Friday, May 24, 2013

Will the Detroit Institute of Arts sell its collection to cover its $15 billion debt?

Detroit emergency manager Kevyn Orr is considering whether the multibillion-dollar collection at the Detroit Institute of Arts should be considered city assets that potentially could be sold to cover about $15 billion in debt.

Oh, oh. This is not going to be very popular, at all. 

But this isn't going to go down without a fight. DIA Executive Vice President Annmarie Erickson said the museum has hired New York bankruptcy attorney Richard Levin of Cravath, Swaine & Moore to advise ways to protect the collection from possible losses. 

“We are standing by our contention and belief that we hold the collection in trust for the public,” Erickson said this evening. “And although to some it may seem to be an asset, we do not.”


1 comment:

Dr. Mark said...

Here's my transcript of the very short Channel 7 News video sequence* (00:52 to 01:12) that summarizes Kevyn Orr's way to protect DIA artworks:

Jim Kiertzner at the DIA: "...the Emergency Manager [Kevyn Orr] doesn't want to sell assets here. He told the DIA several weeks ago to protect the assets."

Bill Nowling [Kevyn Orr's spokesman]: "They could look at forming some covenants in ways that would monetize the value of the asset there but keep the art here in Detroit."

Selling artwork covenants to investors, as I see it, lets the DIA keep Detroit's Monet while investor money goes into a Detroit Artworks Endowment that funds, in priority order:
1) security and insurance for the DIA artworks backing the covenants
2) unfunded liabilities that could otherwise cause a default or divert city revenues away away from current priority services
3) the arts!
Have your Monet and money too! Since artwork covenant sales raise money to prevent a default, creditors can't get at the artworks! Now there's real protection for DIA artworks, and to get it Detroit only gives up the capital appreciation that curators ordinarily use to trade artworks they've got for artworks they want. If Detroiters are happy with the artworks they've got, they're not out anything for their huge new source of income!

Trying to protect artworks with a "public trust" is a public bust! Professional standards for museums don't apply to cities, even cities that own museums, and AAM/AAMD rules especially don't trump a museum-owning city's legal obligation to adequately provide essential municipal services. So, back to Kevyn Orr, who offers a method that can actually work because it generates the cash to fund liabilities and avoid default! Orr never did say sell the artworks -- that comes from lazy reporters who don't serve their readers. He just said DIA artworks are part of the solution. There's a big difference. Here's hoping reporters start picking up on it.