A coalition of local and national foundations have reached a deal intended to save Detroit’s largest art collection and limit cuts to the retirement benefits of public workers. On Monday, U.S. Chief District Judge Gerald Rosen announced that he had finished mediating a deal under which the nine organizations involved in negotiations would pay $330 million into public pensions and turn the publicly-owned Detroit Institute of Arts (DIA) collection over to the private nonprofit which currently runs the museum.
The plan effectively eliminates the risk that Emergency Manager Kevyn Orr would pressure the DIA into selling off some of its art as part of his plan to steer Detroit through the largest municipal bankruptcy in American history. Orr has estimated that the city faces an $18 billion long-term debt burden, including a $3.5 billion pension liability.
The nine foundations involved in negotiations released a joint statement saying the $330 million deal “offers an important opportunity to help Detroit find much needed solutions to its unique challenges.”
“As foundations, we recognize the limitations of the role we can play,” according to the statement. “But helping the leaders of this community put forward workable solutions to vexing issues is something to which we can contribute.”
One of Detroit’s major public employee unions is skeptical. Last month, while the foundations were still in negotiations, AFSCME Local 207 Vice President Michael Mullholland told msnbc he was concerned the deal would end up being “a way to buy the art at fire sale prices, and then toss the money to the pensions to make it look in the papers like they give a darn about our pensions.”
Experts have put the total value of DIA’s collection at around $2.5 billion, far more than the $330 million being paid to convert it into a non-profit. Last month, Christie’s auction house released a preliminary appraisal for a small fraction of the museum’s assets and found even those were worth between $452 and $866 million.
While $330 million might not go a long way compared to what Orr says is a $3.5 billion pension shortfall, other analysts have disputed the relevance or accuracy of his estimates. In November, Wally Turbeville, a former vice president at Goldman Sachs and current senior fellow at the progressive think tank Demos, published a report arguing that long-term debt estimates were both “simply inaccurate” and irrelevant to Detroit’s immediate fiscal woes.
“The real issue is about the cash, and in fiscal year 2014 it is about an $198 million cash shortfall,” Turbeville told reporters during a November conference call.