Detroit's Financial Issues Starting to Boil Over

[iheartthed]

^Detroit was also offered money to build a subway system from the same administration that bailed out New York. We see how that turned out...

[jt1]

I still do not see one solid argument for not going bankrupt/into receivership.

It would allow us to end the contracts with the city unions, eliminate some of our legacy costs, bring in required financial oversight. We are curretnly at junk bond rating so our rates wouldn't be impacted. I doubt we have very much, if any room left to borrow.

In the short term it may scare off some business/residents but in the long term it seems to me that it would give us an opportunity to get the city finances in order.

Of course I have no expertise in this field so can anyone tell me what is bad for the city of Detroit about receivership/bankruptcy?

[skyl4rk]

The City of Benton Harbor is currently under receivership. The receiver takes over financial decisions such as purchasing, hiring and contracting. The receiver answers to the state and to no one else.

The Council and city manager are still there but they don't make any financial decisions.

[lilpup]

You mean the loan package from 35 years ago?

And almost as many years to pay it off [[after a few renewals and extensions along the way), only to then be replaced by massive Federal funding in the name of "homeland security" every year since 9/11. Did you hear NYC squeal like a pig when that funding was finally cut this year??

[English]

How DPS finances are faring under receivership:

http://www.metrotimes.com/news/bobb-...debt-1.1047664

[EastSider]

Sigh...there is currently no political entity, either school district or city, under 'receivership.' A receiver is appointed as part of a bankruptcy filing in court. What we currently have in DPS, Benton Harbor, etc, are appointments of emergency financial managers.

The distinctions, while seemingly minor at first glance, are important enough to make the distinction meaningful.

The Citizen's Research Council of Michigan put out a useful report in April of this year that roles through the issues fairly well.

http://www.crcmich.org/PUBLICAT/2010s/2010/rpt362.pdf

[JBMcB]

How DPS finances are faring under receivership:

http://www.metrotimes.com/news/bobb-...debt-1.1047664

By receivership you mean "emergency financial manager"

The article is, mostly, complaining that Bobb isn't being transparent enough. Agreed. However, complaining that the deficit is worsening? The school system had been playing fast and loose with it's accounting for decades, then the worst financial conditions since the 1930s hit - yeah things are going to get worse before they get better.

[R8RBOB]

Here is the problem with Detroit going into receivership: it is the largest city in Michigan. You are the owner of business A. You are looking to do business in Michigan and you heard that Detroit is bankrupt and in receivership. You are asking yourself, do I want to do business in this state when the largest city in that state went "belly up." Think of a tanker in the middle of the ocean and the engine room has taken in water. The rest of the tanker is dry and fine but the engine room is flooded and sealed. That's Detroit.

This is one of the main reasons why state leaders don't want Detroit in receivership. If the largest city goes belly up then what does that say about every city, town and village in Michigan? Putting a Pontiac or a Highland Park under the control of a financial manager is no big deal. Who other than the residents is going to noticed? But Detroit is a game-changer. Even if Snyder wins next month, his hands will be just as tied as Granholm's were in regards to Detroit.

[MCP-001]

For once, I just have some questions...

Is Detroit headed for Bankruptcy? If so, will it be a good thing in the long-run?

Yes.

That depends on who will take control afterwards. If they are totally clueless about why the city went bankrupt, then the answer is no. If they learn from the lessons of history, there might be a chance at succeeding.

Is it likely that Detroit will go into state receivership? If so, how soon? And, what will be the outcome?

Depends on what actions the next governor takes.

See above for the rest of the answer.

[ferntruth]

It's also not going to prosper when those who profess such love for it refuse to live here.

I'm not being defensive, I just don't appreciate lectures from quitters.

As much as it pains me to admit this, you are dead on right Bailey.
Glad you put him in his place on this one.

[daddeeo]

It hardly makes a difference who becomes Governor. Each one will be screwed.
They'll be like Captain Smith on the Titanic who realizes they're aren't enough life boats available. Hell with having a nerd as governor, we need a janitor to clean up the mess.

[mwilbert]

The school system had been playing fast and loose with it's accounting for decades, then the worst financial conditions since the 1930s hit - yeah things are going to get worse before they get better.

It is true that the schools' finances were horrible before Bobb; that is why he was brought it. Maybe they were even worse than people thought before he arrived. But the "worst financial conditions" thing is kind of misleading as I don't see how that directly affects the finances of the schools. Was DPS revenue reduced because of the economic conditions? I'm not aware of that, but even if so it is not the main factor. DPS is in worse shape because its state aid is based on student population and DPS has been losing students faster than it has been able to cut costs. Whether you blame Bobb should depend upon whether you think he could have reduced the loss of students or cut costs more quickly.

[iheartthed]

As much as it pains me to admit this, you are dead on right Bailey.
Glad you put him in his place on this one.

Not really. If the Detroit Area were doing what it needed to do to be an attractive place for people to live then you wouldn't even miss me.

[bailey]

Not really. If the Detroit Area were doing what it needed to do to be an attractive place for people to live then you wouldn't even miss me.

Interesting justification. Using that logic, one could also say; if Detroit were doing what it needed to do to be an attractive place for people to live and work, then it wouldn't miss those that chose to live and work way out at "42 mile".

[mwilbert]

Not really. If the Detroit Area were doing what it needed to do to be an attractive place for people to live then you wouldn't even miss me.

Not really. They aren't talking about you in particular, but about you as a representative of a class of people who have an interest in Detroit and a wish for it to succeed, but do it from afar. If all the members of that class lived in Detroit, it would make a big difference.

