When you owe over $18 billion, does selling off a few paintings for $800 million make much difference?
That's the question for Kevyn Orr, emergency manager of the city of Detroit, who is looking for ways to satisfy creditors now that America's largest municipal bankruptcy has been given the go-ahead by a federal judge.
On Wednesday, the revered auction house Christie's said it has appraised some of the Detroit Institute of Arts' collection and said the works had a fair market value of $452 million to $866 million. It also suggested five alternatives to selling, which would allow the city to benefit financially, while keeping the DIA collection intact.
Christie's, which was retained by the city to appraise city-owned works as part of Detroit's bankruptcy case, said 11 pieces on display in the museum account for 75 percent of the appraised collection's total value.
Christie's only appraised 2,781 pieces, purchased with city funds and representing less than 5 percent of the institute's total collection, which includes masterpieces by Bruegel, van Gogh and Cézanne.
The alternatives, outlined in a letter to Orr from Christie's Americas president Doug Woodham, were: to use the art as collateral for a loan, lease the works to a partner museum, create a "masterpiece trust," sell the art and loan it permanently to DIA, or put the works in a traveling exhibition.
On Tuesday, Judge Steven Rhodes ruled that Detroit was eligible for Chapter 9 bankruptcy restructuring.
But the federal judge questioned the push by some of the city’s largest creditors to sell paintings and sculpture from the DIA. While he did not say specifically that the art should be spared, Rhodes said that such a sale would not have helped Detroit avoid bankruptcy.
“A one-time infusion of cash by selling an asset,” he said, would have only delayed the city’s “inevitable financial failure” unless it could have also come up with a sustainable way to enhance income and reduce expenses."
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Rhodes said that in considering selling assets, a city “must take extreme care that the asset is truly unnecessary in carrying out its mission.”
A coalition of creditors filed a motion last week asking the judge to appoint a committee to oversee an independent appraisal of the collection.
Orr told the Detroit Free Press editorial board after Tuesday's ruling that in “preliminary discussions” with Christie’s, it appeared that the market value of some of the best pieces in the collection would be less than $2 billion — a figure widely cited as a low estimate of the collection’s value — and that the appraisal could come in at less than $1 billion.
“We will try to get some value from the art in some fashion,” he told the board, but he said that did not mean that there was any plan at present to sell any art at auction. “Let’s be clear. That’s a city asset,” he told the newspaper.
He has said publicly that museum officials must “save themselves” by finding a way to contribute money, possibly as much as $500 million, toward the city’s debt relief.
The institute itself is opposed to an art firesale.
"The DIA art collection is a cultural resource of the people of Detroit," it said in a statement. "The museum's collection is the result of more than a century of public and private charitable contributions for the benefit of the public.
"Protected by a charitable and public trust, the collection has survived several municipal fiscal crises and financial downturns, including the Great Depression, free from threats to its existence," it said.