Last year’s restructuring is pulling the Colonial Williamsburg Foundation back from the brink of financial disaster, the nonprofit’s president says.
The ambitious plan has helped ameliorate a financial strain that could have caused funding from the Colonial Williamsburg Foundation’s endowment available for operations to evaporate as early as 2026, President and CEO Mitchell Reiss said earlier this week at a business roundtable hosted by the Williamsburg Economic Development Authority.
“It’s almost beyond our imagination to think about Williamsburg without the Colonial Williamsburg Foundation, but that was certainly a possibility,” he said.
Like many nonprofits, Colonial Williamsburg draws upon its endowment each year to cover the cost of operations, personnel and other expenses, Reiss said.
“It’s a type of savings account,” Reiss said.
The endowment is currently valued at $697 million, according to Bloomberg.
In the decade before Reiss arrived in 2014, the Colonial Williamsburg Foundation had taken $600 million out of the endowment, tapping as much as 12 percent of the fund in some years to keep operations afloat, he said.
Standard practice for most nonprofits, Reiss said, is to use 5 percent of an endowment annually to cover shortfalls and use the remainder for investments to make the endowment grow.
Reiss has set a goal of reaching the 5-percent withdrawal threshold in 2020.
“The year I started, the foundation lost $176,000 every single day,” Reiss said. “These losses aren’t acceptable, and they clearly are not sustainable. If we had kept on doing it, we would have gone out of business. Not within a few decades, but within a few years.”
In addition, the foundation also was saddled with debt used to renovate Colonial Williamsburg’s Vistor Center and hotels to accommodate of an influx of tourists during Jamestown’s 400th anniversary in 2007.
“The amount of money we borrowed was based on assumptions about visitor numbers and hotel occupancy rates that did not materialize,” Reiss said.
Colonial Williamsburg still owes about $300 million on that debt alone, Reiss said.
Last year, Colonial Williamsburg embarked on the restructuring plan, laying off employees and outsourcing operations such as retail, maintenance, real-estate management and golf.
Reiss said the plan was put into motion after more than two years of study showed that while some previous changes had saved the foundation about $10 million, that path wasn’t sustainable and continued to rely too much on the endowment.
“We believed that if we kept on with the incremental changes, it would simply be death by a thousand cuts,” he said. “It wouldn’t be enough to truly save the foundation.”
In addition to outsourcing services, Colonial Williamsburg moved its administrative offices — including Reiss’ — from the Goodwin Building on Merchants Square to the CW complex at Bruton Heights, allowing the foundation to market the building to prospective tenants.
The foundation also closed the Kimball Theatre, which had not made a profit since at least 1999 and lost more than $750,000 in 2016, Reiss said. William & Mary later took over the theater’s operations.
So far, Reiss said, the outsourcing appears to be working as CW’s retail, golf and spa operations are now turning a profit.
Although Colonial Williamsburg expects about $2 million less in ticket sales this year compared to 2017, the dip in admissions will be blunted by savings realized from a $7-million cut in Colonial Williamsburg’s marketing budget, Reiss said.
While a healthy endowment is important, Reiss stressed that Colonial Williamsburg remains focused first and foremost on telling the story of America’s founding.
“Financial stability isn’t our goal, it’s a just a means to larger, more noble end,” he said.
