Foundations pledge to save art in Detroit

National and local philanthropic foundations have committed $330 million toward a deal to avoid cuts to Detroit retirees’ pensions and to save the Detroit Institute of Arts’ renowned collection, federal mediators involved in the city’s bankruptcy proceedings announced on Monday.images

The plan was a first both in the foundation world, as the New York times reports, “which has not been a source of money to shore up public-sector pensions in the past, and in municipal bankruptcy cases, experts said. It also offered the first indication of progress in the intense mediation with Detroit’s creditors to resolve the city’s financial crisis. Those talks have been proceeding under strict secrecy guidelines.

“Nine foundations, many with ties to Michigan — including the Ford Foundation, the Kresge Foundation and the John S. and James L. Knight Foundation — have pledged to pool the $330 million, which would essentially relieve the city-owned Detroit Institute of Arts museum of its responsibility to sell some of its collection to help Detroit pay its $18 billion in debts. In particular, the foundation money would help reduce a portion of the city’s obligations to retirees, whose pensions are at risk of being reduced in the bankruptcy proceedings. By some estimates, the city’s pensions are underfunded by $3.5 billion.

“As part of the plan, which negotiators have been working on quietly for more than two months, the museum would be transferred from city ownership to the control of a nonprofit, which would protect it from future municipal financial threats. The foundations would stipulate that Detroit must put the money into its pension system, said Alberto Ibargüen, president of the Knight Foundation.

“The unusual effort by the foundations was not the first instance of charitable groups’ and high-profile figures’ trying to help the ailing city. Previous contributors include Lloyd C. Blankfein, the chief executive of Goldman Sachs, and Warren E. Buffett, the billionaire investor, who attended an event with city and state leaders in November to announce a $20 million initiative to help small businesses in Detroit. But it is far from certain whether the new pledges will bring about a deal to save the museum while also helping the city meet its pension obligations, and several possible roadblocks remain. As much as $500 million may be needed to protect the art from an auction, officials have said, so additional philanthropic donations are being sought. Detroit is also contending with some 100,000 creditors in its federal bankruptcy case, and some are expected to oppose the plan. Even if the notion were to proceed, it would not be enough to resolve the city’s pension underfunding, but merely to ease it somewhat. Moreover, the foundation deal would address only a portion of the larger bankruptcy puzzle, a vast array of debts, creditors and assets that must be rearranged before the city can emerge from the nation’s largest municipal bankruptcy.”

“There’s a lot of detail to work out here — it’s a moving target,” said Mariam C. Noland, president of the Community Foundation for Southeast Michigan, a 30-year-old philanthropy organization in Detroit that began rallying national foundations last fall after the federal judge mediating the bankruptcy case, Gerald E. Rosen, approached her with the idea.

Still, many people saw the proposal as a positive development, and perhaps as a sign that more agreements may be coming in a case that no one wants to see linger.

“When you start seeing first settlements come down the road, you’re seeing the dawn of a Chapter 9 plan that is to be confirmed,” said James E. Spiotto, an expert on federal municipal bankruptcy, known as Chapter 9.

“Kevyn D. Orr, Detroit’s emergency manager, who led the city to file for bankruptcy, said he welcomed the foundation proposal but emphasized in a statement that many issues remained.”


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