Detroit Bonds Downgraded to Junk Status

[Richard]

"Richard fears that raising cash with the art collection puts Detroit in a moral death spiral, driving out sanctity at an increasing rate*. I consider that scaremongering and baseless speculation, but... hey, he'll point me to data that substantiate his point... won't he?"

Link to what ? a link to common sense that says you do not use people that are living daily in what could be deemed a bit of a mess ? They are not guiny pigs they are living breathing fellow Americans maybe your theory works maybe it does not but are you giving any thought at all to the ramifications if it goes south ? and where will you be if it does?oppps sorry folks?Are you really willing to take that risk?

I would agree that Detroit may need innovative ideas but she is really in no shape to be using untested ones that could be more hurtful then helpful,but of course you will provide a link that proves your theory in a tested and true manner ,you do have one right?

But of course this has nothing to do with the OP so it becomes mott anyways.

[Coaccession]

...common sense that says you do not use people that are living daily in what could be deemed a bit of a mess... They are not guinea pigs they are living breathing fellow Americans maybe your theory works maybe it does not but are you giving any thought at all to the ramifications if it goes south ? and where will you be if it does?oppps sorry folks?Are you really willing to take that risk?

Isn't letting Detroit's bonds fall to junk status an experiment, Richard? Letting elected officials run down the City's finances to point where it can't pay for the public safety and health of those living breathing Americans in Detroit makes them guinea pigs, doesn't it? Leaving Detroiters without essential services concerns me more than taking away their access to masterpiece artworks -- not that I think public safety and health and access to masterpiece artworks are in any way mutually exclusive when Detroit can have its Monet and money too. I expect this experiment in bond defaults will concern a bankruptcy judge, too, and fear said judge will simply order the masterpiece artworks sold to make Detroit's creditors whole while letting all Detroit's future revenues go to essential services. If bankruptcy might force Detroit to give up its vast off-the-books financial reserves lodged in the City's Arts Department, it's worth taking a chance now to try to establish an arts endowment that avoids bankruptcy and ensures both essential services and access to masterpiece artworks.

I would agree that Detroit may need innovative ideas but she is really in no shape to be using untested ones that could be more hurtful then helpful,but of course you will provide a link that proves your theory in a tested and true manner ,you do have one right?

Easements, covenants and the like have been well-established in English common law for centuries, Richard, and while establishing that Detroit's exhibition, research and conservation rights run with personal property as it transfers from owner to owner will take a good brief, it's not a far stretch at all for a court to uphold them. You've heard of rights that run with the property, haven't you?

http://en.wikipedia.org/wiki/Easement

But of course this has nothing to do with the OP so it becomes mott anyways.

Parsing your text frequently presents a challenge, Richard, but not usually an insurmountable one. You got me this time.

[Richard]

You will have to excuse me because it is hard to read the little screen when you have this big paragraph .

The easiest thing for me to do is to look for the blue link that you were going to provide that would direct me to a tried and proven case of your theory , I must of missed it ,if you could be so kind as to show me that again.

Letting the bond status drop to junk is not an expirment ,it is a tried and proven method .

I would say "letting " is not the proper word to use in this case .

Let's say you want to buy a house but your not sure how low the market will go so you do what is called sitting on the fence .

So now you have somebody telling you hey it's going no lower.

There are bigger people in this game then you or I will ever be so what you are baseing this project on already has a predetermined ending and I really do not think doing anything with the art is in that end result so I do not really know what else to say other then I wish you luck in your future challenges and it has been interesting.

[Coaccession]

You will have to excuse me because it is hard to read the little screen when you have this big paragraph .

The easiest thing for me to do is to look for the blue link that you were going to provide that would direct me to a tried and proven case of your theory , I must of missed it ,if you could be so kind as to show me that again.

Here you go:

http://en.wikipedia.org/wiki/Easement

Letting the bond status drop to junk is not an expirment ,it is a tried and proven method .

Well, not for a Michigan city the size of Detroit, it's not. We've yet to see how this process plays out in a city anything like Detroit...

There are bigger people in this game then you or I will ever be so what you are baseing this project on already has a predetermined ending and I really do not think doing anything with the art is in that end result so I do not really know what else to say other then I wish you luck in your future challenges and it has been interesting.

You may be right. Still, Detroit owns the art, and if no one in the City government now will use it, someone new may run for office who tells Detroiters how they can afford to restore essential services and add comprehensive support for the kinds of arts investments that have paid off so handsomely in the city's art collection... that is, if the City still has an art collection after this EFM/consent/bankrupcty plays out. Of course, if the art collection is gone, the City's bonded debt and vested pension/healthcare obligations will be gone, too, so we'll see how Detroit looks with a fresh start financially.

[Richard]

This is from a bond sale on 3/11/2010 there are some key points to take note of .

