The Delaware Art Museum will sell at least three, possibly four artworks, to raise money to pay off its debt, the News Journal has reported. The move would violate the rules of both the Association of Art Museum Directors and the American Alliance of Museums, likely bringing sanctions (similar to those visited upon the National Academy Museum in 2008) on the Delaware institution. “We’re basically shunned for a period of years,” acknowledged CEO Mike Miller.
The report doesn’t say which artworks are to be sold, but nothing given to the museum as a gift or bequest. The goal is to raise $30 million, in part to beef up the endowment but mostly to pay off the institution’s debt, acquired as a result of huge 2005 expansion during the museum boom. The News Journal lays out the picture in grim detail:
In 2005, the museum nearly doubled its size under a $32.5 million building project that was plagued with cost overruns and delays. To finance the expansion, the museum took out $24.8 million in tax-exempt bonds, which were expected to be paid in full by 2037.
But after the 2008 financial crisis, banks tightened their lending regulations. At the same time, the museum’s endowment declined sharply from $33 million to a low of $21 million. Faced with a dropoff in corporate and private donations and at least a decade-long operational deficit, the museum cut staff. …
The situation became so dire that the Delaware Museum had to default on certain stipulations in its debt agreement, Miller said, such as maintaining a sustainable debt-to-earnings ratio. That prompted Wells Fargo to demand repayment sooner. The museum has paid $5 million toward the debt principal over the last three years, along with annual debt-service payments of more than $500,000.
The institution owes a remaining $19.8 million on the bond.
Notably, the museum — which is known for its English Pre-Raphaelite collection — also currently lacks a director, after Danielle Rice left last August. It’s currently being run by Miller, a former chief financial officer for DuPont Merck Pharmaceutical Co. with “no arts background,” according to the News Journal, as the search for a new director has been put on hold while the board deals with the debt issue. Sixteen board members voted unanimously to sell the artworks, with three trustees absent from the meeting.