Endowments are backbone of operations

By Tracie Dungan

Posted: November 5, 2011 at noon

Jason Ivester
Executive director Don Bacigalupi speaks on Wednesday, Sept. 15, 2010, at the site for the Crystal Bridges Museum of American Art in Bentonville during a sneak peek tour of the facility.

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BENTONVILLE — America's richest family gave more than $1.2 billion to Crystal Bridges in 2010, including three gifts totaling $800 million in endowments that serve as the foundation of the museum's ongoing financial support.

The Walton Family Foundation, funded by the heirs of Wal-Mart Stores Inc. founder Sam Walton, announced last year's gifts of more than $1.2 billion to the museum in a Sept. 23 news release. The amount included $403 million beyond the $800 million in endowments that the museum announced in May.

After hearing the news of the additional $403 million in September, Gov. Mike Beebe called Crystal Bridges "an international cultural beacon."

 "The Walton Family Foundation's unprecedented investment ensures that Arkansas will be home to a world-class destination for generations to come," Beebe said.

Dewey Blanton, a spokesman for the American Association of Museums in Washington, D.C., said the Walton family's philanthropy to Crystal Bridges has reached a historic level.

"I can't say this definitively, but it may be in the history of American museums, that in its founding, no museum has ever gotten this type of support," Blanton said. "The generosity of the Walton foundation and family has ensured that Crystal Bridges will be a pillar of American museums for years to come."

The foundation said in the news release that the grants totaling $403 million will fund artwork, general operating expenses and construction.

"This investment in Crystal Bridges Museum of American Art is an extraordinary gift to our region, the nation and the world," museum Executive Director Don Bacigalupi said. "It will improve the quality of life in our region while providing cultural and educational opportunities today and in the future.

In May, the museum announced a trio of endowments totaling $800 million from the Walton Family Foundation during a national media tour of the museum site under construction in Bentonville.

Bacigalupi said May 4 that Crystal Bridges  still will pursue gifts from outside private donors and other revenue sources.

But the earnings from one of the endowments alone — a $350 million gift expected to yield about $14 million annually at 4 percent — will finance roughly three-quarters of the museum's projected ongoing operations budget in its first year, he said.

The remaining endowments are $325 million for acquisitions, so the museum can continue building its art collection, and $125 million for capital costs associated with upkeep of its buildings and grounds and related "rainy day" expenses, he said. Proceeds from those two would be tapped only as needed.

"They're intended to fund the museum's core existence into perpetuity," Bacigalupi said. "These extraordinary gifts ... will allow us to turn to the community with confidence."

An endowment is akin to an investment savings account that generates interest or other proceeds as ongoing income for the recipient.

Bacigalupi said the budget for the museum's debut year has taken more estimating than a typical budget. Although there are other museums that provide some guidance, none is similar enough to Crystal Bridges for precise projections on how many visitors will come, how much money they'll spend at the museum or how long they'll stay, he said.

"There's no exact science to predicting that," he said, adding that the eventual costs of operating the buildings is another major unknown until after the first year.

In general, Crystal Bridges officials predict it will have about 150,000 to 300,000 visitors each year. That translates to about 411 to 822 patrons a day, if open seven days a week.

"We are prepared for smaller numbers than that, and we're prepared for larger numbers," Bacigalupi said, calculating the first year's operating budget between $16 million and $20 million.

Explaining the museum's business plan May 4, he presented a slide presentation that included a pie chart of the museum's projected operating expenses. It revealed 30 percent of Crystal Bridges' budget is expected to go for campus and building operations; 28 percent on programming, including curatorial, exhibition, education and library events; and 17 percent toward museum support services.

In addition, 12 percent each is expected in two areas: marketing and fundraising; and auxiliary services, such as the museum store, culinary services and other retail.

As for revenue sources, the museum plans two other major income categories in addition to the "investment income" category under which its endowment support falls.

"Earned income" will include sales from retail, restaurant and catering as well as from facility rentals.

"Contributed income" will include the museum's efforts at courting other gifts, grants, sponsorships, and its membership program.

Information for this article was contributed by Chris Branam of the Arkansas Democrat-Gazette.

This article was previously published in the Arkansas Democrat-Gazette on Sept. 24, 2011.

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