Posted on 09/01/2013 4:18:05 AM PDT by Kaslin
I love Detroit. Although that’s a minority opinion of late, it’s as true today as it was when I was growing up there. I never knew a vibrant, thriving Detroit, but I’ve heard the stories and seen the pictures. Now it’s broke and desolate, looking for a way out, or at least a way back to even.
In that quest, many are turning their heads east, looking to Washington for a bailout, either in full or in part. The case they make is rife with moral hazard but steeped in emotion. Ignoring the horrible precedent and future liabilities it would open for taxpayers – how do you save Detroit but not Chicago, Baltimore, Illinois or California? – no lesson would be learned by politicians who empowered themselves with unkeepable promises, crony deals and corruption. And, more importantly, the residents of Detroit would not see the consequences of their blind loyalty to a political party they empowered to do this to them.
Pain must be felt. A price must be paid for this level of irresponsibility over that long of a time. No one is innocent in the death of Detroit; there are only varying levels of guilt in the city.
With a bailout (hopefully) off the table, another way must be found to dig out Detroit from the $18 billion debt-valanche under which the city finds itself. In looking forward it might be helpful to look backwards for some possible answers.
In its heyday, Detroit was a beautiful city with great buildings, a large geographic area with nearly 2 million people and an amazing art museum. Its heyday is long gone, but those things still exist and have value. Sure, in the cases of the buildings and land that value has diminished, but there’s still some.
First, the buildings and land.
The old saying about land is true, “They aren’t making any more of it.” It has value. It could be sold off not to people/companies looking to build but to create new cities. This would free it from the corruption of Detroit’s government and the hindrance of its taxes/regulation.
The beauty of the architecture in downtown Detroit cannot be overstated. These are real buildings, not these prefabricated “green” ugly glass buildings being built today. These are the type that can’t be built today – not only because of regulations, but because of the cost is too high and the skills needed to make them have long since vanished.
Their value has diminished, and the public image of what it takes to open a business in Detroit from a tax perspective would have to be changed. But their appeal to growing, thriving businesses is possible. Huge, old, beautiful buildings at a bargain price, coupled with tax advantages and the caché of helping one of America’s greatest cities, could attract some serious companies. The workforce is there; the work just needs to be attracted.
But the real dent Detroit can make in its debt problems lies on Woodward Avenue across the street from my alma mater, Wayne State University – The Detroit Institute of Arts. The DIA is not only a beautiful building, it’s filled with priceless works of art owned, in many cases, by the city.
In times of trouble an asset is an asset. The economy of Detroit may have crashed, but the art market certainly has not. There are billions of dollars hanging on the walls of a museum that doesn’t get enough visitors to support itself or justify its continued existence.
If that sounds harsh, that’s because it is. You can throw the best party ever, but if no one shows up, what’s the point? Sure, occasional school groups from the region make the trip, but the building is generally uncrowded, to put it politely. Besides, the city is broke.
Closing the DIA and selling the art won’t wipe out all of Detroit’s debt, but it could take out a large chunk.
Moreover, if the idea of selling these treasures is unappealing to some, particularly liberals, this would be a perfect opportunity for a liberal billionaire – or two or three – to step up and put their money where their mouth is. George Soros, Bill Gates or any number of mindbogglingly wealthy liberals could buy the art and leave it where it is. Progressive “charitable trusts” such as the Pew Charitable Trusts, which already have demonstrated a desire to seize art collections to which they weren’t invited when they stole the Barnes Foundation for the city of Philadelphia, could step up and put their billions to use.
They won’t do it because there’d be no return on that investment, which is the point. Having a world-class museum in a place no one visits is about as helpful as a horse on a boat. If no one or group of people are willing to practice what they preach, those masterpieces would be much better served hanging in a private collection where they will be appreciated than hanging in a museum where they are ignored.
