In 1981, the Basque government suggested to the Solomon R. Guggenheim Foundation that it would fund a Guggenheim museum to be built in Bilbao's decrepit port area, once the city's main source of income.[3][4][5] The Basque government agreed to cover the US$100 million construction cost, to create a US$50 million acquisitions fund, to pay a one-time US$20 million fee to the Guggenheim and to subsidize the museum's US$12 million annual budget. In exchange, the Foundation agreed to manage the institution, rotate parts of its permanent collection through the Bilbao museum and organize temporary exhibitions.[6]
The museum was built by Ferrovial,[7] at a cost of US$89 million.[8] About 5,000 residents of Bilbao attended a preopening extravaganza outside the museum on the night preceding the official opening, featuring an outdoor light show and concerts. On October 18, 1997, the museum was opened by Juan Carlos I of Spain.[5]