An EFM domino effect?

[Huggybear]

So what's the speculation on whether a debt default by Detroit would precipitate EFMs in the surrounding communities?

If you connect some dots:

[[1) From the information out there, it appears that Detroit's default would impact Wayne, Oakland and Macomb Countys' credit ratings [[I haven't heard whether that would also hurt their constituent communities);

[[2) The counties are holding on by a thread financially [[as are their constituent cities);

[[3) The state is going to hit communities with heavy reductions in revenue sharing next year; and

[[4) No one wants to pay higher taxes,

then is it plausible that the entire Metro region may end up under one or more EFMs? You've heard how Snyder wants stuff consolidated. This would be one hell of a way to have that happen, no?

HB

[DetroitPlanner]

L. Brooks has made it known that he wants to do everything possible to help Detroit because if they go down so does Oakland County's credit rating. This would be disaster.
http://www.detroityes.com/mb/showthr...troit-s-future
http://www.crainsdetroit.com/article...n-got-it-wrong#
http://www.annarbor.com/business-rev...land-fab-five/

[313WX]

I hate to say it, but if that's what it takes to get some progress in this region and leave the petty city/suburb BS behind [[and welcome regionalization), then so be it.

[DetroitPlanner]

I hate to say it, but if that's what it takes to get some progress in this region and leave the petty city/suburb BS behind [[and welcome regionalization), then so be it.

Why hate to say it? Divisiveness is one of our region's biggest issues.

[Hypestyles]

Hm, if L. Brooks can be supplanted with someone, so much the better.. why is a credit rating so more valued than people's well-being..

[Lowell]

Why hate to say it? Divisiveness is one of our region's biggest issues.

I'll take that a step further. Divisiveness is THE issue.

City-suburb, even suburb-exurb, US-Canada, race, and class. We are split up all over the place sprawling aimlessly about without a metropolitan vision.

It is not as bad as it was and there has been much improvement. But we have long, long way to go.

[jackie5275]

Maybe this will be what it takes to get some regionalization going on with some matters like public transportation.

[Dexlin]

Why and how? Even if you outsource operations, someone still has to pay down DDOT's debt [[and, for the forseeable future that'll be Detroit, alone), and there is no existing authority in the region capable of taking on the operation that averages over 100,000 riders a day. I keep hearing the line "farm it out to SMART", and it's really naive. SMART neither has the ability to manage a system or this size nor the stomach or wherewithal to even take on even half of DDOT's debt. DDOT does services and routes/lines SMART would never do, because they wouldn't be profitable enough though they'd be absolutely essential to any regional transit systems. It's been gone over in other threads on this, but the only real option is to start from scratch, and it will have to include some kind of regional tax, period.

Bing's plan might marginally improve service for DDOT, but the move in no way makes a vertical step towards a regional system. This is a horizontal move; it doesn't address even begin to address the regionalism question.

[313WX]

Why hate to say it? Divisiveness is one of our region's biggest issues.

Actually I enjoyed saying that, but I know it's not a politically correct thing to say around here [[the region).

But besides that, it's also sad that a nanny has to come in to help us do what we should have been doing over the past 40 years.

Fact of the matter too is folks from both sides will have to make sacrifices they won't like.

[JBMcB]

SMART neither has the ability to manage a system or this size nor the stomach or wherewithal to even take on even half of DDOT's debt.

SMART runs roughly 60 routes through dozens of cities across three counties. DDOT runs 40 in one city. I don't think complexity would be an issue. As for debt load, disbursing the debt across dozens of cities would be a much more tenable situation than having the city of Detroit service it.

[antongast]

SMART runs roughly 60 routes through dozens of cities across three counties. DDOT runs 40 in one city. I don't think complexity would be an issue.

DDOT annual passenger miles: 189,134,313
DDOT annual unlinked passenger trips: 36,657,274
DDOT 2010 operating budget: $168,024,763

SMART annual passenger miles: 85,972,520
SMART annual unlinked passenger trips: 12,194,271
SMART 2010 operating budget: $108,682,341

The systems aren't even close in scale. Besides, running high-density, high-frequency, 24-hour urban bus service is a completely different sort of administrative project than running low-density, low-frequency suburban routes, and requires administrators with different skill sets and types of experience.

[Novine]

"As for debt load, disbursing the debt across dozens of cities would be a much more tenable situation than having the city of Detroit service it."

