CINCINNATI (Reuters) - Cincinnati's National Underground Railroad Freedom Center, which opened with great fanfare along the banks of the Ohio River in 2004, is struggling with a $1.5 million revenue shortfall this year.

The Center's exhibits memorialize the escape of slaves from the American South. Just across the river from the slave state of Kentucky, Cincinnati was a major stop on the "underground railroad" that helped slaves go north to Canada.

The museum also has an exhibit examining contemporary slavery, which includes such practices as forced child labor and sex trafficking.

The museum has from the beginning wanted to become a national museum. This would involve ceding the building to the federal government which would take over its annual $3 million costs for operational maintenance.

"There's going to be a shortfall... " said Stephanie Creech, external relations manager for the Freedom Center, in an interview with Reuters Monday. "We want to close that gap."

She said that operating costs for the year were about $4.5 million for 2011, while earned income and fund-raising totaled $3 million.

"While the challenges are very real, we remain committed and confident that this institution will indeed stay open and will broaden our contribution to this community and to the nation," said Creech.

The Center's annual operating expenses have been cut from about $12 million in 2004. It also has cut its full-time work force from 120 to 34.

The Center paid off its mortgage and owns its building, but now wants to increase its revenue through more fund-raising, partnerships with other institutions, increased revenues from facility rental and an on-site restaurant, with a liquor license, to replace its current cafe.

Attendance at the museum for 2011 was 113,543, up from last year but about a third of the original preopening projection of 300,000 a year.

One bright spot for the museum's future is that development along the Ohio River banks in Cincinnati has started to increase, Creech said. For years, the Museum was one of the few venues along the River, sandwiched between the Reds professional baseball and Bengals football stadiums. New restaurant and retail spaces are opening along the River, which should increase museum traffic, Creech said.

Cincinnati will host the World Choir Games in July, which is expected to bring tens of thousands of visitors. The city is developing a "culture pass" that will allow visitors to explore the city's cultural attractions, including the Freedom Center, for one price.

The city of Cincinnati gave the center $300,000 this year, a move sharply criticized by the anti-tax group Coalition Opposed to Additional Spending and Taxes (COAST).

Another critic of the museum has been Christopher Smitherman, Cincinnati NAACP Chapter president and city councilman. He said the Center marketed itself as a museum that was going to tell the "very rich history" of African-Americans and now is a "smorgasbord of conversation around freedom."

"It's a tremendous facility, but it's not living up to its potential," Smitherman said. He said Cincinnati African-Americans must be included in the conversation of how to help the museum, if it is to succeed.

The Freedom Center was built with public and private investments -- a national capital campaign launched in 1995 generated $110 million, of which $40 million represented public investments from federal, state and local governments, according to the Center.

(Writing and reporting by Mary Wisniewski; Additional reporting by Joe Wessels in Cincinnati, Editing by Greg McCune)

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