The city of Detroit has added three heavy-hitting business and foundation leaders to the list of witnesses it filed two weeks ago in its historic bankruptcy case. As Bankruptcy Judge Steven Rhodes considers whether to approve the city’s plan for restructuring debt and its future financial, management and administrative functions, he’ll evaluate, in part, whether it’s feasible.
The city’s witnesses to testify to feasibility and the importance of the plan to the business community are:
Roger Penske, founder and chairman of the Penske Corporation.
Dan Gilbert, chairman and founder of Rock Ventures, LLC and Quicken Loans, Inc.
Rip Rapson, president and CEO of the Kresge Foundation.
According to the city’s court filing, the three men will speak about the “importance from a business and investment standpoint of the City’s ability to capitalize and build on the efforts contemplated in the Plan post bankruptcy” and “the importance and effect of addressing in the Plan, among other things, the City’s blight, public safety, and urban revitalization.”
Rapson, according to the document, also will discuss “prior and future efforts that include but are not limited to, the substantial annual philanthropic funding to the City by Kresge and other philanthropic foundations and entities.” Kresge remains a major funder of the Detroit Future City project, which began as the Detroit Works Project under Mayor Dave Bing. Detroit Future City has developed a “strategic framework” that addresses economics, land use, neighborhoods and planning topics in the city.
Numerous other philanthropic organizations are funding a range of efforts in the city, including the pledge by 12 foundations to put $366 million toward pension funding in exchange, in part, for the Detroit Institute of Arts collection being protected from sale. Kresge has committed $100 million of that effort.
Attorneys for the city of Detroit filed a witness list this week in bankruptcy court. Among the 27 individuals named are Emergency Manager Kevyn Orr, Mayor Mike Duggan, Skillman Foundation President and CEO Tonya Allen, and Midtown Detroit Inc. President Susan Mosey.
From the Detroit Institute of Arts, the list includes Eugene Gargaro, chairman of the board, Graham Beal, director, president and CEO, and Annmarie Erickson, executive vice president and COO, and Board Member Marc Schwartz.
Other city officials named include John Hill, chief financial officer, Detroit Police Chief James Craig, and the fire commissioner. Several state employees are on the list including State Treasurer R. Kevin Clinton and Richard Posthumus, a senior advisor to Gov. Rick Snyder. The list also includes numerous financial, actuarial, accounting and restructuring consultants.
Bond insurer Financial Guaranty Insurance Co. is seeking to “conduct due diligence” on the collection at the Detroit Institute of Arts and in this motion asks Bankruptcy Judge Steven Rhodes to allow it. Such “due diligence” means accurately determining the value of the art, as pertinent to the ongoing bankruptcy proceedings, which require an analysis of the city’s assets. FGIC says it has four buyers interested in pieces from the collection. They are listed in the motion
Minutes after the bankruptcy court mediators released a statement and proposed terms of the deal between the city and three bond insurers, Emergency Manager Kevyn Orr appeared on CNBC. Here’s the Storify version of what he said — with extra context and background:
The city’s new Plan of Adjustment contains some details of private foundation contributions to the $815 million “grand bargain” – the deal that would maintain the Detroit Institute of Arts collections and other assets in charitable trust for the public and protect them from sale to fund pensions.
The yet-to-be-finalized deal also includes Gov. Rick Snyder’s proposed $350 million over 20 years from the state. Under the deal, private foundations would contribute $373.5 million, including $7.5 million they have already committed to the museum (see below for foundations and amounts pledged). The DIA, according to the Plan, would contribute $100 million:
The DIA undertakes to secure commitments for contributions of the $100 million (subject to the Present Value Discount) from the business community (and their related foundations), other foundations and individuals. As of the Closing, The DIA shall be responsible for any portion of the $100 million … for which is has not secured commitment from DIA Funders as of the Closing. However, The DIA shall have the right after the Closing to substitute for its obligation to pay any or all of he DIA Deficiency commitments from new DIA Funders or an increased funding commitment from an existing DIA Funder.
Pensions, under terms of the “grand bargain” would be managed by a new Receivership Transition Review Board that is independent from the city for at least 20 years. The DIA also would establish an “ad-hoc” governance committee with members representing the foundations funding the grand bargain, the city and the state of Michigan.
Meanwhile, bond insurer Syncora, which holds about $620 million of the city’s $18 billion debt, is seeking to subpoena a massive amount of information related to the museum’s assets, finances and management. No protective orders have yet been filed, nor are hearings scheduled about Syncora’s action.
If the “grand bargain” goes through under the proposed and most recent Plan of Adjustment, the museum “will provide an array of art programs at no or discounted costs to the residents of the State.” While the Plan doesn’t mandate what those could be, it does suggest that “such programs could include” exhibitions rotating through other Michigan museums and art centers, professional development programs with the Michigan Museums Association, an expansion of the Inside/Out program to place art reproductions in outstate locations, providing discounted art conservation services for other Michigan museums and developing an educational program based on the DIA’s collection that supports National Common Core Standards.
According to the court documents filed March 31, the “Foundation Funder Intended Funding Amount” plan is:
Community Foundation for Southeast Michigan $10 million
William Davidson Foundation $25 million
The Fred A. and Barbara M. Erb Family Foundation $10 million
Max M. and Marjorie S. Fisher Foundation $2.5 million*
Ford Foundation $125 million
Hudson-Webber Foundation $10 million
The Kresge Foundation $100 million
W. K. Kellogg Foundation $40 million
John S. and James L. Knight Foundation $30 million
McGregor Fund $6 million
Charles Stewart Mott Foundation $10 million
A. Paul and Carol C. Schaap Foundation $5 million*
Total $373.5 million, less credits to DIA Commitments (*$7.5 million)
Net Total $366 million
-By WDET’s Sandra Svoboda
@WDETSandra and firstname.lastname@example.org
Bond insurer Syncora is seeking a massive amount of information from the Detroit Institute of Arts, Christie’s and the Michigan Attorney General as part of the Detroit bankruptcy case. The request includes the DIA’s membership information, documentation of how art was acquired, financial performance reports and tax records, appraisals, communications with the city about selling artwork and more. (The entire request is visible below.)
Next Chapter Detroit’s Sandra Svoboda discussed the subpoena with WDET’s Craig Fahle on his show today.
The company filed copies of the subpoenas in bankruptcy court that were to be served on the museum, the auction house, which appraised part of the collection, and the state’s top lawyer, who wrote an order last year stating the DIA’s collection was held 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.”
Spokespersons for all three entities declined comment to NextChapterDetroit.com. An attorney for Syncora did not return an email message. Syncora, according to the city, insures and partially holds about $620 million of the city’s $18 billion debt.
The Detroit Free Press reports that legal experts say the subpoena “is unlikely to make much headway in court.”
-By WDET’s Sandra Svoboda
@WDETSandra and email@example.com