Currently debt-free, the DIA raises $12 million annually from corporate, foundation and individual donors, and receives roughly $23 million in tax subsidies from Wayne, Oakland and Macomb counties. (The Detroit News)
The Detroit Institute of Arts likely will be expected to bolster a fund that would supplement city pensions and protect its art from a bankruptcy-induced sale, multiple sources told The Detroit News.
The commitment sought could be as high as $100 million over 20 years, augmenting $330 million in pledges from regional and national foundations and a $350 million state effort Gov. Rick Snyder pitched to lawmakers this week in Lansing.
“Everybody knows the DIA’s got to be in, but for what?” said one source familiar with the continuing negotiations quarterbacked by Chief U.S. District Judge Gerald Rosen, the leading federal mediator in Detroit’s historic Chapter 9 bankruptcy.
The expectation of DIA participation is one of 27 conditions tied to prospective funding from the Ford, Kresge, Knight and other foundations, according to a foundation source knowledgeable of the terms. The push presents the museum’s leadership with a delicate balancing act carrying implications for its endowment, operations, fundraising and the tri-county millage.
“It’s not doable given our business model,” DIA Chairman Eugene Gargaro told The News in an interview Thursday. “I could not commit the future DIA leadership to another $5 million (per year) in fundraising over 20 years.
“I can say that categorically. Which organization in Michigan raises $17 million a year just to stay open? That doesn’t work in reality and that doesn’t work on paper. Am I saying we’re not going to participate? I’m not saying that at all. There has been no dollar amount mentioned.”
But there likely will be. Currently debt-free, the DIA raises $12 million annually from corporate, foundation and individual donors, and receives roughly $23 million in tax subsidies from Wayne, Oakland and Macomb counties.
“Our concern is we do not lever up the museum” with debt “to the point it can’t be a going concern once the emergency manager’s work is done,” Gargaro said. “What additional new money is the DIA considering contributing to this new fund? They may come back to me and say, ‘Gene, we need more.’ But so far they haven’t done that.”
Any effort by the DIA to join the foundation-led campaign to supplement city pensions would need to ensure that millage dollars supporting museum operations remain within the museum. Diverting county taxpayer dollars to support Detroit pensions would imperil the millage — a risk the DIA and the foundations angling to protect it from creditors want to avoid.
But saying, “no, it can’t be done” increasingly is an untenable position for the DIA, whose leverage is rapidly diminishing. The doomsday scenario of selling art to fund pensions is likely to force the museum to consider creative financial solutions. Among them could be redirecting parts of its endowment, or a portion of its annual fundraising, to the foundation effort or approaching its major donors for a “once-in-a-lifetime” ask that would ensure the DIA.
The fundraising campaign, still developing, is considered a critical component to efforts to settle the largest municipal bankruptcy in American history and avert a protracted legal confrontation pitting the DIA and its art against creditors and city pension funds.
Corporate foundations tied to such prominent corporations as General Motors Co., Ford Motor Co. and DTE Energy Co., to name three, are likely to be solicited, two ranking auto executives said. Dan Gilbert’s Quicken Loans Inc., whose expanding empire of downtown buildings and affiliated employees has a vested interest in both a viable DIA kept whole and a functioning city workforce, also is likely to be asked to contribute.
“We would look at it extremely closely and make a decision based on what the need is and what the request might be,” Selim Bingol, GM’s chief spokesman, said, adding that any donation to a fund to support the DIA would be “substantial.” The GM Foundation, with $89 million in assets, issues grants of roughly $25 million annually in and around Detroit.
The situation remains fluid, and the outcome is uncertain. The governor’s decision to brief lawmakers on his $350 million plan just one day before his State of the State address pushes the DIA into an archly political context. Nor is it clear how the emerging plan tying the protection of DIA art to supplementing city pensions will play with creditors angling for maximum financial recovery in the city’s bankruptcy.
“Everyone has bought the vision, but the numbers are being worked on,” said another foundation executive involved in the process.“Funders have talked about the DIA being all-in. But there has been no talk about all-in means. This is the most fluid thing I’ve ever seen done.”
Staff Writers Melissa Burden and David Shepardson contributed.