Detroit bankruptcy: Will city's storied art collection be sold? (+video)
Detroit's emergency financial manager has broad discretion to decide what to sell or lease during bankruptcy, including a world-class municipal museum and its masterworks.
Besides looking for ways to cut operating costs and assessing obligations to pensioners and retirees, a bankrupt Detroit is also turning to its public assets, such as its airport, parking garages, and its publicly owned art to find ways to chip away at its $11.5 billion of unsecured debt.Skip to next paragraph
Subscribe Today to the Monitor
The potential sale of its public art collection, which includes masterworks by Rodin, Degas, Van Gogh, and Cézanne, is generating the most controversy. Emergency financial manager Kevyn Orr announced Monday that he is hiring Christie’s Appraisals Inc., the famed New York City auction house, to appraise a portion of the collection at the Detroit Institute of Arts on the behalf of creditors who are requesting the assessment, which then might be used in a sale or leasing situation to help pay back the debt.
Creditors have good reason to demand the assessment. When Mr. Orr announced Detroit was filing for Chapter 9 bankruptcy in July, he said he wanted to stop paying unsecured debt to creditors and, instead, restructure the terms to offer them 10 cents or less on the dollar.
RECOMMENDED: Detroit's dilemma
But Orr is assuring the public that he is looking at the art collection, among other assets, as a way to “create value from the asset without a transfer of ownership.”
“Our goal is to preserve the value of all of the city’s assets and make sure they are rationalized in a way that value can be returned to its citizens and, in certain cases, enjoyed by Detroit metro area’s residents for many years to come,” he said, in a statement released Monday.
Certain pieces of the museum’s 60,000-piece collection are off-limits, if their original benefactor stipulated they can never be sold, but Orr has the right to sell pieces without those barriers. It's unlikely he will do it, says Stephen Selbst, chair of the bankruptcy department at Herrick, Feinstein, a New York City law firm. Under the terms of a Chapter 9 bankruptcy, Mr. Selbst says, the court cannot determine which assets, if any, should be sold, leaving the decision solely in Orr’s hands.
“My guess is that Kevyn Orr is getting the appraisal to demonstrate to creditors there are no sacred cows and he will at least consider the sale of property. But at the end of the day, creditors can’t force him to sell it,” Selbst says.
Orr could potentially lease the artwork as collateral to raise money for a loan, says Dennis Enright, a national expert in privatization of government assets with NW Financial in Hoboken, N.J.
“You could create a revenue stream around it. It’s definitely not a normal governmental world activity, but certainly private collectors use their art as collateral and bet it against for their own private interests,” Mr. Enright said.