The following is adapted from the Philamplify report, “Kresge Foundation: Will This Bold Grantmaker Become the Next Great Social Justice Foundation?”
The city of Detroit filed for Chapter 9 bankruptcy on July 18, 2013, the largest municipal bankruptcy filing in United States history. After a two-month trial, U.S. Bankruptcy Court Judge Steven Rhodes approved a plan in November 2014, to counteract decades of financial decline and make the city solvent again. The so-called “grand bargain” will ultimately raise more than $800 million from foundations, the Detroit Institute of Arts (DIA), private donors and the state of Michigan, as reported by The New York Times. According to The New American, it will reduce the city’s debt by $7 billion, save the DIA, earmark $1.7 billion to maintain the city’s essential services like police and fire protection and minimize pension cuts to public sector retirees by 4.5 percent.
In part, the grand bargain was created to protect the DIA from having to auction off its art – an option since the DIA was then owned by the city. Foundations and others saw the importance of preserving Detroit’s historical art pieces and agreed to make contributions to the grand bargain to reduce public employee pension cuts if the DIA’s survival could be guaranteed. In fact, Kresge Foundation CEO Rip Rapson testified during the Detroit bankruptcy trials that the DIA is significant to Detroit’s history and future, calling it “a cultural asset the city can’t afford to lose or have diminished.” In addition to contributing $100 million to the grand bargain, the DIA also became an independent charitable trust, like most large American museums, instead of being owned by the city. In January 2015, Nonprofit Quarterly reported that, thanks to generous private donations and roughly $70 million granted from foundations, the DIA reached its $100 million goal.
The grand bargain also helped Detroit out of bankruptcy by creating a new entity, called the Foundation for Detroit’s Future, which is governed by a five-member board of directors. The board includes Community Foundation of Southeast Michigan President Mariam Noland, PVS Chemicals Inc. President and CEO James Nicholson, former Wayne State University President Allan D. Gilmour, Kresge Foundation CIO Robert Manilla and Ford Foundation General Counsel Kenneth Monteiro. Going forward, money from foundations, private donors and the state of Michigan will go through The Foundation for Detroit’s Future and the foundation will then funnel the money to the city.
The first grand bargain payment of $23.3 million dollars was paid to the General Retirement System and the Police and Fire Retirement Systems in December 2014, including $18.3 million from foundations and $5 million from the DIA. A total of 20 payments will ultimately be made to the City of Detroit from the Foundation for Detroit’s Future. As of December 2014, the city’s pension fund was 88.9 percent funded. This equated to a market value of approximately $3.1 billion. Twelve foundations are committed a total of $366 million over 20 years to the grand bargain. The contributions made by foundations are listed in the graph below, including the subject of the most recent Philamplify report, “John S. and James L. Knight Foundation: Can It Look Beyond #ShinyBrightObjects and Do More to Promote Equity?”
December 10, 2015 marked Detroit’s first year free of bankruptcy – though, as the Detroit Free Press noted – there is more work to be done. In the years to come, we hope foundations like Kresge and the others that contributed to the grand bargain will listen to and collaborate with Detroit residents to honor their rich history and bright future.
Jocelyn O’Rourke was a Philamplify fellow at the National Committee for Responsive Philanthropy (NCRP). She is currently a research associate at the Criminal Justice Policy Foundation.