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In a sign of difficult times behind the scenes at Balboa Park, a ratings company has downgraded the credit rating of the Natural History Museum because of concern that it’s not making enough money to pay $12.4 million in debt.
The museum has suffered major losses in attendance during the recession, especially in comparison to the crowds it drew during high-profile Pompeii and Dead Sea Scroll exhibits.
But the museum’s chief operating officer said the move doesn’t affect the facility directly, and he promised it will pay a hefty upcoming debt payment on time. “Our operations go on as normal,” said George Brooks-Gonyer, who’s also the museum’s chief financial officer.
The credit-rating downgrade, from B1 to Caa2 in the Moody’s Investors Service ratings system, means that lenders will require a higher rate of interest in return for taking on the higher risk of lending to the museum. Technically, the bonds were and still are “junk” bonds because of their risk to lenders.
In essence, the downgrade means that Moody’s thinks it’s become more likely that the museum will not be able to pay off its debt. Bloomberg.com reported on the downgrade earlier today.
“The downgrade and outlook revision reflects Moody’s ongoing concerns about the financial health of the museum,” Moody’s said, according to Bloomberg.com. “Fund-raising overall continues to remain weak given the current economy.”
Brooks-Gonyer confirmed that museum attendance slumped by 44 percent and membership by 45 percent in the 2008-2009 fiscal year, which ended on June 30, compared to the previous one.
According to the museum’s annual statement, income from ticket sales fell from $12 million to $4.7 million between 2007-2008 and 2008-2009. Contributions dipped too, from $5.9 million to $4.1 million. However, the museum spent much less on exhibit costs and more on science and research.
The museum had a $28 million budget in the 2007-2008 fiscal year, much higher than usual, Brooks-Gonyer said. That was when the Pompeii and Dead Sea Scrolls exhibits came to town and drew big crowds.
Then the recession hit. According to Bloomberg, The museum laid off 15 of its 100 employees during the 2008-2009 fiscal year. Bloomberg reported that attendance met only half of projections for a recent “Body Worlds” exhibit of preserved body parts and cadavers.
Brooks-Gonyer said the museum’s $12.4 million in debt is the remainder of a $15 million loan that it took out to help fund a 90,000-square-foot expansion in 2001. The expansion cost about $35 million, with the majority of the money coming from fundraising, he said.
The city owns both the main museum building and the expansion. It leases them to the museum for free.
The museum expects to make a $750,000 debt payment by the deadline on Jan. 1, Brooks-Gonyer said. The museum does have money allocated for bond payments, although he said it did spend most of its reserve to get through the 2008-2009 fiscal year.
This fiscal year’s museum budget is about $12 million, Brooks-Gonyer said. “Right now, we’re anticipating meeting our budget. That last year was challenging for us and everybody else. So far this year, we’re on track to hit our plan.”
— RANDY DOTINGA