The Detroit Institute of Arts is not home free.
Not after a valuation of its prodigious collection, submitted this week to the city, concluded the museum’s 60,000-piece collection could be worth as much as $4.6 billion, nearly six times the value Christie’s placed on the DIA’s most prized pieces last winter.
Details of the analysis come just days before the deadline for city pensioners to vote on a “grand bargain” that would inject $816 million into the city’s two pension funds to cushion cuts, courtesy of more than a dozen foundations, DIA donors and the state Legislature.
The latest evaluation may come too late to shape the voting, considering pensioners’ ballots must physically be in California by Friday. But the timing of analysis, conducted for the city by New York-based Artvest Partners LLC, is likely to do one of two things:
Rekindle charges of bad faith against the city for the simple reason that Artvest’s bottom line is richer — and more comprehensive — than the valuation completed last December by Christie’s, the international auction house, and used to shape the financial architecture of the Grand Bargain.
Or, second, vindicate the position of the city and the DIA, which holds that the mechanics of selling off the collection, and the collateral damage it would invite, would depress prices and prove that the prospect of a multi-billion payout for creditors is more wishful thinking than reality.
“The danger is in flooding the market,” Alan Fausel, vice president and director of fine arts for Bonhams auction house in New York, told The Detroit News in an interview. “There are only so many buyers for so many things.”
Add the caveats and potential complications that could come with trying to liquidate massive chunks of the DIA’s prized collection in a short time. Or that the run-up in values from 2002 to 2011 represented a once-in-a-lifetime burst of new collectors onto the global art scene — a development “not likely to be repeated over the next five years,” Artvest says.
Additionally, a concerted move by creditors to extract value from the sacrosanct DIA would risk a) scuttling the grand bargain, should it be approved, or b) spark a vicious round of litigation that would enrage the art world, divide the region and tip the case into chaos by reopening deals pegged to the grand bargain and its money.
“It’s a lot easier to talk about selling art than it is to actually sell it,” Annmarie Erickson, the DIA’s chief operating officer, told The News, echoing a theme common to the art world, as well as the Christie’s and Artvest valuations. “High-value objects that have restrictions on them would be litigated.”
But not necessarily by the pension funds whose beneficiaries the grand bargain is intended to help. Time and a keener understanding of the alternatives — almost all of them worse — has persuaded most official groups of Detroit employees and retirees to support the foundation-backed deal at the expense of financial creditors.
The police and fire pension fund “has never advocated selling Detroit’s art,” Bruce Babiarz, a spokesman for the Police and Fire Retirement System, wrote in an email. “Distribution of a potential liquidation sale among all creditors may not enhance the economic settlement terms that have been agreed to for pensioners.”
No, but with a verdict on the grand bargain just days away, the Artvest valuation once more shines harsh light on one of the more discomfiting facts of Detroit’s historic Chapter 9 bankruptcy: namely, the process Emergency Manager Kevyn Orr and his team of bankruptcy lawyers are using to value the city’s most prized assets.
Lawyers for creditors say the city’s Chapter 9 case lacks transparency, that they do not know the full market value of Detroit’s most valuable assets, that their clients are not being treated fairly by a process carefully managed by the city and the head of the case’s federal mediation team, Chief U.S. District Judge Gerald Rosen.
The latest exhibit: the timing of the Artvest report, arriving as retirees are concluding their balloting, public safety unions are concluding bargaining on their contracts, and the epic confirmation trial before U.S. Bankruptcy Judge Steven Rhodes is little more than a month away.
“People can complain that we’re sandbagging,” said Bill Nowling, spokesman for the emergency manager. “We’re not. Clearly in the report it dispels any notion that you could get anything close to what the creditors say, if at all.
“The whole point of Chapter 9 is to make sure there’s a city left when you’re done, not crate everything up and sell it. They can’t force us to liquidate any asset. All they can do is persuade the judge the plan is untenable — that is, it can’t be done.”
Maybe that’s “all” that can be done, but it ain’t nothing. Notwithstanding logical caveats that reflect the positions of Christie’s and the DIA leadership, the Artvest valuation still is likely to energize creditors frustrated by what they perceive to be an inadequate accounting of the city’s most prized assets, the DIA included.
How far they’ll get is another story. The forward march of the grand bargain, if approved by pensioners, is assuming a momentum all its own. Orr and his team support it; Gov. Rick Snyder and the GOP-controlled Legislature support it; Rosen and his team of mediators, who work for Rhodes, support it.
The deal proposes to monetize the value of the DIA’s collection to bolster pensions and secure the art for Detroit and southeast Michigan. Implicitly it draws distinctions between unsecured creditors — the folks who worked for the city with an expectation of support in retirement vs. the monied investors who reaped large yields off risky Detroit debt until the city collapsed into bankruptcy court.
They have an argument to make, but Artvest isn’t likely to make it much easier.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays.