This report provides a RYG scorecard for the first ten years of the DIA Millage (2013-2022). It addresses the impact of the millage on the DIA’s Finances (which we rated GREEN), the DIA’s Performance in converting resources into services and programming (which we rated RED/YELLOW), how effectively the Governance process (through the Art Institute Authorities) has operated (which we rated RED), and how effectively the Service Contract(s) have represented the interests of the residents of the Tri-County region (which we rated RED). Based on this analysis we present seven recommendations for the new Service Contract.
In 2012, residents of Macomb, Oakland, and Wayne Counties voted to approve a 0.2 mills property tax to benefit the Detroit Institute of Arts for ten years from January 2013 to December 2022 (a total of approximately $250M). Subsequently, in March 2020, the residents of these three counties (the “Tri-County” region) voted to renew this millage for another ten years (an estimated further $330M, for an estimated total public investment of $580M). The benefits that the residents of the Tri-County region receive in return for the millage are defined by Service Contracts, which are negotiated for each county for each ten-year millage period. The Service Contracts are negotiated and administered by Art Institute Authorities, whose members are appointed by each county’s Chief Executive and Commissioners.
This report provides a RYG scorecard for the first ten years of the DIA Millage (2013-2022). It addresses the following four areas:
- The impact of the millage on the DIA’s Finances (which we rated GREEN),
- The DIA’s Performance in converting resources into services and programming (which we rated RED/YELLOW),
- How effectively the Governance process (through the Art Institute Authorities) has operated (which we rated RED), and
- How effectively the Service Contract(s) have represented the interests of the residents of the Tri-County region (which we rated RED)
3.0 Overview of DIA Finances (GREEN):
In the decade before the millage (2002-2012), the DIA’s finances effectively flatlined. Since the introduction of the millage, the DIA’s finances have improved exponentially. More specifically,
- The millage has, in practical terms, achieved the target of raising the DIA’s endowment to $400M.
- The endowment at the start of the millage was $145M. The DIA’s last reported tax return showed investments of $424M and an endowment of $365M.
- The DIA’s endowment is now the second largest in a survey of eight other comparable institutions in the closest American metropolitan areas by size. (See benchmark in Section 5.0)
The DIA’s average “profit*” over the last five years has been ~$38M. Even without the millage, the DIA would have achieved “profits” of ~$10M/year.
* The term “profit” refers to the DIA’s total revenue minus operating expenses. It appears in the DIA’s annual financial audits as “Change in Net Assets from Operations.”
The cumulative impact of the millage over 2013-2022 almost precisely matches the DIA’s growth in investments and profitability over that period.
The second millage (from 2023-2032) will provide an estimated $330M of further public funding, providing significant opportunity to both further stabilize the DIA’s financial position AND provide more community benefits.
In terms of determining the correct balance between funding the DIA’s long-term financial stability and providing community benefits, one approach might be to: (i) Identify a well-resourced, best-in-class comparable institution to the DIA, (for example, the Minneapolis Institute of Art, see Section 5.0); (ii) allocate the required proportion of the millage funding to provide the DIA with equivalent long-term financial resources to this best-in-class institution; (iii) require the DIA, through the Service Contract, to perform (in terms of programming and performance) at an equivalent or better level than this institution; (iv) determine the appropriate level of ongoing community benefits from the remaining millage funding and the endowment.
4.0 Overview of DIA Performance (RED/YELLOW):
In assessing the DIA’s performance over the millage, we have benchmarked it against similar institutions in the eight closest US Metropolitan areas (by population)
In this benchmark, the DIA had the second-highest salary bill (normalized to Detroit’s cost of living) and the second-highest endowment, but it ranked fifth in terms of maximum reported # of annual visitor numbers and last in terms of the number of exhibitions it opened from January 2013 to December 2022.
- In the benchmark,
the DIA ranks last in its efficiency of turning resources into both
visitors and programming.
- To become a mid-level regional performer, it needs to increase its annual visitor numbers by 50% and its programming by 100%
The DIA has achieved a solid 5% year-over-year growth in school visits. No data is available to assess the quality of this service.
