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Not Just a Pension Subvention: Why “Grand Bargain” to Rescue Detroit Institute of Arts Could Work

Brothers-in-arms: Bankuptcy attorney Richard Levin, left, and Detroit Institute of Arts director Graham Beal Photo by Lee Rosenbaum

Brothers-in-arms: Bankuptcy attorney Richard Levin, left, with Detroit Institute of Arts director Graham Beal
Photo by Lee Rosenbaum

Sometimes winning or losing philanthropic support is a question of how you structure the grant proposal.

Foundations approached in recent months by Graham Beal, the Detroit Institute of Arts’ director, had all told him the same thing: They would not provide funds towards the $500 million that Detroit’s emergency manager, Kevyn Orr, said he wanted the museum to come up with (by selling its art or otherwise) to help the beleaguered city emerge from bankruptcy.

At the IFAR panel discussion on DIA’s situation, which I attended on Oct. 24 in New York, Beal revealed: “We’ve been meeting with significant donors.” (He specifically mentioned the Ford Foundation.) “Their answer is: ‘We don’t do this—give money to settle other people’s debts.’…This is a problem that foundations don’t feel it is right for them to respond to.”

So why are the Ford Foundation and others (including the Kresge Foundation, W.K. Kellogg Foundation, Charles Stewart Mott Foundation, Skillman Foundation, Community Foundation for Southeastern Michigan, McGregor Fund, Fred A. and Barbara M. Erb Foundation and Detroit’s Hudson-Webber Foundation, as reported by the Detroit Free Press) now getting behind the so-called “grand bargain” that would give Orr the $500 million he wants from the DIA?

My guess is that this change of heart is due to the change in how the use of the funds is now being defined. While the money could be used to help pay a portion of the pensions that the city owes its workers, the $500 million would, in essence, be used to buy the once-independent museum back from the city, releasing the DIA from Detroit’s onerous oversight and allowing it to function in perpetuity (one hopes) as a stand-alone nonprofit entity, no longer subject to the vagaries of municipal stewardship.

Cannily advised by New York bankruptcy attorney Richard Levin, the DIA had been laying low in the “grand bargain” discussions (scroll to bottom), mediated by U.S. Chief District Judge Gerald Rosen (profiled here). But yesterday the museum announced its “enthusiastic support for the work that has been done to date.” It also “pledged to help refine and implement the plan in the weeks ahead. The plan engages national and local foundations, among other funding sources, to create a mechanism for providing cash for the City, while ensuring the present and future [emphasis added] safety of the DIA collection,” according to the museum’s statement.

That’s a meaty objective that a foundation officer can sink his teeth into.

My guess is that not all stakeholders in the Detroit bankruptcy discussions will endorse this solution. They may still clamor for maximum monetization of the DIA’s city-owned artistic assets. If they succeed, they may get more than they bargained for (as Beal explicitly suggested at the IFAR event)—an eviscerated, unsustainable city-owned museum that still has art to be cared for and operating costs to be met, without the crucial financial support of the recently passed tri-county millage (which the counties say they would no longer pay if artworks were sold).

Mark Stryker of the Free Press reports:

Bankruptcy experts cautioned that whatever plan emerges from Rosen’s mediation will still be just a component of an overall solution. Detroit bankruptcy attorney Doug Bernstein said a key will be whether other unsecured creditors object to pensioners receiving what could be perceived as a $500-million bonus. At the same time, many creditors are sure to fiercely contest a plan they believe leaves the DIA collection beyond their reach.

For now, though, Kevyn Orr is in the driver’s seat. By rights, if he gets all the DIA-related money he asked for, that ought to satisfy him.

But will he get it?

As museum development officers know, $500 million (even in pledges that may be paid out over time) is a huge amount to raise in a ridiculously short period: The parties to Judge Rosen’s “grand bargain” discussions reportedly hope to have the details nailed down before Orr issues his initial plan, expected by early January.

It’s a tall order, but I’m putting my bets on the ever resourceful, if battle scarred Beal. But if he wins, his travails aren’t over: He’d still need to raise substantial new endowment funds. As he himself has acknowledged, the 10-year millage was a welcome reprieve but not a permanent solution to the museum’s financial challenges.

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