Our Day of Financial Reckoning Is Now Upon Us

[Richard]

You way underestimate the litigation powers of the DIA's monied donors... any artwork would take YEARS of litigation before a single item hits the auction block... if ever...

Not to even mention the support that would come from across the country, I would think no matter how bad things are the last thing the city needs is to become ground zero on testing the art community,something about being squished like a bug.

Remember when this is all done and over the city will still need to borrow and have good relations with other states, Washington ,etc. It does no good to cut ones nose off to spite.

Other then that non issiue , I wonder if somebody bought or leases a bucket truck and bought a box of light bulbs if they could change out street light bulbs more cost effective then the city? I would think so and it would only have to be approved by the EM so little red tape and would look really good in the newspaper on the fast results accomplished .

Of course money is tight and one would have to secure the contract first but with that contract in hand they could easily get the truck.

[softailrider]

Anyone who has lived in Detroit, or done business in Detroit, has known for at least 10 years that we have been living in a 3-card-Monty world.

Like it or not we are a mess. Like a formerly 400 pound woman who is now down to 120, there is a lot of extra stuff hanging around. Most of it covered in bedsores and in need of a delousing.

That's very descriptive, it does form a picture in my mind.

[gnome]

I've heard this both ways. However, this is from the FAQs in the pro DIA millage website artisforeveryone.com from last year.

IF it's no longer the city making the decision...then IHD has a very good point about litigating into uncharted waters.

thanks for that information, now I am more confused than ever. Below is an article from 2002 in the Metro Times about the Byzantine history of the DIA and the Founders Society.

http://www2.metrotimes.com/editorial....asp?rid=16581

[gnome]

That's very descriptive, it does form a picture in my mind.

I watched an episode of The Biggest Loser and was struck by the amount of extra stuff that flaps around after massive weight loss. Some of those ladies looked like microwaved silly putty, and when I think silly, I think Detroit finances.

kind of a long way to go for an allusion, but I am glad it worked for you.

[aj3647]

DIA Director Graham Bell when asked if the City can liquidate the DIA's assets as part of a bankruptcy:

http://live.freep.com/Event/Live_cha...xt_for_the_DIA

Although the city indeed own the collection, under the current operating agreement, the DIA has total discretion over it. In the event of a bankruptcy, things get legally cloudy, but I feel confident, for various reasons, "Ain't gonna happen."

So there you go.

[bailey]

DIA Director Graham Bell when asked if the City can liquidate the DIA's assets as part of a bankruptcy:

http://live.freep.com/Event/Live_cha...xt_for_the_DIA



So there you go.

IIRC, that operating agreement expires in 2018. I believe that was one of the talking points of the anti-millage folks.

[Wesley Mouch]

Many here attack Mr. Orr -- as a puppet of Snydley and/or Koch Brothers or part of some dark conspiracy to deprive Detroiters of their 'rights'. Its my belief that most of the anti-EM rhetoric is a conspiracy by entrenched interests. We all have our conspiracy theories, don't we.

Back to my point, here's a snipped from the Freep article that doesn't suggest that Orr has a secret agenda to abuse city workers:

Though Nowling said city workers are likely to be asked for additional concessions, the report wasn’t all bad news for them. It acknowledges the deep pay and benefits cuts they’ve taken and major efforts to reduce the city’s work force by thousands in recent years, largely through attrition and early retirement. The report said, “Most city departments are understaffed.” Orr’s report said he is reviewing a plan to recruit talented employees and retain high-performing workers, and he will reinstate a citywide employee evaluation system and re-evaluate the city’s compensation structure.

from http://www.freep.com/article/2013051...yssey=obinsite

[aj3647]

Many here attack Mr. Orr -- as a puppet of Snydley and/or Koch Brothers or part of some dark conspiracy to deprive Detroiters of their 'rights'. Its my belief that most of the anti-EM rhetoric is a conspiracy by entrenched interests. We all have our conspiracy theories, don't we.

Absolutely. Detroit has a Tammany Hall-style corrupt political machine every bit as bad as Chicago in its 20th century heyday. They have a vested interest in being anti-EM because the EM threatens their ability to steal from the taxpayer cookie jar.

[Whaler]

Just finished reading the whole Mess..I do not have an answer..Won't pretend to..How do you start something over???...This is the worst mess I have ever witnessed ...We can spread the Blame around It is well deserved..But how do we get out of this...Any Real Ideas where to start..Somewhere there needs to be a plan...The problem is nobody is going to like it...I do not care for any of the politicians involved in this mess..As Lowell said "Where do we Go from Here"...Any thoughts????....Whaler

[Zacha341]

Whatever crumbs remain in said cookie jar!

