In Detroit bankruptcy, what will happen to DIA?

[Rosa]

Good afternoon. Long time lurker, first time poster here.

I've been reading a bit about the budget woes and staff cuts the Detroit Institute of Arts has been dealing with lately. There's a question that's really bothering me. I understand the museum is owned by the City of Detroit. I think it's wonderful that the people of Detroit own such a jewel. However, if Detroit files bankruptcy, as it appears it will sooner or later, what will happen to the DIA? I have nightmares of them auctioning off the Rembrandts and Van Goghs to pay Detroit's bills. The DIA is an absolutely irreplaceable resource.

Does anyone know how a Detroit bankruptcy would affect the DIA?

[LodgeDodger]

I get dibs on the Mackintosh Argyle chair!

Welcome, Rosa. I'm sure the DIA is funded through other sources. Otherwise, it would have closed or liquidated a long time ago.

[Rosa]

I'm sure you're right, LodgeDodger. However, I'm thinking of how personal bankruptcies are usually carried out. For instance, if I file Chapter 7, I have to provide the court with a list of all my assets. Any assets in excess of the state exemptions are eligible to be seized by my creditors. If Detroit filed BK, would the DIA artworks be assets that could be sold off or seized, or are city bankruptcies handled differently?

And I'll have that nice medieval chapel with the gorgeous stained glass that's near the Kresge Court. It would make a nice add-on to the homestead here in Hamtown.

[cman710]

Welcome to the Forum, Rosa. I hope you continue to participate here.

In order to answer the question, I think we would need to know what Detroit "owning" the DIA means, if Detroit owns it at all. Does Detroit own the DIA's building? Does Detroit own any of the works of art? Is the DIA owned technically by an entity that is not the city of Detroit? Those are just some of the questions.

In order to try to find more information about the DIA, I consulted the DIA's 2008 Annual Report. [[The 2009 report has not been posted yet).

In the section of Note A of the financial statements entitled, "Art Objects and Collection," it states:

In conformity with allowable museum practice, the value of the Art Collection is excluded from Statements of Financial Position. Title to art objects purchased by or donated to the DIA is offered to the City of Detroit Arts Department and title transferred when accession to the permanent collection has been approved by the Board of Directors of the DIA and the Arts Commission of the City of Detroit...Sales of works of art are subject to a policy that requires proceeds from their sales to be used to acquire other items from the collection.

So the city does hold title to the artwork in the museum.

Note C, "Relationship with the City and State of Michigan" provides a clearer answer to the ownership question:

Effective February 1, 1998, the DIA entered into an operating agreement with the City to administer, manage, and fundraise for the museum with the mission to promote and maintain the excellence of the museum. The City continues to own the museum's permanent art collection, including works of art acquired prior to or subsequent to the operating agreement, as well as the building museum and grounds. The operating agreement expires June 30, 2018.

The note also indicates that the DIA manages the museum without compensation.

So the city does own the DIA and its artwork. I am not sure how that would play out in bankruptcy. The museum does not state the value of its artwork in the financial statements, so I do not know what the estimated value of it is, though I would imagine it is in the hundreds of millions. If I can find any more information about bankruptcy and how it would play out, I will post it here.

[cman710]

As a side note, in the financial information section of the annual report, we can get a window into the sources of the museum's revenues. The information below is for the fiscal year that ended June 30, 2008.

That year, the DIA had just under $45 million in revenues, and $42.2 million in expenses. Of the $45 million in revenues, $23.6 million came from private donations. $7.6 million came from membership and development, and $6.5 million came from programs and operational activities. Just over $1 million came from government appropriatons [[most of which was probably state funding). About $2.9 million came from Board appropriations, but I am not sure where these revenues ultimately originated from. At the least, this shows that the museum relies very little on public funding for its operations, but it relies very heavily on its endowment and donations. That source has undoubtedly taken a big hit since the 2007-2008 fiscal year, especially with the accelerating downturn of many Michigan companies.

While the museum's revenue was greater than its expenditures, the museum nonetheless had a deficit of $1.2 million because of other changes in net assets, such as capital expenditures. The museum's net [[total) deficit was $9.89 million. The DIA did have positive cash flow, however, and at that point, had $8.3 million on hand in cash and short-term investments.

[Coaccession]

Since Detroit owns the art collection at DIA, it's one of the wealthier cities in the USA. All that financial value is off the books -- that's how museums keep their books, with FASB 116 blessing -- but we're not talking the hundreds of millions of dollars cman710 mentioned. The number is way, way up in the billions -- enough to generate cash income on an endowment that would fully fund Detroit's arts and culture budget and essential services to boot. If Detroit mobilizes that value, the structural deficit goes away and there's no need for any bankruptcy.

[lilpup]

There must be some types of protection in place for municipal assets while in receivership. Cleveland didn't lose their art institute or zoo when they entered receivership.

[Retroit]

I predict that 20 years from now, DetroitYESers will be debating whether the long-abandoned DIA should be turned back into an art museum or converted into a mass transit station or a backdrop for movies and outdoor concerts.

[cman710]

I predict that 20 years from now, DetroitYESers will be debating whether the long-abandoned DIA should be turned back into an art museum or converted into a mass transit station or a backdrop for movies and outdoor concerts.

You never know, but the city has just finished spending over $55 million to renovate the DIA, so I do not see the building being abandoned any time soon.

[Coaccession]

Maybe it really is a wrap for this 2011-2012 revival of the original 2009 thread, but...

I predict that 20 years from now, DetroitYESers will be debating whether the long-abandoned DIA should be turned back into an art museum or converted into a mass transit station or a backdrop for movies and outdoor concerts.

