Should cities sell heirlooms to pay bills?

As Detroit debates the question regarding its treasured art museum, many cash-strapped municipalities are facing similar hard choices.

By Bruce Kennedy May 28, 2013 9:25AM

The historic Senator Theatre in Baltimore, Md., being auctioned. (Credit: © Rob Carr/AP)Does it make sense for cities with severe budget problems to auction off prized municipal assets? Or in doing so, do they risk selling the very things that help make them viable, interesting and unique?


That's the question under debate in Detroit, which is teetering on the edge of bankruptcy. Some Motor City officials have come under fire for suggesting the city-owned Detroit Institute of Arts sell off some of its famous multibillion-dollar collection to help relieve some of its hometown's crushing economic burden and to pay for basic services.


Since the start of the global recession, cities all over the U.S., and indeed the world, have been acting like a cash-strapped couple wondering whether they should part with a valuable heirloom to help pay the monthly mortgage bill.


In 2010, Newark, N.J., sold 16 buildings, including its police and fire headquarters and the city's symphony hall, to deal with an $80 million budget deficit. Now it's leasing back some of those buildings from their new owners. Late last year, Baltimore agreed to sell its historic Senator Theatre (pictured) over the objections of the city's comptroller and at a substantial loss.


And earlier this year the city of Dijon, the capital of France's famous Burgundy wine region, auctioned off half of its coveted municipal wine cellar to help pay for local social programs.


Sometimes these asset fire sales can backfire. In 2008, Chicago's then-mayor Richard Daley signed a 75-year lease on the city's parking meters for $1.2 billion to an international partnership led by Morgan Stanley (MS).


But as Matt Taibbi reported in Rolling Stone, not only did the deal deprive Chicago of revenue from its widespread parking-meter system, but it also did little to alleviate the city's budget shortfall. And he notes that in some Chicago neighborhoods, "the meter rates went from 25 cents an hour to $1 an hour in the first year of the deal, and then to $1.20 after that."


Critics of such municipal sales worry that local governments letting go of long-term valuable assets in exchange for a one-time payment are shortchanging themselves.


"This is tantamount to selling the family china, only to have to rent it back in order to eat dinner," economist Yves Smith, the author of the blog Naked Capitalism, told The Associated Press in 2010.


Art and its value are, of course, in the eyes of the beholders, so the issue of art collections can be tricky. But the defenders of the Detroit Institute of Arts are preparing for a long legal battle, if necessary, to keep their priceless collection intact.


"We are standing by our contention and belief that we hold the collection in trust for the public," DIA executive Vice President Annmarie Erickson told the Detroit Free Press.


More on moneyNOW

43Comments
May 28, 2013 10:53AM
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Why not? If you or I were as stupid with our money as the various levels of government are, we'd be forced to sell off items to draw down our expenses or pay off debts. Government should be no different, instead of constantly raising taxes on fewer and fewer people to continue over-promising and under-delivering, they should look at actually reducing costs and returning government to balance.

 

The real problem is that the politicians are so hungry for power that they can't be honest with the people and tell them that the gravy train is over. If you took ALL of the money and assets of all of our billionaires away in taxes, we could balance the budget for 1 year. But now, all the billionaires are broke, so what happens in year 2? Most government from city, to county, to state to national is now unsustainable if costs/expenses continue to rise and nothing is done to grow commerce to match.

May 28, 2013 12:07PM
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That doesn't work if you're still spending on a deficit! You sell off your art, pay your bills, and then next year you're back in the same position because you didn't cut spending. This is just a short term band-aid and is definitely not a fix.
May 28, 2013 10:53AM
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I like the mention of "free beer" on the marquee.  Get them drunk, then they will spend freely.
May 28, 2013 11:21AM
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The problem is that it solves nothing long term.  The spending deficits will be recurring and rear up again in another few years.  What happens when you run out of stuff to sell?  These would be at best short term, stop gap measures that don't really solve anything and are not truly equitable in the long term.
May 28, 2013 12:02PM
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There is no reason to have municipalities own art, real estate or whatever other assets if they are fiscally unsound.  In my area of CA, the school district owns numerous orange groves that they purchased as property for new schools.  When the time comes to build a new one there is some excuse as to why none of their existing properties meet the requirements.  So they float a school building bond, go buy new land in many cases having to buy people out of their houses.  Then they build elaborate schools.  Remember it's a school building bond only.  So once they open they are short of staff, books, chairs etc because that is operating budget.  But do they sell any of their existing land, NO.  They say it may be used for future school sited.  One of the last schools built borders a large grove that is a corner lot.  The decided they didn't want to "waste" the corner lot, so purchased from the owner at inflated price the grove next to it and built the school on it.
May 28, 2013 2:45PM
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oh come  on people!  You bleeding hearts are killing me.  Detroit is dead.  100% waste land.  No one who lives in Detroit goes to see its art.    If you live outside of Detroit you are nuts to drive into Detroit.  Sell anything and pay the bills!  The best thing that can happen to Michigan is to let Detroit die.  It doesn't serve a purpose.  I loved Detroit.  Grew up in Detroit during the 60's and  70's.  It's time to move on.  Let the poor city die.
May 28, 2013 12:17PM
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DITTO!!

