A recent talk by the president of the Kresge Foundation sheds light on the path by which Detroit emerged from bankruptcy last Friday, and the pivotal role of philanthropy in reaching that milestone.
Friday’s ruling by federal bankruptcy Judge Steven Rhodes releasing Detroit from bankruptcy — a stunningly quick exit, with nearly unprecedented agreement among most of the creditors — provides a good opportunity to revisit the October 21 FIRG presentation by Rip Rapson, president of the Kresge Foundation, which is headquartered roughly 20 miles from Downtown Detroit. In his presentation, which should be seen in its entirety here, Mr. Rapson made two striking points that bear some additional thought amid the celebrations over Detroit’s return to self-governance.
The first was that Kresge — and Mr. Rapson personally — played a significant role, with other foundations, the appointed bankruptcy mediator, and the governor of Michigan, in the delicate negotiations leading to the “Grand Bargain” among the city’s creditors. The most famous part of the foundation’s involvement was its $100 million commitment to a philanthropic fund to prevent a selloff of the city’s world-stature Institute of Arts. The contributions of more than a dozen foundations, matched by the state, furnished the $800 million-plus needed to save the art and provide more money in the final agreement for municipal pensioners. But in Mr. Rapson’s telling, he and Kresge also played a broader, albeit quieter, role in helping investors to see the advantages of a negotiated settlement backed by the region’s public, private, and philanthropic leadership, rather than a protracted fight over Detroit’s few assets. This intervention in what could have become a giant legal, financial, and political brawl was, to say the least, unconventional for a national foundation.
Mr. Rapson’s second point was that settling the bankruptcy is, relatively speaking, the easy part. Much harder will be for Detroit — with a plunging population, a decimated tax base, and a disillusioned electorate — to become a well-managed, well-governed, and accountable city. The Kresge Foundation has invested hundreds of millions of dollars in efforts to make that outcome more likely, and stands ready to invest more. Yet in full candor, Mr. Rapson could not say that he is confident it will work. It is too important a goal not to pursue in earnest, but it is also going to be punishingly difficult to achieve.
I have some other thoughts on what might lead a foundation to take on such incalculable risks and assert public leadership in something that might not end up looking like a glorious cause (“We won’t know for five, ten, 15 years whether Detroit has solved its systematic problem,” a bankruptcy expert told the New York Times). But the discussion about risk can wait for the next post. For now, it’s more than fitting to pause and reflect with appreciation on what this story tells us about the potential for leadership, cooperation, and compromise in the face of financial and political catastrophe.
Not the least of the lessons is that philanthropy can be a pivotal partner — not just a source of financial help, but an honest broker and a credible force for consensus — in forging solutions out of seemingly intractable conflict and loss.
[Photograph: Flickr user Barbara Eckstein]