Bankruptcy revelation: Detroit weighed DIA spin-off for $550M in 2011
By Nathan Bomey and Mark Stryker, Detroit Free Press | |
McClatchy-Tribune Information Services |
The plan -- according to records obtained by the
The grand bargain created a fund of
The 2011 plan -- which originated in the office of then-
It also shows the general idea of partnering with major private foundations like the
Cockrel told the
But DIA officials said Monday they were never briefed on the idea.
The fact that officials considered selling the DIA to fund the city budget could provide leverage for some holdout financial creditors because it shows the city previously considered monetizing the DIA and funneling some of the money to general operations. Bond insurers
U.S. Bankruptcy Judge
Retirees voted this month to approve Orr's restructuring plan and the grand bargain, which provides for a 4.5% cut and loss of cost of living adjustments (COLA) for general retiree pensions and no cuts for police and fire retirees and loss of half of COLA. Orr told pensioners that cuts would have been much deeper without the grand bargain money.
Until the idea of the grand bargain solidified around the beginning of this year, Orr repeatedly said he was keeping all options on the table to restructure the city, including selling art. The public first learned that DIA artwork might be at risk when the
It doesn't appear that the 2011 plan had anything to do with the current grand bargain plan spearheaded by U.S. District Chief Judge
Significantly, the 2011 idea includes nothing linking support for the DIA with helping pensioners, a key provision that allowed Democrats and Republicans in
Rosen has said that he and fellow mediator
More than a dozen foundations -- including Ford and Kresge -- ultimately made pledges. Rosen could not be reached for comment on Monday.
First grand bargain?
In a memo dated
He warned that an emergency manager could "choose to sell substantial parts of the DIA's individual collections" and that the danger to the DIA was "a real and imminent threat."
"I think you what you have here is a broad history about the importance of the DIA in the city," Orr spokesman
Ford proposed seeking
City financial officials estimated the value of the DIA at between
Cockrel said Monday that the idea originated with Ford and grew out of Cockrel's concerns about the city's worsening financial situation. Cockrel said he floated the idea at the time to DIA Director
"My recollection is that they were receptive to the idea but also made it clear that it needed further study and that they also wanted to more deeply assess the city's unfolding financial situation," he said, adding that a short time later he asked Ford to generate a memo about the idea.
Gargaro said he was never told about it. "That's something I would recall, but I never heard about it," Gargaro said. "Anything like that would have occasioned me talking to members of the executive committee as a courtesy. ... Anybody who said they discussed it with me is off base."
DIA Chief Operating Officer
"When I returned to (the) museum and shared this information with the director, he was not aware of it, either," she said.
Cockrel said the plan was created to generate discussion about how to help the DIA and died because of shifting priorities.
"After it was submitted, focus in city government shifted away from specific units of city government to the city of
Although several major financial creditors are still pushing for a prospective sale of art to pay the city's debts, Orr has officially proposed allowing the museum to spin off as an independent institution controlled by a charitable trust in exchange for foundation pledges, DIA donations and state of
It's not clear whether Rosen had knowledge of the Cockrel proposal. Orr, who eventually embraced Rosen's idea and integrated it into the city's sweeping restructuring plan, testified in a deposition last week that he was not aware of the earlier proposal.
Neither creditors nor the judge in a municipal bankruptcy can force the sale of assets. But if Rhodes refuses to confirm the city's plan at trial, the consequences could push Orr to propose a sale to raise more cash. DIA lawyers have argued that the art cannot be legally sold, because it's held in a charitable trust, a position endorsed in a formal opinion by
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