The Indianapolis Museum of Art announced Wednesday night that it plans to pay off more than $17 million in debt at the end of the year, reducing its overall debt load to less than $100 million for the first time since 2004.
The museum said it typically spends about $3.5 on annual interest payments but has been on a mission under CEO Charles Venable to improve its financial outlook by reducing debt, cutting expenses, improving its credit rating and lowering the annual draw on its $360 million endowment.
In 2013, Moody’s Investors Service stamped the IMA with a negative outlook because of what it described as “an excess draw on the endowment” of around 8 percent—well above the Moody’s-recommended 5 percent.
A core objective of the IMA's new 10-year strategic plan"is to ensure a sustainable business model that thrives on an endowment draw rate of less than 5 percent," the IMA said. During the current fiscal year, the IMA reduced the endowment draw to 5.49 percent, with a 5.25 percent draw rate budgeted for the next fiscal year.
“Our significant interest payments hinder the organization, as they consume funds that otherwise could be used to fund IMA programs and staff,” said a written statement from Venable, who was hired in 2012 and had his contract extended last month until 2026. "One of our main priorities at this time is to improve the guest experience, and capital is needed to do that well ... We need to be investing more in exceptional experiences with art and nature for our guests, and paying off our outstanding debt will over time make funds available to do this.”
IMA memberships have grown from 5,000 to a record high of 15,000 under Venable's tenure, but his strategy to do so sparked controversy. A year ago, the museum began charging an $18 admission fee, replacing a free-admission model that had been in place 64 of the previous 65 years.
The admission charge, however, worked as planned, prompting frequent visitors to buy annual memberships at $55 for individuals and $75 for families instead of single-admission tickets.
Board officials give credit to Venable for expanding the IMA’s programming lineup and for landing major art and capital gifts, including a $10 million gift from the Lilly Endowment to establish an endowed Innovation Fund.
“We are on the road to financial stability,” said IMA Chief Financial Officer Jerry Wise in a written statement. “Paying down the principal on our debt is a significant step in ensuring a sustainable future for the IMA."