Bankruptcy might be Detroit's only option - Freep article

[corktownyuppie]

Don't forget the revenue vacuum that is the DDA. It literally sucks up all of the property tax revenue that is generated in the DDA district and spends it only in the DDA district. Where else in the city do the locally generated property tax dollars stay in the area where they are paid? Nowhere. Those dollars are spread across the entire city, including within the DDA district, to cover the costs of general services. If the DDA wasn't sucking up those dollars, how much of the property tax revenue generated in the district would be available to pay for services elsewhere in the city.

Well it's one thing to say that Downtown doesn't share its revenue with the neighborhoods. It's another thing to say that the neighborhoods are picking up the bill and subsidizing Downtown and Midtown.

Downtown and Midtown are 3 sq. miles out of 138 sq. miles in the total city. That's just over 2%. I'm confident -- but not sure -- that the combined property tax and income tax from those 3 square miles account for over 2% of the city's revenue...even if you subtract out the Detroiters from the neigborhoods working in the CBD.

10 years ago, non-resident income tax was 105 million. Resident income tax revenue was 229 million. [[Data comes from here, p. 27) Now I don't know how many of those non-residents worked downtown, but I'm sure it's the majority if not the totality. And that was 10 years ago, so my guess is that the gap between those two numbers has only widened, not narrowed.

So over 30% of the income tax revenue comes in through 2% of the city. Plus, CBD business pay an extra 1 mill in property tax to fund the DDA. Even if you state that Downtown/Midtown hoards their resources and don't share it with others...it's a far cry from saying that the CBD is subsidized by by the outside neighborhoods.

[7miledog]

Ok, so WXYZ is reporting that conditions of some of Detroit's municipal bonds contain a provision requiring an immediate $400M payment to bondholders in the event of the appointment of an EFM. Practically, this would essentially force Detroit straight into bankruptcy. The pushback from Detroiters would then be, "the State forced Detroit into bankruptcy", and that would technically be true. Whew, talk about clusterfu*k on Snyder's hands.

"Turnaround expert Patrick O'Keefe tells Action News that the worries surround penalties written into bond agreements, that kick in if an Emergency Manager is appointed. The special clauses would force the city to pay as much as $400 million immediately, if the city is placed under an emergency manager.
In its report, Moody's also said that 'The city faces a heightened risk of filing for bankruptcy should an emergency manager be appointed.'"
Read more: http://www.wxyz.com/dpp/news/region/...#ixzz1g04VcVsu

[R8RBOB]

Ok, so WXYZ is reporting that conditions of some of Detroit's municipal bonds contain a provision requiring an immediate $400M payment to bondholders in the event of the appointment of an EFM. Practically, this would essentially force Detroit straight into bankruptcy. The pushback from Detroiters would then be, "the State forced Detroit into bankruptcy", and that would technically be true. Whew, talk about clusterfu*k on Snyder's hands.

"Turnaround expert Patrick O'Keefe tells Action News that the worries surround penalties written into bond agreements, that kick in if an Emergency Manager is appointed. The special clauses would force the city to pay as much as $400 million immediately, if the city is placed under an emergency manager.
In its report, Moody's also said that 'The city faces a heightened risk of filing for bankruptcy should an emergency manager be appointed.'"
Read more: http://www.wxyz.com/dpp/news/region/detroit/moody's-investor-service--considers-downgrading-detroit's-credit-rating#ixzz1g04VcVsu

Well, it's game over. EM or no EM, Detroit is out of money and and none is falling out of the sky so the only recourse is bankruptcy.

Snyder does not want bankruptcy because the state would be on the hook to support a bankrupt Detroit. Every city, village, township and county would be shorted to fund Detroit during its bankruptcy period and heads like Patterson would be out for blood.

Bing and the Council don't want bankruptcy because bankruptcy signals failure and their political careers would have the stink of a bankrupt city.

[313WX]

Well, it's game over. EM or no EM, Detroit is out of money and and none is falling out of the sky so the only recourse is bankruptcy.

Snyder does not want bankruptcy because the state would be on the hook to support a bankrupt Detroit. Every city, village, township and county would be shorted to fund Detroit during its bankruptcy period and heads like Patterson would be out for blood.

