Restoring solvency

Overseer seeks to sell collectibles
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Published : 08/07/13
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Detroit’s recent bankruptcy filing is the largest of any municipality in U.S. history. It has been reported that Detroit has spent $100 million more every year than it takes in, and with long-term liabilities of at least $15 billion, it’s not surprising that the city, and its state-appointed financial manager, Kevyn Orr, would seek out every avenue to restore Detroit to solvency.

Should that include selling valuable art and collectibles owned by the city and displayed in the Detroit Institute of Art?

Considering selling

In May, Orr’s office contacted the museum and requested an inventory, with the express purpose of determining how much the works would realize if sold to private buyers.

A huge uproar arose, and state legislators proposed a bill prohibiting Orr from selling any artwork from the museum, even in the event of a bankruptcy.

The bill was not taken up, and the legislature went for its summer recess.

Michigan’s governor, Rick Snyder, stated that he didn’t want to see the DIA’s collection “disappear,” but that “the art is an asset of the city,” implying it could be sold like any other asset to satisfy creditors.

However, Michigan Attorney General Bill Schuette issued a contrary opinion stating, “The art collection of the Detroit Institute of Arts is held by the city of Detroit in charitable trust for the people of Michigan, and no piece can thus be sold, conveyed or transferred to satisfy City debts or obligations.”

Federal bankruptcy law supersedes any laws and statements by state officials, so it remains to be seen whether artworks can and will be sold to pay off city creditors.

Adding to the controversy is that the museum’s own operations are funded somewhat independently of the city, voters in three suburban counties having agreed in 2010 to a tax surcharge that provides an estimated $23 million per year for 10 years.

If city assets must be sold, it is argued, they should be assets that contribute to the debts, not those which are properly managed and whose funding is assured.

On the other hand, it is argued with some force that city employees should not have to forego pension payments, or the public do without street lighting, when some or all of these works of art can stay together.

Extremely valuable

The museum’s collection is, indeed, fabulous and extremely valuable, including great works by Van Gogh, Renoir, Matisse and Diego Rivera. Estimates are that 38 works alone could generate more than $2.5 billion, with at least three paintings valued at more than $100 million apiece.

In the immediate aftermath of the bankruptcy filing, however, the public’s focus was on one specimen from the museum’s substantial holdings of collectibles, namely “Howdy Doody One,” the original marionette used in the iconic children’s television program from the 1950s. It has been valued at $500,000 to $1 million and, because it has sat in a warehouse since it was last displayed in 2009, seemed ripe for sale.

It is a testament to the public’s feelings about this object that Orr singled it out in a post-bankruptcy statement as “not for sale.”

But what of the museum’s collections of coins, medals, and arms and armor? No word yet.

Armen R. Vartian is an attorney and author of A Legal Guide to Buying and Selling Art and Collectibles. Contact him at www.vartianlaw.com.

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