Absolutely. Detroit has a Tammany Hall-style corrupt political machine every bit as bad as Chicago in its 20th century heyday. They have a vested interest in being anti-EM because the EM threatens their ability to steal from the taxpayer cookie jar.

[Jimaz]

Governor Snyder's Little Dictator

[mwilbert]

A bankruptcy is a re-organization of debt, not a negotiation. What happens is the city essentially comes up with a debt payment plan where the creditors would accept pennies on the dollar for their investments and the judge imposes it.

That is true in theory, but if you think that a judge will impose a plan without negotiation between the parties, I think you are mistaken.

[313WX]

That is true in theory, but if you think that a judge will impose a plan without negotiation between the parties, I think you are mistaken.

True.

But at the end of the day, I don't think it's going to end in the sell off of Detroit's assets. That's more likely to happen with Orr at the helm.

What could happen instead is Detroit could use the assets as collateral for long-term bonds [[I.E. although you won't get as much of a return on this loan, I would offer you Belle Isle if I miss payments on any future bond sales), that way the city wil still have some cash flowing through.

[Delray]

Someone please correct me if you have specific alternative numbers, but my understanding is that the City's financial problem is almost entirely a function of long-term liabilities [[bond indebtedness, pension and retiree health obligations). You could cut current services virtually to zero and would still struggle to stay current on the long-term liabilities.

Services will be cut, nonetheless. Pain must be inflicted as part of the morality play.

Gilbert, Illitches, Magic Johnson, Penske, etc., etc., will make out like bandits, snapping up yet more city-owned assets at fire-sale prices. [[But not DIA masterpieces. Get real.)

The unions will have to give up a lot, just as they did with the GM restructuring.

It would not surprise me at all if current bondholders got out of this whole, however. Maybe the Federal Reserve will move some "D-bonds" onto its balance sheet? Or the State Treasury? I would not rule it out.

The script for this story has already been written. The winners will be the folks who always win. And the losers will be the folks who always lose.

[corktownyuppie]

Someone please correct me if you have specific alternative numbers, but my understanding is that the City's financial problem is almost entirely a function of long-term liabilities [[bond indebtedness, pension and retiree health obligations). You could cut current services virtually to zero and would still struggle to stay current on the long-term liabilities.

Services will be cut, nonetheless. Pain must be inflicted as part of the morality play.

Gilbert, Illitches, Magic Johnson, Penske, etc., etc., will make out like bandits, snapping up yet more city-owned assets at fire-sale prices. [[But not DIA masterpieces. Get real.)

The unions will have to give up a lot, just as they did with the GM restructuring.

It would not surprise me at all if current bondholders got out of this whole, however. Maybe the Federal Reserve will move some "D-bonds" onto its balance sheet? Or the State Treasury? I would not rule it out.

The script for this story has already been written. The winners will be the folks who always win. And the losers will be the folks who always lose.

Sounds like a worldview issue. If bondholders get made whole in all of this, I will write-in Joann Watson for every open position in the 2014 election.

[Hermod]

There are two types of bonds.

There are the "revenue bonds" of the DWSD which are secured by the revenues of the DWSD and do not have outlandish coupons.

Then there are the "general obligation bonds" which are secured by the "full faith and credit" [[har-de-har-har) of the city of Detroit.

[corktownyuppie]

There are two types of bonds.

There are the "revenue bonds" of the DWSD which are secured by the revenues of the DWSD and do not have outlandish coupons.

Then there are the "general obligation bonds" which are secured by the "full faith and credit" [[har-de-har-har) of the city of Detroit.

I'd be concerned but less worried about the DWSD revenue bonds. Bondholders want to get paid. None of the "profit" from the DWSD is allowed to go into the city general fund because of the way the entity is structured.

There's a deal to be made here where the city can lease the DWSD to a managing authority, which will then pay the city millions [[tens of millions?) per year into the general fund. Then by pulling the DWSD fully away from the the city authority, bondholders are [[likely) much more able to get paid in full. Devil is in the details, but everyone wins.

The general obligation bonds of the city? Fuggedahboutit. Current pricing on some long-term Detroit GO munis are around 70 cents on the dollar.

