If you are not a city, state, or federal employee, odds are these days, you stand a good chance of losing your job, your home, or your pension; or all three. If you are a retiree, you probably don’t have a job -yet, your home is paid for, and your nest egg has become catfish batter. If you are a city, state, or federal employee, odds are you get to keep your job and whether you keep your home or not depends on your credit card habits. But regarding your pension plan, I suggest you take a good look at it because odds are, thanks to the convoluted investments in which city, state and federal pension managers have placed your cash, the affordability of your retirement is not a safe bet anymore; not by a long shot. By this reckoning many livelihoods are up against significant statistical odds of being wiped out.
This financial mess was a long time coming. The signs were already clear way back in the summer of 2007. They were very clear and palpable the following winter and spring of 2008, when the City of San Antonio introduced a new bond package for voters to approve. Like many other grand-vision fallacies, it was touted as an investment in our future, a fallback euphemism of choice for otherwise untenable special-interest pet projects.
In its simplest form, an investment involves a purchase, a sale, and a profit. One of the preconditions for an investment qualifying as such, is that in the time between purchase and sale there is a high level of liquidity (cash), allowing both the purchase and the sale to happen instantly if so desired. In the financial world, liquidity is a function of market depth, cash availability (or credit), and trust. There has to be a pool of folks with enough cash and interest to create a trading market, as well as a level of trust that all the factors will remain in place in one form or another. By this measure, regardless of the truisms touted by real estate broker/sages, a home is not an investment. One should buy a home only for shelter and comfort. When a home is purchased as an investment, with the expectancy that it’s equity will generate income (flipping for example, or home equity loans), it becomes something other than a home. For the vast majority of regular folks, purchasing a home as an equity investment can have unintended results that, as we have now seen, lead to a lot of unsheltered discomfort; the very antithesis of what home-buying should be. This is important because San Antonio’s main selling point, and one of its top claims for economic health, is its relatively affordable housing.
In the financial derivatives feeding frenzy of the last decade, thousands of money managers became immensely wealthy. As in the past, this unprecedented wealth led to larger, more expensive homes (inflating the high end of the real estate bubble), and a yearning for social status and respectability. For this current crop of gilded arrivistes, predictably attuned to the gravitas of historical precedent, the road to elevated social status was paved with Art… with a capital A.
There are two basic approaches to Art as a social-climbing exercise for the moneyed class. One is to dive into the art market and purchase visibly important works -or even better, commission a few works from visibly important artists. Two, is to find an art agency worth funding -or even better, start your own art agency which will then serve a dual purpose: Establishing your bona fides as a truly committed patron of the arts, and giving you a hefty tax write-off.
As is the case in any market, the value of an object is in direct correlation to the quality, scarcity, and demand of said object. Art dealers quickly found that demand for art with a certain je-ne-sais-quois was far outstripping available supply. Something had to be done, quickly. Realizing that the New York art market on its own, could not carry the increased load, and that a certain market depth was critical for sustainability, the global art cabal surmised that London, already home to the EuroRich, was a desirable location for a primary art market in Europe. Berlin with its cheap rents was designated the European Community’s art incubator. This followed a simple general premise: While a majority of moneyed art interests in the USA were focused on foundations and agencies, most of the new collectors patronizing individual artists were wealthy Russians and Arabs for whom Europe offered a closer and more welcoming shopping jaunt (they don’t indiscriminately detain swarthy Middle-Eastern types over there). The Chinese, the Japanese, and the more progressive of the Arab Emirates then got into the game, adding Shanghai, Tokyo and Dubai to the roster of market/proving grounds for the arts.
An art-fair boom ensued; led by Art Basel-Miami (which in its Swiss incarnation was until recently a respectable venue for the arts), an event that elevated the spectacle of art marketing and entertaining to a level worthy of Caligula’s admiration. Promoters and shysters all over the world were jumping on the art bandwagon, quickly drowning out the more established and less wealthy gallerists and dealers whose diminished relevance was being upstaged by street barkers in white tents peddling contrived schlock as art -a steady flow of champagne and other recreational intakes ready to assist their cause.
Meanwhile back at El Rancho Grande, the swells, in grand traditional style, were tireless in their pursuit of family-name placement opportunities on the frontispieces of hallowed temples of culture; literally cementing their legacies. In return, they made rain for an unprecedented number of agencies starving for their philanthropic profligacy. American nouveau-money tends to be encumbered by guilt associated with the unabashed amassing of wealth, coupled with a pathological need for just the right kind of social standing.
As we now know, the doo-doo hit the fan in a big way. The unraveling of the worldwide financial system is peeling away support for agencies of culture in such haste, that the survival of these enterprises is becoming untenable. In San Antonio -with folks still enjoying a blissful fit of wishful thinking, hesitant to embrace the full impact of the global financial meltdown- things are going to change dramatically for many of our cultural organizations.
We are a city of handouts. Handouts disguised as acts of charitable pieties (grants, tax breaks, etc.). It is a trait deeply embedded in our culture. We are notoriously proud of our pieties. In fact, we are so proud of them that we have our pieties institutionalized to underline their noteworthiness. There is a pervasive notion that public funding is the motor for cultural enterprise. This approach has been furthered for years by our art and culture communities without much of an effort to diversify their funding base. This year has seen a record number of requests by art agencies for public funding in our city. More to the point, in the last couple of years there has been a noted increase of 501-(c)(3) incorporations for the sole purpose of tapping into the public funding till. It’s the literal embodiment of the old cliche: I’m waiting for my grant to create art. Only in this case it’s not quite about the creation of art. It’s about deriving an administrative livelihood from public monies. It will be interesting to see how many of these non-profits will be alive, effective and relevant two or three years from now. Even in the best of times non-profit sustainability is a daunting process. In a severely hampered financial environment it will be cutthroat.
