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LA Times Reveals Provisions Regarding Mergers in the 2008 Eli Broad/MOCA Agreement; USC Still Interested

"BCAM Born": Exterior of LACMA's Broad Contemporary Art Museum at the time of its February 2008 opening Photograph by Lee Rosenbaum

“BCAM Born”: Exterior of LACMA’s Broad Contemporary Art Museum at the time of its February 2008 opening
Photograph by Lee Rosenbaum

Mike Boehm of the LA Times has gotten his hands on the 16-page bailout agreement between Eli Broad and LA MOCA. That 2008 document, Boehm reports, “includes a four-page section concerning ‘significant actions’ that MOCA trustees can’t take with a simple vote. One of them is agreeing to be subsumed under another local museum—such as LACMA—before 2019.”

Here’s Boehm’s description of the merger-discouraging details:

The review process [for a possible merger] would begin with the appointment of an independent three-member “special committee” that could overrule Broad’s opposition and allow LACMA and MOCA to consummate a union—but not before the Broad Foundation had a chance to make a counteroffer.

The committee’s first task would be to determine whether “exigent circumstances” exist that would justify breaking the prohibition against merging with a nearby museum. The agreement defines “exigent circumstances” as “the inability of the museum … to operate without a … deficit for a period of two consecutive fiscal years,” or a situation in which it was at risk of “bankruptcy, dissolution … or violations of law or contractual obligations.”

Unmentioned by Boehm in today’s article (but discussed by LA Times art critic Christopher Knight during our participation together last Tuesday on KCRW‘s “Which Way, L.A”?) is the possibility of a merger with the University of Southern California (USC)—something that might provide an urgently needed boost to fundraising, while ramping up MOCA’s educational mission and keeping that museum’s own institutional identity largely intact (to a greater extent than would likely occur if MOCA were absorbed by LACMA).

Knight said this during our public radio conversation:

There is, in the contract between the Broad Foundation and MOCA for the 2008 bailout, a section that basically restricts MOCA from merging with any other art museum within a 100-mile radius of the [MOCA's] Grand Avenue building….It also specifically excludes from that prohibition [emphasis added] a merger with an educational institution, such as USC, which has also been discussed as a possible merger candidate.

Contacted by me today for information regarding any possible USC-MOCA talks, the university sent me this statement by Elizabeth Garrett, USC ‘s provost and senior vice president for academic affairs:

The university is in discussions with the MOCA about a possible partnership that would enhance the missions of both institutions. MOCA has a deep educational mission, along with its commitment to exhibiting the world’s most important and influential modern and contemporary art, and USC is one of the top research universities, which also hosts…six arts schools [as well as the Fisher Museum of Art]. Discussions are very preliminary at this time; any decision would be made with the values of both institutions firmly in mind.

Finally, I need to clarify my comments in this post regarding LACMA’s unrealized loss in fiscal 2012 on interest-rate swaps of $52.2-million. The museum’s interest-rate swaps are agreements with a financial institution that hedge against possible interest rate increases on LACMA’s variable rate bonds. The unrealized loss reflects the fact that the fixed interest rate on the swap is now, and has generally been, higher than the variable interest rates on the bonds.

I had somewhat misleadingly stated that the swaps’ unrealized losses “may ultimately turn out better.” In fact, if all goes as expected, that liability will completely “self-liquidate over the term of the bonds to which the swap is tied,” as LACMA’s director of communications, Miranda Carroll, told me. “At the end of the swap term, which is concurrent with the term of our bonds, there will be no gain or loss on the swap.”

The $52.2-million liability on interest-rate swaps in 2012 is not part of LACMA ‘s operating results, which Ann Rowland, the museum’s chief financial officer, recently sent to me, at my request. Those results showed a $3.48-million operating surplus in fiscal 2012.

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