The News Desk is a collection of news, notes and breaking items affecting the Fredericksburg community.
City challenges Slavery Museum bankruptcy plan
BY CHELYEN DAVIS
The city of Fredericksburg says the U.S. National Slavery Museum’s bankruptcy reorganization plan is unfeasible and unlikely to succeed.
In an objection filed this week with the federal bankruptcy court in Richmond, attorney Jeffrey Scharf of Taxing Authority Consulting Services, who is representing the city in the case, expressed a number of doubts about the museum’s plan to reorganize and repay its creditors.
The city of Fredericksburg is not allowed to vote on the museum’s reorganization plan—only Pei Partnership Architects, a New York architectural firm owed $3.68 million, can do that.
But at the museum’s last bankruptcy hearing, Judge Douglas O. Tice Jr. told museum attorney Sandra Robinson she would have to prove the plan’s “feasibility” at the next hearing, now scheduled for June 27.
Scharf’s motion argues against the feasibility of Robinson’s plan. He wrote that the museum’s history shows an inability to raise even half of the money it needs to make the reorganization plan work, and that the current climate—a tighter economy and similar museums competing for donations—make it unlikely that the museum could raise the money it needs.
The museum, founded by former Gov. Doug Wilder, owed creditors about $7 million when it filed for bankruptcy last year, a move made in part to prevent the city from auctioning off the museum’s property at Celebrate Virginia to pay off about $254,000 in delinquent real-estate taxes.
The reorganization plan filed earlier this year relies solely on fundraising, which is the museum’s only source of income. It is predicated on an expectation that the museum could raise $900,000 a year in the first year and more in following years.
The museum raised $940,000 in donations in 2005, its peak year, but less than half that in subsequent years. Scharf’s objection asks how a museum that struggled to raise money in the past can now expect to bring in enough to keep operating.
“In five years of active fundraising the Debtor averaged significantly less than $500,000.00 per year, approximately half of the Debtor’s estimate for the first year of its plan,” Scharf wrote.
“It would have to generate funds exceeding two and half times this average to meet the Plan’s ‘conservative’ estimate for the second year of the plan. Nothing in the Debtor’s history, or the Debtor’s Plan, suggest how this money will be raised especially in light of its past track record.”
Scharf said that since Wilder’s museum was started, other museums with similar missions have also been founded, and would compete for fundraising dollars. He noted that another United States National Slavery Museum has been proposed in Richmond, and a U.S. National Museum of African American History and Culture is being built in Washington.
“These competing museums, along with the financial climate and the Debtor’s longstanding inability to move forward makes it unlikely that fundraising will ever reach, much less exceed, its previous peak,” Scharf wrote.
Scharf said the Wilder museum’s reorganization plan is not specific about how it expects to generate donations, nor from whom.
“The Debtor’s entire reorganization plan depends on the munificence of the general public, or perhaps a few well-heeled philanthropists and their willingness to contribute to an organization that has struggled to raise funds, has failed to commence work on its mission, and is now trying to emerge from the shadow of bankruptcy,” Scharf wrote.
“The Plan mysteriously refers to ‘volunteers and potential contributors’ without identifying anyone who had made any sort of commitment to the Debtor’s project.”
Scharf also objects to the way in which the museum’s reorganization plan handles its tax debt to the city of Fredericksburg. Under Virginia code, he writes, tax liens should be paid first, before other creditors.
The museum’s plan also doesn’t clarify whether it would pay the city interest on the part of its tax debt accrued since the museum filed for bankruptcy. Counting accrued interest, Scharf wrote, the museum’s proposal to repay the city $15,000 a quarter isn’t enough to cover its debt.
Selling the museum’s 38 acres in Fredericksburg, Scharf said, would provide enough money to repay all the creditors.