Homer the Sloth Gnaws at Bankrupt Detroit as Zoo Becomes Burden; “Unlike a museum, our assets are liabilities. They require feeding every day, and they die.”

Homer the Sloth Gnaws at Bankrupt Detroit as Zoo Becomes Burden

Bubbles the chimp and Boo the grizzly are marquee attractions at the Detroit Zoo, furry cultural assets and financial liabilities in a municipal bankruptcy where still life is worth more than animal life. As appraisers value city-owned Picassos and Van Goghs in the Detroit Institute of Arts, the zoo is under pressure to make expensive additions to draw more visitors, even as support from the insolvent city may disappear. And the 3,300 animals in Michigan’s biggest paid tourist attraction are not as valuable in an $18 billion bankruptcy as their fame suggests.“You never want collateral that has to eat or that you have to shovel after,” said Bill Brandt, president and chief executive of Development Specialists Inc., a business turnaround consulting firm in Chicago.

The challenge facing the Detroit Zoo, which is operated by a nonprofit that foots most of its $29.2 million annual operating costs, mirrors that of many municipal menageries: finding money to build attractions as cities face demands for other services.

While the animals appear to be off the auction block — there are no plans to appraise or sell them, said Bill Nowling, a spokesman for Detroit Emergency Manager Kevyn Orr — the city’s insolvency has cast uncertainty over the 85-year-old facility owned by the city and operated by the nonprofit Detroit Zoological Society.

Penguin Paradise

“This is uncharted territory, obviously for this community and others,” Ron Kagan, the zoo’s director, said in an interview. “It makes it tough to do very big and bold things when there is some degree of uncertainty.”

The zoo has already begun work on a 24,000-square-foot penguin preservation center to house the current population of 64 kings, rockhoppers and macaronis, plus gentoos to be named later. Kagan called it “the biggest project in our history,” intended to add to last year’s attendance of 1.2 million people.

“And like any enterprise, we can’t just stop,” he said.

Detroit’s zoo, whose 125-acre facility is two miles north of the city in suburban Royal Oak, has endured as the erstwhile auto powerhouse declined. The city, which filed the largest municipal bankruptcy in U.S. history on July 18, has almost 150,000 vacant parcels and 700,000 people across 139 square miles (360 square kilometers) after losing more than half its population since the 1950s. Its financial obligations have prompted an assessment of assets, which include the art museum and its masterworks, 983-acre Belle Isle park, which is to be leased to the state, and the water and sewerage plant.

Meeting Zuhura

The zoo is a bar-less habitat covering 125 acres, allowing open space for large animals — including giraffes Jabari and Kivuli — to roam. On an early fall morning, mothers pushed toddlers in carts around the grounds and into the chimpanzee house, to view Zuhura, a 2-month-old chimp.

While Detroit owns the real estate, buildings and animals, its operations separated from the city in 2006 and financial support comes from three major sources — earned income, philanthropy and property-tax collections from three Detroit area counties. It receives $1.5 million to $2 million from the city annually, Kagan said. In 2012, the facility’s revenue was $37.3 million, according to financial documents.

The possibility of losing the city’s contribution has meaning beyond money, Kagan said.

“Where the bankruptcy is most questionable is what does this do in terms of confidence of private investment?” he asked. “If people are worried about something fundamentally changing about the zoo, does that hurt our fundraising long term?”

Born Free

In the meantime, costs continue: Homer the two-toed sloth has to eat his leaves and twigs. The Detroit Zoo spent $722,000 on food for the residents last year.

Animal facilities accredited by the Association of Zoos and Aquariums must follow standards for care and welfare, said Steve Feldman, a spokesman for the group. All of this, he said, is intended to promote the conservation of animals that the group considers “priceless.”

Kagan said that means the beasts can’t be monetized.

“Unlike a museum, our assets are liabilities,” Kagan said. “They require feeding every day, and they die.”

Financial pressures in other cities forced changes. Dallas turned its municipal zoo over to the Dallas Zoological Society in 2009. It reduced the city’s annual obligation by $5 million.

Breaking Out

“It came during a particularly gruesome budget year, and it lit a fire under the department to privatize,” said Willis Winters, director of parks and recreation for Dallas. “Zoos are increasingly difficult for cities to operate. We wanted the zoo to succeed and we felt the only way to do that was to privatize.”

At the same time, the Dallas zoo built an elephant habitat.

“The larger the animal, the more expensive the exhibit,” Winters said. “But that’s what drives attendance. And you can’t just do this once — you have to do it every three to five years.”

Brandt said the challenge facing all zoos is increasing expenses that often outweigh cultural value.

“The whole concept of zoos is changing, and they might not be something that, in the long run, can be sustained, unless the funding base is expanded,” Brandt said.

To contact the reporter on this story: Tim Jones in Detroit at tjones58@bloomberg.net