Detroit Could Sell Off Assets to Avoid Insolvency

The Detroit News yesterday reported that the city of Detroit may be forced to sell some assets to deal with its mounting debt. The article mentions Belle Isle, the city's small downtown airport, water and sewer operations and other “crucial” assets that could be sold in an effort to forestall insolvency or the appointment of an emergency manager.

Without a doubt, selling assets could generate some badly needed revenue for the city while improving services for residents over the long term. The city might not be in such dire financial straits, however, had it heeded the recommendations of Mackinac Center Fiscal Policy Director Michael LaFaive when he recommended selling these and other assets more than 11 years ago.

LaFaive wrote at the time that “the Motor City may soon have its financial back to the wall.” With remarkable prescience, he added, “If there is one thing we know from history, it is that recessions happen. A recession for the rest of the nation, combined with demands on the city to comply with huge federal environmental mandates, could spell trouble for Detroit.”

It’s a shame that Detroit did not benefit from the savings that would have accrued from selling these assets a decade ago. LaFaive estimates that had policymakers simply contracted out some operations, the city would be operating with more than half-a-billion-dollar surplus. But it’s not too late. Now that the city does have its back against the financial wall — or financial precipice — it’s time to take such prudent recommendations seriously.