I'm stating the obvious here but no suburban communities are going to want to take on servicing DDOTs debt. That's one of the main reasons that a merger of DDOT and SMART has never happened.

[R8RBOB]

"As for debt load, disbursing the debt across dozens of cities would be a much more tenable situation than having the city of Detroit service it."

I'm stating the obvious here but no suburban communities are going to want to take on servicing DDOTs debt. That's one of the main reasons that a merger of DDOT and SMART has never happened.

I'm following the comments about our public transportation and I have a story.

When I was living in Northern California, I worked at Moffett Field and and there was this civil servant who lived in San Jose. Every day she would take the train [[Caltrans) to work and I had to ask her why would she would take the train when she had a BMW to drive to work in. She told she didn't feel like driving so she took the train. Because I had a Detroit state of mind, I viewed public transportation as something you take when you have no car, no one to call for a ride. Afterwards, I came to realize that public transportation should be a choice.

In Metro Detroit, our public transportation [[buses) suck. No one will volunteer to park their car to ride either SMART or DDOT. This is the result of having a bus-only transportation system. In the 21st century, having a bus-only transportation system in a major city/region is nuts. Buses should always be the supplement for a light-rail/train network but since we don't have any rails or trains then people will blow off getting on a bus if they have a car. It is not surprising why both systems is losing money. No one will choose to get on a bus.

[Wesley Mouch]

DDOT annual passenger miles: 189,134,313
DDOT annual unlinked passenger trips: 36,657,274
DDOT 2010 operating budget: $168,024,763

SMART annual passenger miles: 85,972,520
SMART annual unlinked passenger trips: 12,194,271
SMART 2010 operating budget: $108,682,341

The systems aren't even close in scale. ...

That seems very close to me. DDOT is less than twice the size of SMART. So both likely face very similar issues regarding staff, equipment, purchasing, etc.

[antongast]

That seems very close to me. DDOT is less than twice the size of SMART. So both likely face very similar issues regarding staff, equipment, purchasing, etc.

I'm not sure where you're getting "very close" or "less than twice the size" from. Are you going by the numbers in my post?

Anyway, keep in mind that SMART's passenger miles are somewhat higher relative to ridership than they would be in an urban transit system, because people generally need to ride SMART buses for much longer distances to get anywhere useful. DDOT's ridership is more like 3x SMART's; SMART is really more on the scale of a CATA in Lansing than a large-city transit system like DDOT.

[mwilbert]

In my view the reason main reason why privatizing the DDOT might help the movement toward a regional transit authority is that it could reduce the sense that moving to a regional authority would be taking something away from the city, as you've already shed a substantial amount of control.

I doubt that the city getting an EFM would cause substantial financial contagion; it might make it a little harder for neighboring areas to issue new bonds, but it is hard to imagine the effect would be large. I strongly suspect it is the psychological contagion that actually need to worry about--there is no way for any place in the local area not to have a conceptual link to Detroit, at least in the minds of those outside the region.

[DetroitPlanner]

I'll take that a step further. Divisiveness is THE issue.

City-suburb, even suburb-exurb, US-Canada, race, and class. We are split up all over the place sprawling aimlessly about without a metropolitan vision.

It is not as bad as it was and there has been much improvement. But we have long, long way to go.

Deindustrialization ranks pretty high as well. Poverty too. Politics as well.

I am willing to bet if we did not lose all of these jobs to the south or overseas the region would be less divisive, less poverty, and all political factions would have the oars rowig in the same direction. Now everyone is fighting over jobs, population, and can't afford to worry about the impoverished.

[erikd]

The impact of the impending financial collapse of Detroit city government will be felt far outside of the city. Depending on how things go down, it could be disastrous for the county and state.

Contrary to popular belief, Detroit is not a sovereign entity, but a creature of the state. The recent changes to the EFM laws may be an attempt to indemnify the state against financial responsibility for contracts entered into by local municipalities, but it is very possible that the supreme court will declare this to be unconstitutional, and the state will be forced to assume things like Detroit's pension liability, which is how the previous law has always worked.

In a worst case scenario of total financial collapse of city government, the state would be forced to assume a large portion, if not all, of the city's debt, and the county would be on the hook for replacing many services, such as tax collection, health and human services, and policing. This has already happened in Highland Park and Pontiac, but if it happens that way in Detroit, it could drive Wayne County into insolvency, which would then cause even more debt and responsibility to be transferred to the state.

