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October 9, 2014

Detroit, DIA and losing sight of objective



Whenever I am involved in making major decisions I keep in mind the overlying objective. In the case of Detroit's bankruptcy the major objective should be to put the city in the best possible financial position in order to bring back the vibrancy of the city serving the needs of its citizens and helping the city grow and prosper.

I am having a difficult time understanding how the Grand Bargain by giving away $10 billion of city assets in return for 5¢ on the dollar helps accomplish the above objective. Here is a list of possible reasons and if anyone has additional thoughts please let me know.

1. The decision makers wanted to help the retirees and in order to do this they needed to raise $880 million and the only way they thought they could do this was to surrender the ownership of the art worth $10 billion. In the process of trying to save the art they lost sight of optimizing the financial position of the city.
2. When the major donors of the DIA caught wind of the bankruptcy they were concerned the art would be sold to payoff debts of the city and they wanted to prevent this from happening. Their objective was to save the DIA and the saving of Detroit was secondary. Perhaps these donors were big contributors to politicians and they put the squeeze on these political folks.

If I believed in conspiracy theories I could paint a picture where the major power centers, the Governor, Jones Day and large contributors to the Republican party, all along were more focused on saving the DIA than looking out for the best interest of the city. I am glad I don't believe in conspiracy theories, but I do believe it is easy to lose track of objectives.... http://lstrn.us/1n76snd

What increases my bewilderment is why didn't the decision makers come up with other ways of saving the art. The logical solution, assuming the objective is to put the city in the best possible financial position was to sell $880 million of art and have the city at least retain ownership and control of $9 billion of the assets they own at the DIA. The city could decide to own the art forever, but they also would keep open the possibility of selling the art in the future if need be. Under the Grand Bargain this option is forever closed.

Once the Grand Bargain is struck as it is presently structured the city reduces its debts by $7 billion and reduces its assets by $10 billion. In other words the city reduces its net worth by $3 billion. This does not address the other assets being given away to settle the city's debts.

3 comments:

  1. As my Wills and Trust professor use to say, "Now class, money makes people funny."

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  2. "That policy package is a heavy lift. It’s far easier to call for more education. But education, while desirable for all people as citizens, won’t fix what’s broken in the job market. It will just get us better-qualified baristas.

    Will that be for here or to go?"

    10/13/2014 NYT conclusion in an anti-education comment in Debate Section.

    REBUTTAL:: The Boy Scout motto applies: be prepared, Second -- Charles Darwin's little known secret: If you can't adapt, you won't survive.



    The little educated won't be prepared when things change (tax the outsourcers), and second add Ronald Reagan's philosophy to the mix that he initiated. He said: " I don't have to outrun that bear, Johnny. I just have to outrun you."


    You can fix the economy for yourself by being prepared and adapting your skills against the competition.


    For example, a survivalist in the wilderness of life has the skills and attitude to survive

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  3. The pipe dream of "free market" is just that. As long as corporations and billionaires reap $$ from taxpayers (government) there will never be a "free market". Example: Taxpayers/ratepayers subsidize Hemlock Semiconductor to the tune of $365 million as well as $32 million annually until 2030. I see nor hear anyone at the bastion of the "free market" , the Mackinac Center, trying to stop this corporate welfare in the name of the "free market". What a joke.

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