Detroit is bankrupt. The Detroit Institute of Arts (DIA), however, is doing well, increasing its attendance by approximately 30% (460,000 to 600,000) year over year since initiating a three county property tax mileage in 2012. It has also increased its operating budget for the first time since 2009 and after a 25% budget reduction during the Great Recession. As a true asset of the City of Detroit, the DIA is now being looked at by the city’s Emergency Financial Manager Kevyn Orr, a bankruptcy lawyer, as a mechanism to pay down some of the city’s $18 billion dollars of debt.
Since filing for bankruptcy this past July, Orr has consistently said “the DIA is on the table” and that “all assets must be valuated.” On December 4, Christie’s Auction House completed an appraisal of 500 of the DIA’s city owned pieces of art at a paltry $450 to $866 million; well below the originally estimated $2 billion. Needless to say, a windfall for creditors is not coming from the DIA, especially when the city has upwards of 100,000 separate creditors – 40,000 of which are City of Detroit retirees whose pensions may be cut in order to restructure city debt. Proposed changes could result in benefits that are $9,000 less than the $30,000 the average retired pensioner receives each year.
Is a year’s salary worth the loss of Diego Rivera’s Detroit Industry mural? Or are we asking the wrong question? We should be asking why is the DIA such a hot commodity, especially now that its value is not nearly enough to make more than a dent in any restructuring.
The City of Detroit has many other assets; including land, its Municipal Parking Department and – perhaps the most valuable – the Detroit Water and Sewage Department (DWSD), which provides service to nearly four million people in Detroit and 127 of its neighboring communities in Southeast Michigan. According to a February 2013 report, the DWSD’s annual revenue is $850 million a year, which is just as much – if not more – than the estimated revenue from a possible sale of DIA art. So why hasn’t this been discussed in more light, especially given the historic efforts of the suburbs to “gain control” of the DWSD at the opposition of Detroit officials? Orr floated a plan to transfer the department to a regional authority in September 2013, but it came with an admittedly overzealous $9 billion price tag.
The DIA, located in Detroit’s burgeoning Midtown district, is a focal point for the “anchor strategy” often promoted by city officials and civic leaders. Similar strategies elsewhere have proven successful at encouraging economic and community development. The DIA’s cultural assets compliment the educational institutions and hospitals in the area by contributing to a balanced neighborhood (one of the few growing in Detroit). It promotes activity and ancillary development that feeds off the anchor institutions like Wayne State University and the neighborhood’s museums and art galleries. This Saturday, December 7 is the 41st annual Noel Night, a neighborhood “open house” that is anticipated to draw 50,000 visitors. The DIA is often the focal attraction of Noel Night. The Water Board Building, while a work of art in itself, doesn’t draw nearly as many visitors compared to the DIA. It also doesn’t anchor a neighborhood or offer more than pumping and cleaning water.
Going forward, tough decisions must be made to alleviate Detroit’s debt, and these decisions shouldn’t be made lightly, click for more info on how you can make the right decision. Everyone cannot and likely will not be made whole, but that doesn’t mean the city’s soul should be gutted for pennies on the dollar. One metric should be considered for every decision Orr and the bankruptcy judge make: “will this decision contribute to stabilization and increasing Detroit’s population?” Thinking about the future city is almost more important than the current crisis. The bankruptcy process for a municipality isn’t the same as the one for a company, where profit is the bottom line. In that scenario it’s easy to determine whether it makes sense to keep running the company or to sell it off piece by piece. A city can fire workers and end contracts with vendors but it can’t make 700,000 people move, close down all services, and then wish those that remain good luck. Operating the city and growing the population should be the goal as Detroit moves forward and most people don’t decide on where to live based on who they write the check to when paying their water bill.