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Monday, June 3, 2013

State solution to DIA threat?

In the past week or so, it has come out that Emergency Manager Kevyn Orr is looking at liquidating the (significant) city-owned elements of the DIA to help pay for some of Detroit's outstanding bills. Now, perhaps it is the right thing to consider as someone simply trying to balance the books. In any case, Mr. Orr perhaps believes he is fulfilling some kind of fiduciary duty. However, stripping the DIA would be a tremendous mistake and blow to Detroit's revitalization. We are trying to save the city, not accelerate its demise. The choice between preserving our culture vs. paying for retiree healthcare is a false one - we have to find a creative way to do both.

Of course, there is justified uproar about this possibility and threat to the DIA (and on one hand, it is encouraging to get more stakeholders interested and involved in finding good solutions for Detroit). The state legislature is reportedly considering a bill that would prevent the liquidation of DIA assets during a potential Detroit bankruptcy. It is a good signal, but I think it still leaves too much to chance (and the courts). The courts could overturn this law, or creditors could tie up the city/DIA for years in lawsuits.

Instead, I propose the State take possession/title of the DIA assets (and potentially, other City treasures we would like to protect for the public good like Belle Isle, etc.) in exchange for a capital infusion (there is no price tag and the number shouldn't really matter, but maybe $1, or $100 million, or $500 million, or $1 billion - the state has a bit of a surplus now, and if a capital injection could help fund a proper restructuring for the City that keeps it out of bankruptcy, so much the better). Critically, the deal should have an iron-clad clause whereby the City could redeem/reclaim the assets at some point in the future (e.g., in 10 years, or when the City meets some milestones) by repaying the State face value. Also, a clause promising to keep the assets in the city would help. This could help make such a deal palatable to City stakeholders (knowing they could reclaim the City "jewels" at some point; they could not do this if the "jewels" were liquidated in bankruptcy court) and hopefully, would accelerate a City-State agreement (unlike the dithering that cost Detroit the Belle Isle deal). If done early enough, I think this approach would properly shield the City assets from bankruptcy and the courts.

Benefits to City
>Cash infusion (and possible delay/prevention of bankruptcy)
>Protection of key assets for Detroit citizens
>Possible re-acquisition of key assets (buy-back option)

Benefits to State and other stakeholders
>Preservation of significant public assets
>Pathway to greater collaboration/investment in City
>Greater influence on key issues/assets in City