Foundations to contribute $330M to help protect DIA collection, Detroit pensions

[Lowell]

I heard that a big announcement was in the works for today. This just came in from my Crain's alert. It is under the rumored $500 million 'ransom note' discussed elsewhere on this forum, so maybe this is an opening bid?

A group of local and national foundations have committed more than $330 million to help Detroit resolve two daunting challenges in the city's bankruptcy case: a solution to underfunded pensions and the preservation of the Detroit Institute of Arts' collection.

The presidents of the Community Foundation for Southeast Michigan, Kresge Foundation, the New York City-based Ford Foundation and the Miami-based John S. and James L. Knight Foundation are heading a leadership committee coordinating the effort, according to a statement issued on behalf of mediators in the Detroit bankruptcy case.

While details of the offer haven't been revealed, a court statement said DIA supporters are offering more than $330 million in assistance.

The foundation contributions and $33,000 donated so far to a fund at the Community Foundation will go directly to the pensioners and not fund a permanent endowment, foundation President Mariam Noland said.

Chief Judge Gerald Rosen of the U.S. District Court for the Eastern District of Michigan is mediator in the case, with assistance from attorney Eugene Driker and others.

The foundation support has leveraged additional commitments including a previously reported $5 million gift from A. Paul Schaap, a former chemistry professor whose work led to the founding of Southfield-based Lumigen, and 130 individual contributions to a subsequent fund set up at the Community Foundation. That's according to the statement made on behalf of mediators by Rod Hansen, media information officer for the U.S. District Court.

So far, contributions to the Community Foundation fund have come not only from around the state but also from Maine, Oregon, Illinois, Florida, Maryland and Scotland, Noland said. The amount raised is in addition to Schaap's gift.

The mediators said they continue their work to facilitate agreements among as many of Detroit's creditor constituencies as possible and are "deeply grateful for the incredibly generous and constructive part the foundations have agreed to play in this larger process."

Read the rest of the article on Crain's here

[Baselinepunk]

Once precedence is set, there will be no reason why the State, ahem, I mean, Dictator Orr can't come back and press them for more. This whole thing is shit and I cannot believe people put up with this.

Only in Detroit #OD

[Ray1936]

It's not shit when your pension and healthcare is going into the dumpster.

[BankruptcyGuy]

Lowell, I appreciate you posting this. I was going to comment, but I don't have enough details to opine intelligently. My questions would be:

1. Is all the money funded at one time?
2. Who owns the art at the end of the day?
3. Is there buy-in from other creditors for the "purchase" of the art for that price?
4. How can the "purchasers" be so sure that the funds will be used for the described purpose? How will creditors' objections be handled?

My biggest question is: if the pension fund hole is $3.5B, and this is $300MM, is the hole just 10% filled? Who's going to fill the rest of it, if anyone?

It beats, as my mother would say, a sharp stick in the eye, but maybe I'm missing something else.

[Honky Tonk]

My favorite comment from the article:

CAROLYN MAZURKIEWICZ I do not see a donation from any foundation associated with the Ilitch family. This is the family that profits the most financially from the city of Detroit.

[compn]

i'll believe it when i see it.

[renf]

So far as I can tell from essays in the local papers and in the NY Times and Wall Street Journal, the Sloan Foundation has not yet participated in this attempt to simultaneously protect pensions and the DIA collection. Alfred Sloan more or less ran GM from 1922 to 1956. Back in the pre Civil Rights Revolution days, the Sloan Foundation made some modest contributions to keep one or more of Detroit's Jim Crow hospitals alive. Recently, the Sloan Foundation has not been very active in Detroit. Does anyone know why?

[bailey]

... the Sloan Foundation has not been very active in Detroit. Does anyone know why?

Probably for the same reason the Ford Foundation [[frankly shocked to see them kicking in) isn't very active here.... its located in the center of the universe and the only city that matters in the country. Its civic programs are dedicated to the NYC metro area almost exclusively...its in their mission statement.

