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Could a Grand Bargain Save Detroit’s Art from the Auction Block? Let’s Hope So

December 12, 2013 by Marion Maneker

The Detroit Institute of Arts

It’s curious that the Detroit Free Press phrases this possible grand bargain over Detroit’s art in terms of DIA’s participation. It is also telling that the deal comes shortly after Judge Rhodes ruled the bankruptcy could go through. In other words, a deal to save the art from inclusion in the city’s assets has been brewing for some time and now emerges once the bankruptcy can proceed. That is a reminder to the shrieking and fretting arts writers who framed the issue as a moral cause when it was a political fight between various Detroit-area constituencies. Art cannot be removed from human society, nor should it be:

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.

DIA joins deal in works with mediators that would protect art, pensions in Detroit bankruptcy (Detroit Free Press)

Update: An astute reader pointed us to this Dec. 5 Detroit Free Press story:

Since early last month, Rosen has met with at least 10 local and national foundations to ask them to create the new $500-million fund. A Rosen-mediated deal also would free up money in the bankruptcy case to satisfy other creditors and go toward restoring some of the city services that hard-hit Detroit residents sorely lack.

“Bankruptcy is designed to be a carrot and stick,” the source told the Free Press. “It encourages parties to negotiate issues and solve them or the court will find a solution. I think that’s why Judge Rosen sees the opportunity here to really provide the opportunity for every party to come to the table and reach a solution before one is determined by the court that is outside their control.”

Wealthy Detroit Area Resident Offers $5m to Secure DIA Art, Says Others Will Follow Suit

December 6, 2013 by Marion Maneker

Van Gogh, Portrait of POstman Roulin

Detroit’s A Paul Schaap is stepping up to try to organize a public campaign to secure DIA’s art collection. He says he’s good for $5m and will talk to the judge who is acting as mediator between the city and creditors about organizing a broader campaign:

“I believe there are more than just a few people in the metro Detroit area who would step up and see this as something we should all try to do to save the pensions and stabilize the DIA,” Schaap said in an interview Friday. […]

“We have a passion for the city,” said Schaap, who lives next door in Grosse Pointe Park and was a Wayne State University chemistry professor before starting his own technology company. “We go to the DIA, the symphony, ballgames. We’re Detroiters. Maybe this is a way to help.”

Philanthropist offers $5M to protect Detroit museum’s collection (CTV News)

Big Day for Detroit…and the Institute for Arts

December 3, 2013 by Marion Maneker

The Detroit Institute of Arts

Update: The Detroit Free Press reports on Judge Rhodes’s decision to allow Detroit’s Chapter 9 bankruptcy to proceed. His statement signals that he will not allow deep pension cuts but also hinted that windfall sales of art would not solve the city’s problems:

The city will now proceed with its plan to introduce a proposal to restructure its debt and reshape government operations. Lawyers for Jones Day, the law firm that represents the city in bankruptcy court, expect to file the first version of the so-called “plan of adjustment” by the end of the year.

The plan is expected to include controversial cuts to unsecured creditors and asset sales, including a potential spinoff of the water and sewer department and the possible sale of Detroit Institute of Arts property.

Judge rules Detroit eligible for historic Chapter 9 bankruptcy; says pensions can be cut  (Detroit Free Press )

The next chapter in the saga of Detroit, it’s municipal collapse and the battle between city workers, tax payers and the surrounding political entities will begin today when Judge Steven Rhodes rules on the city’s eligibility for bankruptcy:

Many legal specialists and government officials say they expect Detroit will be found eligible for bankruptcy protection. Under the provisions of municipal bankruptcy, a city must be deemed insolvent, a standard that many bankruptcy specialists say Detroit, which is buried beneath $18 billion in debts, is likely to meet. In fact, Detroit’s filing marks the nation’s largest municipal bankruptcy ever in terms of the size of the debt.

