Instead, it is time for desperate Detroit to get creative. The city needs real leadership to make tough calls which might have until recently seemed unthinkable. Local government bonds are usually a safe risk, which is why cities can borrow money cheaply. But what is happening in Detroit is turning that assumption on its head. Already, borrowing rates are up for all the Michigan suburbs because of the Detroit fiasco.
As the New York Times recently reported, the fallout is even having impacts on markets outside of Detroit: “The municipal bond market appears to be sending Michigan’s cities a message that no matter how well rated they are, they are going to have to postpone their plans and projects or pay more for them.” Investors appreciate safety, so it is essential for the city to calm the nerves of the bond market and take drastic action. Restoring Detroit's fiscal health is important to suburban Detroit and the entire state. And, as more major urban cities across the country face similar pressures, it is important for Detroit to become a model of how to prudently handle the results of decades of financial neglect.
Instead of coming to taxpayers with their hat in hand, one idea is Detroit should begin selling off their unused treasurers so they can actually be enjoyed and appreciated. Just the priceless art work alone owned by the city would be worth billions on the private auction market. With initial support from famous American philanthropists such as Charles Lang Freer, and donations from the Dodges, the Firestones, and Fords, The Detroit Institute of Arts amassed more than 60,000 works spanning centuries. Sitting in storage far away from view are piles of authentic pieces from Paul Cézanne, Vincent van Gogh, Pablo Picasso, Edgar Degas, and Winslow Homer just to name a few. Unlike most art museums which are run by nonprofit corporations, these priceless pieces that any student of art would recognize are controlled by a museum outright owned by an incompetent city. The best way to ensure the pieces are cared for is to sell them to people who will properly care for them. While saying good bye to culturally significant items is drastic, Detroit’s crushing liabilities require drastic action.
In addition, if there is one thing Detroit still has plenty of, it is land. A different idea being floated to help make the city solvent is to sell Belle Isle, which is a little used 982-acre public park. Pushed by developer Rodney Lockwood, the plan is to sell it to private investors and give the property the status of a commonwealth, such as Puerto Rico. The small island would have a price tag of $1 billion and citizenship would be sold for a reported $300,000/person. With low taxes and a business friendly environment, the small isle could become a major business hub, and the billions of dollars generated by their activity would be re-spent locally in Detroit. Allowing risk takers to embody that Detroit entrepreneurial spirit and flourish in a tax-free environment would be a true form of economic stimulus.
Detroit is suffering, but bailouts are never the answer. It is time for the city to clean itself up, become self reliant, and give job creators the tools they need to make the city great again.