In this light, it’s hard to understand why San Antonio leaders have so tightly hitched the art and culture wagon to the ship of public funding, which is sinking at the dock. Our swells, in their own grand tradition, touting more boom times ahead, have seen fit to increase the percentage of public monies from our Hotel/Motel (HOT) tax to be funneled to art agencies via the City’s Office of Cultural Affairs; stoking false expectations of future largesse. Additionally, a major bond package was passed -voted on by a very small segment of the City’s electorate- for what amounts to pretty much a series of vanity projects, funded by public debt, all of which will be hard pressed to be adequately completed as projected within the bond budgets. Then, there’s the matter of operating costs. The elephant in the room, no one talks about operating costs because its El Diablo Grande in the details and current leaders are hoping to pass on this particular public project evil-doer to future city admins.
San Antonio is one of a few major cities that have a HOT tax allotment for the arts. Most other entities allocate art monies from their general funds. Public funding in many places is perfunctory and minimal, a good-housekeeping seal of approval by a city’s art department, much like a credit rating for the arts, which bestows official approval upon art agencies that then must either earn their keep, or find private sources of funding for programs and operations (which is becoming more and more the business model for savvy non-profits). In contrast, San Antonio has a relatively high number of non-profit agencies whose operational sustainability is based almost exclusively on charitable funding (in all fairness, this applies to social services as well as the arts). Many will be left by the wayside.
Not all non-profits are at a loss. A good example of innovation and creativity (even though not an art agency) is Goodwill Industries. Goodwill realized not long ago that revenue from its core business was slipping because its branding emphasis was so heavily focused on being a charitable organization (Goodwill Industries is one of the top charitable performers nationwide, with more than 80% of its income directly funding social services and other charitable efforts; while an average non-profit charity delivers closer to 10% to 20% of its derived income to support its stated mission). To address the revenue decline, Goodwill devised a pilot program in some of its markets, hiring an advertising agency and re-branding the company as a bargain shopper’s destination of choice; effectively positioning its stores as a low-cost shopping alternative, in direct competition with Wal-Mart. The re-branding pilot program was reportedly so successful it is gradually being implemented in other markets. One of the serendipities of the current financial fallout is that shopping for secondhand clothes, long a counterculture staple, has become even more of a hip activity; which allows us to make the argument that Goodwill Industries, intent on increasing its revenue stream to fund its charitable missions, actually found it profitable to re-brand itself as a cultural arbiter for bargain minded shoppers. It was just a charity. It is now more of a hipster-shopper’s paradise.
Our city leaders like to say that with the approval of the bond package and the increase in the HOT tax, San Antonians are investing in the arts. Truth is, where the HOT tax is concerned, tourists are investing in the arts; and where the bonds are concerned, Chinese and Japanese Sovereign Funds are investing in the arts. With few exceptions, we, the citizens of San Antonio, are not investing in the future of arts and culture in our community. We are happy to let others do it for us. It’s our handout heritage at play (as of this writing the Japanese economy -like ours- is in a major recession, they might not be our art patrons much longer).
Nothing is truly an investment unless it follows the basic formula I mentioned earlier in this essay. Art is not a liquid asset and it has no real market depth. It has, in good times, a certain desirability attached to it because of its potential for enhancing social prestige; which may, in time, allow access to other quality-of-life intangibles. But as a tangible asset class, art is clearly a poor performer. Yet, when fostered properly, the industries of art and culture, and the enterprise factor inherent to all creative businesses, can be important economic generators and renewable sources of creative capital. Without having to underscore what other cities are doing about this, since every city’s particular context (education level, social environment, passive or dynamic economy, etc.) determines the viability of any economic plan; there are a number of possible creative-enterprise support options that could take hold within San Antonio’s particular socio-economic context.
One option is to establish a capital resource allocation program for our city’s creative/cultural industries; an important paradigm shift involving the Office of Cultural Affairs, which would phase out the grant application process as it now stands, replacing it with a creative enterprise fund to fuel a smattering of creative industry hubs throughout the city. OCA would strengthen its collaboration with the City’s Economic Development Department (a collaboration that already has substantial precedent and a good track record), and/or other economic development agencies, to facilitate everything from business permits to tax advantages to business consultancies, and to provide matching funds in the form of specialized, low-interest, small-business loans cobbled from public and private funds; all with the stated purpose of developing and stabilizing small businesses owned and operated by creative industry workers. The HOT tax, which is now a passive cash source for charity handouts, would become an active-capital pipeline fueling a dynamic public/private venture for the city’s creative community. A much more effective and productive use of San Antonio’s tourism revenue.
If we choose to ignore our more imaginative options, if we insist on supporting our investments in creative capital with a systemic, unhealthy reliance on unsustainable charitable handouts, our much touted future will be of little depth, poor performance, and diminished returns. We have to take it up a notch, or two, or three. We have to raise the bar and elevate the public discourse. We need an intelligent, competitive, dynamic environment to maintain liquidity in our creative capital. This in turn will allow us to engage the best available resources for a tangible investment in our city’s future.
And this is the real Art of the matter.
Michael Mehl, November 18, 2008