Another seven corporations and two foundations are contributing nearly $27 million toward the Detroit Institute of Arts’ $100 million portion of the grand bargain,
At a new conference this morning at the museum, representatives from the Roger S. Penske and Penske Corporation, Quicken Loans and the Rock Ventures Family of Companies, DTE Energy, Blue Cross Blue Shield of Michigan (BCBSM), Meijer, Comerica Bank, and Consumers Energy as well as the JPMorgan Chase Foundation and Delta Air Lines Foundation made the announcement.
The “grand bargain” is the combination of state money ($195 million), philanthropic funding ($366 million pledged from 10 foundations), and the DIA’s commitment to raise money for Detroit’s two pension funds. The money becomes available as long as the city’s pensioners approve the Plan of Adjustment, which includes giving up the ability to litigate over provisions of the bankruptcy and the state’s emergency manager law. In exchange, the city agrees not to sell the museum’s artwork to raise funds for creditors.
“We are extremely pleased to see this very generous corporate support for the grand bargain and City of Detroit pensioners from these major Michigan businesses,” DIA Board Chairman Eugene A. Gargaro Jr., said in a statement. “They all have a long history of civic and community support and these leadership pledges demonstrate their strong commitment to Detroit’s future. We thank them for helping the DIA to fulfill its $100 million Grand Bargain commitment and know that other donors will join in this great success story for our city and our state.”
The $26.8 million comprises $10 million from Roger S. Penske and Penske Corporation, $5 million from DTE Energy, $5 million from Quicken Loans and the Rock Ventures Family of Companies, $2.5 million from BCBSM, $1 million from Meijer, $1 million from Comerica Bank, $1 million from JPMorgan Chase, $800,000 from Consumers Energy and $500,000 from Delta Air Lines Foundation.
With the new funds, the DIA has reached nearly 80 percent of its $100 million commitment, officials said.
Today was the deadline for Detroit retirees to vote on the city’s bankruptcy restructuring plan, known formally as a “plan of adjustment.” The California firm tallying the votes had to receive them by today. All creditors get to vote on the plan of adjustment. But pensioners’ votes are particularly key—especially when it comes to the future of the “grand bargain.” Michigan Radio’s Sarah Cwiek explains why.
- A new report on the value of the Detroit Institute of Arts collection was released just days before creditors and retirees’ votes are to be counted, but will the new appraisal have any impact on the bankruptcy vote? The MiWeek team weighs in on this DPTV program. Here’s a link to a preview of the segment, which airs at 7:30 p.m. Thursday
As a backdrop to the news today about an analysis showing the Detroit Institute of Arts collection is valued at up to $4.6 billion, a figure that could fall to $1.1 billion in actual sales if the art was put on the market, NextChapterDetroit.com brings you a bit of history about why and how the museum’s collection has been part of the bankruptcy case this year.
1-The artwork at the Detroit Institute of Arts is the city’s top asset, according to Detroit’s Disclosure Statement, the document designed to provide information to creditors so they can evaluate the city’s restructuring plans. The artwork, while not precisely valued in the May 5 document, was worth more than city-owned land, Belle Isle and the Detroit-Windsor Tunnel.
2-Prior to Emergency Manager Kevyn Orr filing for bankruptcy, Michigan Attorney General Bill Schuette issued an opinion that the artwork was protected from sale and “is held by the City of Detroit in charitable trust for the people of Michigan, and no piece in the collection may thus be sold, conveyed, or transferred to satisfy City debts or obligations.” His opinion has no force of law in federal bankruptcy court.
3-Bond insurer Syncora, who stands to lose nearly $300 million in the case, is one of the creditors that has been advocating for selling art to cover debts. Here’s what Syncora attorney Stephen Hackney said at an April hearing:
“The art has been a sort of noteworthy, highly publicized part of the case, and from our standpoint, a very important part of the case … The city is proposing to address the issues surrounding the art collection in a way, from our standpoint, that yields far less value.”
4-Bankruptcy Judge Steven Rhodes on April 28 granted Syncora’s request to view communication between Schuette and the DIA that preceded his opinion that the art was protected from sale to pay debt. In issuing his ruling from the bench, Rhodes said:
Plainly, the extent to which the art held by the Detroit Institute of Arts should be taken into account in evaluating whether the city’s plan meets the best-interest test of the bankruptcy code is a substantial issue in the case, one that has not been prejudged or determined by the court at all, and, of course, this ruling should not be construed to suggest one way or another how the court will or may rule on that substantive issue of confirmation.
5-In preparation for trial, the city and the DIA hired Artvest Partners, an art investment firm, to “assess the viability and practicality of selling art or otherwise monetizing the collection,” according to Bill Nowling, spokesperson for Detroit emergency manager Kevyn Orr.
