Negotiations at the Detroit Institute of Arts

The Detroit Free Press has a good update on what is going on with the Detroit Institute of Arts collection and how it relates to the current bankruptcy.  The reports notes the DIA is participating in discussions with Detroit city creditors in trying to save the collection. The complex deal seems spin off the DIA from the city to raise funds from foundations and save the art.  There are still those who wish to sell city owned (purchased) pieces of art, so negotiations are on going.

The Detroit Free Press reports
A potential grand bargain that could shield the Detroit Institute of Arts from the reach of creditors in the city’s bankruptcy while bolstering at-risk city pensions took a key step forward today.

The Detroit Institute of Arts embraced publicly, for the first time, the broad outline of a federally mediated deal that would protect its art from sale and spin off the museum from city ownership into an independent nonprofit. The deal would raise roughly $500 million from a consortium of national and local charitable foundations and funnel the money into retiree pensions on behalf of the value of the art at the DIA.

There’s still no guarantee that all of the parties — including labor groups representing about 23,500 pensioners and foundations of different size and interests — will be able to work through the layered complexities of hammering out a deal. But the DIA’s enthusiastic support is seen as a pivotal move in the march toward toward a possible compromise.

The museum also indicated that it was open to contributing financially to the plan.

“This is an elaborate game of weaving everybody together, and the kind of a situation in which no one is completely on board until everyone is on board,” said a board member of a local foundation who has knowledge of the talks but is not authorized to speak on the record.

“By definition, unless the DIA was directly involved in a solution, then the other funders wouldn’t be, either. The DIA wouldn’t take this step unless they thought there was a way forward.”

In a statement issued today, DIA leaders said they had pledged at a Tuesday meeting with mediators, including U.S. Chief Judge Gerald Rosen and Eugene Driker, to help refine the proposal that Rosen has been pushing behind closed doors since November. The museum expressed “enthusiastic support” for the work that had been done so far and said it had “begun to mobilize its considerable public support to implement a fund-raising strategy that will satisfy the city’s needs.”

“The plan engages national and local foundations among other funding sources to create a mechanism for providing cash for the city, while ensuring the present and future safety of the DIA collection,” the statement said.

Crucial details of the plan remain under discussion, such as the size and nature of a DIA financial contribution, the legal structure of an independent DIA and the specifics of each foundation’s gift, including the number of years the foundations would have to pay. One possible scenario, for example, would be a revenue stream of some $25 million annually over 20 years.

DIA officials declined to comment beyond the statement, but last week someone with knowledge of the negotiations said the talks were moving “swiftly.” In the best-case scenario for the plan moving forward, a Rosen-brokered grand bargain would come together in the next few weeks, allowing Detroit emergency manager Kevyn Orr to include it in his plan of adjustment to restructure city debt that he expects to file by early January.

A number of significant hurdles remain to a final deal. One big question mark is whether unions representing pensioners will drop potential objections to Orr’s plan in exchange for accepting the pot of cash created by the foundations.

Bruce Babiarz, spokesman for retired police and firefighters, said mediation discussions remained confidential and that no formal proposal exists, but that the police and firefighters would welcome any viable solution. “If the private sector is willing to generate revenues or monetize artworks to protect pensions for first responders and beneficiaries, we would welcome that support,” he said.

Still, Babiarz did not rule out pushing for a sale of art: “Clearly, the DIA holds many donated treasures, but perhaps there are works that could be sold or monetized that would not impede the cultural treasure that is the Detroit Institute of Arts,” he said.

Rosen has been lobbying leaders of at least 10 foundations, ranging from giants such as the New York-based Ford Foundation and Kresge Foundation of Troy, to modest-size organizations such as the McGregor Fund of Detroit. But the boards of directors of those foundations would still have to agree that supporting municipal pensions is consistent with their missions.

Finally, the DIA’s own financial contribution would likely be a thin needle to thread. Museum leaders have said all along that any plan for the DIA growing out of the city’s bankruptcy must not involve the sale of art, jeopardize the tri-county property tax that keeps the DIA afloat or impair the museum’s ability to raise hundreds of millions of dollars in endowment funds to which it has already committed.

“I would be enormously relieved if the art was no longer threatened, but the question will be: What would the museum have to do to achieve this,” said Ruth Rattner, a DIA board member.

Orr’s plan will have to be confirmed by U.S. Bankruptcy Judge Steven Rhodes, who has final say over whether it treats all parties in a fair and equitable manner and is in the best long-term interest of the city. Only Orr has the power to sell city assets such as art, but creditors could pressure Orr by convincing Rhodes not to approve his plan.

Orr, who regards the DIA as a city asset he can tap for cash, said he believes he can’t make a deal Rhodes will approve without money from the museum, and has pressured DIA officials for months to monetize its collection.

Many creditors have already expressed displeasure with Orr’s handling of the art.

The New York auction house Christie’s was hired by the city to evaluate nearly 2,800 pieces of city-bought art at the DIA, a fraction of the more than 65,000 works at the museum. Its preliminary report last week put the fair market value of these works between $452 million and $866 million, a far lower figure than many expected. The entire collection is still believed to be worth billions.
Source: The Detroit Free Press

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