DIA Liquidation

Chief Economist of the Federal Reserve of Chicago at the Detroit branch, Paul Traub, mentioned during our discussion about Detroit’s bankruptcy the prospect of the city liquidating the Detroit Institute of Art’s assets, which have been appraised at between $421.5 million to $805 million (Time).  The proposal to ameliorate Detroit’s financial crisis by liquidating DIA remains a matter of contention.  Detroit’s chapter 9 bankruptcy judge, Steven Rhodes, authorized in December (at the time of the bankruptcy declaration) the sale of DIA’s assets to help pay off the city’s debt.  However, Rhodes questioned the effectiveness of such action.  “When the expenses of an enterprise exceed its revenue, a one-time infusion of cash, whether from an asset sale or borrowing, only delays inevitable financial failure unless the enterprise reduces expenses or enhances income,” Rhodes said in December (LA Times).

As Juan mentioned in his post on the Detroit Three, DIA has approached Detroit’s automakers asking for $50 million to decrease pension cuts and help DIA keep its art.  A city so plagued by misfortune and disrepair should work to maintain the few valuable and attractive assets it has left.  I think liquidating DIA, which Time Magazine ranked as Detroit’s No. 1 tourist attraction, would be a long term economic mistake for Detroit.

http://articles.latimes.com/2013/dec/04/entertainment/la-et-cm-detroit-institute-of-arts-bankruptcy-20131204

http://www.freep.com/article/20140501/NEWS01/305010203/DIA-Detroit-Institute-of-Arts-Syncora-Bill-Schuette

http://nation.time.com/2014/01/14/the-fight-to-save-detroits-art-museum/

2 comments to DIA Liquidation

  • Louis Ike

    I agree that it would be a terrible loss for Detroit, the area, and the country as a whole if DIA were liquidated to support the bankruptcy of America’s once great cities. However, if I recall correctly Mr. Traub said that the idea of selling off the art from the DIA has recently been taken off of the table for bargaining. He mentioned that the appraisal of the art at roughly $1 billion served as a means to set a price at which a fund could be collected through donations to offset the sale of the art.

  • Louisa Ortiz

    Yes, I would agree that losing the art would be horrible for Detroit. Honestly, the museum is one of the main reasons that I would want to go back. Instead of a one time payment, they will continue to have a steady stream of income as well as a steady stream of tourists coming to visit and help their economy. Coming from a tourism town, I know how damaging it can be to a community to lose that source of income.

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