CNNMoney: Detroit teeters on the brink despite autos comeback

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There is also the possibility that the state may take over the city, which would open the door for Detroit to file for bankruptcy. That would make it the largest U.S. city ever to suffer that fate.

"The financial situation in the city is quite complicated and there are no easy answers," said Bettie Buss, senior research associate, Citizens Research Council of Michigan, a nonpartisan public policy think tank.
While the auto industry is still a major presence in Michigan, there's relatively little left of it inside the city limits.
Even though General Motors [[GM, Fortune 500)' headquarters is in downtown Detroit, the automaker doesn't even rank among the city's top 10 largest employers. Chrysler Group, the sole auto company in the top 10, operates the only assembly line inside city limits.
So Detroit has seen little benefit from the auto industry's return to profitability.
But the auto rebound has helped to turn around finances at the state level. A recent estimate shows state surpluses growing faster than expected, to nearly $850 million by the end of the fiscal year in September.
The auto rebound has boosted collections of both income and sales tax, as well as some business taxes.

According to Chris Hoene, director of research for the National League of Cities, those sources of revenue respond much faster to economic improvement than property taxes, which are the major source of local government revenue. The state has also benefited from its ability to make steep cuts to the financial support it gives to local governments, adding to Detroit's woes.
The problems that have taken Detroit to the precipice of fiscal disaster have been building for years. Even with massive spending cuts over the last decade, the city is still losing population and tax revenue faster than it can trim its budget

"The level of services has been reduced, but not fast enough to balance with the reduction in revenue," said Buss. "And even if you further reduce services, [the city] has significant legacy costs. It has twice as many retirees as active employees. For police and fire, it's three times as many retirees."

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Full article: http://money.cnn.com/2012/01/18/news...tm?iid=Popular

Will Detroit get a bailout now?

IMO, Detroit doesn't need a bailout. It solves nothing besides pushing the problem back a bit.

Detroit needs to fundamentally change its unsustainable business model.

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Originally Posted by Bham1982

IMO, Detroit doesn't need a bailout. It solves nothing besides pushing the problem back a bit.

Detroit needs to fundamentally change its unsustainable business model.

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That's what EFMs and bankruptcy are for. The municipal equivalent of a hostile takeover. Creative destruction.

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Originally Posted by Det_ard

That's what EFMs and bankruptcy are for. The municipal equivalent of a hostile takeover. Creative destruction.

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But they're not going to do that. They're going to indiscriminately slash and burn to maximize short-term savings even at the expense of long-term sustainability, pay back the creditors, and then leave. There's nothing "creative" about EMs, they're bean-counters to the core.

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Originally Posted by truthseeker

When the majority of Detroiters cut their grass, maintain their property, respect themselves, use proper English, and demand a real end to the violence, then maybe, just maybe, Detroit will have a future.What I see is a city where the majority of its residents blame others for their own situation in life.It's time Detroiters take back their city from the self inflicted cesspool they created.

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I think the majority of residents already do this. You can drive continuously down 7mile from Woodward to Telegraph and find very well maintained neighborhood on each side the same is true for parts of the east side. The blight and neglect comes from property owned by land spectators and banks who do not take care of their property and refuse to make it availble for possible residents or businesses. Many residents have voiced their concern about this issue. Its less about the residents and more about the city enforcing regulation on absentee land and property owners. The blight and crime is instegated by vacancy.

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Originally Posted by truthseeker

I beg to differ. The majority of the city and its residents have given up. Suburban lumber stores are profiting hugely just on plywood to board up houses. Take a trip down W Chicago, a once stately street. Plywood everywhere on such a historic street.Detroiters need to do more than be vocal. It's time for action. Time for Detroit residents to tear down the blight themselves. Time for Detroit residents to arrest criminals stealing from stores. Time for Detroit residents help their neighbors. Time for Detroit residents close the drug houses themselves. Time for Detroit residents to form armed citizens patrols to protect their neighborhoods especially at night.Time for Detroit residents to take back their streets from greedy people like Matty Moroun.When other Detroit residents really want action they will do it themselves and not wait for others to do it for them.If anyone needs help in Detroit, tearing down dangerous abandoned houses, tearing down illegal fences, forming citizen patrols, contact me and maybe two people can become 4, and 4 can become 8 and so on.

