Emergency Manager Kevyn Orr threatens to sell off DIA Art Collection (Detroit: fit in, house)

[313Weather]

Originally Posted by maclock

CHAPTER THREE

Preparing for Chapter 9

The Importance of Negotiations

It is crucial that, once the magnitude of a financial crisis is established, thorough negotiations be undertaken with creditors and stakeholders to avoid insolvency. In fact, such negotiations, undertaken in good faith, are a legal prerequisite to filing a chapter 9 case. Even if the municipality already has determined that it likely will be forced to file for bankruptcy protection, it should continue to try to negotiate with key creditors to avoid that result, and should carefully document what steps are taken to reach agreement. It is not necessary that a municipality accept a short term fix that only briefly defers an inevitable meltdown. But if such a fix is offered, the municipality must analyze it carefully and make sure it can prove that in fact it will not solve the municipality’s problems sufficiently to avoid both short-term and long-term insolvency. For example, it makes no sense to renegotiate a long-term debt obligation by deferring interest or other payments for a year if, on the first anniversary of the deferral, the municipality will be unable to satisfy the revised obligation absent something akin to divine intervention. Similarly, a municipality should not accept one-time concessions from labor that would avoid insolvency in the short term but extend unsustainable labor agreements by one or more years such that insolvency is inevitable and the deficit facing the municipality will be even deeper as a result of the extension.


(Excerpted from Municipal Bankruptcy:Avoiding and Using Chapter 9 in Times of Fiscal Stress, a booklet detailing Chapter Nine bankruptcy published by Orrick, a leading national law firm.)

The bolded is key in Detroit's case.

All of the so-called restructuring is only a short-term fix. EVERYONE, including the EM, has said that. In fact, Detroit's structural deficit has only worsened after a good year of state intervention.

The state of Michigan simply needs to bite the bullet that's been shot.

[scolls]

I'm not an art person either but at some point we have to keep our institutions if we have any hopes of being a real city. Selling the art is just to pay debt and is not going to put police on the streets or turn on street lights. I know citizens want street lights but street lights aren't going to attract new investment. You sell the art and then when the money runs out, then what? On a side note, I supported the DIA millage but if they sell off all the art, why should I pay for an art museum with no art?

[Coldjensens]

If this is just being done to generate some temporary capital so they can continued their out of control spending, then it is plain stupid. Sell off one of the things that Makes Detroit unique special and desirable just to get a couple more years of the same old thing? The problem is this does not appear to be a solution, just a band aid. So far, no solution is proposed, so what is the purpose of this? Postpone bankruptcy some more?

What I find frustrating is we (Wayne and Oakland counties) just voted to subsidize the DIA to prevent things like this from happening. Now if they sell off the paintings, all we did was subsidize the cost of past graft, corruption and stupidity (and apparently ongoing stupidity).

If they woudl wake up and make the cuts they must make and then had to sell off some art to pay some debt (debt that woudl then be gone and not come back). It might be understandable. However in this situation it appears to be saber rattling to try to get the suburbs to subsidize more business as usual in Detroit.

This $5 million they are looking to cut today is silly. So what? They must cut $300 million - get to it. There is no question of whether they can avoid cutting $300 million, There is no question of whether they can kick the can down the road some more. It is done. There really is not that much of a decision to make . Yes you must cut it, even if you think you cannot, you must. Just do it. How hard is that? If they cannot cut it without defaulting on some obligations, then they have three choices, default, shut down or bankruptcy. If that is where they are that is where they are. It does not seem that difficult to figure out. If the City is bankrupt, then get it positioned for bankruptcy and do it. I am becoming less and less impressed with the efm. Still he needs to have a chance, he has not been there a year yet.

No. Once gone, it will never come back. The DIA is left over from Detroit being a world class city. Detroit will not be a world class city again and we will not be able to recapture anything of this caliber.

[scolls]

Who couldn't see this coming with the EFM? Seriously you give one guy who is not elected by the citizens free reign to do things a federal bankruptcy judge can't even do. Not only that, the citizens of Michigan voted to repeal this law and they just re-pass the same damn law.

[jonnynonos]

It won't happen. Snyder wouldn't let it. It would create overwhelming hatred of them both.

Further it wouldn't even put a dent in Detroit's financial quagmire.

Just political theater.

[mgkeith]

" However in this situation it appears to be saber rattling to try to get the suburbs to subsidize more business as usual in Detroit." -Coldjensens

That was my first thought.

[313Weather]

Originally Posted by scolls

Who couldn't see this coming with the EFM? Seriously you give one guy who is not elected by the citizens free reign to do things a federal bankruptcy judge can't even do. Not only that, the citizens of Michigan voted to repeal this law and they just re-pass the same damn law.

Not to mention a whopping 82% of Detroiters with a 50% voter turnout voted down the law.

But under this administration, the people's will clearly hasn't mattered.

[Coldjensens]

It is amazing what people do not understand. The EFM law was not voted down, it already existed. What was voted down was an extension of EFM powers. The new EFM law is a watered down law that cured some issues that made the old law unworkable but did not include some of the broad powers the legislature believed the voters found offensive. No one knows if voters woudl have voted to kill the new EFM modification law or not. They shot down the old modification to the law but no vote was made on the new extension. Just because voters reject one version of a modification to a law does not mean the legislature cannot ever again pass any law relating to the same law. Legislature passed a law. Voters said we do not like that law, legislature tried to fix what they perceived the voters did not like about the law.

If voters shot down a 55 MPH state speed limit, that does not mean there should be no speed limit. It means it should not be uniformly limited to 55, so the legislature must try again with something else. That is what they did.

[scolls]

Actually voters voted to repeal the law Snyder passed originally, not the emergecy manager law itself. He then went and passed the identical law and even through in any city with a manager would be grandfathered in, and any city declared a financial emergency before March 27 is grandfathered in, and no suprise Detroit was declared a financial emergency before the 27th so Detroit is under a law Michigan voters voted to repeal. The only difference between this law and previous is the city can chose bankruptcy or the EFM. Voters didn't shoot down the EFM completely.

[maclock]

Originally Posted by 313Weather

The bolded is key in Detroit's case.

It seems the collection is so valuable, that it might be enough to retire a massive amount, if not all, of Detroit's long-term debt. If that's the case, then just sell the art and start over again. The city is withering on the vine and it needs to do the responsible thing and pay down its debt, hit the reset button, and plan for the future. That art belongs to the past; the city and its current residents belong to the present.