Rescue of Detroit Institute of Arts Collection Not a Done Deal

Rescue of Detroit Institute of Arts Collection Not a Done Deal

A so-called "grand bargain" to shore up a bankrupt Detroit's pension system and prevent the liquidation of the world-renowned Detroit Institute of Arts collection still faces several critical hurdles, the Detroit Free Press reports.

Under the restructuring plan released Friday by Detroit emergency manager Kevyn Orr, a deal to shore up city-funded pensions over the next twenty years with the help of an $815 million rescue fund pledged by a coalition of local and national foundations, the state of Michigan, and DIA itself requires city pension fund representatives to accept certain financial concessions as well as changes in governance and financial oversight of the system. Orr's plan, which would cut pensions for firefighters and police officers by 4 percent and other city pensions by 26 percent, has been denounced as unfair by the General Retirement System and Police and Retirement System Board. At the same time, two major bond insurers have made clear that they will continue to fight for the right to force the breakup and sale of the DIA collection. Groups representing pensioners and retirees remain in negotiations with U.S. District Judge Gerald Rosen, the federal mediator in the Detroit bankruptcy proceedings and the man responsible for suggesting the rescue fund idea.

Meanwhile, the Michigan state legislature has yet to approve the $350 million in appropriations called for under the plan, while Michigan governor Rick Snyder has made clear that the state's willingness to contribute to the rescue fund is contingent on greater oversight of the city pension boards.

Orr's "DIA Settlement" includes the provision that counties continue to collect a voter-approved property tax millage that provides some $22 million in annual funding to DIA, or about 70 percent of its annual budget, and assumes new governance and oversight structures at the institution, including a voice for the city, its funding partners, and other stakeholders — a condition that could lead to the addition of new board members or the creation of an advisory board.

The question for city pensioners is whether to sign off on the $815 million rescue fund or seek a better deal in court — an option that, according to Laura Beth Bartell, a bankruptcy law professor at Wayne State University, would require the liquidation of the DIA collection. "That’s the only better deal there is," said Bartell. "There are no other assets. Would [U.S. Bankruptcy] Judge [Steven] Rhodes force the liquidation of the DIA? It's my assessment that he's not going to force Kevyn Orr to liquidate the DIA if the pensioners say no to the grand bargain. I think what they’re probably doing is trying figure out how to divvy up the money that’s in the grand bargain and whether to fight about the control of the pension board, and whether they're willing to concede they've overestimated the returns."