood right on its head.

Need I add that no mid-sized museum in the country actually subsists on a model where more than half its revenue comes from annual donations?

Short summary: The Barnes will most likely be headed from Day One just where the Philadelphia Orchestra is— to bankruptcy court. The difference is that the Orchestra, with its $140 million endowment, isn't really bankrupt at all, except for its executive leadership. But the Parkway Barnes almost surely will be, and soon.

Help from the city?

You may notice that I've omitted one ordinary revenue stream from this discussion: public financing. It's a rare museum indeed— public or private— that doesn't need to tap the people's purse in one form or another. But neither the revenue projections put forward by the Barnes in 2004 nor the estimates offered by Gillman last year make any mention of public funding. Why not?

To begin with, the City of Philadelphia, which does (for example) support the Philadelphia Museum of Art, has made it repeatedly clear that it won't subsidize the Barnes. Of course, it already has— by leasing four acres of prime real estate to the Barnes at $10 a year, and bearing the tens of millions of dollars in costs for relocating the Youth Detention Center that formerly occupied the site of the Parkway Barnes. (Somebody had to lug away all those kids.)

As for the state, in addition to the $100 million allocation (as well as a smaller grant of $7 million, enacted at the same time), there's the $80 million capital development bribe ponied up in 2004 to compensate Lincoln University for dropping its resistance to ceding its control over the Barnes board. That's plenty of generosity from Harrisburg, especially considering that a quarter of the money could have put the Barnes in Merion on easy street. No wonder the well is a bit dry there.

The Barnes could qualify for annual federal funding as a National Historic Landmark site. The U.S. Department of the Interior has already ruled it qualifies for such a designation— but only in Merion, and with the gallery collection intact there. Even in America, new buildings don't qualify as historic sites.

The Merion alternative

What to do? The answer is blindingly obvious: Keep the Barnes collection in Merion. Its operating costs there are less than half what they'll be in Philadelphia. They can be reduced further by a few prudent economies, such as cutting director Gillman's inflated salary (which is more than twice that of his immediate predecessor). The Barnes in Merion could also tap federal revenues for historic sites, as Independence Hall and Valley Forge Park do.

The big myth about the Barnes is that it can't survive financially in Merion. Obviously, it did so for many decades. Its operating deficits in the early 2000s were willfully misrepresented. I have checked all the available Barnes 990 filings with the Internal Revenue Service for the past decade, and at no time did the deficits it reported to the government amount to more than a third of those the Barnes claimed to be suffering when it applied to move to Philadelphia.

Halfway decent (and also honest) management, competent fund-raising, and Landmark support could keep the Barnes where it is and as it should be. It will still be the only option that can preserve the Barnes collection intact when the disastrous Parkway experiment has failed.♦

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