Troy City Government is going BANKRUPT by 2016.

[Danny]

Recent source from Channel 4 News reported that The City of Troy is suffering an financial crisis and the city will run out of cash by 2016. How can a middle class city with a booming skyscrapers and Somerset Mall along Big Beaver Rd. going dead broke like Detroit within 4 years? Something's weird is going on in Troy and its burning.

[Hermod]

Recent source from Channel 4 News reported that The City of Troy is suffering an financial crisis and the city will run out of cash by 2016. How can a middle class city with a booming skyscrapers and Somerset Mall along Big Beaver Rd. going dead broke like Detroit within 4 years? Something's weird is going on in Troy and its burning.

Nothing weird about it. The real estate tax take is down because of the 2006 housing crisis. Unless the tax take is increased, the city will burn through its reserves by 2016. Between now and then, either housing values have to recover, the tax millage rate needs to increase, or they need to reduce their budget. The possible solutions are difficult, but not very complex.

[313WX]

I guess it's time to bring in the EFM...

[corktownyuppie]

I guess it's time to bring in the EFM...

It will be time to bring in the EFM. They've got 48 months to solve the problem, otherwise that's exactly what's gonna happen.

[Detroitnerd]

I guess it's time to bring in the EFM...

Troy was already starting to feel the pain a few years ago. There was a time when they just couldn't build enough commercial space. Between 1970 and 2000, developers built about 10 million square feet of commercial space. I wonder what the vacancy rate is. I imagine Troy still has more jobs than residents, but the appeal of the "City of Tomorrow" seems to be wearing a little thinner every year. They had to give Kelly Services a huge tax abatement to convince them to double down on their HQ there; that wouldn't have happened 10 years ago.

If I remember correctly, Troy has the third most commercial space in the metroplex [[and, likely, the whole state), behind Detroit [[1) and Southfield [[2).

[j to the jeremy]

Recent source from Channel 4 News reported that The City of Troy is suffering an financial crisis and the city will run out of cash by 2016. How can a middle class city with a booming skyscrapers and Somerset Mall along Big Beaver Rd. going dead broke like Detroit within 4 years? Something's weird is going on in Troy and its burning.

I will try to avoid schadenfreude and just say that their tax rates are too low to be sustainable and city too spread out, infrastructure wise, to attract young people. Major businesses no longer want to locate in edge cities, they want exciting walkable areas to attract high-level young employees. Too bad for Troy that they have just been cutting taxes and services for too long now, and there's nothing left to cut. I guess the friends of the Troy Library should get ready for another fight.

Makes the mayor who hates federal matching funds look a bit naive, no?

[MikeyinBrooklyn]

Makes the mayor who hates federal matching funds look a bit naive, no?

I will not try to defend that loudmouthed fool of a mayor, but I will say that her only discernable sensible quality is that she doesn't want Troy to spend more money, whether city-raised or federal in origin. Spending less to reduce the cost of government as shouldered by taxpayers is anything but naive. I also think people who advocate spending other people's money [[i.e. Troy spending a federal grant) find out that the costs to themselves to supplement or sustain the original grant are substantial. We're seeing that now with the President's original stimulus: states and localities got a boatload of federal loot, much of it unfront. The following year[[s), they either need to raise taxes or cut back drastically. Troy's problems, like Detroit's [[although massively smaller, obviously) are entirely fixable at the local level. Unlike Detroit, they probably will. But, not to have a double standard, yes, if the checks start a'bouncin in 2016, an EFM should be appointed.

[jj84]

A lot of this is also tied with Lansing trashing personal property tax. If an alternative tax source isn't made to replace Personal Property you will see many Cities with EMF come 2014-2016 and some will probably file bankruptcy and may even dissolve.

With the Changes in Personal Property Tax Cities and School need other options for funding. How you go about raising that revenue is another thing. The way sales tax is distributed to communities also needs a major overhaul but Lansing isn't going to do that. It would need to be a constitutional amendment.