Bing and the Council don't want bankruptcy because bankruptcy signals failure and their political careers would have the stink of a bankrupt city.

The chickens have come home to roost.

In a way, I do hope all the shit hits the fan as soon as possible. It would be what the region and state gets for blatantly ignoring Detroit for over the last half century. It will also be what Detroiters get for their lack of concern over who's running their city.

[corktownyuppie]

The chickens have come home to roost.

In a way, I do hope all the shit hits the fan as soon as possible. It would be what the region and state gets for blatantly ignoring Detroit for over the last half century. It will also be what Detroiters get for their lack of concern over who's running their city.

The chickens have come home to roost.

In a way, I do hope all the shit hits the fan as soon as possible. It would be what the region and state gets for blatantly ignoring Detroit for over the last half century. It will also be what Detroiters get for their lack of concern over who's running their city.

I'm right there with you. Either we're gonna get our financial house in order or we won't. Let's just let it happen already. I'll add that the sooner we get it over with the sooner we can rebuild. One can only avoid reality for so long....

[corktownyuppie]

p.s. This isn't unprecedented. New York City was right where we are right now 40 years ago. Yes there are differences, but a lot of similarities, too. A lot of people will have to change the way think and the things they do. But Detroit can one day be a great city again.

http://en.wikipedia.org/wiki/History...%E2%80%931977)

However, the financial crisis, high crime rates, and damage from the blackouts led to a widespread belief that New York City was in irreversible decline. By the end of the 1970s, nearly a million people had left since the '50s, a population loss that would not be recouped for another twenty years. The more fiscally conservative was elected as mayor in 1977.

[Hermod]

Residential areas [[neighborhoods) generally suck up more tax money than they produce and are "revenue negative" for a city. The primary reason for this is schools. Industrial areas, office buildings, and commercial strips are "revenue positive" simply because there are no school kids living there. So, yes, the neighborhoods are subsidized by the downtowns.

[Dexlin]

Ok, so WXYZ is reporting that conditions of some of Detroit's municipal bonds contain a provision requiring an immediate $400M payment to bondholders in the event of the appointment of an EFM. Practically, this would essentially force Detroit straight into bankruptcy. The pushback from Detroiters would then be, "the State forced Detroit into bankruptcy", and that would technically be true. Whew, talk about clusterfu*k on Snyder's hands.

"Turnaround expert Patrick O'Keefe tells Action News that the worries surround penalties written into bond agreements, that kick in if an Emergency Manager is appointed. The special clauses would force the city to pay as much as $400 million immediately, if the city is placed under an emergency manager.
In its report, Moody's also said that 'The city faces a heightened risk of filing for bankruptcy should an emergency manager be appointed.'"
Read more: http://www.wxyz.com/dpp/news/region/detroit/moody's-investor-service--considers-downgrading-detroit's-credit-rating#ixzz1g04VcVsu

If that's true - and I have no reason to believe that it's not - Detroit's three options have been whittled down to two, and that's the consent agreement or bankruptcy. If Snyder wanted to be a real dick, he could potentially put in a titular EM, but in a bankruptcy court, it wouldn't really matter who is technically fronting up the city government.

It's looking even more like it's up to the city council and the mayor to solve this than ever before, because if what above is true, the only thing Snyder will be doing is shopping for a good municipal bankruptcy. It kind of gets me wondering if Detroit began its changes if the legislature would find some of the $200 million [[as the city make the necessary restructures) they owe the city to keep it out of bankruptcy, which might end up costing far more than that if it's imposed? It seems to me that if Detroit has to pay out that much money, instantly, during bankruptcy that the state would have to raise taxes on the entire state to help Detroit pay off its debt.

[skyl4rk]

http://www.crcmich.org/PUBLICAT/2010s/2011/rpt373.html

If you want to know about Detroit's financial situation, this report is the most recent, unbiased comprehensive overview of Detroit and its debt situation.

[Dexlin]

Thanks for that, skyl4rk.

I skimmed the report and read the so-called conclusion, and was surprised that it left more questions that answers. They seem to offer a helluva lot of information, but at the end in the "conclusion" kind of leaves it up to the reader to decide what the conslusion is.

