Eli Broad fires back at LACMA's rival plan to rescue MOCA
Given his extraordinarily deep pockets, it’s perhaps not surprising that billionaire art collector Eli Broad was thinking of a line from "Jerry Maguire" on Wednesday as he contemplated the high-stakes civic competition he’s in with the Los Angeles County Museum of Art to bail out L.A.’s fiscally threatened Museum of Contemporary Art.
“The answer is like in the movie: 'Show us the money,’ ” Broad said from San Francisco, where he’d just announced a $25-million Broad Foundation grant for stem cell research.
The question, he said, is which bailout carries a stronger guarantee of secure funding for MOCA’s endowment and exhibitions: his $30-million offer or LACMA's merger proposal, to which no price tag has been publicly attached.
With more than $2 billion in his foundation's coffers — even after a 16% drop over the past year — Broad thinks MOCA leaders can take his money to the bank.
As outlined by Broad, MOCA would have to match the first $15 million with fundraising of its own. That combined $30 million would replenish a withered endowment and cover an expected $5-million operating deficit. Then Broad would donate an additional $15 million over three years to help fund MOCA’s art exhibitions.
On Wednesday, LACMA director Michael Govan wouldn’t name an amount needed to finance the merger proposal, which would depend on stepped-up fundraising and savings from streamlined joint business operations. Instead, he laid out an argument for the merger that could be summed up with a different familiar phrase: The whole is greater than the sum of its parts.
“People love to support things that have quality and are sustainable, and they will give more money if something has great quality and is sustainable," he said. LACMA, which has enjoyed fund-raising successes for its multi-phase expansion and renovation program, and which has a pipeline to public funding that MOCA lacks, presumably would bring the lion’s share of the sustainability to the table.
Broad's $56-million donation for the Broad Contemporary Art Museum, plus $10 million more for art purchases, is the biggest single chunk of LACMA's capital campaign to date. But the billionaire's partnership with the encyclopedic museum became strained in January when he said he had decided not to donate his collection of about 2,000 contemporary works. Instead, he has kept them under his own Broad Art Foundation, which lends art to museums around the world.
Merger specifics such as how many of MOCA’s curators and others on its 94-member staff would keep their jobs would be worked out by the two museum boards, Govan said. Strong curators would be vital to keeping MOCA “internationally distinctive” and free to organize the adventurous exhibitions it's known for, he said, but “do you need an internationally distinctive MOCA accounting department? No.”
MOCA's collection and exhibitions have earned it a reputation as perhaps the world’s best museum devoted solely to post-World War II art. But its inability to raise enough money for its ambitious programs since 2000 has put it in a pickle. With reserves dwindling steadily over the decade, MOCA’s problems went from chronic to critical when the world financial mess hit. The museum board's second meeting this week is scheduled for Thursday in hopes of choosing between the two rescue plans — and possibly deciding whether MOCA's director, Jeremy Strick, will continue in a job he began nine years ago.
At Tuesday’s meeting, Govan presented LACMA’s ideas for a merger. Thursday, it's Broad's turn. Broad said he's been invited to attend the board meeting and will answer questions MOCA's trustees have about his offer. Broad, who was MOCA's founding chairman from 1979 to 1984, is a life trustee of the museum, which means he has no voting rights. Until now, he said, it has been years since he had attended a MOCA board meeting.
“It’s been a very difficult process,” said Audrey Irmas, another MOCA life trustee who said she was in on Tuesday's long, inconclusive session. “Those of us who have been longstanding members of MOCA have this feeling of wanting MOCA to remain MOCA” and keep it configured as-is, in two downtown venues.
Govan has said the merger would reverse the roles of the two venues — making the larger, hangar-like Geffen Contemporary the lead space instead of the smaller, more formal Grand Avenue building. Under a merger, he said, MOCA exhibitions also would be mounted at LACMA’s Wilshire Boulevard campus, in the Broad Contemporary Art Museum and the Lynda and Stewart Resnick Exhibition Pavilion now under construction.
Broad wondered where an exhibition of MOCA's art would fit in BCAM: there's "a contract where two-thirds of the building has to be for the Broad collection," he said. "We've been loose with them, [but] they know what their obligation is, that two-thirds of the building was to show our collection."
Broad says he is irked by continued speculation that he has attached "conditions and all that stuff" to his offer to help MOCA. An unsourced New York Times report Wednesday said that "some board members have grown wary of Mr. Broad's offer" because it would "put him in the position to control the museum or its collections if the museum is not able to complete its fundraising efforts."
When MOCA leaders asked for his help, they agreed to raise the $15 million in matching funds, Broad said. The other understanding he said he has with MOCA is that if it accepts his offer, all donations to the museum's endowment would be "sequestered," so only 5% to 6% of the endowment could be spent each year. MOCA's troubles stem largely from failing to raise enough money, then borrowing heavily from the endowment to meet operating costs.
LACMA, too, is under unusual fundraising pressure, despite its recent successes. Questions about its long-range finances were raised in an Aug. 21 press release from Moody's Investors Service announcing Moody's A2 rating for $383 million in bonds LACMA recently issued. The new bonds refinance previous borrowing by LACMA to build BCAM and the Resnick Exhibition Pavilion, and carry out renovations to other buildings.
Moody's noted that LACMA had raised $307 million gifts and pledges to back its bonds, leaving a "significant" amount still to be raised. Operating costs also are rising — from $46.8 milion in 2006-2007 to $68.2 million in 2007-2008, according to the museum's financial statements — the larger amount reflecting the opening of BCAM. Expenses are apt to grow again with the addition of the Lynda and Stewart Resnick Exhibition Pavilion. Assuming that a merged MOCA would maintain its current programming level, LACMA would take on an additional $20 million in annual operating expenses -- offset by whatever savings could be realized from combining business operations, and whatever boosts in donations the merger would inspire.
Another bond-related expense for LACMA is the bank letter of credit needed to reassure investors that they'll be paid if the museum defaults. The arrangement requires LACMA to keep a certain amount of its assets in reserve, the Moody's analysis noted, or the museum could be declared in default or be placed under further restrictions that could limit its financial flexibility. Govan said the museum is "doing fine" in maintaining the level of reserves required under its letter of credit.
LACMA suffered a 7% loss on its investments in 2007-08, the Moody's report said, and as of June 30 had increased its bets on hedge funds and private equity investments to 20% of its portfolio, up from 5% in 2005. Govan said losses from this fall's financial meltdown have been in line with endowment losses of about 25% being reported by some other major cultural and nonprofit institutions.
While noting LACMA's challenges, the Moody's analysts gave its bonds a solid rating, citing the museum's strong community standing, its fundraising strength, and the funding kicked in by its landlord, Los Angeles County, which has reached about $20 million a year.
"Los Angeles is a very wealthy city, even in bad times," Govan said when asked about the challenge of having to raise $76 million to back the construction bonds.
LACMA's director said that before proposing the merger with MOCA, he sounded out prospective donors about whether they would help fund the costs, because no county money would be involved. He came away confident that the money would be there to replenish the smaller museum's endowment and absorb its operating costs. "We'd be crazy to propose this," he said, "if we didn't think it had financial gains for both institutions."
-- Mike Boehm
Photos: Eli Broad, Irfan Khan / Los Angeles Times; Michael Govan outside the Broad Contemporary Art Museum. Mel Melcon / Los Angeles Times; MOCA's Grand Avenue building, Liz O. Baylen / Los Angeles Times; MOCA's Geffen Contemporary, Liz O. Baylen / Los Angeles Times