Fate of Detroit’s art hangs in the balance as bankruptcy trial begins
Private foundations have pledged $816m to save the city’s art collection, but some creditors call the Grand Bargain unfair
By Julia Halperin. Web only
Published online: 01 September 2014
On Tuesday, 2 September, a bankruptcy trial to determine the future of the city of Detroit is due to begin after more than a year of negotiations—and the fate of the Detroit Institute of Arts (DIA) hangs in the balance. The resolution of the largest municipal bankruptcy in US history is likely to set precedents for other struggling cities. At the centre of the conflict is the question of whether a bankrupt city can avoid selling any valuable asset, including its art collection.
At trial, several of the city’s largest creditors will seek to persuade Judge Steven Rhodes to reject the proposed plan, drafted by local officials, to eliminate more than $7bn of the city’s $18bn debt. Among the most controversial elements is a provision to protect the city-owned art collection from liquidation. The executive vice president of the Detroit Institute of Arts, Annmarie Erickson, is expected to testify.
To safeguard the museum’s collection and raise money for the city’s pensioners, the state of Michigan has teamed up with local and national organisations to pledge $816m over 20 years. The money would essentially fund a “buy-back” of the collection from the city of Detroit while providing pensions to retirees from the city’s police and fire departments. (Donors to the so-called Grand Bargain include the Los Angeles-based J.Paul Getty Trust, the Andrew W. Mellon Foundation and the DIA itself, which pledged $100m.)
The agreement is controversial because it would pay some of the city’s other creditors, including the large bond insurers Syncora and Financial Guaranty Insurance Co, significantly less than the pensioners. The insurers argue that this solution is unfair and discriminatory and therefore in violation of US bankruptcy law. They also claim that a sale of the art collection could garner much more than the grand bargain would contribute—as much as $8.1bn. Though it is likely that any decision will be appealed, city officials hope to complete the trial by the end of September.
Submit a comment
All comments are moderated. If you would like your comment to be approved, please use your real name, not a pseudonym. We ask for your email address in case we wish to contact you - it will not be
made public and we do not use it for any other purpose.
Want to write a longer comment to this article? Email email@example.com