Snyder (Max Ortiz / The Detroit News)
Officially, Gov. Rick Snyder won’t talk about his plan to pump $350 million public dollars over 20 years into a foundation-led fund to spare the Detroit Institute of Arts’ collection by supplementing city pensions.
But the proposal to remove a key obstacle in Detroit’s historic bankruptcy is nonetheless in the works, two ranking state officials confirmed over the weekend, intensifying pressure on the museum’s leadership. And just to sharpen the point, the governor isn’t missing the chance to send a message to a DIA interested in a fix financed by someone else.
“Unable would be a different question,” Snyder told The Detroit News in an interview, referring to DIA Chairman Eugene Gargaro telling The News last week that raising $100 million to augment a state contribution and $330 million from nine foundations would be “not doable” for the DIA under its business model.
“Unwilling? I mean that would be kind of a difficult statement, a challenging statement for someone to make to say they’re unwilling to solve a problem involving the protection of their assets,” the governor said. “You would hope the DIA would work really hard to help solve this issue.”
It says it’s trying, as much as most of its public statements suggest otherwise. Ranking museum officials, already part of talks with foundations and the top federal mediator, Chief U.S. District Judge Gerald Rosen, met last week with Emergency Manager Kevyn Orr to discuss the DIA’s predicament and possible paths out. Orr did not mention a specific fundraising target.
But others deeply involved in the process have, pegging the DIA’s portion at $100 million. Expectation is building on all sides — the state and lawyers for the city, retirees and unions, federal mediators and the DIA, particularly — to craft an agreement that could generate $800 million or more to bolster underfunded pensions and grant the DIA’s collection a permanent reprieve from creditors.
The stakes could not be higher for the DIA and a bankruptcy settlement, for corporate migration back to the city and Detroit’s growing rep in the art world as the newest cool place to be. Start selling Bruegels and Van Goghs to satisfy creditors, and any momentum likely would be stopped dead, almost overnight.
A DIA-pension agreement, proposed by Rosen in a November meeting with foundation officials, is a potentially elegant solution to what is considered the most vexing problem of Detroit’s bankruptcy. It would keep the DIA and its collection intact by dramatically increasing long-term support for city pensions, solving two problems simultaneously and not at the expense of the other.
The foundation commitment, led by the New York-based Ford and the Troy-based Kresge foundations, is emerging as the catalyst for a so-called “grand bargain” that is the DIA’s last (and only?) hope to elude the predations of creditors. The deal would combine private dollars, a state commitment and DIA fundraising into a fund to be used to speed Detroit’s exit from the largest municipal bankruptcy in American history and to sever the city’s ownership claim to the museum.
“You’re now getting to the point where there’s a large enough sum where it could make a real difference in terms of the outcome for retirees versus not having that money,” the governor said. “The more participants the better. It shows more participation of more constituencies across the state and across the city. It also would increase the resource pot.”
Despite increasingly frustrated push-back from Snyder and foundation heads, DIA officials continue to insist that a $100 million fundraising target is too rich to help buy its freedom from city ownership. They say it likely would compromise efforts to expand its endowment by $300 million over the next nine years or so of the authorized tricounty millage.
They say recovering property values in the counties covered by the millage are not likely to generate enough operating dollars to offset a call for as much as $5 million a year in annual fund dollars over 20 years to help finance its own bailout fund. And they say they “are in no way going to tamper with free general admission for residents of Wayne, Oakland and Macomb counties.”
“There is no way we could raise $100 million,” Annmarie Erickson, the DIA’s chief operating officer, said in an interview Tuesday. “That’s never been a serious number. The final number remains a topic of conversation. The clock is certainly ticking. We’re getting close ... to hammering out the final deal — what everyone is going to commit to. But we’re not there.”
Not yet, anyway. With each passing week, the DIA’s leverage diminishes and its choices grow more stark. It can move to help shape the terms sought by the foundations and the state, terms likely to a) require a financial commitment from its donors that b) alters its endowment-raising strategy with implications for a likely millage renewal.
Alternatively, it can prepare for the mother of all legal battles with creditors, keeping Detroit in bankruptcy and alienating DIA funders in the foundations for years to come. Or it could result in the unthinkable, the sale of priceless city-owned works to raise cash. Or all three.
The dilemma answers itself.
Daniel Howes’ column runs Tuesdays, Thursdays and Friday.