I’m struck by just how much Detroit’s bankruptcy has turned into a “Little Red Hen” story: The city, plagued with a budget shortfall in upwards of $18 billion, has told the Detroit Institute of Arts (DIA) that they need to help out. The thinking seems to be that everyone’s part of the team, and everyone needs to work together in order to bring the city out of this financial mess.
Announced this morning, DIA now has the backing of major foundations in the amount of $330 million to help cover, in particular, the city’s pension funds (which accounts for approximately $3.5 billion of the city’s deficit). This might come as a surprise; over the last year, DIA and the city of Detroit have been tussling back-and-forth over whether the city can use DIA’s art collection to cover its debts. What’s important about this new proposal is that the museum’s art collection will not be used as collateral for the city’s debt, only the donations from these foundations, which include the James L. Knight Foundation, the Ford Foundation, and the Kresge Foundation.
Negotiations regarding this proposal have been ongoing since November of this year. DIA, in conjunction with U.S. Chief District Judge Gerald Rosen and attorney Eugene Driker, appointed mediators in Detroit’s bankruptcy, has been an “active partner” in coming up with a solution to help the museum help out the city, and in a way that does not monetize the collection.
In a December report authored by Christie’s, the independent evaluator of the DIA collection hired by the city, options for monetizing the collection included outright selling the work and using the collection as collateral for a loan. All these proposals were rejected by the museum. Still, the city was not one to provide any alternatives. The city’s Emergency Manager Kevyn Orr had obliquely stated in October that city was working on ways to utilize the museum’s assets. “I’m deferring to them to save themselves,” he said, “but if they don’t, I’ll take them up.”
And now after months of negotiations, DIA might have found a way to save themselves. This time, though, they’re not alone, having the backing of federal mediators and an entire consortium of non-profit foundations with ties to Detroit. As mentioned in a joint-statement published today on the Knight Foundation’s website, the consortium came about directly from negotiations with Judge Rosen:
… [W]hen Chief Judge Gerald Rosen and his mediation team facilitated an opportunity for us to work together for Detroit’s future, we readily agreed. As a diverse group of local and national philanthropies, we are pleased to contribute to what we hope will be a balanced, workable plan that will enable Detroit to emerge from bankruptcy renewed and stronger.
The proposal we’ve been working on has one overarching goal: to enable Detroit and its citizens to focus on the task of renewing this great American city. Intended to be part of a larger, agreed-upon plan of adjustment, this plan furthers that goal in two critical ways, by helping the City honor its commitments to its retirees and preserving an extraordinary community cultural asset, the Detroit Institute of Arts.
As far as this individual deal goes—foundation donations in lieu of DIA’s art collection—nothing will be set in stone until all competing claims have been settled with the bankruptcy case at large. Still, should the proposal move forward, there may be some questions over whether foundations will need to put their other grant-making obligations on hold. The hope is that these concerns will be mitigated somewhat by the value of the individual proposal, which should help spur the resolution of the city’s slow, ongoing legal dispute with its creditors. Bruce Babiarz, spokesman for Detroit’s pension system seems hopeful, too.
“We are pleased that the negotiations are proceeding,” he told the New York Times. “The city has not made obligatory payments to pension funds. Any way the process can raise funds to meet its pension obligations, we’re in support of this.”