Kate Taylor reveals the troubled finances of the American Folk Art Museum. The museum on 52nd St. in Manhattan borrowed during the boom and is unable to meet its obligations under a New York program that acts as a conduit through which cultural institutions can borrow.

All bondholders have been paid on time. But for months the museum has been unable to make payments into a debt service fund as required under its agreement with New York City’s Trust for Cultural Resources, the public benefit corporation that issued the tax-exempt bonds for the project.

The next payment to bondholders, in January, is to be covered by the bond insurer, ACA Financial Guaranty. […]

The museum’s director, Maria Ann Conelli, said that, with layoffs and other measures, the museum had cut its budget to $7 million for the 2011 fiscal year, down from $8.5 million in 2010 and $10.3 million in 2009.

[…] Over the years attendance and revenue figures have fallen far short of the projections made while the new building was being constructed. At that time it was predicted that attendance would reach 255,000 a year by 2005 and generate $1.7 million in revenue.

Actual attendance was half that in 2005, and attendance today, though growing, remains at 160,000 a year. Admission revenue was $306,000 in the 2009 fiscal year, according to the museum’s draft financial statements.

The cost of operating the building, meanwhile, has been higher than expected, and the museum’s tax returns show that in recent years expenses have outpaced revenue. Net assets, which were $26 million in June 2002, had dropped to $3.1 million by June 2009.

Debt Problem Has Museum Scrambling (New York Times)