[coracle]

I heard it reported that this money can ONLY be used to support the DIA and Pensioners so that is very reassuring. Maybe the first support for the DIA could be giving the suburbs the millage back they were conned into by the Proposal wording.

[Patrick]

Probably for the same reason the Ford Foundation [[frankly shocked to see them kicking in) isn't very active here.... its located in the center of the universe and the only city that matters in the country. Its civic programs are dedicated to the NYC metro area almost exclusively...its in their mission statement.

Pretty much spot on. Remember a few years back how it took a bit of bad press and some political maneuvering to get the Ford Foundation to commit to its "birth" city. Those east coast assholes were kicking and screaming the entire way, but they new the bad press wouldn't help their cause.

[Lowell]

Lowell, I appreciate you posting this. I was going to comment, but I don't have enough details to opine intelligently. My questions would be:

1. Is all the money funded at one time?
2. Who owns the art at the end of the day?
3. Is there buy-in from other creditors for the "purchase" of the art for that price?
4. How can the "purchasers" be so sure that the funds will be used for the described purpose? How will creditors' objections be handled?

My biggest question is: if the pension fund hole is $3.5B, and this is $300MM, is the hole just 10% filled? Who's going to fill the rest of it, if anyone?

It beats, as my mother would say, a sharp stick in the eye, but maybe I'm missing something else.

Excellent questions that underline the vagaries of this essentially [IMO] hostage negotiation situation. Hopefully the State of Michigan steps up now and insures protection of the collection and the pensions. This is a state treasure, not just a Detroit treasure, that immensely benefits the state's brand and image.

Imagine the Tigers being owned by the city and being sold and moved out of state. It would provide some instant dollars but the loss of prestige, not to mention future revenue from taxes an jobs, would damage business recruitment and residential appeal that, in turn, would further damage the ability to fund the pensions.

The alternative of auctioning off the collection might get more immediate dollars, but the intangible loss that would accompany such a disaster would be immense. I have heard very little assessment of that value. It would create a Humpty-Dumpty situation - it can't be put together again once dispersed.

Once the pension hole is filled, or partially filled as seems to be the only possibility, how will the future funding be enabled when assets like the DIA are destroyed? This is a bit of an eating one's seed corn situation. It gets one through the winter but not the next year.

In the end both the pensions and the DIA could be lost.

[BankruptcyGuy]

The biggest hurdle is my question #4. The BK court cannot require the liquidation of art, period. So if there is a "buyer", in the form of these foundations or some combination of them and the state, the City can do what it likes with the art. But if they do get a check, where it is spent is up to debate.

Since the pension hole is over time, a payment by the buyer over time would fit in nicely. I'm not sure of the legal mechanism to protect those funds from other creditors, though.

[majohnson]

The city undoubtedly owns 5% of the art, which has been valued at $600M. Quite obviously, the collection is worth over $300M and conceivably $12,000M.
Why should the city transfer ownership over such an asset in exchange for less than face value?
Wouldn't the city be better off selling 2.5% of the art for $300M and keeping the other 97.5%?

If the art is moved into a trust and away from the city, there is the risk that powerful people will change the trust terms/trustees and gain control. See Albert C. Barnes Collection.

If the art's ownership is to change, it should be for its true value, not less than 5% of its value.

[Gistok]

The city undoubtedly owns 5% of the art, which has been valued at $600M. Quite obviously, the collection is worth over $300M and conceivably $12,000M.
Why should the city transfer ownership over such an asset in exchange for less than face value?
Wouldn't the city be better off selling 2.5% of the art for $300M and keeping the other 97.5%?

If the art is moved into a trust and away from the city, there is the risk that powerful people will change the trust terms/trustees and gain control. See Albert C. Barnes Collection.

If the art's ownership is to change, it should be for its true value, not less than 5% of its value.

Thanks for reminding us that you're a member of the "JoAnn Watson Save Our Crown Jewels No Matter What" club...

The WHATEVER percent that constituted a city purchase includes some of the richest of the DIA's collection.