Detroit is broke, and Detroit did it to itself. As such, a price must be paid to save itself. That price should include what anyone who finds themselves in a similar situation would have to do – liquidate what you can to pay what you owe. The buildings and the land are easy, but the art is gonna hurt. And it should. It’s where the money is; it’s also where part of the solution is.
The art collection at the DIA is estimated to be valued at $2.5 billion but, as The Washington Post reported, “the exact value is impossible to determine because it is rare for so many valuable works to hit the auction block. The DIA has more than 60,000 works spanning centuries, with nearly 90 percent of the pieces in storage.”
Nobody knows how much the paintings would fetch. But it’s more than the city has now. And that’s the point.
MI ping.
IBTIBTFADP
(In Before The “I’d Buy That For A Dollar” Picture)
“The workforce is there; the work just needs to be attracted”
doubtful
They would probably get much less than expected because as is said that many valuable works don’t go up for sale at one time, so there just wouldn’t be the money available to pay normal market prices for all of the collection.
It would be a fire sale which is appropriate; Detroit is burning down around the city government’s ears while they fight over the ashes.
Sad to say, but the next time a minority group in this country proves itself capable of self-government will be the first time. Detroit will continue to rot away and be a good background set for apocalypse movies until the residents decide to make themselves and their city successful. In the meantime it will just be a place for the good-intentioned or conniving to exploit some government to throw more money into.
More work for bureaucrats who have failed to do that for the last 70 years or so. “Hey, bring jobs to Detroit and we will give you a tax break.”
That’ll work. /sarc
Detroit they always said, has a lot of potential. Selling off the works at the DIA will not directly solve the problem but it is a start and you are correct. No city wishes to relinquish her treasury of arts but Detroit does not have a choice. In order to facilitate such a program, an OUTSIDE contractor must be brought in to sell off the goods BUT the funds must be secured NOT BY city officials rather, held in a special redevelopment fund for the city.
The bottom line however must be significantly reducing the crime problems by pumping tons into the Police force so they can enforce and clean up the streets. Once the streets are safe, business will come in and the city will truly experience some kind of Renaissance. Until then, nobody wants to go or work there...
I would sell some of it but you’ve got to have an eye on the future. One suggestion I heard from Roger Penske recently was the possibility of privatizing the museum itself, selling some of the art and putting the rest into the federal system or even renting the art out to other museums. Penske said that selling the art is a little like selling the wheels off your car.
As far as the creditors are concerned, they are as guilty as the city council and unions. They kept loaning money with every intent of the feds stepping in and giving them a taxpayer funded bailout. I’m not completely unsympathetic. I would use an old school solution of turning over vacant properties to the creditors (tax free) and they will find a way of making them profitable. Oil and gas leases alone will amount to a sizable chunk of change. I would also go after the ill gotten gains of criminal city council members.
There is no hope for Detroit.
“The bottom line however must be significantly reducing the crime problems by pumping tons into the Police force so they can enforce and clean up the streets. Once the streets are safe, business will come in and the city will truly experience some kind of Renaissance. Until then, nobody wants to go or work there... “
Unless there are fundamental changes made any money received by selling off assets will be sucked up in very short order by the current corrupt city politicians and unions. So, I thinking why bother?
BTW I see from the local news this morning that Kevyn Orr has fired one of two pension fund managers.
The old saying about land is true, “They aren’t making any more of it.” It has value. It could be sold off not to people/companies looking to build but to create new cities. This would free it from the corruption of Detroit’s government and the hindrance of its taxes/regulation.
This is painfully naive. The land has no value precisely because of the people who live there and those who govern it.
Going into the not too distant future there will not be a need for so much land due to the worldwide drop in fertility rates.
There is plenty of land to be had in better governed jurisdictions.
I just read Detroit is about to demolish 4,000 structures.
That only leaves about 66,000 empty buildings and homes.
That’s the point. The auction is held OUTSIDE of city officials control. They forfeited their right to a say on any matter a long time ago. No, it must be independent of the Detroit city council.
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