So where does Detroit actually stand in light of everything that has happened in the last 2 years?
As it turns out,pretty good.
Couple of things to keep in mind post bankruptcy.
If the city does not maintain a good balance sheet,the state can step right back in.
During the bankruptcy the city got a reprieve when it comes to city pension funds.
Until 2024 when that obligation restarts to the tune of $350 million dollars.
If in 2024 the city is unable to meet that obligation,the state steps back in.
Lucky for the city,who choose good leadership,who in turn managed to squirrel away despite it all,$350 million in the general fund in order to cover that,now and not waiting to default in crisis.
In steps the big Covid,and wipes the fund down critically.
The feds under the stimulus package allotted cities reimbursement for depleted funds,Detroit received theirs and it was placed directly back into the general fund instead of what other cities did and spent it elsewhere.
Why does that matter outside of being able to meet the 2024 pension obligation?
Well you voters approved a $270 million neighborhood initiative bond sale,for improvements outside of the CBD core last year.
Before Covid the city did not exactly have a high bond rating,actually it was pretty bad,good for people like me because you as citizens pay a high interest rate,higher then most.
So the bond sale was in April of this year and two things happened.
The state agreed to allow the city to use their revenue share as collateral.
The bond ratings company and the investment community was impressed with the way the financials were being handled,as witnessed by the consistent general fund and the rapid replacement of it during Covid,that Detroit jumped up into a AA rating.
Which is pretty impressive.
How so you might ask?
The mayor had a voter approval for a $270 million bond sale,what he did was offer $175 million up for bonds,he wanted to keep the rest in reserve,because you do not know what the future will throw at you.
So the auction comes up for the bond sale.
$175 million were offered.
3.3 billion in calls were received for the bonds,that is billions with a B.
So what is a call and auction?
Detroit says we are offering up $175 million in bonds what is your bid?
So I would call,as an example,$50,000 @ 12% interest,that would be my offer.
So what happened this time?
Well because Detroit was at a AA rating it became less risk and more desirable,which resulted in a lot more competition.
So Detroit could say,sorry Richard I got a call over here for $50,000 at 10% interest,you are going to have to do better then 12%.
So then I have to counter.
So what happened in the end,City of Detroit offered up $175 million in bonds which drew 3.3 billion in calls which created so much competition,that it drove the interest rates down to a final 3.36% .
Considering the time frame 10-20-30 years that bonds play out,that equates into millions in interest only that current and future city residents just saved on one bond sale.
Most of you know my political leanings,but I lean towards policies over personal likes,because as this clearly shows policies are what makes or breaks a city.
You guys have come a long ways from the bankruptcy days,it is not always obvious or fast enough, but as it stands now,good decisions are keeping you on solid ground as you move forward.
That climb is pretty impressive,good job.