Detroit today successfully sold $250 million in bonds – just five and a half hours after the debt was first offered on the market.. The sale of the fiscal stabilization bonds will enable Detroit to allow the city to pay off its short-term debt and restructure its long-term financial obligations at lower interest rates. The city has an overall $325 to $328 million accumulated budget deficit.

Despite the city’s junk-bond rating, the 5.08% interest rate the city received was lower than the 5.75% estimated by Mayor Dave Bing in his budget-deficit elimination plan. The lower interest rate will save the city a $1.1-million payment and adds $20 million to the mayor’s plan overall, said Dan Lijana, a Bing spokesman.

Lijana said $500 million was offered for the bond, meaning twice as many investors tried to buy the city’s debt than was necessary. The structure of the deal was enticing to investors who sought to buy high-yield municipal debt -- particularly because the state treasurer is required to repay the debt as opposed to the city.

Last month, the state Legislature voted to allow Detroit to exceed the $125-million cap placed on the sale of bonds. The bonds were sold through investment banks led by Goldman Sachs Group Inc.

"Our plan to bring financial stability to Detroit took a critical step forward today," Bing said in a statement. "We've worked hard to restore trust in our city and city government and this deal is an endorsement of our progress. We will continue to ensure the city is spending within its means by eliminating waste, going after every dollar we're owed and maximizing efficiencies."

[Richard]

And if you go here you can see the bonds are trading at comparative levels with other cities .

http://michigan.municipalbonds.com/b...a_min:1000000/

[Coaccession]

{Regarding} a bond sale on 3/11/2010...

"Our plan to bring financial stability to Detroit took a critical step forward today," Bing said in a statement. "We've worked hard to restore trust in our city and city government and this deal is an endorsement of our progress. We will continue to ensure the city is spending within its means by eliminating waste, going after every dollar we're owed and maximizing efficiencies."

Good point, Richard. Bondbuyers will surely endorse Detroit's further progress toward financial stability thanks to two years of eliminated waste, enhanced revenues and maximized efficiencies. Ha. HA. HAHAHAHAHAHAHAHAHA...

Seriously. Detroit's art collection is the City's only asset with any chance at all of turning around its financial distress. It looks like the Bing administration will ignore than opportunity. This latest $137 million cash infusion will be gone, probably far, far sooner than the two years that the last $250 million cash infusion lasted. After all, next year alone $50 million will go towards penalties from the last downgrade.

[Richard]

So even though I just showed you that even in the junk status Detroit bonds have value similar to non junk bond status of other cities your still going down that road?

The 2010 sale was successful beyond expectations because the state guaranteed the notes secured through tax collection through the entire state in essence saying we will not let Detroit fall.

Because if it does the state bond rating will also fall and they will not let that happen.Detroit is viewed internationally so it would be in the limelight more so then many other cities,they may have their issues but they are not stupid for lack of a better word.

No matter how you look at it the art in this case could be considered snug as a bug in a rug.

Once again you might consider a trip to Greece they are a bit more desperate and may just consider this as no other option unlike Detroit.

So basically an efm will come in, the current powers to be will be out ,with the new charter the people will have control back of their city,finances will be in order, a majority of the corruption will be flushed ,all within two years so really no need for short gain long term loss.

[DetroiterOnTheWestCoast]

Must be a pretty good yield on those bonds now.

[Hypestyles]

what happens if bonds go into a default status? Just who all are the creditors involved in bond sales, like this most recent one? [[137 million?)

[Coaccession]

No matter how you look at it the art in this case could be considered snug as a bug in a rug.

Outstaters might take a different view on guaranteeing unlimited issues of Detroit bonds -- especially those Outstaters who left Detroit behind when they moved to the suburbs. Encouraging those outstaters are those in Detroit, like Ed McNeil, who say Michigan's conditions for the bond guarantees are completely unacceptable. So, you may get an EFM who liquidates Detroit's art collection rather than asking Michigan to cosign for more deficit spending. Snug is relative.

Once again you might consider a trip to Greece they are a bit more desperate and may just consider this as no other option unlike Detroit.

Greece doesn't have the English common law, so its courts don't have a bias toward enforcing novel private contracts that don't conflict with precedent or legislation [[in a nutshell, the common law permits what it doesn't prohibit, civil law prohibits what it doesn't permit). That said, Portugal, Italy, Greece and Spain have an impressive store of value in their museums, so if they could convince investors that they would fulfill their commitments -- a big if -- their cultural collections could underpin impressive endowments. Perhaps EU and national legislatures in Europe will put cultural property to double duty some day, but it's not something a city there could decide to do.

So basically an efm will come in, the current powers to be will be out ,with the new charter the people will have control back of their city,finances will be in order, a majority of the corruption will be flushed ,all within two years...

