What do you do when you are swimming in red ink? Well, if you’re Mayor Kwame Kilpatrick — who is guiding a city that’s neck-deep in vermilion — you’re considering ways to keep Detroit afloat. And as the mayor pointed out in a recent news conference, the sale of some city assets is up for consideration.
It has happened before. Early on in the Kilpatrick administration, the city unloaded several hundred acres of prime suburban property in western Wayne County that previously served as the site of the old Detroit House of Corrections.
So there is certainly precedent.
And the current situation is dire. The city has a $93 million deficit from the 2003-04 fiscal year that has, as of yet, not been completely addressed. There’s a projected deficit of $65 million from this year that could be looming, and a $230 million shortfall for next year that must be dealt with.
What will be going on the block to help stanch the fiscal hemorrhaging? The mayor’s not yet saying. Being the civic-minded types that we are, we looked into the matter and came up with the following potential items, and the potential prices they could fetch. Keep in mind that the estimates are just that — estimates, often very rough. Also, as with any garage sale, no reasonable offer will be refused.
Watts for sale
Detroit’s Department of Public Lighting provides electricity to about 87,000 streetlights and 1,000 traffic lights. The problem is pervasive malfunctions that keep whole neighborhoods in the dark. The department also provides power to 235 public schools in the city. The department operates from three main locations and owns 31 substations throughout the city, along with a steam plant. In total, power is furnished to more than 1,800 public and private customers.
With 298 employees, the department’s operating budget for the current fiscal year is about $61.5 million, while revenues are almost $55 million, leaving a $6.5 million tab for taxpayers to pick up.
No definitive city study has been done to determine the exact cost of the power plant that serves Detroit, says Victor Mercado, city utilities and operations chief. Mercado wouldn’t even provide us with a broad estimate of the value of the department he oversees, saying, “I would get into big trouble if I gave the wrong number out.” In 2001, however, the Midland-based Mackinac Center for Public Policy, a nonprofit think tank that advocates free-market policies, published an estimate in a report on Detroit’s power system called “The Power to Privatize.”
In it, Ronald Utt, a senior research fellow at the conservative Heritage Foundation in Washington, quoted one expert as saying electric utilities often sell for 1.5 to 2.5 times the total value of the department’s equipment and facilities, which in this case comes to about $200 million, according to Utt’s calculations four years ago. That puts the department’s value at anywhere between $300 million and $500 million.
But Utt added a caveat at the time. “Detroit’s public lighting department is so inefficient that it would likely sell for somewhat less than what an operation of this type might otherwise go for.”
As garage sale items go, this one is big, big, big. The city’s wastewater treatment plant, sitting on 126 riverfront acres in southwest Detroit, is the largest facility of its type in the United States. It may seem odd to refer to a plant that removes human waste and all manner of other thoroughly repulsive stuff from water as one of the city’s “gems,” but a jewel it is. With annual operating costs of $101 million, the sprawling, yellow-smoke-belching plant serves 3 million people in Wayne, Oakland and Macomb counties.
What could the city get for this behemoth that makes sewer water clean enough to be returned to the Detroit River? According to George Ellenwood, spokesman for the Department of Water and Sewerage, there’s a calculation that provides a rough estimate: Take the number of gallons of wastewater treated annually (in this case 1.6 billion) and multiply it by the cost of treating each gallon (about $5). Using that formula, the value is about $8 billion — and that’s no shit.
Ringing (up) our Belle
We wanted to go back and figure out, based on the original purchase price, what the value of Belle Isle would be now when adjusted for inflation. Unfortunately, our crack team of researchers could find no calculator that could convert wampum into dollars. It was also tough figuring the value of five barrels of rum, three pounds of vermilion and three rolls of tobacco, which, along with the aforementioned wampum, is what Lt. George McDougall is rumored to have bartered for the Detroit River island back in 1768. Consequently, we had to skip ahead more than a century, to 1879, when the state Legislature authorized purchase of the property for up to $200,000. According to the two inflation calculators we ran the number through, that would place the island’s value in today’s dollars at about $3.6 billion. We doubt, however, that anyone is going to shell out those sorts of shekels for the Belle, lovely as it is — and that includes our good-hearted pals across the river, even if we were to accept Canadian coin.
