MACKINAC ISLAND – Recent municipal bankruptcies have not ended well, but the outcome of such a move would be different for Detroit because leaders are planning for it, Treasurer Andy Dillon said as part of a series of panels on the resurgence of the city.
Dillon said the goal is still to keep Detroit out of a Chapter 9 bankruptcy, but he said the option is not going to be held back for the last minute.
“I can tell you we’re not going to be unprepared,” Dillon said. “That’s where most of these have not succeeded is people have not really planned.”
The problem with a municipal bankruptcy, Dillon said, is there have been few of them so there is little precedent to follow. Instead, Dillon said he is looking to the largest recent private sector bankruptcies.
“We saw how it can be done well with GM and Chrysler,” he said, though adding, “People can argue some rules were bent there.”
While selling city assets, particularly under a bankruptcy, is possible, Dillon said it was too early to say what assets might actually be available and sold.
“What’s being discussed here is a legal possibility and a hypothetical,” he said of the possibility of selling the collection at the Detroit Institute of Arts. “You have Kevyn (Orr, the Detroit emergency manager) who is a restructuring lawyer and thinks like a lawyer. … I think it’s going to be a very complex legal issue. I think it was just way too soon for it to hit the press; I hope that it tamps down.”
Recently introduced legislation (SB 401 ) could take the issue off the table by enacting the ethics code of the American Alliance of Museums, which addresses maintaining the integrity of a museum’s collection.
Technically, the bill would apply to any publicly owned collection in the state, Amber McCann, spokesperson for Senate Majority Leader Randy Richardville (R-Monroe), who sponsored the bill, said, but she said he intended the measure to protect the collection at the DIA.
Richardville also anticipates that should the measure pass, it would be litigated.
A committee hearing on the bill will likely take place next week, she said.
There has been no caucus discussion on the proposal, she said, but Richardville has been getting a very positive reaction from attendees at the conference to the legislation.
Selling the Detroit Water and Sewerage Department could be more attractive, Dillon said. The city cannot take any money out of the revenue, so it gets no value from owning it, he said, but in selling it, it could get some of the revenue locked up in the assets.
But that also is still a theoretical discussion, not a likely option, he said.
Even if the city does go through bankruptcy, that could be a positive for business, said Robert Kurnick, president of Penske Corporation.
“The difficult decisions have to be made,” Kurnick said. “From our perspective, that’s exciting. The fact that structural issues are going to be addressed. That makes us a little bit more excited about investing in the city and investing in the region.
The goal is still to have all those decisions made in the next 18 months, Dillon said. He said Orr will have a 10-year plan for the city completed in the coming weeks.
Dillon said the key difference from early efforts to revive the city is the scope of the current effort. “There’s no nibbling on the edges here. We’re really going at the heart of the situation,” he said. “It’s not about how are we going to keep this on life support and bump along a few more years.”
Businesses will be able to move faster on new developments under the new emergency manager, Dillon said. He noted that both the mayor and the city council had planning offices, and developments needed approval of both to move forward. Orr now takes on the authority of both bodies.
“I don’t think Jack Welch or Roger Penske (could) have turned the ship,” he said, arguing the city council had “super powers.”
“We now have a referee,” Eric Larson, co-managing partner of Bedrock Real Estate Service, said. “That’s the way I look at the EFM.”
Dillon said the current cooperation between the city and the state is essential. He noted, for instance, that currently the city’s police precincts do not have the ability to communicate over their radio system.
After the review started, the city put together a bid for a new radio system that would allow that communication, but when the bid was submitted to him, he ran it by the Department of State Police and found the system would not allow the city to communicate with troopers or with neighboring communities.
The types of businesses involved have also changed, Larson said. “It’s not just the big businesses any longer,” he said of the companies moving into the city. A growing number of businesses in downtown are small, startup companies, he said.
Detroit is a prime place to start a company, several of those entrepreneurs said during one panel.
“Detroit has been a perfect place for us,” said Paul Glomski, CEO of Detroit Labs. “It provides an authentic experience for recruits who can work anywhere they want.”
Glomski said his company, which provides information technology consulting, would be “one of thousands of tech startups” if he had located it on one of the nation’s coasts.
The location has also given his company more media access that has helped it grow, he said
“I think the tenacity of the people in Detroit make it easy,” said Jaque Panis, director of business development and strategic partnerships for Shinola, a specialty watch maker located in Detroit. “You should really look past what is so often shown in the press and in the media about Detroit. There is so much beyond the bad.”
Panelists brought back that theme from many recent discussions on the city: an excessively negative attitude about the city from residents of the city.
“Our people are the hardest working, most competitive people in the entire world,” John Rakolta Jr., CEO of Walbridge. “We just have to be more positive about ourselves. We have an incredible future.”
John Rakolta III, business development director at Walbridge and the elder Rakolta’s son, said the city needs to communicate to young workers the value of living and working in Detroit. “The value it brings (is) not only in the monetary sense but in the community sense,” he said. “It’s really turning the corner.”
“It’s becoming a more attractive place in part because Detroit’s seen as a place to roll up your sleeves and jump right in,” Katy Cockrel, director of strategic communications at Ignition Media Group.
And there is movement to improve the city.
“For a long time people had vision, people had opportunities, people had thoughts and plans that they were promoting,” Larson said. “It wasn’t until now that we had the combination of the wherewithal, the resources, the financial and human resources to make things happen.”
No matter the method needed to overcome the city government’s financial woes, Detroit’s overall renaissance will depend on spreading the recent resurgence in downtown to the neighborhoods, panel members said.
“You cannot go in downtown Detroit today to find a loft, an apartment today to buy; it’s all gone,” former Mayor Dennis Archer said. “Now we need to find a way to expand that into the neighborhoods.”
“You cannot leave the majority population of the city behind in this reinvention,” former city Councilmember Sheila Cockrel said.
While there is development happening, she noted only 14 percent of the city’s general fund comes from property taxes.
“Jobs have to be created for people who already live here,” Cockrel said.
Some of those efforts are already underway, including corporate donations that purchased police patrol cars and other emergency vehicles and a project that purchased and cleared 10 square blocks of mostly abandoned houses near the Eastern Market.
“If we can get the safety and education catching up, you won’t have that situation where you live there until you have kids and then you move out,” Dillon said.
The key change from the past is efforts cannot be scattershot, Larson said. “It’s got to be targeted; the investment has to be concentrated,” he said.
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