Bing: Detroit's budget deficit could swell to $1.2B by 2015

[begingri]

BY SUZETTE HACKNEY
DETROIT FREE PRESS STAFF WRITER

Detroit's $155 million budget deficit will grow to $1.2 billion by 2015 if drastic steps are not taken to cut costs, Mayor Dave Bing told City Council.


Bing, presenting his 2011-12 proposed budget, said the city must immediately find $200 million in order for the budget to be balanced. The new fiscal year begins July 1.

"We face challenges unlike any the city has ever seen, challenges that demand bold action and a business approach that this administration is prepared to take," Bing said. "We do not have the luxury of waiting for someone else to solve our problems."
Bing is proposing a one-year increase of up to 3% to the city's portion of the gaming tax. The increase, which would require legislative approval, would generate $20 million in additional city revenue.

Continued at: http://www.freep.com/article/2011041...sey=nav%7Chead




See also:

JoAnn Watson: Detroit deserves bailout 'at least' as big as GM

In the past, Watson has said the city deserves at least $1 billion.

http://www.detnews.com/article/20110...--as-big-as-GM

[Bham1982]

Does Councilperson Watson realize that those Wall Street and Automotive "bailouts" were high-interest loans?

Does she care?

[Mr. Houdini]

Why does Detroit 'deserve' a bailout? What has the city, the people of the city, done to deserve it?

[BrushStart]

As much as it may suck, the state really needs to consider letting Detroit file for bankruptcy. The ship has taken on too much water over the years. The legacy costs are too high, there are too many inefficiencies throughout city services, there are too many bodies on the payroll for the size of the tax base.

Detroit needs to wipe the slate clean, start fresh. Right now is the time to get lean and aggressive. Downsize the city, seize property through eminent domain, haul in investors by the ear. The city has some positive momentum going on in and around downtown- wipe the debt clean and let the investment community know that the city is on solid financial footing going forward. Run a balanced budget.

I just don't see any other way. How can a city that's continuing to lose population carry a 1.2 billion dollar debt and hope to ever pay that down? The interest alone is going to eat up a ton of each year's fiscal budget. I really hate to suggest this as well, but privatize some shit. Get City Airport off the books, that thing is a loser- a serious money pit. Form some public-private partnerships with Belle Isle to bring in revenue, etc.

[Danny]

Well let's Gov. Snyder, the NERD! and his appointed EFM Dictator turn Detroit into a pre-ghostown. Close up the streets, sweep the poor and low-income families out, shut down city unions, reduce city services. Within the year 2111, Detroit would be better. This time it won't be so many blacks, poor and low-income families living in its neighborhoods.

[mwilbert]

Bing's proposals are really inadequate. How does delaying pension payments solve anything? Just getting through another year is not really much of a goal, and even that is only possible if lots of people agree to things they aren't likely to agree to.

I sense an EFM being awakened from his life-support capsule deep in the salt mines even now.

[mikeg19]

I'm not a financial guru. If the city were to file for bankruptcy, what are the downsides besides being lit up in the media?

[JBMcB]

I'm not a financial guru. If the city were to file for bankruptcy, what are the downsides besides being lit up in the media?

The bureaucracy that's run the city into the ground wouldn't have control over it's own demise anymore. Besides that - the city would have a hard time borrowing money, not that it's easy right now. Anyone know what the interest rate on Detroit muni bonds is right now? I've heard the city's credit rating is in the "junk" category. Really, Detroit doesn't have that much to loose in filing for bankruptcy right now.

[mwilbert]

Probably not much worse than being subjected to an EFM in the first place--you lose a lot of control of your destiny either way. However, I don't expect Michigan will allow Detroit to go bankrupt; the EFM will probably just cut whatever has to be cut to get the budget in balance and say that means bankruptcy isn't necessary.

[iheartthed]

Probably not much worse than being subjected to an EFM in the first place--you lose a lot of control of your destiny either way. However, I don't expect Michigan will allow Detroit to go bankrupt; the EFM will probably just cut whatever has to be cut to get the budget in balance and say that means bankruptcy isn't necessary.

The state won't allow Detroit to go bankrupt. It would cause the credit rating of every municipality in Michigan -- along with the state's rating itself -- to be instantly downgraded.

[showstoppa]

a proposal I have would be really hard for some people to take, but it may have to be done since the city's population has dropped so low. That would be to sell off Cobo Hall, City Airport, and finally the Water and Lighting departments.

I've always wondered why the city was in the utility business if it weren't able to have them function at a acceptable level. I seriously don't know what the city is holding onto City Airport for.

[mwilbert]

It would cause the credit rating of every municipality in Michigan -- along with the state's rating itself -- to be instantly downgraded.

I doubt this is true. It hasn't been true in those few recent cases where municipalities have done this. Credit rating agencies are pretty dim, but not that dim. They are generally capable of distinguishing between solvent and insolvent cities, and it is in their interests to generally rate higher rather than lower.

[Ray1936]

"That would be to sell off Cobo Hall, City Airport"

The trouble there is you'd have a helluva time finding a buyer. I wouldn't put a nickel into either.

[Fnemecek]

a proposal I have would be really hard for some people to take, but it may have to be done since the city's population has dropped so low. That would be to sell off Cobo Hall, City Airport, and finally the Water and Lighting departments.

Cobo Hall was already sold. [[Okay - technically, control of it was "transfered" to a regional authority in exchange for them covering some of our debt.)

City Airport has been up for sale for more than a year. No one has offered to buy it.

DWSD was also sold [[scratch that - put under the control of a regional authority).