Commercial appraiser Jumana Judeh says the “jewel of Detroit” is still subject to the laws of supply and demand, and the market isn’t exactly flooded with buyers who want their own private island just off the shores of Detroit. Unless — and there’s always an “unless” — the island was turned into a high-priced gated community. (Note to marketers: Do you think it would be a selling point if we touted this as America’s first moated community?) Such a project, with one luxury home per acre, Judeh says, would probably sell pretty well. She thinks $500,000 a house would be a reasonable price for a potentially $500 million development. It’s no $3 billion, but its still quite a wad of wampum.
Barrel full of monies
The Detroit Zoo is a treasure trove of big-ticket, high-value items. We’re practically salivating over all the coin that could be collected just by selling off the zoo’s menagerie. The animals currently idling away their days could be turned into real cash cows, so to speak. Of course, accredited zoos don’t buy and sell animals, so we’re probably talking shady deals on the Internet, or possibly a backdoor deal with Siegfried and Roy. If you have no scruples — and who can afford scruples in a financial crisis like this? — you can peddle tiger cubs on the Internet for $1,800 and a giraffe for $30,000. Your average garden-variety monkey starts at $2,500 and tops out around $10,000. The zoo has more than 8,000 animals. Even at the bargain basement price of $1,000 each, that’s a cool $8 mil right there.
And that’s just the tip of the greenery. The zoo’s other assets, including buildings, machinery and trucks, are worth about $62.5 million, according to Rana Kozouz, the zoo’s media relations director. That’s not counting items like furniture and computers, which we’d like to roll into a free-with-purchase deal — buy a macaw, get a desk chair. All zoo equipment is owned by the city, which also finances the department to the tune of $4 million in fiscal year 2005 alone.
The land is the real peacock in this parade. Though owned by the city of Detroit, the Detroit Zoo sits on 125 acres of prime real estate in Royal Oak and Huntington Woods. A 4-acre parcel in Royal Oak between Main Street and Washington at I-696 sold to Schostak Brothers in 2003 for $4 million. Because it’s such a larger parcel, the zoo’s land wouldn’t necessarily bring in a million an acre. One developer, whose firm has worked in the area, said $750,000 an acre is a realistic price. That works out to a little more than $93 million — an amount that just about equals the 2003-04 budget deficit the city has to fill.
As the astute reader has already surmised, the idea of selling the zoo, like some of our other garage sale items, is being made with tongue in cheek. No one would take such an idea seriously, right?
At Monday’s Detroit City Council meeting, Councilmember Lonnie Bates, who seemed confused as to where the zoo is, actually raised the issue.
“Maybe we need to sell it,” mused Bates, who went on to ask director Ron Kagan, “How much is it worth?”
“I have no idea,” Kagan replied. “Who buys a zoo?”
Wheeling and dealing
The Cobo Conference/Exhibition Center, site of the wildly successful North American International Auto Show every year, is a drain on tax dollars, subsidized to the tune of as much as $19 million annually, according to the folks at the Mackinac Center for Public Policy, a nonprofit advocate of privatization based in Midland.
City tax records indicate the exhibition hall and convention center is worth $33 million. The problem is there’s still more than $100 million in debt — created when Cobo was expanded to its current 700,000 square feet in 1989 — that won’t be repaid until 2015.
So, do we expand the facility to the million square feet auto dealers now say is needed to accommodate the big annual show, creating another $650 million or so in new debt (which, like the current obligation, is shared by taxpayers throughout the region with a levy on hotel rooms and liquor), or do we cut our losses and unload this white elephant?
And, if we do try to sell, who would buy, considering that, in the cutthroat business of hosting conventions, most facilities of this type around the country are money-losers? Well, it was announced last month that casino interests have been sniffing around.
But any deal with them is far from sealed. How do we make it happen? Anyone who has ever held a garage sale knows that when you have an item that’s tough to move, you sweeten the transaction. In this case, there’s a natural solution: Throw in Joe Louis Arena for free. Why not? It doesn’t look like the Red Wings are going to be using it anytime soon.
In the meantime, the honchos running Cobo could recoup some green by selling off the 140 pieces of art they bought for a cool half mil last year.
It’s an old real estate maxim that the three most important features of a property are location, location, location. The Manoogian Mansion, the official residence of Detroit’s mayors since 1965, has that to spare. It also has something else: prestige, prestige, prestige. The 5,000-square-foot home at 9240 Dwight St. enjoys a prime piece of river frontage. There’s a boathouse, complete with kitchen, that can house a 40-foot yacht. According to The Detroit Almanac, the mansion was built in 1928 at a cost of $300,000. Manoogian bought it at auction 11 years later for a garage-sale-like $25,000. The Almanac goes on to note that the place has 15 rooms, including three downstairs sunrooms that face the river, two dining rooms, four bedrooms (plus two smaller bedrooms for servants), three full baths, and a few half-baths. So there’s never any waiting in line to take a leak.