6-The Artvest report disputes some of the findings in another report that was commissioned by some of the city’s creditors.
7-Issued today, the Artvest report cost $112,500. (Its author, Michael Plummer, co-founder of the Artvest firm and a former employee at both Christie’s and Sotheby’s, is scheduled to appear as an expert witness during the city’s bankruptcy trial in August.)
8-The report was issued just days after pensioners and other creditors needed to mail their ballots to meet the Friday deadline of the votes being received. Would this information have changed their minds? We’ll never know. As a related noted: The DIA has pledged to raise $100 million toward pension funding as part of the “grand bargain,” the agreement that also has, among other terms, the state paying $195 million and foundations contributing $366 million toward the pension funds.
Among the Artvest report’s findings:
About two-thirds of the DIA’s collection is in four areas that have “fallen out of favor with collectors and that are underperforming their market peak in 2007”. The are: American Art pre-1950, Old Maser and 19th Century European Paintings, and Impressionist and Modern Art.
If the DIA collection were for sale, “few sales would be to other museums, both because other museums are likely to boycott such sales, as well as because funding constraints limit their participation in the marketplace at today’s price levels.”
If the DIA wanted its art auctioned, Sotheby’s and Christie’s might not participate. Sotheby’s parent company was based in Detroit from 1983 to 2006, and had a number of connections to the DIA. Christie’s “received unusually strong negative feedback from both the museum community and the art industry by merely conducting an appraisal.”
If the city sold art through an auction house outside of Christie’s or Sotheby’s, it could expect to lose 20-40 percent of potential selling prices.
Another issue raised in the report is the authenticity of some of the pieces. The DIA has works that are thought to be Modiglianis but have not been validated by the art worlds’ most trusted sources. And also, according to the report, the authenticity of some of the Old Masters paintings could be challenged during a review of them before a sale.
The iconic Diego Rivera murals would have little value if moved. According to the Artvest report, cutting them off the walls would seriously damage them.
A sale of the art, especially if ordered through a court decision related to settling debt, could result in “formidable legal obstacles and prolonged litigation.” Some of those obstacles, according to the report, are: items would need free and clear title to be sold, and the threat of future litigation could prevent that; it’s likely the Michigan Attorney General would take legal steps to prevent the sale, based on his opinion from last year; the heirs of DIA donors would be likely to “pursue every legal option necessary to stop or delay the sale of any of the art, potentially leading to years of litigation.”
The potential impact of selling the most valuable works would “deprive the museum of its core attraction, drastically reduce attendance and related revenues, drive away potential donors of future gifts and endowments, and in all likelihood, ultimately for the closure of the DIA due to a loss of economic sustainability, resulting in a full liquidation.”
-By WDET’s Sandra Svoboda
@WDETSandra and email@example.com
A New York art investment firm estimates the Detroit Institute of Arts collection is worth billions of dollars. But, the firm says, if the art was sold to pay creditors in the bankruptcy, it would likely only bring in half that amount.
The company, Artvest Partners produced a 112-page report for Detroit Emergency Manager Kevyn Orr analyzing the financial value of the D-I-A’s collection as well as issues and dynamics involved in selling it. The city and the museum hired the firm.
NextChapterDetroit.com has a longer analysis of some of the history and findings of the report.
Several creditors and some pensioners have argued the city should monetize the collection to pay part of its $18 billion dollars in debt. They likely won’t be happy this report came out just days after they needed to return their ballots voting on the city’s Plan of Adjustment, the blueprint for restructuring debt, which does not include selling anything from the DIA. The Plan does include the “grand bargain” funding: that’s the state’s $195 million and the private foundation contributions of $366 million to fund pensions. The agreement also comes with a $100 million commitment from the DIA toward pension funding.
The Artvest report estimates total worth of the museum’s 60,000 pieces is between $2.8 billion and $4.6 billion dollars with the individual pieces ranging in value from tens of millions to a few thousand dollars.
The Artvest analysis also finds selling the collection would produce between $1.1 billion and $1.8 billion in revenues. The report identifies several challenges in today’s market. For example, a majority of the DIA’s collection is comprised of styles that have fallen out of favor with collectors and investors.
“This is the first comprehensive valuation of the entire DIA collection. The report makes it abundantly clear that selling art to settle debt will not generate the kind of revenue the City’s creditors claim it will,” says Bill Nowling, Orr’s spokesman.
Still, creditors likely won’t give up the fight to have the city sell art to pay debt.