- The DIA’s public art
program (PIPA) has underperformed in comparison to five other large
public art projects in Metropolitan Detroit.
- Rather than utilize the existing mural painting ecosystem in Detroit, the DIA has attempted to recreate it internally.
- PIPA has raised multiple red flags in terms of the DIA’s ability to deliver community-based projects
5.0 Overview of Governance (RED):
In assessing the Art Institute Authorities (AIA’s), this study considered the following. How compliant are the AIA’s with the governing legislation? How effective are they in overseeing the quality of the services that the DIA provides to the residents of the Tri-County area? How well prepared are they for the upcoming service contract negotiations?
Two of the three AIA’s have failed to comply with governing legislation.
- The AIA’s have provided minimal oversight of the quality of the services that the DIA provides to the residents of the Tri-County area.
- The AIA’s have not addressed any of the basic steps of supplier quality oversight.
- The AIA’s have ignored numerous red flags that would typically indicate the need for stricter control measures.
- In reality, the AIA’s have allowed the DIA to progressively reduce how much information it reports.
- The AIA’s have not
performed any steps that might prepare them for the upcoming service
- They have not performed a benchmark of the DIA against comparable institutions and have made no effort to gather the public’s requirements.
6.0 Recommendations for the new service contract:
The results of this Scorecard arrive at a watershed moment where the impact of the first millage (2013-2022) can be assessed and be used as a guide for writing the Service Contracts for the second millage (2023-2032).
Based on the research performed during this project we recommend seven major changes be made in the new Service Contract.
- The new service contract should include an increased target figure for community benefits.
Why: Only 5-10% of the millage money is currently allocated to community benefits. This low level of community benefits may have made sense given the DIA’s precarious financial situation in 2012, but it does not reflect the DIA’s healthy current and projected financial status. (See Section 4.0, Overview of DIA Finances for further details.)
- The new service contract should define ongoing community benefits beyond 2032.
Why: The major impact of the millage has been to directly or indirectly increase the endowment, which will provide significant annual revenue for the DIA in perpetuity. The new service contract should reflect this by confirming that the current benefits (free admission, school visits, etc.) will continue in perpetuity (or until all parties agree to terminate them). Note the Minneapolis Institute of Art has had free admission since 1989.
- The new service contract should include a target for the endowment value at the end of the second millage.
Why: The target for the endowment (which, directly or indirectly, will be the major legacy of the public’s investment in the DIA) is currently a “handshake agreement” and not contractually defined. The public’s investment in the endowment needs to be more transparent and better protected.
- The new service contract should require the DIA to engage in an annual process of participatory budgeting to assess what new and expanded services the public want.
Why: The services and benefits defined in the current service contract reflect what the DIA was doing in 2012, prior to the millage. There needs to be a framework and process to assess what services the public currently wants and how best to provide them.
- The new service contract should require the DIA to provide sufficient information to assess its performance relative to comparable institutions and other objective measures.
Why: Currently, there are no objective measures of the DIA’s performance, which allows them to set their own standards, and under-deliver relative to similar institutions in comparable metropolitan areas. For an example of a reporting dashboard, see the Boston Museum of Fine Arts’ year in numbers.
- The new service contract should describe a framework for tracking the DIA’s performance, and a process for continuous improvement.
Why: With the resources they have been provided with, the DIA should be providing substantially greater benefits to the residents of the Tri-County region. For example, to be a mid-level regional art institute they should aim to increase visitor numbers by 50% and programming by 100%. (See Section 5.0, DIA Performance). There is currently no framework for tracking and remedying this.
- The new service contract should not allow DIA board members to sit on the board of the Art Institute Authorities.
Why: the current service contract encourages the Art Institute Authorities to share two members with the DIA board, which is a clear conflict of interest.
7.0 Further Information
To request a presentation of the full report from which summary is extracted, please contact:
steve (at) essayd.org
Modified on 9/18/23 to demote the Service Contract recommendations to Section 7.0 and update the Executive Summary to reference the Service Contract recommendations.