uk timberland endowment drawdown threaten Colonial Williamsburg long
Editor’s note: This article is the second in a series exploring Colonial Williamsburg finances. Up next: Where Colonial Williamsburg gets its money.
In eight years, Colonial Williamsburg will either be planning a celebration or preparing for its funeral.
President and CEO Mitchell Reiss is taking steps he believes will keep Colonial Williamsburg alive and well past the 100 year anniversary of the organization’s founding in 2028. But signs point to a tough road ahead, and he has publicly admitted so.
Reiss warned in a late June letter to the public that Colonial Williamsburg is spending too much and dipping too far into its prized endowment. Within the letter was a call to action that Colonial Williamsburg will need to make “fundamental changes” to the way it operates, lest it dry up its savings within eight years or sooner.
Regardless of who has been at its helm, Colonial Williamsburg has used portions of its endowment each year for more than 30 years to offset its operating expenses.
In good years, parts of the endowment are invested and the organization uses only the interest from those earnings. In bad years, Colonial Williamsburg must draw from the principal of the endowment fund to cover expenses, cutting into its long term earnings.
Between 2006 and 2016, the endowment has been on a roller coaster, growing to a peak of $819 million at the end of 2007 before plummeting during the 2008 recession to a low of $610.6 million. It crawled back upward to $783.7 million in 2013 and has since undergone a four year slide to $663.6 million at the end of 2016, according to Colonial Williamsburg’s publicly available tax records and audits obtained by the Gazette. The past four years have been especially problematic, because the amount withdrawn outpaced the interest and earnings.
Without the endowment, the organization would all but crumple.
“I learned a long time ago, I’d rather under promise and over deliver, so I have a very aggressive and ambitious timetable for restoring the foundation to financial health,” said Reiss during an Oct. 10 interview with the Gazette. “I think that we are well on the pathway to doing that.”
The Gazette has combed through publicly available tax records and audits dating back to the early 2000s and reviewed Colonial Williamsburg’s annual reports from as far back as the 1970s to get a clearer picture of how the organization operates and where its financial troubles stem from. During its reporting, the Gazette has spoken to more than a dozen people inside the organization and outside experts.
While declining attendance has plagued Colonial Williamsburg for the past 30 years, the Gazette’s review also found that, during the past decade,
the organization has been unable to reduce its more than $300 million debt and its endowment has shrunk 14 percent, even as it continues to provide first class perks to high level employees.
Colonial Williamsburg is a sprawling organization that combines its nonprofit mission with for profit hospitality and real estate operations. As a whole, the organization’s $227 million budget in 2016 made it one of the largest nonprofit museums in the country; it holds more than $1 billion in assets and employed 3,400 full and part time employees in 2016, according to tax records and a Colonial Williamsburg generated fact sheet.
For nearly the past two decades, though, a crack has grown in Colonial Williamsburg’s basic business model: Paid attendance and operating revenues consistently shrank and could not keep up with expenses. The organization has increasingly used its endowment as a patch, and in 2016, expenses would have outpaced revenues by $69 million without help from the endowed funds, according to the organization’s 2016 audit.
Still, the American Alliance of Museums reaccredited the Colonial Williamsburg Foundation in early July. In its comments, the alliance acknowledged the foundation’s “financial health is fragile.”
“CW is not yet able to meet its financial obligations without drawing down on its endowment in a way that is not sustainable. There is good reason to believe that, as outlined in the current strategic plan, it will achieve a more fiscally sound operating status by 2021, or sooner,” the alliance wrote.
Colonial Williamsburg declined to make its most recent strategic plan available.
“We have to stabilize the foundation; We’re on the pathway to do that,” Reiss said of the organization’s plan moving forward. “We have to make sure we have the balance to do that. We have to make sure the commercial side pays for itself. (Once) we stabilize the foundation’s endowment we can do everything we want to do with history and education.”