The report was authored by Michael Plummer, co-founder of the Artvest firm and a former employee at both Christie’s and Sotheby’s. He is scheduled to appear as an expert witness during the city’s bankruptcy trial in August.
-By WDET’s Sandra Svoboda
@WDETSandra and firstname.lastname@example.org
Featured art above by Carl Oxley III.
After morning arguments on issues related to Detroit’s bankruptcy case, Judge Steven Rhodes delivered from the bench this afternoon a few decisions. He agreed to allow planning to move forward for bus tour of the city as part of the bankruptcy trial. But he refused bond insurer Syncora’s request to subpoena leaders of the 10 foundations originally involved in the “Grand Bargain” and the Michigan Attorney General Bill Schuette. Syncora attorneys wanted to ask Schuette about his opinion last year that preceded the bankruptcy filing in which he ruled that the Detroit Institute of Art’s collection was protected from sale by Michigan law.
Here’s a transcription of what Judge Rhodes said:
Addressing first the Attorney General’s motion to quash the subpoena that was issued to him by Syncora. The court concludes that this motion should be granted. The court concludes that the Attorney General’s opinion that is the subject of that subpoena is for all purposes the equivalent of a brief, and it will be given weight by the court only to the extent that the facts on which it relies are established in the evidence and the law on which it relies is persuasive. In weighing any settlement in the case including what’s been called the “grand bargain” here, the court will weigh the merits of the opinions, evidence, facts and law and not take into account the position of authority of the people who may have taken positions on side or the other of the issues. So in these circumstances, there is no basis for questioning the Attorney General about generating his legal opinion so that motion is granted.
Addressing next the foundation’s motion to quash the subpoenas that were issued to them, the court again concludes that this motion should be granted. The court concludes that none of the … subjects and none of the documents that are sought from the foundations are relevant to or even arguably relevant to the issues of whether the plan is discriminatory or whether it is unfairly discriminatory. … Accordingly, that motion is granted. Now having said that, it was mentioned during argument that Syncora is interested in information relating to the foundations’ ability to pay. That is a relevant subject on which the court would allow limited discovery. It is not however, as far as the court could determine, a part of the discovery that was in fact served. The court hopes that Syncora’s counsel and counsel for the several foundations can work out a streamlined and efficient way for Syncora to get the information it needs to evaluate this issue of their ability to pay. …
Turning now to the motion for a site visit, the court is inclined to exercise its discretion to grant that motion and to go on a site inspection as requested. The court believes it is likely that the value of such an inspection would be outweighed by the effort it would take to organize and execute the tour so it will take, however, further discussion and planning here in the meantime. So while I’m not prepared yet to enter an order granting the motion, I do think it is appropriate to move the discussions forward. And so to that end I am going to ask the creditors who are objecting to the plan at this point to nominate one or two of them to attend a meeting with one or two representatives of the city, me and the (U.S.) Marshall’s office to discuss and conclude the details necessary to effectuate this site inspection, and if the creditors are unable to agree upon one or two representatives for that purpose, the court will identify someone for you. I think that’s as much on that motion as we can do at this point in time.
The city’s petition for protective order of retirees’ personal information: The court did state on the record earlier that it would find that Syncora had withdrawn this request based on the court’s ruling that the retirees’ hardships was not at all relevant to the issue of either unfair discrimination or fair and equitable, and just to elaborate on that a bit, as the court stated earlier, it is unaware of any case law interpreting section 1129 that holds that it is appropriate to consider the relative hardships of creditors in evaluating the issues under that section of the bankruptcy code. And indeed as the court suggested in the hearing, if that door were opened here and that subject were relevant here, it would literally open up every single retiree as well as Syncora itself to these same inquiries about hardship, assets, income, financial position. And that would be an extraordinarily burdensome and invasive process for all concerned.
Turning finally to Syncora’s motion to compel complete and truthful answers to the interrogatories, the court is likewise going to deny this motion but with a finding on the record here that to the extent that any answer to any of the interrogatories as to which Syncora seeks a more complete answer is incomplete it’s because the city doesn’t know the answer.
Gov. Rick Snyder has signed the legislation that authorizes the state’s $195 million contribution to the Detroit bankruptcy settlement and creates additional oversight of the city’s finances and operations. The governor called the settlement, part of the “grand bargain,” a good deal for taxpayers because it sets the stage for the city’s comeback.
“This is about how not just Detroit but the spirit of Michigan came back,” Snyder said at the signing, held at the Globe Building near the Detroit Riverfront, which is under construction to become a Department of Natural Resources recreation center. “While we celebrate today, let’s recognize that there’s more work to be done.”
