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Is Art the Answer for Detroit's Bankruptcy?

By John Reeves - Dec 7, 2013 at 9:09AM

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Earlier this week, a judge ruled that Detroit's bankruptcy could go forward. There are now concerns that the city might sell its valuable art. Is it right for them to do so?

"The court finds that Detroit was and is insolvent." That was the determination of Judge Steven Rhodes earlier this week. The city can now proceed with its Chapter 9 bankruptcy.

Detroit's emergency manager Kevyn Orr will soon propose cutting pensions and selling valuable assets. Of the latter, the possibility of auctioning off all or part of the city's collections at the Detroit Institute of Arts (DIA) has been extremely controversial. With long-term debt between $18 billion and $20 billion, Detroit faces some impossibly difficult financial choices. Does it make sense for the city to sell its art in order to get its finances under control?

At first glance, my answer to that question is no. The Detroit Institute of Arts, which houses paintings by van Gogh, Rembrandt, and Matisse, is one of the finest museums in America, and its treasures are part of the city's rich cultural heritage. On a personal note, one of my favorite paintings – Jan van Eyck's "Saint Jerome in his Study" – is part of the museum's collection.

St. Jerome in his study, Jan van Eyck, c. 1435

On further reflection, however, I must admit that this issue is more complicated than my gut reaction implies. What if selling the art results in smaller cuts for the city's pensioners, who are already struggling to get by? Why wouldn't a city with disastrous finances want to obtain funds from one of its most valuable assets? These questions intrigued me, so I set out to investigate them further.

How much is priceless worth?
The Detroit Institute of Arts was founded in 1885, and is one of the top six collections in the United States. Among the museum's remarkable pieces are Diego Rivera's Detroit Industry and Vincent van Gogh's Self Portrait. Earlier this year, art dealers estimated the market value of the museum's top 38 pieces to be worth approximately $2.5 billion, according to the Detroit Free Press.

Just this week, the auction house Christie's provided its appraisal of 2,781 of the DIA's 66,000 works, which represents roughly 5% of the total collection. The appraised works were those that were classified as "City of Detroit" purchases, and were valued by Christie's at $452 million to $866 million. Emergency manager Orr decided to appraise just the city-bought pieces for now, as opposed to those works that were donated to the museum. Legally, though, the city owns the entire collection.

Where we are right now
In allowing Detroit's bankruptcy to go forward, Judge Rhodes was cryptic in his remarks relating to the art. He did note that a one-time sale of the collection would not have allowed Detroit to avoid bankruptcy. On the other hand, he did appear to open the door to a possible sale of some of the collection in the future, as long the city took "extreme care that the asset is truly unnecessary in carrying out its mission." That line, however, appears to be open to differences of opinion.

Soon after Rhodes' ruling, Orr told the Detroit Free Press that "we will try to get some value from the art in some fashion." According to press reports, Orr's office is hoping to get at least $500 million in revenue from the museum's collections.

Nicholas O'Donnell, a legal expert in this area, told me that Orr has been pretty coy so far about the art. The emergency manager may propose a partial sale or he may recommend leasing the art to a partner museum. O'Donnell believes that Orr may also be hoping that the mere threat of a sale might result in additional money to the city from foundations.

The case against selling
The DIA is adamant in its opposition to selling any of the art from its collection. Soon after Judge Rhodes issued his ruling this week, the DIA wrote that it hopes that Orr "will recognize the City's fiduciary duty to protect the museum art collection for future generations." It further noted its belief that the city cannot use the art to satisfy its obligations, and said it would take action to protect the art if necessary.

O'Donnell told me that the issue of deaccessioning -- which means selling art -- is very controversial in the art world. Many professionals in the museum community are opposed to selling art in principle, and believe that the proceeds if a sale does occur should only go toward buying more art. The DIA believes the art is a public trust, and is extremely skeptical of the various ideas to "monetize" the collection. Its position is very clear: it wants the city to leave the art alone. Period.

The case in favor of selling
One of the city's creditor's succinctly made the case for selling the art when he told the Detroit Free Press that "art is not an essential asset and especially not one that is essential to the delivery of services in the city." Orr seems somewhat sympathetic to that view, telling the newspaper recently, "Let's be clear. That's a city asset."

Orr's position is somewhat understandable, even if you don't agree with it. According to Judge Rhodes' written ruling, the city faces negative cash flows of $346 million in 2017 in addition to its long-term debt of $18 billion-$20 billion. With very few revenue sources at his disposal, Orr doesn't have a lot of options. And with the city already failing to meet the basic needs of its residents, his choices on the cost-cutting front are equally unpromising.

Finally, the average pensioner in the city receives about $19,000 per year. Orr has made it clear that pensions will be cut, so anything that can minimize the size of those cuts will be welcomed by city pensioners.

Fighting for civilization
Lytton Strachey, an English writer and member of the famous Bloomsbury Set, was once asked during the First World War why he wasn't in France fighting for civilization. Strachey responded drily, "Madam, I am the civilization for which they are fighting."

In the case of Detroit, the aim of the bankruptcy is to revitalize the city and improve the quality of life for its residents. Judge Rhodes stated that before selling an asset the city should make sure that it "is truly unnecessary in carrying out its mission." A healthy and vibrant Detroit Institute of Arts feels like a very necessary part of that mission to me.

After considering both sides of this issue, I believe the city should do everything in its power to preserve the collection as it is. Civilization is worth fighting for.

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