Detroit could be just like Brooklyn if it keeps its world-class art collection and uses cheap land to attract artists, a city adviser told a federal judge overseeing the biggest U.S. municipal bankruptcy.
Michael Plummer, founder of Artvest Partners LLC, testified Thursday that the collection at the Detroit Institute of Arts could allow the city to copy the New York borough’s success in cultivating a community of artists that would help revitalize Detroit.
“Artists are driven by cheap real estate,” Plummer said at a hearing Thursday. Should the city be forced to sell the institute’s art as some creditors have demanded, “artists would have no reason to move here.”
The city’s last remaining major creditor, Financial Guaranty Insurance Co., has attacked a proposal that protects the art collection. Wealthy donors and Michigan lawmakers pledged to shore up Detroit’s public pension system with more than $800 million as part of a “grand bargain” under which the city promised not to sell the art. FGIC says the part of the collection that the city owns should be used to raise more money to pay it and other creditors.
U.S. Bankruptcy Judge Steven Rhodes is overseeing the trial on the city’s debt-reduction plan, which would eliminate about $7 billion of liabilities, to determine whether it’s fair and feasible.
Detroit filed a record municipal bankruptcy last year, listing $18 billion in liabilities and saying decades of decline left it unable to provide basic services.
Edward Soto, a lawyer for FGIC, questioned the city’s claim that the art can’t be sold without first fighting a yearslong court battle with the institute and Michigan’s attorney general.
Plummer said the delay is a legitimate fear because sales of other large collections have been held up for five years or longer by similar disputes.
Brooklyn is a good model for Detroit because its renewal was based partly on artists moving out of expensive real estate in Manhattan to the more affordable borough. That created a cultural shift in New York, he said.
“It is the artistic center of New York,” Plummer said of Brooklyn.
DIA Vice President Annmarie Erickson told Rhodes the museum would battle any effort to sell the artwork because it believes the collection, including the pieces owned by the city, are held in public trust and can’t be sold just to pay debt. Pieces are only sold in order to raise money to buy other artwork, she said.
Rhodes asked Erickson why the art museum was important to the community, particularly the 60,000 local children that visit annually as part of school programs.
Erickson said it helps children develop critical thinking skills and helps visiting families learn about art. The museum is also an important part of the revitalization of Midtown Detroit, an area with new restaurants and shops that also includes Wayne State University, Erickson said.
Selling any artwork to pay debt would threaten a property surtax that supports the museum. Two county executives have vowed to stop collecting the additional tax if any art is sold, she said.
The museum gets as many as 600,000 visitors a year, many from overseas. The DIA houses some of the world’s most important works, said Vanessa Fusco, a vice president with the auction house Christie’s International. Those include Pieter Bruegel the Elder’s “The Wedding Dance” and one of Auguste Rodin’s “The Thinker” sculptures.
Fusco wrote a report that concluded the city-owned part of the collection could be sold for no more than $867 million. FGIC paid for its own report, which said the city could sell some works for about $1.5 billion, or use the collection as collateral on a $2 billion loan, according to a court filing.
The city’s estimate didn’t cover at least 327 pieces that creditors say include masterworks by artists such as Edgar Degas, Pablo Picasso and Andy Warhol, according to the court filing.
Water and Sewerage Department
At the start of the hearing Thursday, Rhodes asked the head of the city’s Water and Sewerage Department how much it would need to borrow over the next decade to replace aging water mains and other infrastructure.
Sue McCormick said the department may need to spend as much as $200 million a year.
“So $2 billion?” Rhodes asked.
McCormick said the total would be less than that because of agreements during the past several weeks for bondholders to refinance debt and for surrounding counties and the city to create a regional water district to serve residents in nearby communities. Rate increases and savings should allow the city to pay for some upgrades without borrowing, she said.
Detroit’s Water and Sewerage Department services 40 percent of Michigan’s population.
Source: MEDC
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