Folk Art Museum’s Financial Woes Mount

american folk art musuem wallyg Folk Art Museum’s Financial Woes MountThe American Folk Art Museum, just short of its 50th birthday, is facing mounting and severe financial pressures. On Jan. 1, the museum missed a payment due on municipal bonds originally issued a decade ago to fund the move to its West 53rd Street headquarters. (Bond insurance kicked in.) Earlier this month, the midtown institution disclosed in a forbearance agreement that it is $3.7 million short of the funds needed to make the next payment, due July, and that it has little expectation of being able to raise the funds in the interim. “The institution continues to anticipate that it will not be able to resume payments into the debt service fund for the foreseeable future,” according to documents prepared by Robin A. Schlinger, chief financial officer.

The strategy, beyond an initial round of cost-cutting: An aggressive fund-raising campaign, the courting of at least one big-name billionaire donor and a possible international exhibition of the museum’s treasures. Maria Ann Conelli, executive director of the museum, remains confident. “We’re still here,” she said, “and we have some exciting exhibitions coming up in the near future.” However, when asked specifically about defaulting on bond payments, she deferred to the museum’s lawyer, who did not respond.

Since its much-ballyhooed opening in its new space a decade ago, the well-loved but less-known museum has fallen short of its initial attendance and revenue predictions. Attendance, reaching only around half of the expected 1.7 million in 2005, is down another 18 percent since 2007. Only $306,054 was collected in revenue for admissions in 2009, the last year for which public data is available.

Many of the museum’s problems can be traced to Ralph Esmerian, long the museum’s most generous benefactor and its board president for 20 years. The fourth-generation jeweller and son of Raphael Esmerian, a gem dealer who emigrated from Paris in 1940, had been an extremely generous patron of the museum for many years, and a chief contributor to the purchase of its West 53rd Street location. But he was arrested on charges of bankruptcy fraud, wire fraud and concealing assets late last year. (He faces a preliminary hearing Feb. 22). Trustees and curators of the museum were shocked to discover that some items he had pledged to the museum were also pledged as collateral on his bank loans. (Sotheby’s ended up selling a handful.)

“For many, many years, Ralph Esmerian made up the museum’s deficit shortfall,” said David Schorsch, a noted antiques dealer who worked as his adviser. But he is no longer in a position to do so. Recently, Alice Walton, the Wal-Mart heiress, was courted-apparently unsuccessfully, a person close to the matter said-to take his deep-pocketed place. But she was turned off by an exhibit on show, “The Private Collection of Henry Darger.” Darger was an outsider artist, and his exhibition featured images of naked children.

Meanwhile, contributions to the museums have fell to $2.3 million in 2009 from $5.7 million in 2007. Cost-cutting measures have been implemented since, and some shows may run longer than they might have otherwise. But one of the museum’s bigger fund-raisers, its annual antiques show, generates almost negligible income for the organization, according to Sanford Smith, of Sanford Smith Associates, an art and antiques show management company that for years handled the event. “The people who should be bailing the museum out are sitting right there on the board,” said Mr. Smith, who urged them to “rise to the occasion.”

Some trustees have stepped up. There was a $250,000 challenge grant made by board president Laura Parsons and her husband, Richard, in 2010, matched by the combined contributions of a variety of donors, and a $125,000 grant from Lucy and Mike Danziger, But that isn’t enough, and the museum is launching an aggressive fund-raising campaign and is in negotiations to take some of its masterworks on exhibit internationally.

And a blockbuster is coming. In March, the museum will bring an enormous red-and-white-patterned quilt display to the Park Avenue Armory, in the largest quilt collection ever exhibited in New York City. The huge 650-piece exhibit is on loan from collector Joanna Rose, and is open to the public for six days beginning March 25. While generating no new revenue directly, “the American Folk Art Museum is taking another important step in expanding and reaching new audiences,” said Ms. Conelli. “Visitors can then continue their exploration of techniques and form” at the museum.

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