Montclair’s Multi-Tasking Art Endowment: The Guggenheim Did It First

In her Mar. 26 NY Times article (scroll down) describing the planned deaccessions by the Montclair (NJ) Art Museum, Carol Vogel reported:

Officials at Montclair were quick to say that the proceeds from any sale of art would go ONLY [emphasis added] toward purchasing other works, a practice that is consistent with the Association of Art Museum Directors policy.

But James Panero, in his article for yesterday's Wall Street Journal, tells the real story: Interviewing the museum's new director, Lora Urbanelli, he discovered that some proceeds from the planned sales, while eventually intended to fund art purchases (as required by the ethical guidelines of AAMD), will first be used to keep the museum's endowment at the level required to satisfy terms governing the institution's tax-exempt bonds, which had been issued to fund its expansion.

James says that "nothing in the AAM [American Association of Museums] or AAMD rules explicitly prevents museums from selling their art..., earmarking that revenue for future acquisitions, and then using the endowment money raised from the sales to back their loans."

I disagree.

As I wrote for a February 2003 Art in America article about an institution that tried this gambit before---the Guggenheim, AAMD's guidelines don't indicate that deaccession funds can perform double duty as bond collateral. On the contrary, they clearly stipulate that "funds (principal and interest) received from the disposal of any deaccessioned work of art must be used ONLY [emphasis added] for the acquisitions of works of art."

Here's more from my AiA report on the Guggenheim's prior misuse of deaccession funds:

The Guggenheim's reclassified funds for art purchases [obtained from deaccessions]...have enabled the museum to keep its endowment above the $35-million level required under the terms of a letter of credit collateralizing the bonds for the museum's expansion....

This is not the first time that the Guggenheim has put art-acquisition monies to a second use. In 1995, the museum gave itself a loan of $2 million from art-purchase funds, which it intended to repay by the end of 1996, according to its then deputy director for finance and administration, Robert Gebbie. When asked about this recently, museum officials said that the loan had been repaid.