The only things I got from the report are that:

1. Detroit could legally and concievably be issued a total of $300 million in further debt.

2. A very large amount of Detroit's outstanding debt is actually that of the Sewage Department [[of the $6.2 billion in outstanding debt, the Sewage Department accounts for $5.2 and "only" $1.0 in general obligation debt), which they make clear is debt being payed into by the region and not Detroit alone.

3. Detroit, in comparison to the other large cities in the nation, has a very high per capita of debt [[only less than three other major cities), but, again, most of it is the relatively stable debt of the DWSD.

4. Much of the rest of the debt have low penalities or no penalities, at all, and that much of it can be renegotiated, and that Detroit so far has been able to meet the minimal requirements for paying it back.

It's almost as if they want to say that for as bad as the city's debt is, that it's not as bad as being reported, but can't seem to bring themselves to put that in their conclusion. People should definitely read it; I'd be interested to see what others can glean from it. It doesn't seem to address current deficits much at all. I think they make one reference to Bing's warning that the city could run out of money by next year.

[corktownyuppie]

Agree...thank you skyl4rk for finding this.

I read through the entire report and want to comment on the "so-called conclusion". The purpose of these reports to remain objective in nature, offering you 99% detail, with 1% opinion, using as little opinion language as possible. Because rendering an opinion takes away from the credibility of the analysis, they simply do it. Or if it's so glaringly obvious, they do so with little fanfare.

[[Note the stark contrast to politicians, who are 99% opinion and 1% details.)

My conclusions are the following: the city is in major, major trouble. And the reality is that now is not the time to deal with these problems....they really needed to have been dealt with 10-15 years ago so it could be done gradually.

I want to respond to Dexlin's points first and then go through my understanding of the conclusion as well. I'm trying to stay unattached to any one opinion, and if someone reads this differently than I do, I'm open to hearing it.

Thanks for that, skyl4rk.

1. Detroit could legally and concievably be issued a total of $300 million in further debt.

Yes. Legally. That's like saying that my family is legally allowed to mortgage my $100,000 house for $120,000. Just because it's legal doesn't meant that it's *financially* feasible. So if I go to the bank and ask for that $120,000 loan, it being legal just means that no one is going to get arrested. What if the bank says, "We'll loan you the money....at 15% per year" or worse, "We are rejecting your loan application." So now what?

2. A very large amount of Detroit's outstanding debt is actually that of the Sewage Department [[of the $6.2 billion in outstanding debt, the Sewage Department accounts for $5.2 and "only" $1.0 in general obligation debt), which they make clear is debt being payed into by the region and not Detroit alone.

The $5.2 billion water/sewer vs. $1.0 billion general debt is not the defining issue here. It's important, so we should keep it in mind. But what is driving this it the annual cashflow for the city: the amount of money coming in vs. going out. It $100 is coming in, but we owe $200, then someone isn't gonna get paid, or we're gonna have to borrow the rest.

From page 1 of the report...

If the city had made the annual required contribution to fund OPEBs on an actuarial basis in fiscal 2009-10, it would have allocated $313.9 million, rather than the $149.7
million actual payment; an additional $164.2 million would have been paid from city accounts to fund future liabilities, reducing the amount available for current operations

That's telling us that last year we should have put $313 million toward pensions, but instead we only put in $149 million. How did we cover the difference? Answer: we didn't. We underfunded the pension. We paid enough to get by for now, but last year we fell behind by $149 million against what we should've put into the account.

From page 2...

The accumulated prior years’ deficit is recorded as $208.9 million. This is 13.2 percent of the total appropriations for general city agencies; it is slightly more than the net amount expected to be received from the city’s property tax; and it is equal to about
$300 per resident of the city. The budget defers $153.7 of the accumulated prior years’ deficit to future periods, leaving a current appropriation of $55.2 million to satisfy the deficit. The operating deficit is an addition to the bonded debt, legacy costs, and other obligations described above.

So in addition to the $149MM short to the pensions, last year the city was also short another $153MM against their budget.

3. Detroit, in comparison to the other large cities in the nation, has a very high per capita of debt [[only less than three other major cities), but, again, most of it is the relatively stable debt of the DWSD.

