DETROIT — Saying the future of the Detroit Institute of Arts and easing pension cuts in Detroit's bankruptcy are critical to the city's future, representatives of Detroit's three automakers on Monday committed $26 million to the grand bargain on which much of the city's exit from bankruptcy is based.
The donations are about preserving the city's cultural heritage and helping pensioners facing steep cuts to retirement benefits, but "most importantly this money is intended to help the Motor City get back on its feet again," said Reid Bigland, an executive for Chrysler, which is donating $6 million to the DIA-pension deal. "This is really about being a contributor and working with those who are also committed to revitalizing this city."
General Motors and Ford and their charitable arms are donating $10 million apiece, a major chunk of the $100 million the DIA must contribute to the grand bargain, in which the museum and its masterworks will be spun off to a non-profit trust for the equivalent of $816 million, with proceeds set aside to help reduce pension reductions for thousands of city workers. DIA board Chairman Gene Gargaro Jr. said the auto companies' contributions pushed the museum to 70% of its $100-million commitment.
Museum leaders continue to solicit corporate, individual and foundation gifts to reach its $100-million threshold, but there's an even steeper financial mountain the museum still has to climb. The DIA must raise an additional $200 million or more in endowment funds during the next eight years necessary to fund annual operations when its tri-county property tax millage expires in 2022. The tax provides about $23 million in annual income, so the museum needs a total endowment of about $400 million to cover the hole in the budget once the millage disappears.
"We're making strong and steady progress on the grand bargain," said DIA chief operating officer Annmarie Erickson. "We would like to get this wrapped up expeditiously. I think we'll be able to turn our attention to the endowment in the near future."
Chief U.S. District Court Judge Gerald Rosen, the federal mediator in the bankruptcy and the chief architect of the art-for-pensions grand bargain, praised as "heroes of the bankruptcy" all of the donors and retirees who are supporting the deal, as well as state political leaders who last week approved a $195-million contribution from state government.
"Today we are all Detroiters, we're all Michiganders and we're all DIA-ers," Rosen said.
Despite the theater of Monday's announcement, the grand bargain, the centerpiece of Detroit emergency manager Kevyn Orr's restructuring plan for the city, is by no means a done deal.
On one hand, retirees in the process of voting on the deal could face larger pension cuts should they reject it. On the other, the city must convince U.S. Bankruptcy Judge Steven Rhodes to approve Orr's plan during a confirmation trial now scheduled to begin Aug. 14 and last 28 days, a delay Rhodes approved in a ruling Monday. Some of the city's largest creditors will argue that the grand bargain is illegal because it unfairly favors pensioners over other creditors shut out of the $816-million fund.
Michigan Gov. Rick Snyder and Orr said it's now up to retirees to approve the deal, and they strongly urged yes votes as the beneficiaries face a July 11 voting deadline.
"Let's build on this," Snyder said. "Let's celebrate this moment of partnership."
Representatives of two associations representing Detroit retirees also urged pensioners to approve the deal.
Shirley Lightsey, president of the Detroit Retired City Employees Association, which represents non-uniformed retirees, and Don Taylor, president of the Retired Detroit Police and Fire Fighters Association, thanked the automakers and foundations who've donated so far and called on fellow retirees to accept what they said is the best deal they'll get.
Lightsey, addressing retirees who say they'll vote no on principal and take their chances on appeal, said: "You cannot eat principal, and uncertainty doesn't pay the bills."