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Detroit Research Paper(Econ/English)

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After Detroit’s Close Call: on the DIA and bankruptcy. “What happened in Detroit must never happen again,” declared U.S. Bankruptcy Judge Steven Rhodes in his landmark Nov. 7 ruling that approved the city’s plan to exit from bankruptcy. Museum officials might add a corollary: “What happened to the Detroit Institute of Arts must never happen again to another cultural institution.” During the bankruptcy proceedings, city creditors sought permission to get some of the money Detroit owed them through the liquidation of masterpieces from the DIA’s city-owned collection.

Instead, under the “Grand Bargain” approved by the court, the city is to receive $816 million over 20 years from nonprofit foundations, the state of Michigan and DIA donors, to be used to reduce the cuts to city workers’ pensions and to allow for the transfer of ownership of the museum’s collection and building from the city to the museum’s own nonprofit corporation.

The DIA, at this writing, has raised some $87 million of its $100 million commitment to the Grand Bargain. Ms. Detroit exits bankruptcy: City's pensions saved in part thanks to Detroit Institute of Art. Photo by Bill Pugliano/Getty Images A federal judge approved Detroit's bankruptcy plan today, allowing the city government to hit the reset button after its years of financial mismanagement. As part of the deal, which took a relatively speedy 16 months to complete, the city is eliminating $7 billion worth of debt—some creditors will be paid just 14 cents on the dollar—while slicing pension payments to its retired workforce by 4.5 percent (and ending their cost of living increases, and upping their health plan costs, and ... you get the idea, it's unpleasant). Meanwhile, the blueprint sets aside $1.7 billion over the next decade to cover critical needs, like demolishing abandoned homes and buying new fire trucks and ambulances.

As many outlets are noting, the bankruptcy could have been far lengthier, and even more painful for retirees, had it not been for an unusual deal designed to save the Detroit Institute of Arts while minimizing cuts to pensions. Attendance up at the DIA | OU News Bureau. Detroit Institute of Arts attendees admire Diego Rivera’s “Detroit Industry” murals on a sunny day in Rivera Court. PHOTO/ARDITA IVEZAJ BY ARDITA IVEZAJ OU News Bureau Attendance at the Detroit Institute of Arts has steadily increased during the last few years, which could mean good things for the museum’s future. According to the DIA website, the museum registered its largest number of attendees in the last 10 years during fiscal 2013, and already is on its way to beating that again.

“We are a little over 100,000 over this year’s attendance compared to the same period last year,” said Pam Marcil, DIA director of public relations. The attendance in the past 10 years has averaged about 393,500 attendees per year. The largest yearly attendance recorded was last year at 594,267. Attendees explore the hallways of the DIA near the Ancient Western Antiquities Collection. The property tax millage passed in 2012 promised as much as $23 million annually for the DIA, which struggled financially.

The Surprising Ways Bankrupt Cities Make Money. In November, the Detroit Institute of Art came up with a way for the Motor City to keep its beloved collection—which was otherwise going to be auctioned off, piece-meal, in the fallout of the city’s 2013 bankruptcy. Ironically, the only works not up for grabs were Diego Rivera’s Detroit Industry frescoes depicting the city’s boom years: strong, somber, masculine factory workers forging steel, fitting pipes, each mammoth mural espousing the multicultural dream of the unionized proletariat. But it was only the sheer impossibility of the frescoes’ removal—not sentimentality—which would leave them untouched by the creditors who’d been trawling the galleries for months.

The museum had been city-owned for nearly a century, which made most of the 57,604 pieces possible collateral on the road to municipal solvency, along with a massive restructuring of labor union pensions, utility shut-offs, and loans from the state. Their exit from bankruptcy? So what does this all mean? Costs, Benefits and Masterpieces in Detroit. Photo Most of the paintings on my walls are by artists I know personally. And although some of these works are hauntingly beautiful, they wouldn’t command much on the open market. But the prices fetched by famous artists have spiked sharply in recent decades. That is not because their paintings have become any better. Rather, it’s that these works have become trophies in bidding wars among the superrich.

That fact has implications for museum policies in general, and in particular for the valuable collection in the Detroit Institute of Arts. Since then, worried creditors have been eyeing those treasures. With Detroit’s sense of history and civic pride on the line, how much should its boosters be willing to pony up? One way to think about the decision is to imagine Detroit as a new municipality about to build a museum stocked and operated at taxpayer expense. Fortunately, costs are easier to estimate, and those for displaying a painting derive largely from its market value.