At least some of DPL was sold to DTE a couple of years ago.

We're running out of things to sell.

[Fnemecek]

The state won't allow Detroit to go bankrupt. It would cause the credit rating of every municipality in Michigan -- along with the state's rating itself -- to be instantly downgraded.

Of course, the state doesn't always have to grant approval for a city to go into bankruptcy. If it gets bad enough, our creditors can eventually force Detroit into bankruptcy on an involuntary basis.

The fact of the matter is that the City of Detroit and the Detroit Public Schools are headed into bankruptcy. It was just a few months ago that Mayor Bing was proclaiming that last year's cuts would bring us into financial stability and prevent bankruptcy/receivership.

Now, we learn that we need yet another round of cuts. Presumably, there will be more next year and the year after that. Eventually, we'll run out of things to cut just like we've pretty much run out of things to sell.

The City of Detroit and the Detroit Public Schools are headed for bankruptcy. The only questions still to be determined are:

• When do we go into bankruptcy?
• Who do we drag down with us?

Personally, I prefer to get this over and done with. The sooner we go into bankruptcy, the sooner we emerge from it and the lower the chances that we'll drag the rest of Michigan down with us.

[Fnemecek]

I doubt this is true. It hasn't been true in those few recent cases where municipalities have done this. Credit rating agencies are pretty dim, but not that dim. They are generally capable of distinguishing between solvent and insolvent cities, and it is in their interests to generally rate higher rather than lower.

If you read the reports that accompany those ratings, you'll notice that - even for the healthiest communities in Michigan - the ratings agencies often cite problems in nearby Detroit as a concern. The fact of the matter is that communities are connected to their neighbors. Problems in one area, if they go unresolved for a long enough period of time, invariably spill over into neighboring areas.

In theory, If a proximity to Detroit is their only issue, it would not affect the credit rating of a neighboring city. However, there aren't any places in Michigan that are healthy enough to avoid such an implication entirely.

[mwilbert]

The problems in Detroit won't be any worse just because it goes bankrupt. There is no reason the dread contagion and its implications would be any worse afterward than it was before. But I really doubt that will happen at all. The creditors won't be able to force bankruptcy because the EFM make sure they get paid. The city has enough money to pay them; it probably doesn't have enough money left over to run the city properly, but that is unlikely to convince the EFM.

I don't even see how the DPS can be forced into bankruptcy--the long-term debt service of DPS is under $60 million a year, which is horrendous but not enough that they can't pay it if they cut half their teachers and put 60 kids in a class.

[NorthEndere]

You know, I applaud in theory Bing getting creative, but I find a total disconnect between his words and his actions. He says that he doesn't want to use gimmicks to the balance the budget, which has been generally done in the past, but the very anchors of this budget plan [[not paying pension loss for a year, raising the wager tax for a year, etc...) are one-year gimmicks, little different than Kilpatrick wanting to sell the tolls for the tunnel.

I actually don't mind gimmicks, in general, but only if there is light at the end of the tunnel. That's to say, if the local city economy was projected to stablize or grow significantly in the coming I'd be less skeptical. What exactly is Bing's Team projecting down the road that makes them think a one-year casino tax increase and pension diversion are anything other than gimmicks? And, while his proposed concessions from workers isn't anything less than bold, it's still only a small part of the budget, and as others have pointed out, the city is to the point where cutting more workers not only won't really solve the problem, but would continue to cut into basic services.

[Danny]

Councilwoman Jo Ann Watson wants a billion dollar government bailout to end Detroit's deficit. I know the Republicans and fewer Democrats in the U.S. Senate and House is going to say, HELL NO!

The Republicans are going to say in the Detroit City Council. 'You all liberals and unions took charge of your city for over 50 years and never change SO DEAL WITH IT!'

The Democrats are going to say, 'We have to balance the nations budget. We wish we have some money to save your city from bankruptcy, but we broke! and there's nothing we can do.'


WORD FROM THE STREET PROPHET!

Detroit is bankrupt like the Soviet Union. Now here's come Snyder's goon squad to clean up our liberal mess.

Neda, I miss you so.

[Novine]

How realistic is it to think that Detroit can be forced into bankruptcy? Most of the city's operational costs are tied up in people. Those people can be laid off. The debts that are due to general obligation bonds can be collected through increasing the debt millages. Those that are tied to specific assets can be met by selling the assets. You might end up with a city with 100 police officers and a debt millage twice the amount it is today and all the city's major assets sold off but the creditors are still going to get paid and as long as the city can pay, no bankruptcy.

[Danny]

How realistic is it to think that Detroit can be forced into bankruptcy? Most of the city's operational costs are tied up in people. Those people can be laid off. The debts that are due to general obligation bonds can be collected through increasing the debt millages. Those that are tied to specific assets can be met by selling the assets. You might end up with a city with 100 police officers and a debt millage twice the amount it is today and all the city's major assets sold off but the creditors are still going to get paid and as long as the city can pay, no bankruptcy.

Not going to happen, folks who work for the city are not destined to give up those bonds for debt millages. Some folks don't this type and plan or change.

[begingri]

Detroit workers could push back against concessions

Article at: http://www.freep.com/article/20110414/NEWS05/104140555/Detroit-workers-could-push-back-against-concessions?odyssey=mod|newswell|text|FRONTPAGE|s

[mwilbert]

How realistic is it to think that Detroit can be forced into bankruptcy?

It isn't realistic. The EFM can pay the creditors if he wants to. And in this context, it doesn't matter how much the city workers are against concessions; they can be laid off.