Jersey City Museum’s Debt Problems Come Front and Center as Arts Group Says it Hasn’t Been Paid

The Jersey City-based performing arts organization Surati says the debt-ridden Jersey City Museum has owed them about $30,000 nearly a year. The founders, Jayanta Banerjee and his wife Rimli Roy, say the museum has repeatedly told them they’d be paid when additional municipal money came through, but they are still waiting, and they came to this week’s City Council meeting to plead their case.

“We all are aware of the funding and the budget state of the museum,” Banerjee said at the meeting. “[But] we have not received three-fourths of the payment — $30,000. … Is there any hope for us, a rather small organization, to recover this money?”

Surati hasn’t gotten paid yet because the museum misappropriated funds, according to city business administrator Jack Kelly. He says the museum has admitted to him that it used Board of Education (BOE) money intended to fund performances by Surati and other organizations to pay off other debts instead.

“They’re behind on their mortgage; they’re behind on their utility bills,” Kelly said at Wednesday’s meeting. “There are a number of problems.”

There are indeed a number of problems for the 109-year-old institution, which laid off its staff and closed its doors for most of the week this spring, as it continued to sink under the weight of its own debt. (Museum officials did not respond to requests for comment this week.)

For one, the museum is heavily reliant on city funding, which has been cut in recent years as the administration grapples with its own budget crisis.

As museum leadership scrambled last winter in a last-ditch effort to “save the museum,” it sent representatives to City Hall for a meeting with Healy administration officials and staffers from the Cultural Affairs division. The museum, according to several sources, was looking for an emergency injection of funds — something akin to the $2.5 million “bridge loan” the city extended to the Liberty Science Center in late 2008.

But the timing could have been better. The administration was — and continues to be — in the midst of a full-blown financial crisis of its own, weighing a number of unpalatable solutions, including a double-digit property tax increase, city-worker layoffs and cuts to vital services.

So the city officials did what they could, offering assistance, expertise and help going forward. But they drew a line in the sand when it came to dollars — there would be no money handed out. The city also cut the museum funding by 25 percent last fiscal year, from $625,000 to $500,000.

The cuts in city funding are just one part of the problem, however. The recession has rocked corporate America and put government budgets of all stripes in peril, creating a toxic environment for nonprofit arts organizations, which rely heavily on charitable arms of corporations and state- and federal-funded grants. Museum leadership acknowledged the problem prior to this spring’s near-closure, as the museum made a renewed effort at expanding membership and small donations, with diversification and grassroots the new buzz words.

Speaking to JCI last November, Nancy Shannon, the museum’s then-director of development and marketing, was forthright about the need for new revenue streams.

“Our shortcoming (as an institution) has been relying on private funders, especially from the real estate and financial services industries, to underwrite our programs,” she said. “Now that the landscape has changed — perhaps for good — we need to make our individual supporters understand that we need to change, too, and ask them directly and often for their support.”

In the 2009 fiscal year, “individual support” accounted for just 2.2 percent of the museum’s $1.4 million in revenues; corporate, foundation and government support made up 86.7 percent.

Despite the push for new members, and what observers generally agree was more dynamic and diverse programming under its last executive director, Laurene Buckley (she left the museum shortly before its near-closure this spring), the financial hole — dug by what might ultimately be considered an ill-conceived expansion to the museum’s Montgomery Street space — is just apparently too deep.

For most of its long life, the museum was housed inside the Jersey City Free Public Library’s main branch on Jersey Avenue. But in 2001 it cut the ribbon on its very own space, a 38,000-square-foot former supermarket at 350 Montgomery Street.

While the Jersey City Redevelopment Agency donated the space, the museum borrowed a reported $11 million for renovations. As of this spring, the museum still owed millions of dollars related to the move, and its fiscal year 2009 budget shows a yearly payment of $126,604 just for the interest on its various debts. (That is more than four times as much as the museum brought in from individual support that year.)

The debt the museum took on to pay for its move was most recently refinanced by Sovereign Bank, through the New Jersey Economic Development Authority (EDA), in 2008. At that point, $2.7 million of debt was still on the books in a new 25-year fixed-rate loan that would be readjusted every 10 years, according to the EDA. According to a filing with the Internal Revenue Service, the overall liability on that loan actually grew by more than $100,000 in fiscal year 2008, from $2.78 million to $2.88 million.

The financial hole, coupled with the cuts in services and exhibitions that will undoubtedly lead to less revenue, has plenty of observers wondering what will happen if the museum defaults on its debts. Technically, Sovereign could take control of the museum’s assets — including the artwork it owns, if it isn’t protected under any special clauses. That was a concern addressed by one trustee at a museum event last month.

“Worst case scenario,” Ofelia Garcia said, “we will find a way to safely store the museum’s wonderful permanent collection.”

Meanwhile, Surati’s Roy says the museum’s non-payment has severely hampered their small arts organization (she puts the group’s total annual budget at “about $100,000”).

“We were wanting to rent out a new space, and we were not able to do that,” she says. “I had to borrow money to pay musicians and dancers who came from India [for a particular production] … I still have not paid some of the people who worked on that project.”

Roy says the BOE paid the museum on December 17 of last year, and that “the museum has been telling us for a long time that they have the intention to pay.” As an artist who had a longstanding relationship with the museum, Roy says she was willing to be flexible.

“I have considered the museum to be a second home to me,” she says. ” I wanted to maintain a cordial relationship with them.”

The museum told her in February that Surati was “first in line” for money, and that they would receive it on July 15, Roy says. As that deadline came and went, she says museum officials told her they were “making headway” with the administration and that she should just hang tight and wait, but that her money was indeed coming — just as soon as the city anted up.

But unfortunately for Roy and for Surati, it looks like that will not be happening, according to the city’s business administrator.

“I am not suggesting to the mayor or this council that we fund the Jersey City Museum,” Kelly said at this week’s City Council meeting. “It would not be prudent.”

Several council members suggested to Roy that Surati take the museum to small-claims court, but she appears reticent to do so.

“We probably need to take legal action,” she says. “But honestly, being an artist, that is just not my interest.”

Irene Borngraeber and Shane Smith contributed to this report.

Jon Whiten

co-founded the Jersey City Independent. He is currently the Deputy Director of New Jersey Policy Perspective.