If the state and county are able to escape responsibility for Detroit's obligations, then the loss of payments, jobs, benefits, will become the burden of bondholders, employees, and retirees, causing a large increase in unemployment, medicare, welfare, and other state and federal funded systems.

At the end of the day, it doesn't matter if other units of government don't want to help assume Detroit's debts. There is no possible way for Detroit to pay for it's current financial obligations, so the burdens will be shared across many levels and communities, like it or not.

[Dexlin]

The systems aren't even close in scale. Besides, running high-density, high-frequency, 24-hour urban bus service is a completely different sort of administrative project than running low-density, low-frequency suburban routes, and requires administrators with different skill sets and types of experience.

Bingo. It blows my mind that people think the two are comparable systems in what they do. Even apart from the difficulty of merging the two fiscally, service-wise, this is apples to oranges. Again, SMART doesn't have the ability to assume the type of service that DDOT provides, which operates a far greater diversity of routes that SMART, which runs really only one time type of service [[low-frequency long hauls). Of course, since Detroit does all kind of hauls and SMART does a particular kind you'll have some overlap, but it's nowhere as much overlap as people think.

[skyl4rk]

erikd, is it correct that the state is on the hook for Detroit's debt?

I don't disagree with your conclusion, but I thought there was a default process that a city could go through. Perhaps that is part of the new EFM law.

[Wesley Mouch]

I'm not sure where you're getting "very close" or "less than twice the size" from. Are you going by the numbers in my post?

Anyway, keep in mind that SMART's passenger miles are somewhat higher relative to ridership than they would be in an urban transit system, because people generally need to ride SMART buses for much longer distances to get anywhere useful. DDOT's ridership is more like 3x SMART's; SMART is really more on the scale of a CATA in Lansing than a large-city transit system like DDOT.

Yes. Comparing figures in your post.

None of the figure your provided were more than 3 times the other. They are about as alike as GM & Chrysler. Both design, engineer, build, and sell cars. Both DDOT and SMART buy, repair, operate and charge for busses. Doubling of even tripling of an enterprise doesn't significantly change the skills [[or lack thereof) of an organization. And combining companies will allow firing of redundant staff -- reducing cost to taxpayers and increasing productivity for them and their community who can spend the money on something else of more value.

American Sales [[from the ever-reliable wikipedia):
Chrysler: 1,085,211
Ford: 1,935,462
GM: 2,215,227

[R8RBOB]

After watching Let it Rip with Brown, Tate and Kenyatta, I have to say that if they City Council comes up with a plan that goes deeper than Bing's plan and run to the governor to get him to force Bing to accept their plan then the governor needs to insert his steroid-fueled EM in Detroit immediately. Perhaps all those years carrying that badge and gun grew Brown's nuts because he said that if Bing didn't enact their plan then maybe Snyder can give the Council more authority to manage Detroit by making the council "de facto" EMs.

For the record, I am against Snyder and the Republican legislature Frankenstein version of a EM but I suppose watching Pugh and Brown losing their jobs would give me some form of glee.

[stasu1213]

I would hate to see the council cut all the services to the bare bone and the EFM would still come in and take over without the problem of cutting but to build the city up. The council will be making it easier for him/her to run this city. I would prefer that the EFM come and make the cuts. His probably would not be any deeper that what Pugh and Co will be

[skyl4rk]

The Governor and State Treasurer can declare bankruptcy for a city.

Page 13:

http://www.michigan.gov/documents/tr...4_348233_7.pdf

Regarding triggering the EFM process

The governing body [[Council) or Chief Administrative Officer [[Bing?) can request it
A creditor with unpaid bills can request it
Local voters can petition for it
Pension plan managers can petition for it if they are not paid by the city
The State Financial Authority receives written notice of unpaid wages or benefits to employees or retirees
The State Financial Authority receives written notice of unpaid bonds
The State Senate or House can request by resolution
Another taxing jurisdiction can request if it has not received payment of tax revenues
The City is in violation of a deficit elimination plan
The City's debt rating goes to BBB or below
At the discretion of the State Treasurer

It seems that the most likely way the EFM process would be triggered is either if Bing requests it or if the State Treasurer requires it based on deficit elimination plan failure or nonpayment of wages or debts.

The deficit elimination plan information is here:

http://www.detroitmi.gov/CityCouncil...ctionPlan.aspx