With Detroit Mayor Dave Bing announcing that his city filed for Chapter 9 bankruptcy protection last week, the largest U.S. city in history to take this measure, many are questioning the Motor City’s viability to host conventions and events in the coming months.
“The bankruptcy filing has raised a great deal of concern for meeting planners and boards who have committed to Detroit,” said Bill Bohde, senior vice president, sales and marketing, at the Detroit Metro Convention & Visitors Bureau (DMCVB). “We’ve sent out letters to clients who have committed to hosting an event here, are considering Detroit as their host city or who have considered holding events here in the past to let them know that this situation will not impact conventions or the services we will provide.”
The DMCVB is an independent, nonprofit economic development organization, which receives 90 percent of its funding from taxes on hotels and motels. The organization also receives membership dues from the corporate community, private sector, trade and service organizations.
The bankruptcy filing is the first step by Detroit emergency manager Kevyn Orr to overhaul the finances of the former hub of the automotive industry, which is mired in billions of dollars in debt as a result of loss of population and tax revenue, in addition to mismanagement of the budget.
“This bankruptcy has to do with legacy bills, pensions owed to city workers and medical benefits,” Bohde said. “It has nothing to do with current cash flow.”
Eligibility for bankruptcy protection won’t be revealed for one to three months, but the goal is to seek protection from creditors and unions who are renegotiating $18.5 billion in debt and other liabilities.
Bohde said he expects other struggling bigger cities with pension problems, including Chicago, New York and Baltimore, to take similar steps in the near future.
In Detroit, there are positive signs that a turnaround may be on the horizon. This month, a 367-room, eight-suite Crowne Plaza Pontchartrain - Detroit Convention Center Hotel opened for business.
Also, the city’s Cobo Convention Center is expected to complete a $279-million renovation next year.
Formerly managed by the city, operational control of the convention center transferred to the Detroit Regional Convention Facilities Authority under a collaborative agreement by the Michigan State Legislature, City of Detroit and Wayne, Oakland and Macomb Counties on Sept. 15, 2009. In 2010, the DRCF awarded the operations contract for the building to SMG, and the facility is funded by its own revenue and the state of Michigan.
The Cobo Center is in the final stage of a three-phase $299-million Capital Improvement Project, with the bulk of the improvements scheduled for January 2015 completion. Convention center officials plan to build a 30,000-sq.-ft. atrium and redevelop the convention center's 40,000-sq.-ft. Grand Ballroom.
There are also plans to redevelop the south side of the building along the Detroit River to reorganize space and create prefunction areas, new meeting and breakout rooms, two new junior ballrooms and integrate the space with the new Atrium. There are also plans to build leasable office spaces that will help generate more income for the convention center.
“We are a self-sustaining organization,” Bohde said. “If there is a budget deficit, we rely on the state, not the city, unlike many other convention centers.”
As part of the bankruptcy protection, a restructuring plan for the city has been developed to ensure that services essential to businesses and visitors will continue.
The DMCVB expects it will be business as usual, despite the filing.
“We have had tremendous support,” Bohde said. “No one is pulling their conventions out of Detroit.”
Interviewed for this article: Bill Bohde, (313) 202-1800