You are correct, but there's an important component missing. We aren't just high per capita debt. We're also low per capita income.

Is $50,000 a lot of credit card debt? It depends. If you make $500,000 per year, you could probably pay it off right now.If you make $50,000 per year, then, yeah...it's a lot.

Moreover, when you look at page 16, Detroit also has the lowest credit rating listed. "BB" Those two harmless letters cause a problem. A BIG problem. "BB"-rated debt is so low that it's no longer considered "investment grade" debt. It's now known as "junk debt". Interest rates are constantly changing, but in today's environment, you can generally assume that we are paying 2x the interest that Oakland County or Ann Arbor would be paying for the same debt.

So we've got a big problem here.

- can't pay our bills every year, so we have to borrow to cover the difference
- we have the highest per capita credit card balance but the lowest income
- our credit rating is shitty so we pay 2x as much as interest as someone with the same balance

and finally...to add insult to injury...our tax collection revenue is shrinking, not growing.
If you make $20,000 per year and shrinking, while your credit card debt is $50,000 and growing...

Problems.

4. Much of the rest of the debt have low penalities or no penalities, at all, and that much of it can be renegotiated, and that Detroit so far has been able to meet the minimal requirements for paying it back.

The minimum legal requirements are being met, but that's not the problem. That's like saying I can make the minimum payment on my credit card.

What if the minimum payment is less than interest that's accruing? Balance gets bigger every year.

What if my credit rating is getting worse? The interest rate is going up every year.

What if my tax revenue is going down? I have less money to pay the bills every year.

And, yes, can we renegotiate our debt? Yes. But shrinking income, rising interest rates, and an increasing balance....doesn't put is in a really strong negotiating position.

It's almost as if they want to say that for as bad as the city's debt is, that it's not as bad as being reported, but can't seem to bring themselves to put that in their conclusion. People should definitely read it; I'd be interested to see what others can glean from it. It doesn't seem to address current deficits much at all. I think they make one reference to Bing's warning that the city could run out of money by next year.

You are right that they aren't addressing the deficits too much, which is why the title of the report is on the "Legacy Costs and Indebtedness". Essentially, what they're saying is, "Before you guys start arguing about this year's budget, you should know that:

[[a) you were behind on last year's budget
[[b) you have major debts coming due
[[c) the interest costs on your debt is rising

The reason why you don't see the alarm bells going off is because this report doesn't really deal with the emergency coming in April. That report would be titled, "Cash on hand vs. expected expenses for 12 months." This would be a scary report.

The one cited above basically is saying [[page 22...)

The general city’s below investment grade bond rating and a certain unease with municipal debt in the markets may well increase the cost of borrowing at the same time that the general city’s cash flow problems are increasing. Detroit issued $249.8 million of limited tax fiscal stabilization bonds in March, 2010, enabling the city to reduce shortterm borrowing, but predictions are that cash flow will again be severely stressed early in 2012.

In other words... you need to renegotiate your pension liabilities, your legacy costs, and your annual operating expenses. Borrowing more money is not an option.

It remains to be seen whether city officials, unions, contractors and other affected entities can develop and implement a strategy to restore the financial viability of the city, or whether the state, acting under PA 4 of 2011 or other authority, will be forced to intervene

...otherwise the state will have to step in and do it for you.

[skyl4rk]

I would be careful about using per capita debt as an analysis tool or a comparison to other cities. Detroit is a city that has many large industrial facilities, which are not considered in a per capita analysis.

Any financial analysis of the City of Detroit should be done by separating the report on the Water and Sewer Department. It is separated as an enterprise fund, but because its revenue source comes from the region, it should be looked at differently. However, if the COD is responsible for Water and Sewer Department debt, that needs to be noted.

If the stock market goes up, perhaps the investments made by the pension funds will go up and reduce the actuarial debt. In other words, no city revenue needs to be spent to relieve this debt if investments do well.

There was not a lot of data on revenue in the report. The property tax and income tax revenue is only a part of total revenue. It is important to know if COD revenue is stable or if some types of its revenue are at risk. That information may be available in COD budget reports.

I don't think you can get a full understanding of the City's financial condition from this report, but it does explain some of the problems the City is facing.

