CHICAGO -- Detroit Emergency Manager Kevyn Orr said he is considering several ways to wring cash out of the Detroit Institute of Art’s collection, one of the most controversial issues surrounding the city’s bankruptcy filing.
“There are a number of different proposals coming through the transom on a regular basis,” the emergency manager said Thursday during a talk at a Detroit Economic Club lunch.
“We’ve asked the operating company to take those proposals up and see if they can come to us with a proposal,” said Orr, apparently referring to the non-profit group that runs the DIA. “I’m deferring to them, but if they don’t take them up, I will.”
The DIA is one of the nation’s few city-owned museums and has a 66,000-piece collection. Of that, roughly 3,300 are “owned outright” by the city, said Orr, who has warned throughout his six-month tenure that the collection is among the city’s most valuable assets.
Orr said Thursday that he’s legally required to include the art collection as one of the city’s assets in order to meet the bankruptcy court’s criteria for crafting a fair and reasonable restructuring plan.
He also said the city’s debt load and the painful choices facing retirees require a review and possible monetization of the art.
“You don’t want to sell grandma’s fine china, but we have an obligation to our creditors who are owed a great deal of money,” Orr said. “The debt service is unacceptable and unserviceable ... I’ve got to balance the situation.”
Orr added some retirees approach him “with tears in their eyes” asking him not to take away their pensions and that some people are choosing between “cat food and tuna fish” to eat.
“There’s no plan to take the bricks out of the Diego Rivera [murals], but I’ve got to deal with it in some fashion,” he said.
Orr, who in August hired Christie’s auction house to assess the DIA’s collection, said they would be finished with their valuations of the “tier 1” art by the end of October and “tier 2” art by the end of November.
The city will then have a price tag it can hang on the collection and be able to include it in the adjustment plan it hopes to give to the bankruptcy court by the end of December.
In other comments, Orr, a former corporate bankruptcy attorney, said that Chapter 9 offers strong protections to the city as a debtor compared to Chapters 11 or 7 of the bankruptcy code.
“Putting aside that you have to go through eligibility determination ... the good aspect is the level of deference the municipality is entitled to,” he said. “No one else gets to propose a plan of adjustment, and we don’t have to request court approval for funding or bonds. It is actually much flexible in very significant ways for the debtor.”
He added he has no doubt the city will pass the eligibility test, in part by relying on the criteria that it was too impractical for the city to negotiate with all of its creditors.
He speculated that Detroit in three years would be a reinvented city with a better balance sheet, city operations that are “average or above,” and could well still be under some form of supervision.
“We’ve got to manage expectations,” he said. “It’s taken us a long time to get here and it’s going to take us a some time to get out.”
It’s a decisive moment for the Motor City, Orr said. But other cities have been through similar crises and others -- like Chicago -- may face them in the future, he said.
“New York went through it, though they got federal aid,” he said, estimating that New York City’s debt would have been $44 billion in today’s dollars. “Look at them now.”