Could be, Richard. Is hoping for it worth taking the chance that an EFM or bankruptcy judge sells off the DIA piecemeal?

...so really no need for short gain long term loss.

The arts endowment and its revenues are a long-term gain for Detroit, Richard, and the capital appreciation that Detroit gives up to create that arts endowment doesn't help the City pay any bills anyway. So, how is that not a win-win for the City and the investors who pay it to keep its DIA art collection in the city as a store of value?

[Red Devil]

Coaccession is right. Besides the art, the city doesn't have a thing that is worth anything to anyone. It will be interesting to see how the ownership is transferred, and to whom. Hopefully Detroit will get a fair price.

[Richard]

Must be a pretty good yield on those bonds now.

5.75% considering a CD is at .05% it is good for small investors wanting to park 25 to 30,000 AFTER they do their research and decide if it is right for them.

When the state is backing it up then unless it goes bankrupt then one could assume it to be somewhat safe but every investment carries risk .

Bond rateing gets dropped to junk status right before the city issued more bonds to raise cash to make it more appealing ?

As bad off as the city's finiances are the bonds that come advailable are sold those that know more about them then myself must believe that it is a risk worth taking otherwise they would not sell.

[Richard]

Coaccession is right. Besides the art, the city doesn't have a thing that is worth anything to anyone. It will be interesting to see how the ownership is transferred, and to whom. Hopefully Detroit will get a fair price.

If they did not have anything of value they could not issue bonds .. Nice try though .

[Red Devil]

Richard,

I said the art has value. The only way that Detroit bonds are a "good investment" is if you've got the lawyers on-hand who can extract something good for you.

[Richard]

Richard,

I said the art has value. The only way that Detroit bonds are a "good investment" is if you've got the lawyers on-hand who can extract something good for you.

My apologies if I misread or misinterpreted your reply.

I agree art does have value but to me in this case it has value in many ways one would be the obvious monetary value but what is more important is the intent of the donors and yes they could have sold the art for cash value but they chose to allow future generations of the public to enjoy it and we have a obligation to uphold that wish ,if we do not and this plan backfires what then happens to the future donors.

Would you endow a piece of art knowing that it will be maybe leveraged and lost to a private collection? I would not,might as well sell it and cash out.

I really am not debating the validity of Coaccessions theory or even if it would work or not I am debating the ramifications of an untested theory on something that means way more then money itself and a loss that would in essence say how we are are as a society.

Add to the mind set that all is lost in Detroit and it needs to take that chance which to me is not worth it because nobody knows enough of what is really happening behind the scenes ,the games being played ,or what is really true or not and to take that risk of what could very well end up with the largest transfer of public art into private hands in history outside of WW2 it is not worth it,because in the end when it comes to greed somebody always finds a way and greed knows no boundaries and has no conscience.

[Coaccession]

...more important is the intent of the donors and yes they could have sold the art for cash value but they chose to allow future generations of the public to enjoy it and we have a obligation to uphold that wish ,if we do not and this plan backfires what then happens to the future donors.

Future donors likely will prefer the museum that uses the cash endowment embedded in the donated artwork to fulfill the promise to allow future generations of the public to enjoy donated artworks over the museum that lets the embedded cash endowment earn nothing but capital appreciation while the museum fails, closes and gets sold off for lack of capital income to run its operations.

Would you endow a piece of art knowing that it will be maybe leveraged and lost to a private collection? I would not,might as well sell it and cash out.

Of course, you can't explain how a museum can lose its artwork to a private collection when it owns a cultural easement to that artwork in perpetuity no matter which collector currently owns the right to store it [[because it can't if courts enforce the easement), while I can easily point to museums that creditors have liquidated when they ran out of cash. Know anything about Fresno, Richard? How's the Detroit Science Center doing? I guess you think the DIA is immune to that, but liquidation can happen if and when Detroit runs out of money, Richard.

I really am not debating the validity of Coaccessions theory or even if it would work or not...

Good thing, too, since you don't seem willing to bother to understand it.

...I am debating the ramifications of an untested theory on something that means way more then money itself and a loss that would in essence say how we are are as a society...

Well, I am glad you're finally expressing some concern of the health and safety of Detroit's residents, visitors and employees, Richard, because I was beginning to think that your only concern was whether the artworks currently doing single duty at the DIA would continue doing single duty at the DIA. If the artworks can do double duty, we won't have to experiment with how an EFM or bankruptcy will affect public health and safety.

...Add to the mind set that all is lost in Detroit and it needs to take that chance which to me is not worth it... of what could very well end up with the largest transfer of public art into private hands in history outside of WW2...

Oh, wait, Richard... I guess you're not so concerned about public health and safety as I thought.

When it comes to valuing art over people, somebody always finds a way and art supremacy knows no boundaries and has no conscience... unless the people wake up and see what is happening.