ETA:

Also, I would be very interested to see what the City's budget would look like if it were not responsible for the Water and Sewer Dept. and DDOT, assuming those entities could be spun off and regionalized. There are other departments which provide services that are nice to have but unusual for most cities, such as Public Health. Then there are costs related to the City Council and their entourage. I suspect that an aggressive mayor could put the City budget in a far better condition fairly quickly, without affecting core services of police, fire and public works.

[corktownyuppie]

There was not a lot of data on revenue in the report. The property tax and income tax revenue is only a part of total revenue. It is important to know if COD revenue is stable or if some types of its revenue are at risk. That information may be available in COD budget reports.

They didn't go into too much detail, but the broad over view isn't pretty:

Detroit municipal income tax revenues declined from $278.3 million in 2006-07 to $212.7 million in 2009-10; current year property tax revenues for general operations declined from $183.7 million in 2006-07 to $168.0 million in 2009-10. With local tax revenue reductions exacerbated by reductions in state revenue sharing payments, the city’s strategy of financing current operations with future revenues is not sustainable. Without major structural changes, limited tax debt, pensions, and other post employment benefits will continue to absorb increasing amounts of the general fund, leaving less and less for essential public services.

You bring up an interesting point:

Also, I would be very interested to see what the City's budget would look like if it were not responsible for the Water and Sewer Dept. and DDOT, assuming those entities could be spun off and regionalized.

I think you really hit the nail on the head here. The DSWD probably has the highest credit rating as its revenues are not steeply affected by migration out of the city. [[i.e. moving from Detroit to Warren still means you're buying the same water)

Higher credit ratings = more access to capital. I think if the employee of DSWD would be willing to bring their legacy costs in line with what is feasible, combined with the city's willingness to spin them off to a regional entity, you could get a major infusion of capital in the city that might well allow Detroit to restructure its debts.

There are other departments which provide services that are nice to have but unusual for most cities, such as Public Health. Then there are costs related to the City Council and their entourage. I suspect that an aggressive mayor could put the City budget in a far better condition fairly quickly, without affecting core services of police, fire and public works.

I think you're right here. All non-essential departments need to be shuttered, at least temporarily. Their necessity can be re-evaluated once the funds become available. I think that putting the budget in a better condition would rely on not just an aggressive mayor, but a motivated constituency and a working partnership with labor. The fact that there are 47 different unions is not helping the situation. Just for the purpose of problem solving, it would help logistically if there was one person who could be elected to represent all 47 at the bargaining table.

Also, I know it's controversial, but some energy needs to be devoted to downsizing the city's geographical footprint. You could DOUBLE the effectiveness of fire and police without adding another dollar by just combining 2 half-filled neighborhoods into 1 full neighborhood.

[Dexlin]

Oh buddy, Corktown. You totally read into my post things I certainly didn't intend starting from my very first point. Nowhere did I advocate or intend to advocate that Detroit should borrow more money. If I want to make my post more clear is that the I've seen the politicians use both the current deficit and the city's long-term debt as an excuse to take the wrecking ball to city government, when I think they'd have a much stronger, clearer and more concise case if they simply stuck to Detroit's spending habits.

That report shows that the debt situation is nowhere near as relevant to the current fiscal situation as it's been painted to be from the mayor's office. I think that NOW would be a really great time to address the debt, anyway, since we may not be able to open that discussion, again, if things get better in the immediate short-term. But, I think people trying to tie the immediate deficit to the debt so as to justify laying off thousands of employees is intellectually dishonest at the very best. The real hit to the city was baked into the city's finances decades ago and involves retired employees. You can deal with the current city employee health care and pension costs without cutting thousands upon thousands of employees, which is what I originally thought would need to be the case.

If Detroit is smart, it will deal with its long-term debt, now, while it's dealing with the immediate deficit. But the report clearly shows that Detroit could actually and conceivably go through a few more fiscal years of doing the bare minimum on the debt before it would turn into an immediate crisis just like the city's debt. My only point is that it seems reading the report that quite a few powers that be are misrepresenting the effect of the long-term debt on the current deficit crisis. To scream that the sky is imminently falling [[when it isn't) is a great tool of motivation, no doubt, and a savy political move. It simply does't make it any less of a lie, though.

