Syncora is now on board

[Wesley Mouch]

Well, Detroit as a political institution has lost of all of its independence for the foreseeable future. Even after emergency management is over, our budgets will be overseen and require approval from a state-appointed board.

Bankruptcy has been [[and will be even moreso) good for Detroit-ers.
But if you were in political power before and compare it to the political power you have now, it's pretty rough.

I don't think any political leader wants that or themselves unless it's the last possible option out of desperation.

The real question is whether current political leaders continue to cut the sort of buy-now, pay-later deals. California's political class is bragging about how much money they have now -- so they are restoring spending. I think we need a structural change in how city & state finances and pensions are handled before we'll see whether the march towards insolvency continues, nd that 'last possible option' becomes the only one on the table.

[nain rouge]

Well, Detroit as a political institution has lost of all of its independence for the foreseeable future. Even after emergency management is over, our budgets will be overseen and require approval from a state-appointed board.

I wouldn't say Detroit has lost all of its independence. That strikes me as hyperbolic. So the final budget now requires state approval. Big deal. At the end of the day, Detroit is still putting the budget together. Sure, the days of truly wasteful spending are over, but it still seems like a win-win for just about everyone in Detroit. Certainly, I'd imagine the city has more spending power now than it did in the final moments before declaring bankruptcy, and it was also able to give pensioners a good long-term kick in the mouth.

As far as I'm concerned, other cities might as well start maxing their "credit cards" right now. Citizens make out like bandits, and the politicians get credit for seeing the city through to a brighter future. With all the investment around downtown, there's still plenty of pork in the barrel for Detroit politicians. The "stringent" state oversight will just be a blip on their radar. I doubt the state is about to oppose The Great Ilitch.

[corktownyuppie]

I agree with some, even much, of what you say. But there are areas where we differ.

I wouldn't say Detroit has lost all of its independence. That strikes me as hyperbolic. So the final budget now requires state approval. Big deal. At the end of the day, Detroit is still putting the budget together.

Well anytime a political act requires your signature, you have leverage. When you have the power to overrule a proposal, you hold the hammer. I agree with you, of course, that this will result in what will likely be better budgets. But I see the budget oversight, somewhat like a co-signer on a car loan. Sure, in the end, you'll end up choosing the car and be responsible for paying the bills. But the co-signer wields a lot of silent power. If he/she thinks you should be buying the Ford Fusion instead of the Lincoln MKZ, he/she can just refuse to co-sign your loan.

Not that you'd be unhappy with the brand new Fusion...but it is a bit humbling to know that your decisions can be overridden.

Sure, the days of truly wasteful spending are over, but it still seems like a win-win for just about everyone in Detroit. Certainly, I'd imagine the city has more spending power now than it did in the final moments before declaring bankruptcy, and it was also able to give pensioners a good long-term kick in the mouth.

For sure.

As far as I'm concerned, other cities might as well start maxing their "credit cards" right now. Citizens make out like bandits, and the politicians get credit for seeing the city through to a brighter future. With all the investment around downtown, there's still plenty of pork in the barrel for Detroit politicians. The "stringent" state oversight will just be a blip on their radar. I doubt the state is about to oppose The Great Ilitch.

Easier said than done. Sure you're right, if it were possible. But this case is a landmark eye-opening deal for investors everywhere. You'll notice when you look at the creditor class payouts that most classes got less than 30%, but a handful of creditors which required collateral got 100%.

Here's what's gonna happen. You wanna max out your credit cards? No problem. But the banks are gonna either ask for collateral on every deal, or they will jack up your interest rates. Or they won't lend you the money at all.

This will certainly change the way bonds get rated and where investors want to put their money. Great Lakes Water [[formerly DWSD) borrowing money? No problem since you're offering collateral and essentially using state credit.

But Wayne County needing to float a new bond? Probably not going to happen without finding a co-signer or guaranteeing payments from something like Metro Airport.

[BankruptcyGuy]

So the final budget now requires state approval. Big deal. At the end of the day, Detroit is still putting the budget together.

In the discussions of the particular legislation, the biggest change is that Detroit will have to follow particular accounting rules [[some of which didn't even apply to the state a few years ago):

No accounting gimmicks to balance the budget;
Proper recognition of income and expenses; and
No using asset sales as "income" to balance things up.

That will be a sea change for Detroit. It was a big change when the state stopped the chicanery a few years ago. Many cities and school districts still do this stuff. Glad that Detroit will be at the forefront of doing things properly.

[ABetterDetroit]

All this deal making is speeding up the clock on exiting bankruptcy. With everything that is already happening it will get really interesting when the city can bring new assets to the table. Police, fire, capital improvements, blight removal for just a few that will get a big jump in funding post bankruptcy. Keeping fingers crossed that it is finished in the near future instead of years from now.