So you would rather sell off some of the best just so that the collection doesn't get spun off like so many of the crown jewels, like Belle Isle and the Zoo, eh?

You so much hate the idea that the DIA goes to the Founders Society as a city asset, that you would favor selling off some. Dumb dumb dumb...

As for your comment about the Albert C. Barnes collection... did you know that it has remained as the original owner has wanted... meaning it can only be shown a few days a week... only to a select few... and only by appointment. Where did you get the misinformation that the Foundation he created changed his original intent?

You need to go back and do your homework....

[downtownguy]

Thanks for reminding us that you're a member of the "JoAnn Watson Save Our Crown Jewels No Matter What" club...

Gotta call you out on that comment Gistok. It's beneath you and just not called for. It's a legitimate concern. Perhaps the best solution lies somewhere in the middle. But to brush off someone who articulated very well some valid reasons for looking at this from all angles before jumping in, I welcome that perspective.

[Gistok]

Well I only looked at this from one very important angle... how the DIA can recover from this calamity. This has put the brakes on anyone from donating another work of art until it is settled. Sell some art... sure... from a donor perspective, you might as well sell it ALL... the damage will be done at that point...

Just look at Coracle's reply... there's folks justs chomping at the bit in some of the more hick suburbs to bow out of the funding for the DIA.

This is not shades of gray... there are really only 2 options that are viable... keep the collection intact... or suffer the consequences... all the other options all have the same end game...

So sorry downtownguy... a solution that lies somewhere in the middle is not a viable option.

[majohnson]

In my response to you, I will actually respond to your arguments.
Pay special attention to part 4.

1. comparison to the zoo and Belle Isle
a
The zoo and Belle Isle are still owned by Detroit.
Detroit has ownership over the zoo, it has merely allowed an non-profit agent to manage it instead of a direct employee. The non-profit is liable to the city if the entire zoo burns down or is otherwise neglected under their watch.
Detroit has ownership of Belle Isle, it has merely allowed the state a temporary lease. The state does not own it anymore than a private citizen who leases a Belle Isle building on a temporary basis for a wedding.
b
Detroit has ownership over the DIA, it has merely allowed a non-profit agent to manage it instead of a direct employee.
c
The difference in the facts would be if OWNERSHIP [[not agency control) over Belle Isle/Zoo was transferred to an entity.
2
I think it would be a great outcome if an entity, similarly to Belle Isle, leased the DIA for 30 years to the highest lease bidder. For instance if ACME-for-profit has the highest lease bid of $300M for 30 years and charges market admission prices to recoup its outlay of $300M to the city.
If that were the case, the city would retain ownership, but the DIA asset would contribute to fulfilling Detroit's obligations.
3
You claim that I am against spinning off assets, as purportedly done with Belle Isle and the zoo.
You are doubly wrong and here is why:
Firstly, spinning off involves change of OWNERSHIP, not merely a change of the owner's management agent. Therefore, neither Belle Isle nor the zoo have been spun off.
Secondy, I would support the transfer of ownership, as long as it is transferred for market value and not 5% of market value.
4
What many fail to see is that transfer of ownership over the $12,000M DIA asset to an entity for $300M is a sale. It is simply a 95% off sale to the lowest bidding but politically connected few.
5
Ignoring your love of idioms, I have done my homework on the Barnes Collection.
A search of the Barnes Foundation website, Wikipedia, and many other widely accessible sources inform us that; much of the Barnes art was moved, the new location is open six days a week, and is accessible to anyone with $22.
6
Orr wants to monetize the DIA and generate $500M. Among the options are to sell 5% of the art for $500M, sell 100% for $500M, lease control over admission, selling only the art that lay in storage, and many other options. None of those result in the same 'end game'.

[Gistok]

OK... I'll bite...

I'm up to snuff on the Barnes...

And since you brought it as a comparison for the DIA... let's look at it.... [[Wiki cut/paste)...

______________________

The Barnes is located in the Philly suburb of Merion. In 1992 extensive repairs were needed to upgrade the mechanical systems, preserve the fabric, provide for maintenance and preservation of artworks, and improve security of the suburban private school museum, all money that the foundation did not have.

