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July 20, 2014

Detroit after bankruptcy what

What happens after bankruptcy? What do we want to happen after bankruptcy? Per an article in the Detroit Free Press on May 10, 2014 "This current fiscal year’s general fund spending came in at $996 million. Over the next three years, Orr’s budget calls for $937 million, $922 million and $927 million, respectively, in general fund spending."

Yes the above budgets are balanced and that is a step in the right direction. This though, is not enough for the city to become a good place to live and raise a family. The expected budgets are not going to draw middle class families to Detroit. If the middle class does not prosper the city will continue to deteriorate with no end in site. Is this what Detroit and Michigan calls progress.

Drastic problems require drastic actions. Reality is there are no quick, cheap fixes. Fixing Detroit is going to take a long time, 10 to 15 years, and it is going to take a lot of money, multiple billions of dollars. Detroit's citizens would be naive to believe the necessary funds will come from the state or federal governments. The city must generate the funds itself by selling assets and investing the funds into its future. It is the art stored at the DIA.

Look around. What other assets does the city own that will generate sufficient cash to have a major impact on the long term viability of the city? My estimate is it will take something greater than $5 billion and less than $15 billion. It addition it will require serious planning, implementation and discipline over multiple Mayoral Administrations to achieve the desired result. Many will claim Detroit is not capable of pulling it off so don't waste the time, effort and art to try.

There is no need to sell all the art at once. Sell it as needed. This approach will aid in maximizing the sales price rather than dumping everything on the market at once. It will also result in a more efficient implementation of the plan to create a new Detroit.

Let us hope that Kevyn Orr and Judge Rhodes shifts their focus from steering Detroit out of bankruptcy to putting the city in a position to succeed rather than just survive. Everyone wants a future. Detroit, by being able to sell art, has a good chance of having one. For this to happen Mr. Orr will need to use his creative energies to find a way for the city not to give up ownership of the art and at the same time keep the creditors away from it.

2 comments:

  1. Wendell_FitzgeraldJuly 21, 2014 at 2:15 PM

    With all due respect the alternative is to have Detroit ask the Michigan legislature for permission to change its property tax to a tax on land values only. This is done by lowering the tax on improvements and raising the tax rate on assessed land values to make up the difference. The city would rebuild itself in a few years drawing to it massive amounts of private capital investing in a free market friendly tax environment where land speculation would be curtailed and land costs would be kept real. No public subsidy or selling off public assets would be necessary. Pittsburg did this from around 1980 to 2000 and in the process rebuilt itself becoming the most livable city in the U.S. to this day. Other Pennsylvania cities do this now with positive results proving the efficacy of the idea of 'land value taxation'. Free markets require taxation of community created land values to fund public services and untaxation of earned incomes and values created by individual activity. Otherwise we merely play into the hands of land speculators or other non-productive rent seeking types at the expense of productive labor and real capital invested in the real economy where real goods and services are produced MayDetroit return to the land of the living.

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