The City of Detroit is bankrupt. It owes $18 billion, including $3.5 billion in pension obligations.
But the City of Detroit also owns the Detroit Institute of Arts (the ‘DIA’), which houses one of America’s richest art collection, the sixth largest in the USA. It boasts works by Degas, Van Gogh, Matisse, Brueghel the Elder and the famous mural by Diego Riviera recalling the city’s industrial history. It is said that only 9% of its treasures are on display, the rest being stored in vaults.
Not surprisingly, creditors of all types are circling the DIA, looking for ways to change all that art into, yes, money.
The story reads like a surrealist novel.
Christie’s was called in to perform an independent appraisal of the value of the holdings, which came out at $450 million. A subsequent request was made by creditors to upgrade that estimate to $816 million.
The court backed the DIA’s contention that a yard-sale-like bankruptcy carried a high risk of damage to the 1741 works of art.
The Court also denied creditors the ability to examine which works would be free and unencumbered of restrictions on disposal. For example, a ceiling by Tintoretto had been bequeathed to the DIA on condition that it never leave the museum.
Then the Grand Bargain scheme evolved. Under the Grand Bargain scheme, the DIA was to sell its art to a Trust required to keep the art. The proceeds were to be earmarked to pay the outstanding pension payments..
This ‘Grand Bargain’ came under attack from bankruptcy specialists arguing that this earmark process in favor of pensioners ran against all known principes of bankruptcy and favoured one category of creditors over all others.
Other proposed solutions included letting entire sections of the Museum or putting the collections on the road for a fee.
On May 27, the Courts denied access to the collections of the DIA.
And all that time, the DIA has maintained its core position that its contents are cultural resources, not municipal assets.
In a nutshell, the situation is astoundingly complex and, no doubt, we will witness many more turns of event before a solution is found.