A Way Out of Detroit’s Desperate Times: Sell the Family Heirloom?
Since filing the United States’ largest municipal bankruptcy in history on July 18, 2013, Detroit has been waist-deep in what its financial manager Kevyn Orr describes as the “Olympics of restructuring.” With “mounting” financial obligations, decaying infrastructure, and people leaving the city left and right to escape unemployment and skyrocketing crime, Detroit is desperate and looking for ways out.
It hasn’t always been this way. Andrew Moylan and Alan Smith of the R Street Institute describe Detroit as something of a “predecessor to today’s Silicon Valley,” and a “center of the high-tech industry of the day.” It also enjoyed rapid population during the early 20th century, being the second fastest-growing US city after Los Angeles.
However, its “just as precipitous decline” may not have been as sudden as those of us tracking auto bankruptcy had previously thought. According to a Reason article by Moylan, more than one million individuals have left Detroit since its population peak in 1950.
Perhaps unfortunately for the city, those who have stayed behind to collect pensions and benefits are only adding to the debt — those unfunded obligations total almost US$5.7 billion, in a city of approximately 700,000 residents. However, rather than painting pension recipients as entitled old folks, the authors give them a refreshing benefit of the doubt: “most pension recipients are honest, hard-working individuals who did their level best while union leaders and city officials broke their trust and mismanaged the fund’s assets.”
At this point, though, putting more than two-thirds of its annual healthcare expenditures to retirees was probably more than the city bargained for. Orr has recommended that the city reduce promises to new employees, in a last-ditch effort to stay out of desperate situations like this in the future. However, the city is now faced with what to do in the meantime.
In a publication cleverly titled “Artfully Resolving Detroit’s Bankruptcy,” Moylan and Smith take a closer look at an unexpected but tremendously valuable component of the city’s dwindling net worth: the famed Detroit Institute of Arts.
The collection is literally a diamond in the rough, compiled of 66,000 priceless works of art that were collected over a period of 130 years. The DIA claims that it is “a beacon of culture for the Detroit area for well over a century … [that] creates experiences [to] help each visitor find personal meaning in art.”
I would not want to be the person who decides to sell these works of art. Reaching for the city’s last beautiful treasures to make money evokes a gut-wrenching sense of desperation, like selling family heirlooms for food and shelter. Arts and culture bring a great deal of value and character to a city — an intrinsic value which is hard to fully capture in dollars and cents.
But, my feelings about works of art are irrelevant in this case. I ought not to refer to the collection as “priceless,” because while its intrinsic value could be argued as infinite, there is indeed a sticker price for this collection.
The DIA’s collection has an estimated worth of $2.5 billion, according to Moylan’s article. If the works were immediately sold and sent away, the profit would cover more than 12 percent of the city’s debt.
By selling the collection, not only would Detroit immediately benefit from sales, it would finally free itself from the money-sucking burden of running the Institute. The museum was constructed in 1927, expanded in 1966 and 1971, and furnished from the 1920s to the 1950s with art purchased by taxpayer dollars. Not only that, but taxpayer dollars have bailed out the Institute on more than one occasion, and taxpayer dollars are used today to run the Institute.
As Moylan so frankly said in his Reason article, “cultural pursuits fall well below things like police protection on any reasonable hierarchy of a city’s needs.” The average response time to a 911 emergency call is now 58 minutes, and more than 40 percent of streetlights in the city are no longer functioning.
As the authors write, an unaltered DIA isn’t critical to the rebuilding of Detroit’s decaying infrastructure. What’s the point of having Van Goghs if you don’t have navigable routes to get to them?
However, those who worry about a “priceless” collection being commodified and sold at below-market prices need not fret. Moylan and Smith agree, “any deal to monetize the art should be conducted at fair-market values, not fire sale prices.” If Detroit absolutely has to sell its art, it should get the maximum value.
If Detroit goes through with the transaction, it will not necessarily part ways with its art permanently. The works could, for example, be sold but on permanent loan to the DIA, leased to other museums, or placed in trust and sold by shares. Clearly, this has been thought out, and if it is a success, the already famous collection could one day be known as the art that saved Detroit.
The politicians who mishandled Detroit funds and landed the city in this situation should be utterly ashamed of themselves, but those now in charge, particularly Kevyn Orr and the 170,000 creditors of the city, are faced with the opportunity to make a responsible sale.
It is truly unfortunate that Detroit is faced with the decision to part ways with shards of the glittering collection that make the Institute a “beacon of culture,” but desperate times call for desperate measures. If selling Grandmother’s pearls to pay for reckless spending and false promises isn’t enough of a wakeup call for Detroit, I don’t know what will be.