The turn of the millennium was a heady time for many Chicago cultural institutions. Cheap loans, high investment returns and swelling endowments spawned a slew of new attractions along the lakefront and around downtown.
The Art Institute built its Modern Wing. The Adler Planetarium expanded. The Goodman Theatre constructed a new home in the recently re-energized theater district. New exhibits sprang up at the Field Museum and the Museum of Science and Industry. The Chicago History Museum underwent a gut rehab.
Cultural institutions were joining in the economic bonanza sweeping the country and, as with for-profit companies and individual homeowners, some would pay dearly for taking financial risks.
Encouraged by boards that included some of Chicago's most influential corporate leaders, many museums and arts organizations decided to leverage their gains by borrowing tens of millions of dollars to fund expansions, renovations and other big-ticket projects.
None has suffered the kind of crisis now playing out at the Field Museum, which expects to slash spending and could lay off scientists. But whether it was job cuts at the Art Institute, price hikes at the Chicago History Museum or a strike at the Chicago Symphony Orchestra, many experienced difficult times.
The faltering economy and cuts in government funding explain part — but not all — of the problems facing cultural institutions, experts say.
"The recession blew a lot of people's projections and plans," said Carroll Joynes, co-founder of the University of Chicago's Cultural Policy Center. "But the plans would have been unrealistic in many cases and freighted with not very good risk assessment, even if the economy had kept humming."
Joynes was co-author of a recent national study that found Chicago-area cultural institutions spent $869 million on building projects from 1994 through 2008. That's more per area resident than New York or Los Angeles.
Some major institutions banked on a rise in attendance revenues after major building projects were completed, an assumption that often failed to pan out. Others, swayed by overheated financial markets, presumed that investment returns would stay high enough to cover borrowing costs and fund operations.
"Every institution you are looking at put a lot of debt on its balance sheet in the past two decades," said former Exelon Chairman and CEO John Rowe, who chairs the Field Museum board, is a life trustee at the Art Institute and chaired the Chicago History Museum board during its renovation project.
"And they did that because you could improve your income statement and pay for more exhibits and more cool things by borrowing tax-exempt money and investing your own money."
Like hospitals and private universities, museums can issue tax-free bonds through the Illinois Finance Authority, a state-created entity.
Since the recession, many cultural institutions in Chicago have struggled with debt service payments, pension shortfalls or operating losses. But those that borrowed conservatively, raised money ahead of time and projected realistic revenues have generally bounced back.
The Lyric Opera of Chicago, for example, launched a fundraising campaign in 2004 specifically to deal with budgetary shortfalls that might arise. In just three years the opera raised $32 million, exceeding its $25 million goal. Then after the economic downturn, the Lyric was able to draw on that fund to balance its budget.
The Goodman Theatre waited until 80 percent of the money had been raised before breaking ground in 1998 on its $46 million building at Dearborn and Lake streets. When the theater cut its budget in the wake of the recession, the belt-tightening didn't last long.
"The fact that we made a prudent decision regarding the building and didn't have extraordinary debt payments enabled the board to be very proactive in restoring the cuts," said Roche Schulfer, executive director of the Goodman for the past three decades.
Envisioning a new home bustling with lectures, performances and art shows, the Spertus Institute for Jewish Learning and Leadership left its cramped headquarters in 2007 for a glass tower that's now considered one of Michigan Avenue's architectural gems.
The nonprofit borrowed about $52 million in 2005 to build the $55 million tower, which contained galleries with 16-foot ceilings and a large loading dock expressly for bringing in large artworks.