As I’ve said before, I love Detroit. Born and raised there to parents who were born and raised there, and went to college at Wayne State. It’s an amazing place. I passionately want to see Detroit revitalized. But part of loving something means being honest about it, and Detroit is a mess. To save the city, to really save it and get it out of the mess it’s currently it means making sacrifices.
That's why the recently announced $330 million deal to "save Detroit's art" and fund pensions is so disappointing. It has nothing to do with Detroit's long-term viability and success. We need a plan for financial stabilization, not a plan to leverage the Detroit Institute of Art's (DIA) collection to help a select few, in this case pensioners.
This deal actually is a symbol of what's wrong with Detroit. Liberal elites prioritize the art collection, not safety, not balanced budgets, not services to the city. Unions prioritize their members first, not overall city success. Democratic politicians prioritize short-term deals to help their constituencies rather that long-term financial stability. Recognize that song? It’s the same old crony tune that got the city here in the first place.
Repeating old patterns of short-sighted deals, putting emotion (the DIA love is real, but irrelevant given the bankruptcy and how few people visit it) ahead of reason and protecting small constituencies at the expense of everyone else won't get the city out of this mess.
And that's why this DIA deal is wrong. It's not part of a long-term revitalization plan. I'm not even sure it's really has anything to do with bankruptcy.
Let me be specific.
First, the $330 million put up by foundations is a ridiculously low number. Even Christie's valuation was $866 million and that was considered very low because they only appraised a small percentage of the art. An estimate by the Detroit Free Press pegged the value at more than $2.5 billion. It seems the DIA collection is being deliberately undervalued to "protect" it. Admirable, I suppose, but that doesn’t change the city’s economic reality so it’s irrelevant.
Second, this deal does NOT really aid bankruptcy. Bankruptcy is about debtors and creditors. This does not involve creditors so it does nothing to stabilize Detroit's finances. Without a strong credit rating and investor confidence, Detroit will have to borrow at higher rates, if it can (eventually) raise new capital at all. And if the city can't raise new capital, how will it repair its long neglected infrastructure and aid economic development?
Helping pensioners is noble, but many live in Florida or Arizona and will not contribute to Detroit's revitalization. That may sound cold, but it’s the reality no one wants to face. If the city’s actions don’t prioritize its own financial stability this will all have been for nothing. And pensioners can be helped through a broader bankruptcy deal.
Lastly, I question the bankruptcy judge's priorities. Detroit has an $18 billion problem and Judge Steven Rhodes has spent an enormous amount of time and effort to engineer a deal between foundations, the DIA and pensioners. It seems to me Judge Rhodes should be focusing on a deal between the city and its creditors. A deal that should include maximizing the city's assets.
The fact of the matter is, in unburying itself through the bankruptcy process, the Motor City is going to face difficult choices. Aside from the ultimate mirror-gazing necessary to ensure it doesn’t find itself in this position again, the city’s debts must be paid.
Detroit’s $18 billion debt is a high mountain to climb for a city whose government spent decades driving away its economic base, but paid it, or as much of it as possible, must be.
And that means not only maximizing the value of the DIA to for the benefit of the whole city, not just a few, but also divesting itself much of its land holdings.
Detroit is land-rich, and they aren’t making any more of that. It has to go. Large swaths of the city need to be sold and geographic area has to be shrunk. It’s unpopular, but it’s necessary. Detroit can’t support an area that used to be home to 2 million with only 700,000 people in it. Neighboring cities could buy pieces or new cities can be carved out of it. This could be an opportunity for a wealthy conservative or libertarian mogul, working with the state government, to start bastion of liberty and free-markets on the grave of what progressives have created.
As much wealth as could be rung from Detroit’s assets should be rung. Between maximizing the city's art collection and its land we can put the city back on a path to financial well-being. It may be an ego-bruising path, but a necessary one.
I love Detroit. But to truly love something you have to be honest about it. It did this to itself. As such, it has to make sacrifices for its mistakes, feel the pain of those mistakes so it’s less likely to make them again.
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