It would take a federal bailout for them to recoup their money. And even if you were delusional enough to argue that "Detroit is too big to fail". There is no logic that "Detroit bondholders are too big to fail".

Like I said. If it happens, then JoAnn Watson for Mayor, baby.

[Wesley Mouch]

...snip...
The unions will have to give up a lot, just as they did with the GM restructuring....snip...The script for this story has already been written. The winners will be the folks who always win. And the losers will be the folks who always lose.

So far, Orr hasn't said this. He's said the opposite.

Has said that city workers have already given up a lot, and that there aren't enough workers. [[See Freep article quote referenced in earlier post.)

As to staff, I think we'll see the changes in pension [[stop the silly large pensions and double dipping; keep the working man's pension mostly intact.) but the biggest change will be in working conditions. Unions have stiffled change. I expect Orr to demand work rules changes so he can add a few workers, but get the same results with city got with twice as many workers in the old days. Efficiency.

I just don't see that this is an attack on the 'losers'.

[Hermod]

I'd be concerned but less worried about the DWSD revenue bonds. Bondholders want to get paid. None of the "profit" from the DWSD is allowed to go into the city general fund because of the way the entity is structured.

As of April 30, 2013, DWSD 5.75% bonds of 2024 were priced at $1.15 to the dollar.

[Eber Brock Ward]

http://www.detroitnews.com/article/2...text|FRONTPAGE

Earlier, someone made the point that AFSCME can't negotiate for retirees, and they were correct.

Al Garrett, president of AFSCME Council 25, confirmed the union received a letter on Monday from the law firm Jones Day, seeking its participation in a discussion dealing with retirees. Jones Day is under contract with the city to assist with its financial restructuring efforts.

The union, Garrett said, will craft a response by the May 27 deadline set in the notice, "indicating our willingness to come in and discuss future retirees."
"But we are without authority to negotiate for [[active) retirees or their healthcare," Garrett said on Wednesday. "We don't have rights to bargain for them, on behalf of them, period."

With this in mind, I think the EM/city needs to find the best way to negotiate in bulk with individual retirees.

I would not be surprised to see a notice sent out to the present address for each retiree with a message along the lines of "we have done the calculations and we are offering you the choice of [[a) losing all of your retiree healthcare benefits effective [x date], or [[b) reducing your pension payouts by [x]% and maintaining insurance coverage as follows:... If we do not receive a response from you prior to [x date], the entirety of your health care benefits will terminate on that date."

I think that's the the most obvious way to do it, since AFSCME can't negotiate for them and they likely have current contact information for each retiree.

Then, it'd be onto the bondholders with something like "take [x]% of a haircut or we're riding this sucker into bankruptcy...."

[Wesley Mouch]

http://www.detroitnews.com/article/2...text|FRONTPAGE

Earlier, someone made the point that AFSCME can't negotiate for retirees, and they were correct.

With this in mind, I think the EM/city needs to find the best way to negotiate in bulk with individual retirees. ...snip...

Something here stinks. As usual, the newspaper article provides zero insight -- just press release facts.

What's really going on? The AFSCME negotiates and deal while they are employed to get the benefits, but can't represent them now? Or maybe they can but won't.

Like 'follow the money', you can also play 'follow the power'.

Here's a theory... please shoot holes as it may be 100% wrong.

AFSCME has been looking out for their members by resisting cutbacks in wages, conditions, and staff. That's their job. They've done it well.

So along comes Orr, and he wants to negotiate with the retirees. But guess what? There's no one to negotiate with. Poof. The retirees don't exist. Represented by the Union during employment. But when they need representation -- they're gone. Can't do it. No way. Period. Bye.

I'm always suspicious when someone manages to take a position that benefits them greatly. Where lawsuits fail or the facts aren't on your side, consider stalling.

My guess here is that the Union 'could' represent them. It seems likely to be legal to represent your former employees. After all, you negotiated the deal for them. And these retirees really need representation. If they don't get it, who knows what will happen to them. But guess who really doesn't care. Their union. Because AFSCME knows that they have two outcomes. 1) Screwed by the EM for sure -- and probably pretty badly, 2) Screwed by bankruptcy court -- and probably pretty badly. But after the dust settles they'll be back and representing the workforce again. Rest assured that the City won't be non-Union for long. So stall baby, stall.

The only person harmed here are the retirees, and guess what? They've got protection for much of their pension, and they don't pay dues! So screw them.

Follow the power.