Whatever's necessary to keep then in the life style they become accustom to?

FREE PENSIONS? LIFETIME BENEFITS? NO CAPS?

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There isn't much left of value in Detroit so to me they either go bankrupt or sell something of value. Either was Detroit is on the way out as most of it is a waste land.
May 28, 2013 11:43AM
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Nah!  Just keep on spending money the city does not have and use no common sense such as reduced spending, certain supplies, personnel reduction, etc.  Why stop spending when the Federal Government has not, it it the thing to do and nobody seems to care....nothing is ever said or mention in the news...so Why worry now.  It will one day just go totally Broke!
May 28, 2013 12:29PM
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Wow, I think every white person left in Detroit is in that picture.
May 28, 2013 2:36PM
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The govt should own nothing except their own offices and the required items for public service and safety.  However, they have all this expensive stuff anyhow.  I expect they will sell off everything, squander or "divert" the money, and have nothing to sell next time this happens ! 
May 28, 2013 6:13PM
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Selling of public assets to cover up for incompetent governance is criminal.
May 28, 2013 3:54PM
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You know Obama will try and bail out that sink hole of minorities, aka Detroit. Might as well, same as Government Motors and Chrysler "Fiat for short". Maybe after Michelle and his daughters get back from an umpteenth vacation. Nice sunny day out. Bet Al Gore will blame Global Warming.

May 28, 2013 10:52AM
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actually it isnt the cities are,if it were purchased with taxpayers money, but yes they should the city is a business and all businesses have downturns that is why you own liquid assets. but i also think(im catholic) the vatican should sell of its artifacts to feed the poor(not america poor) but third world poor
May 28, 2013 11:50AM
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No, art does not belong to the city, It belongs to the people. City works on the tax revenue and they must keep their expenses within those limits. They cant keep hiring and then keep paying high salaries to themselves.

 

It is impractical for small cities to maintain full separate services, they must combine and keep shared services and municipal prescence.

May 28, 2013 11:39AM
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NOOOOO !  Cities should outsource/contract services/jobs to the private sector as much as possible.  Think about it.  EXAMPLE- If a city eliminated the Dept of roads (pot hole filling, lane striping, etc) and contracted the job out to a private company then this would eliminate all those employees on the Dept of roads payroll.  This means that you won't have to keep on employees and pay for their wages, benefits, and RETIREMENTS.  Think about the savings a city would have by eliminating full time jobs in EVERY Dept
May 28, 2013 9:02PM
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No. In the case of Detroit, selling masterpieces of art at the bottom of the market is pretty dumb, but not as dumb as forcing an Emergency Financial Manager in place who is a lawyer by profession and hired his own Law Firm at $500,000/month to "consult" him and insult the city with stupidity like sell the art but don't hire more police fire and EMS while offering commercial retail space for free, to create some badly needed revenues. Orr is a moron. There is something like 50,000 vacant buildings that could and would house a small business boom IF adequately protected from the criminals in and outside of the EFM's cushy offices. The next elections couldn't come fast enough to oust the FOOL Governor Snyder and gives us a Congress that actually works for us and not for the highest payola payer.
May 28, 2013 7:05PM
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Yes they should. They borrowed the money.

 

And after they pay off debts, bills, etc. they should shut down. 99% of ALL city "services" are either not wanted or needed! The ONLY thing they should be allowed to do [if at all] is to provide police protection and that should be in competition with other protection services. Anything else, I bet private enterprise, could do it better cheaper and faster, as long as they aren't granted monopolies.

May 30, 2013 4:53PM
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...oh sure, what a great idea!!...let's transfer EVERYTHING that belongs to all of us to a few rich people, just so the idiots in charge can piss the proceeds away on bridges to nowhere and the equivalent...that's the kind of public thievery that's made this country great!!!
May 31, 2013 9:21AM
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I think the question is: What created the deficit in the first place? In the early 1900's the federal income tax was started and was 1% of a couples adjusted income of more than $4,400. That equates to about $88,000 in today's dollars. That doesn't even include all the other taxes imposed on us today, state sales tax, property tax, luxury tax, gasoline taxes, etc. I did the math and my tax burden is around 40% and I'm just a working man!

 To me, the problem appears to be that those empowered by the people(us) have no idea how to live within a budget. Maybe I'm naive???, don't most households live within their means ( a budget). Those who don't, lose their homes. Oh wait, mortgage crisis of 2008! What if the government proposes to send all the good citizens(especially our law makers) of this fine country to an Economics 101 class?

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