The Toledo Museum of Art is about to implement a variety of enhancements to its visitor experience, including upgrades to galleries, seating, parking, and accessibility. Though far less visible, the project also includes improvements to the heating, ventilation, and air conditioning systems that are vital for protecting its valuable collection while also lowering the museum’s carbon footprint.
Set to begin work in 2025, the HVAC portion of the project will be funded with tax-exempt Property Assessed Clean Energy (PACE) bond financing, a tranche of which will be provided by Columbus-Franklin County Finance Authority. The Finance Authority joined the Toledo-Lucas County Port Authority and Cleveland-Cuyahoga County Port Authority to complete the ambitious project’s financing stack. It’s another example of Ohio’s regional Port Authorities partnering to activate projects around the state.
“The Finance Authority is one of six Port Authorities in Ohio with investment grade bond funds,” says CFFA President Patty Huddle. “It’s easy to assume we’re in competition with one another. In fact, it’s just the opposite. We often engage our peer Port Authorities from outside our region, and they approach us to do the same, when capital needs exceed local capacity or risk tolerance.”
The Toledo Port Authority is the project lead, contributing $11 million in tax-exempt PACE bonds for the over $24 million project. The Columbus-Franklin County and Cleveland Ports will finance $6.73 million each, with the museum providing equity to cover remaining costs. The project is likely the largest renovation undertaken by the museum. Financing is expected to close this month.
“This is a great example of engaging Port Authorities to support cultural institutions, in addition to the typical infrastructure and economic development projects we do,” says Craig Teamer, Director of Finance and Special Projects for the Toledo-Lucas County Port Authority. “We had worked with the Toledo Museum of Art in the past, so they were aware of our capabilities, especially through our Northwest Ohio Bond Fund. When they detailed the project and their needs, our bond fund was able to provide low-cost, fixed-rate financing. But the beauty of the Ohio Port Authority System is that we can work with sister Port Authorities across the state, who also have bond funds.” Teamer says financing discussions with TMA began in early 2024 and it took about four months to close the transaction.
Anatomy of the Deal
The Museum initially contacted the Toledo Port Authority to explore possible financing options, which in turn brought in DiPerna & Co., a municipal financial advisory that helps structure virtually all transactions that involve Ohio’s primary Port Authorities. “We analyze every deal and facilitate underwriting for these regional bond funds,” says firm founder and President Michael DiPerna. “This project was too much for any one of the Port bond funds to support, so we fanned out with the Toledo Port in the lead. With Cleveland and Columbus involved, we made up the total amount the museum needed.”
DiPerna’s team put the term sheets together, aligned the financing partners, and coordinated the deal closing. “These investment-grade bond funds work like an economic development bank,” says DiPerna. The three Port Authorities are providing an approximately 30-year term for the TMA financing – a longer term than is typically found through conventional bank financing. “Because it was a PACE deal, we could take a special assessment on the property, which is somewhat easier than a mortgage on the museum. And the rate won’t fluctuate.”
It all works because of the investment-grade rating of the bond funds. “That means you can sell the debt to large institutional investors,” says DiPerna. And that’s where another partner, Huntington National Bank, enters the picture. Huntington was the bond underwriter for this transaction.
“The underwriter’s most important function is to find an investor or investors to buy the bonds at an appropriate interest rate for the market,” says Philip Angelo, Director, Public Finance, for Huntington Capital Markets. Angelo said this deal was unique in several ways: it involved three separate bond issuers, the size was larger than most bond fund transactions, and it may have been the first time the bond funds were used to renovate a museum. “Tax-exempt bonds, assuming the project qualifies, will almost always be preferable to a taxable financing,” adds Angelo. “Given the relative high interest rate market we’ve experienced since 2022, construction has been more expensive to finance. Any savings that can be achieved increases the likelihood of a project being completed.”
A Smart Option for Nonprofits
Port Authorities are one of the few entities with the authority to issue tax-exempt bonds. As a nonprofit, TMA qualified for it – as do others, like Alvis, Inc., a central Ohio social service agency that also received tax-exempt PACE financing from the Finance Authority. “Alvis was one of the first examples in the country to tap tax-exempt PACE bond financing,” says Finance Authority Vice President Rose Roman. “Think of all the non-profit and cultural institutions in every community. We would love to help more of them with tax-exempt financing.”
Both Angelo and DiPerna agree. “We are very fortunate in Ohio to have Port Authorities that are active in economic development and provide essential funding for a multitude of projects,” says Angelo. “Typically, we see a Port issue bonds for multifamily, office, or industrial projects within their county. The beauty of this transaction was that, in addition to the Toledo Lucas County Port Authority, you had the Columbus and Cleveland Ports willing to step up and issue bonds, take risk, and extend credit to a cultural asset in Toledo. Columbus and Cleveland were willing to do this because of the importance of the museum and seeing the Ports’ mandate of economic development as being State-wide, not just in their backyard.”
“It’s a great vehicle for nonprofits,” says DiPerna. “There’s a real convenience in these long-term, fixed rate, tax-exempt, investment-grade bonds. We’ve done similar deals for hospitals and social service agencies.”
“Nonprofits should always consider PACE financing for energy-related upgrades because it is a best practice to evaluate various funding options,” adds Angelo. “The difference-maker for this transaction was the ability to use the Ports’ credit ratings. Because the Ports have an investment grade rating, the interest rate was significantly reduced.” Coupled with the tax-exempt status of the bonds, the Museum achieved significant savings.
Strengthening a Cultural Gem
This was a big year for the 125-year-old Toledo Museum of Art, widely considered the city’s cultural gem. In addition to closing financing for these improvements, TMA also underwent a rebranding effort that saw the introduction of a new identity system and website. Its collections are being reorganized to provide a more chronological experience, giving guests a better view of both differences and connections between artistic eras. And TMA’s nearby Glass Pavilion will receive $500,000 from the State of Ohio for additional maintenance and renovations. The HVAC upgrades will be applied to the historic Edeard Green beaux-arts building.
“PACE financing was a strong fit for us at TMA, with no initial capital required and reasonable long-term fixed rates,” says President, Director, and CEO Adam Levine. “We appreciated the collaboration between the Toledo-Lucas County Port Authority, the Columbus-Franklin County Port Authority, and the Cleveland-Cuyahoga County Port Authority to provide such a competitive offer for our transformative project.”
“It’s rewarding to know the improvements will help protect the museum’s world-class collection,” adds Huddle.
Thanks to an endowment, admission to the museum is free to the public. The project should not impact the museum’s public hours and is expected to be completed by December 2026.