[Bham1982]

Is there any evidence whatsoever that the premise is even true? Where's the media source?

I find it hard to believe that Troy is the next Highland Park. Given that they have a huge office, retail and industrial base, they would probably be among the last Michigan cities to suffer from changes in residential composition [[and I don't even think that's remotely true).

[Bham1982]

I just looked it up, and Troy has AAA bond rating, highest possible for municipalities.

Most Metro area cities don't have this rating.

[iheartthed]

I just looked it up, and Troy has AAA bond rating, highest possible for municipalities.

Most Metro area cities don't have this rating.

That means nothing. Detroit had a AAA bond rating 10 years ago too.

[Detroitnerd]

That means nothing. Detroit had a AAA bond rating 10 years ago too.

Haha. And weren't those "derivatives" and "mortgage-backed securities" also triple-A rated?

[Danny]

I just looked it up, and Troy has AAA bond rating, highest possible for municipalities.

Most Metro area cities don't have this rating.

By the time, When The City of Troy is going broke! It's credit rating will BBB in no time.

[mwilbert]

From what I've read, about 1/3 of the population wants dense urban, 1/3 want car-oriented suburbs, and about 1/3 want rural living..

I've seen a 30-35% number for people preferring walkable urban, but that is a national number and could easily not hold true for the Detroit area.

[Wesley Mouch]

I just looked it up, and Troy has AAA bond rating, highest possible for municipalities.

Most Metro area cities don't have this rating.

By the time, When The City of Troy is going broke! It's credit rating will BBB in no time.

2016 is four years off. Troy it seems is looking years into the future and seeing the icebergs.

This is responsible, and probably a reflection of why they have a good credit rating.

The question now is what they will do about it.

[corktownyuppie]

Is there any evidence whatsoever that the premise is even true? Where's the media source?

Big difference between Troy and Highland Park is that Troy will likely do [[and be able to do) what ever is necessary to avoid insolvency. But, yes, the budget problems and projected shortfalls are real.

As budget talks continued Monday evening, Troy City Manager John Szerlag gave a sobering presentation of the five-year projected budget, which showed the steady depletion of the city’s fund balance over the next five years to a zero balance in 2017, despite the city adding $1.9 million to the fund balance this fiscal year.

“You needed to see this,” Szerlag told City Council Monday evening. “The job of a city manager is to let a community know what they need to hear, not what they want to hear. … This is something you have to address. You can put it off, but it’s still there.”

http://troy.patch.com/articles/5-yea...nkrupt-in-2017

[jj84]

Troy is smart and does a 3 year budget [[most cities do not do this) So they can see what is on the horizon with reduction in property taxes and personal property taxes. If they just kept going as is and made no changes they would have exhausted their savings by 2016 and run a deficit.

They might get savings by refinancing bonds they currently have out -- enter revenue sharing agreements with their local DDA/TIF's etc. There are many options out there to fix this issue. I think the news media jumped on it just for a story, and to be like they are just like Detroit!

[Detroitej72]

I find it hard to believe that Troy is the next Highland Park. Given that they have a huge office, retail and industrial base, they would probably be among the last Michigan cities to suffer from changes in residential composition [[and I don't even think that's remotely true).

If they keep giving huge tax subsidies to keep companies like Kelly Services, and keep the tax burden on their residential base, with these falling housing values it certainly could happen. That's the problem with corporate welfare.

[Cincinnati_Kid]

A lot of this is also tied with Lansing trashing personal property tax. If an alternative tax source isn't made to replace Personal Property you will see many Cities with EMF come 2014-2016 and some will probably file bankruptcy and may even dissolve.

With the Changes in Personal Property Tax Cities and School need other options for funding. How you go about raising that revenue is another thing. The way sales tax is distributed to communities also needs a major overhaul but Lansing isn't going to do that. It would need to be a constitutional amendment.

Your BOY Snyder runs state government like he ran Gateway Computers, and how did that work out?