In no way do I think that means you aren't entitled to have that interest and live elsewhere.

[iheartthed]

Not really. They aren't talking about you in particular, but about you as a representative of a class of people who have an interest in Detroit and a wish for it to succeed, but do it from afar. If all the members of that class lived in Detroit, it would make a big difference.

In no way do I think that means you aren't entitled to have that interest and live elsewhere.

The person who made the original commenter meant me in particular. Which goes back to my point that if Detroit were doing what it needed to be competitive then she wouldn't miss me in particular because there would be someone to take my place. Detroit's problem is that no one is interested in taking my place. The supply chain is broken. Me living there won't fix it...

Hoarding natives isn't how it works anyway. My inclination is that residents of the Detroit area are far more likely to be natives of the Detroit area than is the case for most major metropolitan areas in the country. That is problematic [[or maybe symptomatic of more troubling issues). Cities need to be transient places. You will always have people moving out of every city in America in search of a different experience, so a successful American city needs to attract new people to keep the balance.

[bailey]

The person who made the original commenter meant me in particular. Which goes back to my point that if Detroit were doing what it needed to be competitive then she wouldn't miss me in particular because there would be someone to take my place. Detroit's problem is that no one is interested in taking my place. The supply chain is broken. Me living there won't fix it...

Yes, I did meant you in particular because I found your sneering condescension towards those that chose not to live in city, but remain in the area, a bit off putting.. especially from one posting from such a significantly removed location.

Hoarding natives isn't how it works anyway. My inclination is that residents of the Detroit area are far more likely to be natives of the Detroit area than is the case for most major metropolitan areas in the country. That is problematic [[or maybe symptomatic of more troubling issues). Cities need to be transient places. You will always have people moving out of every city in America in search of a different experience, so a successful American city needs to attract new people to keep the balance.

Then why is the choice of living at "42 mile" less valid than your choice to live several states away?

[iheartthed]

Then why is the choice of living at "42 mile" less valid than your choice to live several states away?

Because the Detroit area doesn't have the population growth to justify developing out that far.

[jt1]

Here is the problem with Detroit going into receivership: it is the largest city in Michigan. You are the owner of business A. You are looking to do business in Michigan and you heard that Detroit is bankrupt and in receivership. You are asking yourself, do I want to do business in this state when the largest city in that state went "belly up." Think of a tanker in the middle of the ocean and the engine room has taken in water. The rest of the tanker is dry and fine but the engine room is flooded and sealed. That's Detroit.

This is one of the main reasons why state leaders don't want Detroit in receivership. If the largest city goes belly up then what does that say about every city, town and village in Michigan? Putting a Pontiac or a Highland Park under the control of a financial manager is no big deal. Who other than the residents is going to noticed? But Detroit is a game-changer. Even if Snyder wins next month, his hands will be just as tied as Granholm's were in regards to Detroit.

Looking at it from a purely Detroit centric attitude that shouldn't be a consideration. Detroit should be worried about it's own situation [[since that's how the other cities, counties, etc in the area behave). If going into bankruptcy allows long term benefit to Detroit at the short term expecnse of the region.state then they should do it.

I would hope that Detroit isn't avoiding the inevitable so it doesn't impact other areas in the state.

[JBMcB]

Was DPS revenue reduced because of the economic conditions?

As far as I know all incoming revenues have declined. Income tax revenues are down due to massive unemployment. State revenues are down. Property values are plummeting, which affects property taxes. All this, and expenditures haven't gone down significantly.

All of this leads to larger deficits.

[bailey]

Because the Detroit area doesn't have the population growth to justify developing out that far.

Well, not to split hairs, but I would say that your fictitious "42 mile" would place them pretty well outside of the Detroit area... I mean that would be north of I69. I don't think anyone is claiming Pt Huron as part of the sprawl.

But again, they are just making the same choice you did. Except they are still here to pick up the check, whereas you skipped out on your share of your "parent's legacy costs" .

[Zacha341]

Yep, then everyone in the city against the process can say the 'repubs' shut it down... All power brokers will takes their appropriate place and station to do what is needed I suppose. In the mean time the white house keeps printing money to give to those they want to. Many will naively wonder why did not the president 'bail' out the city? The depth of the problem [[and any solution) will be buried in the politics of expectation...

Detroit won't go into receivership until next year at the earliest and that's if Snyder wins for governor. Granholm is too chicken to do it. I don't think Bernero would do it to a fellow Democrat if he wins for governor.

[iheartthed]

Well, not to split hairs, but I would say that your fictitious "42 mile" would place them pretty well outside of the Detroit area... I mean that would be north of I69. I don't think anyone is claiming Pt Huron as part of the sprawl.

But again, they are just making the same choice you did. Except they are still here to pick up the check, whereas you skipped out on your share of your "parent's legacy costs" .

Do you have a point or do you just like to type?

[R8RBOB]

Looking at it from a purely Detroit centric attitude that shouldn't be a consideration. Detroit should be worried about it's own situation [[since that's how the other cities, counties, etc in the area behave). If going into bankruptcy allows long term benefit to Detroit at the short term expecnse of the region.state then they should do it.

I would hope that Detroit isn't avoiding the inevitable so it doesn't impact other areas in the state.

You think this is Detroit's decision and Detroit's alone to decide if it should declare bankruptcy and request receivership?

[Zacha341]

California is heading down this road at the state level.....

Cleveland and Miami went under, New York City got Federal assistance to avoid going under.