Arts institutions feeling impact of ailing economy

Patricia Woodworth, chief financial officer at the J. Paul Getty Trust, which operates two museums in Los Angeles, said the shift in auction bond interest rates from 3 percent to 9.9 percent cost the organization some $650,000 between January and mid-March.

Luckily, the Getty was able to reconfigure its debt into a one-year bond that brought its interest down to 1.7 percent.

Other institutions have had similar problems, including the Los Angeles County Museum of Art, which borrowed $320 million over three years to pay for its new Broad Contemporary Art Museum wing and other construction. But it reached a deal to stem its losses through an arrangement that brings the county in as an investor.

Then there's Carnegie Hall, which issued $41.6 million in auction-rate bonds six years ago for construction of Zankel Hall, one of its three performance venues, and has seen its borrowing costs rise. Spokeswoman Synneve Carlino said officials there are, for now, riding out the storm.

"At this stage, there are currently no plans to refinance the bonds since the increase in our interest rate has been relatively small and, so far, manageable," she said in an e-mail. "However, as the bond market is unsettled at this time, we are watching to see what alternatives develop."

In Madison, Wis., the downturn in the economy is renewing concerns about the long-term viability of the Overture Center for the Arts, which was finished after several phases of construction just two years ago.

A trust fund created to pay back an $87 million construction bond and a $27 million loan and to pay for long-term facility improvements has dipped to about $100 million from about $104 million last summer.

That's because its investments have earned less than 3 percent in the last year instead of the 8.25 percent required to meet its obligations, said Dana Chabot, treasurer of the Madison Cultural Arts District, which runs the center.

Overture Center President Tom Carto said the center could face problems starting in 2013 when expensive maintenance projects will be required.

"We need to plan for that and make sure we have reserves to meet those needs in the next 10 or 20 years," he said.