The governor said the day Detroit filed bankruptcy could be the “darkest chapter” in the city’s history, but the Governor says the taxpayer donation shows the entire state is behind the Detroit recovery effort. “Detroit, Michigan, means something special. It’s not Detroit versus Michigan or Michigan versus Detroit. It’s Detroit, Michigan, and we should hold our heads proud,” he said to applause.
There are conditions attached to the state contribution– including a commission that will supervise Detroit’s contracts and finances for years into the future. The money, along with hundreds of millions donated by businesses and foundations, will be used to mitigate cuts to pension benefits in the bankruptcy process. But pensioners still have to approve the deal. In exchange, they’d give up their rights to sue for their full benefits or other related issues.
“A ‘yes’ vote from pensioners is a vote for their own well being,” he said, “and the continuation of a message that is greater than bankruptcy.”
House Speaker Jase Bolger (R-Marshall) said the Legislature’s passage of the “grand bargain” bills represented how connected the state was in helping Detroit. “We may come from different peninsulas, but as we stand here today, we are all one Michigan,” he said.
Senate Majority Leader Randy Richardville, (R-Monroe), who showed off his made-in-Detroit Shinola watch, said one of the reasons providing state funding for Detroit’s pensions was important was because city workers live throughout the state “in all 83 counties.” (Here’s a map of where they live)
Rep. Thomas Stallworth (D-Detroit) said the city’s bankruptcy, in part, represents failure on the part of political leadership for the people of Detroit. He urged pensioners to vote “yes” on the Plan of Adjustment, saying it represents the “best possible deal for the city.”
Detroit Mayor Mike Duggan echoed the themes of voting yes, bipartisanship and “coming together.” He said, “What you have done with this bill is give us a fresh chance,” and it “will turn out to be one of the proudest things you’e done.”
As he did last week at the news conference at the Detroit Institute of Arts where the Detroit Three automakers announced their $26 million contribution to the “grand bargain” , U.S. District Chief Judge Gerald Rosen spoke. He is considered the architect of the “grand bargain” and has led the mediation efforts in the bankruptcy case.
“This is leadership, not just bi-partisan, but the three branches of government coming together,” Rosen said. “This isn’t a final victory lap. We’ve got a couple more laps to run.”
Also as he did last week, Rosen lauded Don Taylor and Shirley Lightsey, who head up police/fire and non-uniform retiree groups respectively.
Lightsey spoke directly to pensioners, saying “If you let that (grand bargain) money go and it’s off the table, you will have no sympathy from anyone. … Think about your decision. This is something you are going to have to live with.”
Lightsey also repeated her phrase that has been printed on buttons worn by some in the crowd of about 200. “We can’t eat principles, and uncertainty does not pay the bills.”
-By WDET’s Sandra Svoboda and Michigan Public Radio Network’s Rick Pluta
Here’s audio of Rick Pluta’s report.
“The positive spin is that they have satisfied one more requirement for confirmation of the plan,” says Laura Bartell, Wayne State University Law School professor and bankruptcy specialist.
In the five-page filing, Schuette writes that the grand bargain is legal and that its provision transferring the Detroit Institute of Arts collection to a nonprofit “to be held in perpetual charitable trust” is also consistent with Michigan law.
“This result — a result made possible through the generous contributions of local and national foundations, the DIA and the State of Michigan — is an excellent one,” Schuette wrote in an accompanying letter to Judge Steven Rhodes.
Last year, after questions were raised about whether artwork could be sold to pay city debt, Schuette issued an opinion that the museum’s collection could not be “sold, conveyed or transferred to satisfy City debts or obligations.”
That hasn’t stopped some creditors. Bond insurer Syncora continues to advocate for the sale of the art. If that happened, per bankruptcy procedure, the funds raised would be split between all the city’s creditors. Schuette has asked Judge Rhodes to quash Syncora’s subpoena, and a hearing on that issue is scheduled for June 26.
Meanwhile, the terms of the grand bargain bring in about $661 million from the state, foundations and other organizations and individuals to help fund the city’s pensions and protect the artwork from sale. But the grand bargain also requires pensioners to approve the Plan of Adjustment, which prescribes cuts to some pension payments, increased health care costs and other hardships for the 32,000 pensioners.
Voting concludes July 11.
The Detroit City Council today approved the transfer of works from the Detroit Institute of Arts to a charitable trust – for a second time. The first Council action, earlier this month, was a resolution that said members “supported” transferring the art to a charitable trust.
Now Council has unanimously passed a resolution saying they “approve” the transfer.
Some Council Members say they still feel a bit queasy about placing the work in a trust, but they say that the most important thing is to get Detroit out of bankruptcy as quickly as possible. Transferring the art furthers that cause.