With lilpup and 1953 posting that some of the collection at the DIA already belongs to the Founders Society rather than the Detroit Arts Department, and AAM/AAMD museum ethics guidelines saying Detroit should gift its part of the collection to another museum if it goes bankrupt, perhaps Detroiters will soon have to hike up to the Bloomfield Hills Institute of Arts to see their Monet [[or will it be the Gross Pointe Institute of Arts?), and DetroitYESers will revive this thread again in 2029 to have the debate Retroit predicted. Still, you have to hope that Detroit's municipal code has a stronger say in all this than AAMD's ethical code [[that's the point of the Linda Sugin article I linked earlier). If that's the case, then Detroit would still have its art collection and the DIA would never have been abandoned... at least as long as Detroit does the sensible thing and has its Monet and money too... the money it needs to avoid bankruptcy, that is.

[1953]

More on why selling the DIA is a nonstarter:

http://www.crainsdetroit.com/article...ve-worth-much#

[lilpup]

Cman, that's not really an exact picture of the situation. Many of the works in the DIA are on loan or were purchased by non-DIA entities. The City owns the property and some of the collection, but not all.

[Rosa]

According to the 2003-2004 Detroit Budget Analysis, quoted in the DIA wikipedia article:

"The Detroit Institute of Arts [[DIA) is the second largest municipally-owned museum in the United States and contains an encyclopedic art collection worth over one billion dollars."

http://www.ci.detroit.mi.us/legislative/CouncilDivisions/FiscalAnalysis/doc/AGDailies/Arts03-04.doc

It's interesting to hear that about Cleveland. Is their museum municipally owned as well?

[cman710]

Lilpup, I did think that many of the works of art are probably donated, and that is a good point. I am not certain how much of the art the city owns, though I will poke around and see if I can find anything. Still, I think the value of whatever the city does own could be in the hundreds of millions.

[Baselinepunk]

Without digging out my notes from class, I believe that if the city goes into bankruptcy, the DIA would not be affected too bad. I remember something about that the city now has oversight on the place, but essentially the DIA runs as a separate entity from the city. I can't remember if it is the DIA, or the DHM that has the city board positions unfilled for sometime now [[at least they were back two years ago).

I also think that the city cannot make the DIA deaccession and sell items from its collection in order to cover city debets. Thanks goodness because, considering the moronic actions of the Detroit government, I'm sure that many items would have been liquidated over the years to pay for MonCon's transportation and lunches. I think that was changed fairly recently. Everyone has to remember that when Engler changed funding for the Arts in Michigan, repositories like the DIA became more stand-alone than before.

I've seen some posters on this site that are affiliated with eh DIA, or at least know a heck of a lot of what's going on in there, so hopefully they will chime in [[or I can get board and dig through my material) and provide more accurate information


PS -- Never go to Wikipedia for any factual information. It's a junk site that is not even a creditable research tool for high school work and is largely considered drek.

[Rosa]

PS -- Never go to Wikipedia for any factual information. It's a junk site that is not even a creditable research tool for high school work and is largely considered drek.

I appreciate the tip, but I just found the link to the Detroit budget report there. The quote comes from the actual budget report.

Thanks for the info. Given the state the city's been in for years, it seems a minor miracle that the DIA is doing as well as it is.

[mauser]

Lilpup, I did think that many of the works of art are probably donated, and that is a good point. I am not certain how much of the art the city owns, though I will poke around and see if I can find anything. Still, I think the value of whatever the city does own could be in the hundreds of millions.

The City of Detroit owns MOST of the collection outright via direct purchase. This means that there are no donor restrictions on sale as you have with other famous collections. DIA is unique in that the City was very active in the early years to assemble all those works.

What the City owns is worth billions.

[lilpup]

I think the museum most at risk would be the Wright. It's heavily dependent on the city for operational financing.

I don't know how the Science Center is doing - [[if it's technically city owned? - not sure of that)

[DetroitPlanner]

I just bid for the museum on E-bay. I can't wait to see my futon and salvation army dinette set up in the rivera court!

[lilpup]

The taxes and heating bill are going to bury you!

[Lorax]

I believe the Founder's Soicety has control over operations at the musuem, a role they accepted in recent years. I believe the city owns the building and land, and the collections are largely endowments which are not technically owned by the city, since they can't be sold unless voted upon by a majority of the Founder's Society board. At least that's my recollection.

[Gistok]

Sigh......... I just measured it... and Frederick Church's massive landscape masterpiece "Cotopaxi" won't fit into my living room!

[cman710]

Lorax, according to the 2008 Annual Report I linked to above, the city definitely owns the building and land. The DIA and city have an agreement by which the city "operates" the museum, and the DIA "manages" it. It could be that the collections have a special status even though the city has title to the art owned by the museum, as you mentioned, but I have not been able to find anything to that effect.

I am still not sure how bankruptcy would affect the whole situation [[and receivership would be far more likely than bankruptcy), but I am hoping to get a chance to do some research this week. If so, I will post any information I learn here.

[LodgeDodger]

Lorax, according to the 2008 Annual Report I linked to above, the city definitely owns the building and land. The DIA and city have an agreement by which the city "operates" the museum, and the DIA "manages" it. It could be that the collections have a special status even though the city has title to the art owned by the museum, as you mentioned, but I have not been able to find anything to that effect.

I am still not sure how bankruptcy would affect the whole situation [[and receivership would be far more likely than bankruptcy), but I am hoping to get a chance to do some research this week. If so, I will post any information I learn here.

Please do.

[Islandman]

So, both of your posts so far have to do with selling off or mobilizing it value. Please expound on this.