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I hear you loud and clear, but how can residents declare martial law when they were judged and made out to be lawless animals in the media, like recently when resident were trying to rescue neighbors from a burning house? I know residents can do a little bit more, but how much more can we expect them to endure while the city's government and powerbrokers are focused on the Downtown and Midtown areas, and ignoring other viable areas? The Bagley neighborhood has over 30,000 residents in approximately 1 square mile, but I don't see any multibillionaires trying to revitalize Livernois, 6mile or Wyoming.

Does anyone know where the picture accompanying the aricle was taken?
http://i2.cdn.turner.com/money/2012/...eet.gi.top.jpg

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Originally Posted by dexpat

Does anyone know where the picture accompanying the aricle was taken?
http://i2.cdn.turner.com/money/2012/...eet.gi.top.jpg

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It's the Roosevelt Hotel and the 2 neighboring houses right by the train station.

Thanks, Neilr. I remembered that banner sign across the top of the wall, but could not place it. Apparently, that picture is not especially recent - I found this one after I knew what I was looking for:
Attachment 11837

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Originally Posted by truthseeker

When the majority of Detroiters cut their grass, maintain their property, respect themselves, use proper English, and demand a real end to the violence, then maybe, just maybe, Detroit will have a future.What I see is a city where the majority of its residents blame others for their own situation in life.It's time Detroiters take back their city from the self inflicted cesspool they created.

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I think you've solved the problem: Detroit is failing because Detroiters don't "use proper English". Thank you for your bits of wisdom.

But, Detroit can't be on the brink. An Olga's Kitchen is opening up in the Compuware building, and according to some on this site, that's a sign that downtown is BOOMING!

... detroit needs the presence of newer industries.. green industry, alternative-energy, tech-industry, more.. It can't be the mono-industry town of auto-related manufacturing anymore.. hopefully city leadership understands this..

Detroit is illiquid, not insolvent... that is, it's out of cash, even though it has plenty of assets. The biggest single asset Detroit has is its art collection at the DIA. Even though the contractor running the DIA for Detroit -- the Founders Society -- tells anyone who will listen to them that the City can only sell art to buy art, federal law, state law, municipal code and the operating agreement the Founders Society has with Detroit all let Detroit sell art to pay bills. Given how much Detroit's art collection is worth -- many, many billions of dollars -- the interest and dividends alone that the collection's value could generate would be enough to make Detroit liquid, keeping current on all its obligations to bondholders, union members, pensioners, residents and visitors and adding new funding for the arts, sciences and humanities. Other cities in the US own major art museum collections, but Detroit is the only one flirting with bankruptcy -- and it is definitely flirting with bankruptcy because bond indentures trigger an immediate $400 million dollar payment to bondholders if the governor appoints an emergency financial manager, a clause designed to let a bankruptcy judge take over the moment an emergency financial manager gets any authority over the city's finances. The way to head all this off is to use the Monet. The Founders Society will tell Detroiters that their Monet can't do anything for them but hang on a wall, but that's not true. A lot of DYessers say they'd still rather have the Monet than the money, but a bankruptcy judge won't give them that choice... in bankruptcy the Van Goghs will go in a van. Here's hoping Detroit will choose to have its Monet and money too, because any other choices are much worse in Detroit's straits.

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Originally Posted by Occurrence

But, Detroit can't be on the brink. An Olga's Kitchen is opening up in the Compuware building, and according to some on this site, that's a sign that downtown is BOOMING!

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Heh, very true!!! Thanks for reminding me!!!

Maybe we need to take care of this problem first.

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