The foundation tried to extend its opening hours and allow more visitors, but was rebuffed by the governments of Merion and Montgomery County. Later, financial irregularities were discovered in the administration of the collection. Between the renovations, the irregularities, and the associated legal expenses of court challenges, the financial situation of the Barnes declined.

In 2002 the foundation announced that it would petition the Montgomery County Court to allow the art collection to be moved 4 miles to Philadelphia, which offered a site on the Benjamin Franklin Parkway [[the location of Philadelphia's museum district).

In 2004, after a two-year legal battle that included an examination of the foundation's financial situation, a judge ruled that the foundation could move [[and get a new expanded board). Three charitable foundations, The Pew Charitable Trusts, the Lenfest Foundation, and the Annenberg Foundation, had agreed to help the Barnes raise $150 million for a new building and endowment on the condition that the move be approved.

In 2011, the Barnes foundation announced that it had surpassed its $200 million fund-raising goal, of which $150 million would go toward construction of the Philadelphia building and associated costs, and $50 million to the foundation's endowment.

Construction for the new building started in fall 2009 and was completed in May 2012, when the new building opened.
_______________________

OK now that everyone is up to speed on the Barnes... which has moved exactly 4 miles into Philly from it's former suburban location... this sounds like anything but a horror story of a private museum! Granted it wasn't what Mr. Barnes wanted... [[which was a museum open only 2 days, by appointment, and denying access for no reason).

Anyway... most of America's great museums have their buildings owned by their respective cities, but the museum contents are owned by private not-for-profit corporations.

If Detroit had done this spinning of to a private corporation in the past like other major cities, we wouldn't be in the mess we are today.

So rather than finally supporting a similar move... you suggest that a $330M payment to the Bankruptcy Court [[the blood money) is akin to selling the DIA contents to "politically well connected" people.

Let's now get to the chase... you think that the DIA is being given away at pennies on the dollar.. while other [[such as myself) feel that it's a one time payment for keeping it intact... and then the collections should be spun off to a private non-profit corporation. However, you feel it should be SOLD for that $12 billion figure [[your $12,000M) to the private not-for-profit corporation [[or something less than that).

You would like to see the Founders Society pay the $12B [[or whatever) to take ownership of the collections. Dream on... that part is just never going to happen. No other large municipal museum collection in the country, which went to private non-profit ownership, has done so... and regardless of how bankrupt Detroit is... it's not going to do so either.

[majohnson]

So with Barnes, the terms of the trust were changed to violate the most important aspects of the trust as determined by the settler. So analogizing, if Detroit creates a trust requiring the art stay in Detroit and never be moved, the terms of the trust could later be changed to allow the art to move. Much Barnes art was moved to facilitate more viewers, the same could be said of an additional DIA campus in Grand Rapids or Royal Oak. If the Detroit trust states that the collection is never to be divided or art sold/leased, it can later be changed to allow division and selling.

Next, you mention that other great museums have collections owned by entities occupying publicly owned buildings. The important question is whether those cities originally owned and then transferred ownership over their art assets.

You never answer the important question.
Why should the city sell the art to a politically connected few for 95% off?
If one group can come up with $300, how do you know an equally termed contract can not be signed with an entity offering $1,000M?

[bailey]

So with Barnes, the terms of the trust were changed to violate the most important aspects of the trust as determined by the settler. So analogizing, if Detroit creates a trust requiring the art stay in Detroit and never be moved, the terms of the trust could later be changed to allow the art to move. Much Barnes art was moved to facilitate more viewers, the same could be said of an additional DIA campus in Grand Rapids or Royal Oak. If the Detroit trust states that the collection is never to be divided or art sold/leased, it can later be changed to allow division and selling.

Next, you mention that other great museums have collections owned by entities occupying publicly owned buildings. The important question is whether those cities originally owned and then transferred ownership over their art assets.