[marcwigle]

The development at Bob-Lo has been bankrupt at least once already and nothing much is selling there. I doubt that developing Belle Isle would fare much better during these times.

[river rat]

River Rat here for a rare response to the Forum.

As was reported in this Forum several years ago, RR with an investment group made an offer to purchase Belle Isle from the city. The letter to the criminal head of the City at that time offere $100 million [[correct) and was accompanied by a $5 million dollar check. Just think of how they could have wasted that money! There were conditions, they were; the bridge would be included, the city would cede sovereignty, the state would grant us enterprise zone status, the DYC, museum and Coast Guard could stay and it would be private property incorporated as such. This was a real offer that was rejected and riidiculed by the man now in prison and was looked upon very unfavorably by the members of the Forum.

As I currently reside in Europe, I don't get to D. that often, and the real estate market is a little different than it was then. Could be I will talk to the poor unfortunate, but honest man trying to manage the ungovernable when i wander into the area in the next few months.

Anyway, the city should not only declare bankruptcy, it should cease to exist and reincorporate as small areas "cities" that are self sustaining and viable. Midtown, downtown, Indian Village, etc.


River Rat returns

[corktownyuppie]

River Rat here for a rare response to the Forum.

As was reported in this Forum several years ago, RR with an investment group made an offer to purchase Belle Isle from the city. The letter to the criminal head of the City at that time offere $100 million [[correct) and was accompanied by a $5 million dollar check. Just think of how they could have wasted that money! There were conditions, they were; the bridge would be included, the city would cede sovereignty, the state would grant us enterprise zone status, the DYC, museum and Coast Guard could stay and it would be private property incorporated as such. This was a real offer that was rejected and riidiculed by the man now in prison and was looked upon very unfavorably by the members of the Forum.

As I currently reside in Europe, I don't get to D. that often, and the real estate market is a little different than it was then. Could be I will talk to the poor unfortunate, but honest man trying to manage the ungovernable when i wander into the area in the next few months.

Anyway, the city should not only declare bankruptcy, it should cease to exist and reincorporate as small areas "cities" that are self sustaining and viable. Midtown, downtown, Indian Village, etc.


River Rat returns

Downtown isn't really self-sustaining. It's being subsidized by the neighborhoods.

Sorry your development was greeted with such scorn. Would likely have been a better Belle Isle than it is today....

[Coaccession]

As cman710 noted elsewhere, Detroit owns the DIA and everything in it. The liquid assets in the art collection are off the books because museum accounting rule FASB116 allows it, but Detroit owns many, many billions of dollars in liquid assets. Detroit's not just solvent. It's one of the wealthiest cities in the USA. There's no reason to cut the budget to avoid bankruptcy. Detroit just has to mobilize the value of those assets. Cash income from an endowment funded by Detroit's DIA collection could not only fund Detroit's arts and culture spending but essential services as well. Proceeds from any other City assets -- like Belle Isle or Water and Sewer -- pale in comparison.

[Novine]

The vultures are circling. Neither the sale of Belle Isle nor the works of the DIA are ever going to happen for all kinds of reasons. But that doesn't stop the vultures from coming out of the woodwork to push these "get rich quick" schemes that have no basis in reality but make people think there are easy solutions to Detroit's very serious problems.

[illwill]

So what do you guys think will happen? If things get worse [[crime/services) or more expensive [[taxes/insurance), I'm pretty sure that the majority of folks paying taxes, keeping up their homes, abiding laws, investing in the city, fighting for the city, etc [[yah know the kind of citizens that make decent cities) will just leave, compounding the problem.

There comes a point when one must realize that going down with the ship is just plain dumb.

I hope it doesn't come to that.

My visited my Aunt this week who lives in the city and they're planning to walk away from their home by the spring. The house is off of Grand Blvd. and is paid for. However they owe $3500 in back taxes. I have the option of paying the taxes and keeping the house. But after taking a day to think about it, I passed. I'm too concerned about the uncertainty of Detroit and don't want to have my name attached to any piece of property in Detroit at this time. I feel it would become a liability and burden and the city would eventually bend me over to take whatever they could from me in regards to taxes. I can't believe that I would turn down a free house from a relative but i KNOW it's the correct decision.

