John Wisely

USA TODAY

When Detroit declared bankruptcy July 18%2C Michigan%27s largest city was estimated to have %2418B in debt

That includes more than %245B related to pensions%2C %245.7B in unfinanced retiree health care

Supporters hope to save art by raising as much as %24820M to finance pensions

DETROIT — The city's $18 billion bankruptcy presents numerous new questions about who gets paid when a city goes broke.

It also raises an age-old one: What's the value of art?

The answer matters, as the city's creditors, including pensioners and bondholders, eye masterpieces at the Detroit Institute of Arts as a possible way to recover they money they are owed. Mediators are hurrying behind the scenes to craft a rescue plan that would spare the art from the auction block by raising as much as $820 million to finance pensions.

Emergency manager Kevyn Orr is expected to submit his financial plan to the court in March. An appraisal last year from Christie auction house's valued the portion of the collection purchased with city money at $454 to $867 million, but creditors insist the entire collection of more than 66,000 pieces, including donated items, is worth billions.

"It's a truly unique and unprecedented situation, both in terms of the bankruptcy of a major American city but also the possible sale of the art," said Timothy Rub, director of the Philadelphia Museum of Art. "It's an extraordinarily important museum with one of this country's finest collections."

The potential for a distress sale of a world-class museum collection has prompted a nationwide rescue effort. Supporters, including the Ford Foundation, the Kresge Foundation and W.K. Kellogg Foundation, have pledged $370 million to keep the art from hitting the auction block. Michigan GOP Gov. Rick Snyder has agreed to provide another $350 million in tobacco lawsuit settlement proceeds.

Museum officials have pledged to raise another $100 million on top of that.

Detroit owns the museum and the art collection, though a nonprofit group operates it and manages fundraising. U.S. District Judge Gerald Rosen, who is serving as a mediator in the bankruptcy case, is brokering the rescue.

The plan calls for the city to receive the money that is raised and use it to replenish its underfunded pension plans.

Some creditors are skeptical. Bond insurers Financial Guaranty Insurance and Syncora; and AFSCME Council 25, which represents employees and retirees, objected in court pleadings to the appraisal. They called the value placed on the works,"inappropriately low," in part, because it only included pieces purchased with city money.

The appraised works comprise about 5% of the museum's collection. The bulk of the collection was donated to the museum or bought with other money.

Wilma Caldwell, 71, retired from the city in 1998 after a 35-year career as a public health nurse. Her pension is less than $30,000 a year, but she counts on it to pay her bills.

"If I had to make a choice between my livelihood and the DIA art work, I'd choose my livelihood," Caldwell said.

John Wisely also reports for the Detroit Free Press.