Although old, the place should be in tip-top condition. Before the family of Mayor Kwame Kilpatrick took up residence there late in 2002, $225,000 in taxpayer money was spent to fix the place up a little. The nonprofit Manoogian Restoration Society spent an undisclosed amount to make this old house like new. Before that, according to an article in The Detroit News, private donations covered $200,000 in renovations when Dennis Archer moved there in 1994. And between 1998 and 2001, taxpayers spent another $400,000, “including emergency repairs to the pool and hot tub.”
So it’s safe to say this isn’t a fixer-upper.
Chris Cetlinski, a Dearborn Heights real estate agent who specializes in historic Detroit properties (he did an estimate on the Motown Museum a few years ago) says that, based on the going rate for homes in the area, plus the home’s historic value, the Manoogian is worth at least $1.5 million to $2 million. It is, he says, a “conservative” estimate.
The sentimental value of Tiger Stadium, as might be said in a credit card commercial, is truly priceless. In terms of cold, hard cash, though, the venerable ballpark at Michigan Avenue and Trumbull Street, with convenient freeway access, is worth .... what? The answer depends on whom you ask.
Kelli B. Kavanaugh, of the Corktown Citizen’s District Council, says that, based on current land values, the 15-acre site is worth about $40 million. One of the problems with pushing the property, though, is that no one knows for certain what sort of condition the stadium is in, and no one is going to pony up for the kind of extensive study required to find out without some sort of guarantee they will get a development deal, and the city, so far, hasn’t been willing to give such a guarantee.
Peter C. Riley, who has taken a high-profile role in spearheading efforts to find some sort of way to keep the stadium structure from being demolished, says a more reasonable sale price might be about $10 million. However, those who have been following the issue with interest say the city appears to be doing very little lately to actively market the site. There was talk a while back of a Wal-Mart-type big-box retailer showing an interest in the property, but it is actually too small for that type of outlet.
As anyone who has ever held a garage sale knows, once the sun starts to set, there is always much merchandise remaining. What do you do with it? You give it away. Which might just be the best solution here. As it is now, the city is paying the Tigers organization $420,000 per year to provide upkeep and security at the stadium. Instead of ladling out that kind of cash to care for a ghost, the city could offer developers (or multiple developers) a free pass, getting the old field back into the game of generating tax revenue. This would give the city’s oldest neighborhood a rejuvenating shot of major league proportions.
The good news is that the sculpture usually referred to as “The Fist” is worth a fistful of dollars. Before we get to the bad news, though, we have to address this fist thing first.
The actual name of the work is “Memorial to Joe Louis” — a piece of art nearly as impressive as the champ who inspired it. Tipping the scales at 2 tons, it is definitely a heavyweight. Made of bronze, it was commissioned by the Founders Society of the Detroit Institute of the Arts, with the $350,000 price tag underwritten by Sports Illustrated magazine for the DIA’s centennial in 1985. Artist Robert Graham, husband of actress Anjelica Huston, created the piece.
Today, the bronze alone is worth at least as much as the original cost of the piece, says George Gurney, curator of sculpture at the Smithsonian American Art Museum. There’s another sort of inflation to consider as well — the status of the artist and the value of his work, which, in this case, is very high. Gurney says that, within the past three or four years, Graham commanded more that $1 million for another monument.
In terms of our fist, though, there could be some depreciation. Exposure to the elements (not to mention that recent whitewashing by racist suburbanites) can take its toll. Also, the piece loses resale value because it is site-specific. “How relevant would it be to any private collector or some institution in Chattanooga? There aren’t going to be a whole lot of buyers,” Gurney says.
And now for the suckerpunch: The city can’t sell the fist anyway, because it belongs to the DIA. And even if the institute did want to peddle it, DIA curator MaryAnn Wilkinson says, the money would have to be used to purchase more art.
So, no matter how desperate the city’s financial situation becomes, this fist is one civic treasure we’re sure to hold on to.Curt Guyette, Nancy Kaffer, Joe Kirschke, Curt Guyette, Charles Maldonado, Rebecca Mazzei and Braden Ruddy contributed this story. Send comments to email@example.com
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