* The Tribune ran a story not long ago about a $90 million bond sold by the Field Museum that it didn’t have enough resources to service. Some of the juicier parts…
Although the bonds, issued in September 2002, were rated as investment grade, there were signs that the Field might not be ready to take on that much debt. Less than a year before, museum staff assessed the Field’s bond capacity at only $50 million, according to a letter submitted to the state. […]
The loan was risky not just in size but in structure. Unlike previous bonds the Field took out, it allowed the museum to make lower interest payments up front and push off bigger ones until later. Meanwhile, no principal was due until the loan matures in 2036.
The bond pushed the museum’s total liability to $200 million — more than the $189 million in assets it had available to pay off debt, according to the Field’s audited financial statements. The Field’s total annual bond debt payment rose from $2.4 million in 2002 to $4.9 million in 2003 It now stands at $7.5 million.
Looks like those crazy no-principal mortgage loans which were all the rage right before the economy collapsed.
Keep in mind that Chicago’s elite financiers have always played a huge role on the Field Museum’s board (and on Bruce Rauner’s campaign, but that’s another story). And those guys appeared to do to the Field what some of them also did to the entire planet.
* Cooking the numbers…
After nine years of deficits, the Field finally started showing an operating surplus in 2009. But the improvement was due mostly to a change in accounting practices rather than a financial turnaround, according to a Tribune analysis of the museum’s financial reports. That year, the museum stopped counting depreciation — wear and tear on the museum’s building and exhibits — as an annual operating expense. […]
Yet the museum pointed out the surplus to its lenders in an August 2012 bond document filed a month before McCarter’s retirement. The filing did not highlight the new accounting method, asserting instead that positive operating results were accomplished through “the continued implementation” of the fiscal stability plan launched in 2010.
* Golden parachutes…
That same year, McCarter announced he would retire and the museum paid him an $874,375 bonus that more than doubled his overall pay from the previous year, according to tax filings.
* Which combined, of course, to force the Field to do things like eat its seed corn…
By 2011, the rating agency Standard & Poor’s had lowered its outlook on the Field’s 2002 bond. Facing the threat of a slip in its credit rating, the museum used money from its endowment to pay down $12 million of its debt — a move that most museums try to avoid because they depend on investment income from endowments to operate.
* And jack up entrance fees and cut the budget…
Lariviere also plans to cut the museum’s budget, which was about $63 million in 2011, by $5 million. He has said $3 million of the cuts could come from what used to be the museum’s century-old science departments, now merged into one.
The Field employs 27 curators, scientists who discover new species and uncover artifacts that illuminate ancient cultures. They help design exhibits but also collect specimens around the world and publish internationally known research. The Field had 37 curators in 2000 but lost 10 and has not replaced them.