[detroitsgwenivere]

I don't find it hard to believe. Has anyone driven down Stevenson or through the industrial prkway lately? I do about once or twice a month and believe me, its starting to look like a ghosttown. Some of the commercial space has even been torn down because its been vacant so long that its considered outdated and detrimental to the neighboring commercial property values.

But that doesn't mean the city can't turn it around in time. Brooksie won't let his gem turn into coal- I mean HP.

Nothin against HP of course.

[Detroitnerd]

As I understand it, the ratings agencies were definitely part of the problem. At one point, they were in front of Congress claiming that their ratings were not to be taken seriously, that they were just opinions, that they were just free speech, anything to get them off the hook from furious and litigious investors who'd lost quadrillions...

[corktownyuppie]

As I understand it, the ratings agencies were definitely part of the problem. At one point, they were in front of Congress claiming that their ratings were not to be taken seriously, that they were just opinions, that they were just free speech, anything to get them off the hook from furious and litigious investors who'd lost quadrillions...

Yes, they were definitely part of the problem. And there are inevitable issues when the people paying the ratings agencies are the entities that are getting rated. I'm just wanting to clarify that derivatives and mortgage backed securities were not themselves the problem. It was only a small subset among MBS that caused problems....but those problems were massive.

Then you complicate the question because fancy bankers were using borrowed money to buy the investments, which is great when they're behaving normally. When they aren't...you're in a position where you're liquidating assets to pay debts. And every time you liquidate an asset, you drive the price of those assets down. Which forces others to liquidate their assets. Etc. Etc.

The ratings agencies were certainly complicit in that they missed systemic risks in their protocol as well the systemic risks in generally accepted practices in banking...in part because of incompetence...but in larger part because the system was setup in a way that unduly harsh ratings agencies were penalized by getting less opportunities to get paid.

This is one reason why in real estate, you are no longer allowed to choose your appraiser. You might be the one paying for him/her, but the appraisal needs to be done blindly. And that's what was missing in the ratings agencies too. It wasn't necessarily blatantly fraudulent...but it might have been willful blindness.

To get a AAA rating is really tough. Only 3 US Corporations have it.

Yes you are right...the Ratings Agencies are not be blindly trusted. And their "legal arguments" in front of Congress were a total farce. But they're not just fabricating ratings out of thin air, and their analysis still has some value.

[Parkguy]

I have a sneaking suspicion that you'll see more of these stories. The balkanized system of local government we have does fine as long as there is unlimited growth, but I think we are going into a period of limited, slower growth [[after a long bout with flat line in Metro Detroit), so the suburbs are in for a rough few years, at least as far as city services are concerned, just like Detroit. Lots of small suburbs have already begun sharing costs and services-- mergers are next, along with some un-incorporations. The same will probably happen with school districts.

[Hermod]

I have a sneaking suspicion that you'll see more of these stories. The balkanized system of local government we have does fine as long as there is unlimited growth, but I think we are going into a period of limited, slower growth [[after a long bout with flat line in Metro Detroit), so the suburbs are in for a rough few years, at least as far as city services are concerned, just like Detroit. Lots of small suburbs have already begun sharing costs and services-- mergers are next, along with some un-incorporations. The same will probably happen with school districts.

Some of the public employee unions are going to have "come to Jesus" moments as well. At some point in time, the bureaucracies have to be trimmed. Some cities and other political entities may request the state to put in an EFM just long enough to void the union contracts.

[Detroitnerd]

Some of the public employee unions are going to have "come to Jesus" moments as well. At some point in time, the bureaucracies have to be trimmed. Some cities and other political entities may request the state to put in an EFM just long enough to void the union contracts.

Funny how all that "tough love" stuff goes out the window when it concerns bankers who trash the economy, pharmaceutical companies that kill tens of thousands, oil companies that destroy the environment, etc.

Reminds me of the old cartoon of two giant capitalists riding a little train that can barely haul them. One looks down at the diminutive fireman and engineer and cries, "There's the problem!"