[Islandman]

Illwill,

So they have not payed the taxes because they want to walk away from the house? I feel you on not wanting to purchase anything, but if it's already paid for..

[winstonst]

Set up an LLC. Keeps you out on a personal basis. Talk to a lawyer, but you can do it yourself.

[Novine]

" I can't believe that I would turn down a free house from a relative but i KNOW it's the correct decision."

Almost nothing is ever free. Look at the people who win houses in contests and then can't afford to keep them due to cost, taxes, etc. That said, unless this house is in the worst neighborhood in the city, I'm sure a smart investor could make a profit from it. But if your not going to live in it or be a landlord, taking a pass on it is probably the right move to make.

[corktownyuppie]

" I can't believe that I would turn down a free house from a relative but i KNOW it's the correct decision."

Almost nothing is ever free. Look at the people who win houses in contests and then can't afford to keep them due to cost, taxes, etc. That said, unless this house is in the worst neighborhood in the city, I'm sure a smart investor could make a profit from it. But if your not going to live in it or be a landlord, taking a pass on it is probably the right move to make.

You're right. A smart investor could very well make a good profit on it, depending on location, of course. Grand Blvd right by Henry Ford Health System should be very easy to rent. So then your only liability is the tax liability and then any repairs that come up on an old house. As an investor, I would be much more afraid of the hazards of being a Detroit landlord than I would any problems with the "city trying to gouge you for all they can". The city can't just double your taxes, even with an EM, because at some point, you'll just say, "OK, you can take the house".

In any case, your response reminds me of a friend who was trying to find owners to adopt a litter of "free" puppies. Oh, sure, the puppies are free. The vet bill, the food, and your soon-to-be-chewed-up leather couch aren't free

[j to the jeremy]

River Rat here for a rare response to the Forum.

As was reported in this Forum several years ago, RR with an investment group made an offer to purchase Belle Isle from the city. The letter to the criminal head of the City at that time offere $100 million [[correct) and was accompanied by a $5 million dollar check. Just think of how they could have wasted that money! There were conditions, they were; the bridge would be included, the city would cede sovereignty, the state would grant us enterprise zone status, the DYC, museum and Coast Guard could stay and it would be private property incorporated as such. This was a real offer that was rejected and riidiculed by the man now in prison and was looked upon very unfavorably by the members of the Forum.

As I currently reside in Europe, I don't get to D. that often, and the real estate market is a little different than it was then. Could be I will talk to the poor unfortunate, but honest man trying to manage the ungovernable when i wander into the area in the next few months.

Anyway, the city should not only declare bankruptcy, it should cease to exist and reincorporate as small areas "cities" that are self sustaining and viable. Midtown, downtown, Indian Village, etc.

River Rat returns

Problem with that last idea is that something must be done to help the non-hip [[read non-white) areas of the city as well. I think it's really sad that mayor after mayor has emphasized "damage control" only in areas which are somewhat poised for gentrification, or that consist of mansions. While Detroit Works, and the AIA charette that came here a couple years ago both recommend that strategy of "urban villages", the plan is useless without both excellent regional transit and support being given to poor people, who would be disproportionately affected by such a plan. The big problem with Detroit Works is that Bing has promised not to use eminent domain, which he shouldn't use anyways. It's really easy to suggest things like shutting down whole neighborhoods, but none of the politicians in Michigan right now are intelligent enough to pull it off. Bing couldn't even get DDOT to run on time, Snyder looks like a wimp, and right now a lot of Detroiters are reminiscing about back when that "crook" at least had buses going every 15 minutes.


"Shrinking" a city is not a short-term plan. It is a long-term development strategy that must be coupled with all sorts of other reforms. As for Belle Isle, were you proposing building upscale residential there? As a public resource it's one of the most prized parks in the nation, despite its run-down areas. I'm sure a city that needs "shrinking" would be a tough place to build more upscale properties at a time when we need to be preserving as many intact neighborhoods as possible.

And corktownyuppie was right, all those tax breaks for Dan Gilbert are coming out of the pockets of those people struggling to survive in poor areas which are being omitted from every idealistic proposal floated by people living in Downtown and Midtown.