You never answer the important question.
Why should the city sell the art to a politically connected few for 95% off?
If one group can come up with $300, how do you know an equally termed contract can not be signed with an entity offering $1,000M?

Well, lets look at the logic behind your assertions here... the "politically connected ones" are not changing the mission of the DIA... however, should the art be placed on the open market and sold off piecemeal, [[once the decade or so of lawsuits over which pieces Detroit could actually sell resolves) its a certainty that each and every one of the significant pieces would leave, and likely hang in private collections in places like China or Dubai.

Once that happens, the regional tax for operating the DIA ends [[as the anti detroit activists in the burbs will revolt immediately), no one ever contributes any money or significant works to the DIA ever again, attendance evaporates, and the DIA ceases to exist as an entity.

Which do you prefer? the art and the DIA preserved ..and a remote possibility [[and by no means do I agree with your accusation of nefarious motivation by the foundations) of a mission change or a the veritable certainty of the DIA's closing?

There is more involved here than just getting top dollar. Fortunately others can see that.

[Novine]

Anyone who paid attention to what happened with the Barnes collection knows that what happened was essentially a hostile takeover of the collection for the purpose to move it to Philly, completely contrary to the wishes of Mr. Barnes. To call it a conspiracy isn't outside the bounds of what happened. Having seen that happened, why should people just accept a "trust us" viewpoint of the DIA's situation? I wouldn't.

[coracle]

"Just look at Coracle's reply... there's folks justs chomping at the bit in some of the more hick suburbs to bow out of the funding for the DIA."
You're right Gistoc. I see a bigger picture [[no pun intended) than funding the DIA. DIA is just a step in establishing a continuing drip drip,drip, of my money getting under your control and I don't like it because I don't trust y'all. [[I'm sure there are others in the suburbs that feel the same).

[Gistok]

Anyone who paid attention to what happened with the Barnes collection knows that what happened was essentially a hostile takeover of the collection for the purpose to move it to Philly, completely contrary to the wishes of Mr. Barnes. To call it a conspiracy isn't outside the bounds of what happened. Having seen that happened, why should people just accept a "trust us" viewpoint of the DIA's situation? I wouldn't.

Perhaps a read on what was behind the move from a location that was just 2 blocks outside the city limits to a location in Philadelphia proper... the museum found that they were being blocked from granting more public access by that most common of reasons... the NIMBY crowd... in this case rich neighbors of the museum in the wealthy enclave of Lower Merion didn't want a lot of people in their neck of the woods....

http://articles.philly.com/1996-06-2...-robert-marmon

So they didn't move for some nefarious reason...

[bailey]

Perhaps a read on what was behind the move from a location that was just 2 blocks outside the city limits to a location in Philadelphia proper... the museum found that they were being blocked from granting more public access by that most common of reasons... the NIMBY crowd... in this case rich neighbors of the museum in the wealthy enclave of Lower Merion didn't want a lot of people in their neck of the woods....

http://articles.philly.com/1996-06-2...-robert-marmon

So they didn't move for some nefarious reason...

You need to concede that one there Gistok... regardless the short the drive, the fact remains that Barnes' instructions were made specifically as a giant fuck you to the Philly art community and the museum itself. He didn't want them benefiting from the collection...now they are.

[Barnes was] An irascible New Deal eccentric with a keen eye [[he was an early North American collector of Matisse and Picasso), Barnes disdained the Philadelphia Museum of Art [[located about four miles from his Foundation) as "a house of artistic and intellectual prostitution... The main function of the museum has been to serve as a pedestal upon which a clique of socialites pose as patrons of the arts."

That the art now resides there, after a decade of legal battles and pretty shady dealings. Regardless of the cover taken behind "zoning and traffic concerns" the move was in direct contravention to the guys last instructions and it was done only due to a hostile take over of the foundation.

[Gistok]

I agree Bailey... but one interesting point was that the Barnes Foundation had only 5 trustees... an very easy number to take over when you only require 3 votes... but the DIA Founders Society has well in excess of 40 Trustees... so any such takeover is remote at best.