Michigan Pledges $350 Million to Fund to Protect DIA Collection, Detroit Pensions

With the goal of protecting the pensions of retired city employees and keeping intact the collection of the Detroit Institute of Arts, Michigan governor Rick Snyder on Wednesday pledged $350 million over twenty years to a rescue fund for Detroit, the Detroit Free Press reports. Shortly thereafter, U.S. Bankruptcy judge Steven Rhodes put his weight behind the plan, saying he might not ever allow DIA artwork to be sold to meet the claims of the city’s creditors.

The money from the state would be added to the $330 million pledged last week by nine local and national foundations — funds that are contingent on the city and its creditors reaching a bankruptcy settlement that would, among other things, remove DIA from city control and establish it as an independent nonprofit. The availability of state funds for city retirees also is contingent on a larger bankruptcy settlement that includes unions and city retirees and which disposes of all court cases involving the city. DIA, for its part, pledged to make a "significant contribution" to the rescue fund, though it did not specify an amount.

Significant obstacles remain, however, before the museum receives emergency funds from the state, including approval by the state legislature and the Detroit pension board, a thumbs-up from Detroit emergency manager Kevyn Orr, and buy-in from unions, retirees, and others who are litigating claims against the city. Steve Spencer, a financial advisor for Financial Guaranty Insurance Co., one of the city's creditors, expressed concern about the state's decision to put "art ahead of the economic realities and recovery interests of the city's pensioners, bondholders, and other unsecured creditors."

Although Snyder has made it clear he expects the museum to contribute to the rescue fund, DIA officials have balked at the $100 million figure over twenty years that he and others have suggested. With an annual operating budget of $32 million, DIA is funded largely by a tri-county tax millage passed in 2012 and the roughly $12 million it raises annually from donors. In a statement, the museum said it remained "focused on continuing conversations with the mediation team, state, county and city officials, our board members, staff, and supporters to determine how we can be as productive and supportive as possible in this process, with the ultimate goal of a balanced, achievable solution."

Mark Stryker, Paul Egan, Nathan Bomey, Kathleen Gray. "Snyder Pledges $350M to Save Detroit Pensions, DIA Artwork, but Hurdles Remain." Detroit Free Press 01/23/2014.