But a city must also show that it has negotiated in “good faith” with its creditors or is unable to negotiate with them because such talks are impracticable. Some public sector unions and retirees, who object to the possibility that their pensions may be cut, say Detroit’s leaders never made an earnest effort to bargain, but rather intended to seek bankruptcy all along. Outside bankruptcy, the Michigan Constitution prohibits reducing pensions that public workers have already earned.

Whatever Judge Rhodes rules, the legal battles will be far from over. Any decision is likely to bring a number of appeals. If Detroit is found ineligible for bankruptcy protection, the city, which has already begun defaulting on some debt, is also likely to find a barrage of demands and lawsuits from its creditors.

Detroit Braces for Bankruptcy Ruling (NYTimes)

Creditors Demand Independent Valuation of Detroit Art

November 26, 2013 by Marion Maneker

Screen Shot 2013-11-26 at 6.09.03 PM

 

The Wall Street Journal’s Emily Glazer summarizes the creditors call for an independent valuation of the city’s art. It’s important to remember than in a Chapter 9 bankruptcy, the city cannot be forced to sell assets without a judge’s approval:

The creditors said they have not seen any valuation by the city of its art collection after waiting for months, said the person. The art, including works by Vincent van Gogh and Diego Rivera, has been speculated as worth more than $1 billion, according to the filing. The value of the art, if sold, could become key to boosting creditors’ recoveries in the largest municipal bankruptcy in U.S. history.

The creditors requested that the art be assessed based on arms-length market transactions, which the court and creditors could match against estimates provided by the city of Detroit, according to the person. The creditors also said the city could avoid litigation if the creditors have a say in the art’s valuation, the person said.

The Detroit Free Press gives some more details:

In the filing, the creditors argued that Orr is not moving aggressively enough to monetize the art. They warned that the New York-based auction house Christie’s — which the city hired to assess the art’s value — may deliver an “inappropriately low assessment, substantially below the market value of the Art.”

Bond insurers FGIC, Syncora and Ambac Assurance; Michigan Council 25 of AFSCME, the city’s largest union; three European banks that own the lion’s share of the city’s pension obligation certificate debt; and several other creditors jointly filed the motion.

“To date, other than retaining Christie’s, the Emergency Manager has failed to provide creditors with any information regarding any further steps the City has taken or intends to take to explore options and strategies to monetize the art in a manner that maximizes value,” the creditors said in the filing.

The creditors called for Rhodes to appoint a committee of creditor representatives to hire a new outside authority to value the art, allowing the city and creditors to “explore a wide range of options to monetize the art, including options that preserve the DIA as a culturally relevant institution as well as enhance creditor recoveries, in order to reach a consensus about the treatment of the art under the plan.”

Detroit Creditors Push for a Price on City’s Art (WSJ)

Detroit bankruptcy creditors ask judge to take steps toward sale of DIA treasures (Detroit Free Press)

Schjeldahl Pierces the Hysteria on Detroit’s Art

July 25, 2013 by Marion Maneker

No one involved in the debate over selling the Detroit Institute for Arts’ collection thinks the act would be a good thing. Lost in the debate is the fact that selling art is a time-consuming process, unwieldy at its best and terrible during a bankruptcy. Seizing the value of DIA for Detroit’s creditors—especially the retired public employees—would be a trick, multi-year project.

Peter SchjeldahlAs much as the decision has become a flashpoint for the bankruptcy story, it is truly a sideshow and a bargaining chip meant to underscore the severity of the situation. The surrounding suburban counties of Detroit want to keep DIA intact and open, they’ve said as much by providing an operating budget. It seems unlikely that those same counties won’t step up in one form or another to keep the art in Detroit.

But should brinksmanship provoke a sale, the New Yorker’s Peter Schjeldahl provides a succinct reminder that selling art is not tantamount to destroying it. Indeed, civic pride and self-importance aside, one museum is not necessarily a better steward of art than another or a private owner:Continue Reading

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