Dire Report on Detroit Is Offered by Manager

[alp227]

Source: NY Times

An emergency manager assigned to lead this city back from the brink of financial ruin has taken his first detailed look at Detroit’s woes, and the picture of debt and disarray he paints may be bleaker even than earlier grim portrayals.

In a report to be presented to Michigan’s treasurer on Monday, Kevyn D. Orr, the emergency manager appointed in March to take over operations here, described long-term obligations of at least $15 billion, unsustainable cash flow shortages and miserably low credit ratings that make it difficult to borrow.

And in the face of those fiscal troubles, Mr. Orr, a longtime bankruptcy lawyer, portrayed city operations in Detroit as in need of significant repair, including overhauls of the city’s Police Department and Fire Department, among others.

“No one should underestimate the severity of the financial crisis,” Mr. Orr said in a statement issued by his office on Sunday. “The path Detroit has followed for more than 40 years is unsustainable and only a complete restructuring of the city’s finances and operations will allow Detroit to regain its footing and return to a path of prosperity.”

Read more: http://www.nytimes.com/2013/05/13/us/detroit-fiscal-problems-are-severe-report-says.html

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Detroit Free Press article to be printed Monday: "Detroit's 45-day report: Orr calls city 'dysfunctional and wasteful' after years of mismanagement, corruption"

Detroit will finish its current budget year with a $162-million cash-flow shortfall and doubts about the financial health of its pension funds, according to a new report by the city’s emergency manager that lays out the financial free fall in stark detail.

The report, mandated by the state after an emergency manager’s first 45 days in office, confirms a city in desperate shape, with costs for retiree benefits eating up a third of its budget and public services suffering as Detroit’s revenues and population shrink each year. That has led to deferment of payments and an accumulated deficit that would exceed $600 million were it not for borrowing practices the city has used to cover shortfalls.

A city that has taken out loans and moved money between funding sources “has effectively exhausted its ability to borrow,” said Kevyn Orr’s report to the state Department of Treasury, to be made public Monday.

Orr’s report, his first to the state since his appointment March 25, amounts to a status update on his efforts to get a handle on the depths of Detroit’s fiscal crisis. Beyond crystallizing the fiscal mess, it provided little new data or details on how Orr, a Washington, D.C., bankruptcy lawyer, plans to help stabilize a city on the brink of a municipal bankruptcy.

Among Orr's major goals:

■Hire a third-party expert to restructure the city’s fire and transportation services for an overhaul similar to one under way in the Detroit Police Department aimed at getting more officers on the street and out of desk duties

■Continue efforts to transition the city’s Lighting Department to an outside provider over the next five to seven years.

■Seek cooperation from the state and Wayne County on better ways to tackle blight and the city’s estimated 78,000 vacant structures, about 38,000 of which are in potentially dangerous shape.

■Review how city departments operate, eliminate redundant functions and consolidate where necessary.

■Bargain further concessions from the city’s labor unions and seek to reduce or eliminate health care plans for 28,500 city employees active or retired. The city’s post-retirement benefits liabilities exceed $5.7 billion, and given discrepancies in accounting and actuarial analyses, it’s unclear how badly underfunded the city’s pension systems are. Detroit’s pension and health care costs are undermined by the city’s lopsided ratio of retirees to active employees; retirees outnumber the city’s current work force by more than 2 to 1.

[Union Scribe]

1. True. It is bleak.

And having an unelected businessman allowed total control over city management and contracts is still not the way to solve it.

Orr, who is GOP extremist Rick Snyder's appointment, has already given the city's money to his old boss's new firm in a sweetheart deal. You want to talk about ending corruption and wasting money? It sure isn't going away with this bullshit.

As usual, management fucked it up and the peons are punished. The city council and the mayor? They still get paid, for having no power and doing nothing.

[1983law]

6. What?

"The city council and the mayor? They still get paid, for having no power and doing nothing."

Best news I have heard. Before, they were getting paid to screw up the city.

[blkmusclmachine]

2. Strains of Corporate fascism.

This isn't democracy.

[DallasNE]

3. Nothing In Here That Couldn't Have Been Said 45 Days Ago

And how much has this cost Detroit to date?

Goodbye pensions. Goodbye labor contracts.

Hello outsourcing. Hello privatizing everything. And the contracts will all be signed by non-elected government officials. Hello banana republic.

When you simply walk away from all of your obligations as this reports Detroit will be forced to do of course the credit picture will improve. But these extreme austerity measures will cause financial hardship unimagined when all of those checks are either reduced or eliminated, making life more miserable for people already struggling in Detroit. When people aren't spending sales tax revenues will dry up making new rounds of cuts necessary. Hello Greece!

Vaseline not included.

[AnotherMcIntosh]

4. "return to a path of prosperity"?

Prosperity will not return to Detroit until and unless manufacturing jobs are returned to the United States.

Rhetoric from a bankruptcy attorney is not going to change that.

[aristocles]

8. What would induce manufacturers to return to the United States?

When workers outside the United States will work for a pittance?

[FrodosPet]

12. Nationalization without compensation?

Tell the CEOs "If you don't move your factories and support operations back to the United States, we will expropriate any resources you and/or your company have in the United States. We will seize your bank accounts worldwide. And if you set foot in U.S. territory, or some place that will extradite, you will be arrested and held without bail and charged with whatever we can think of"?

It could be a huge chance to help bring socialism to the United States.

[Nye Bevan]

13. Oh, that pesky Constitution.

nor shall private property be taken for public use, without just compensation.

The government would have to pay full market value for the stock. The executives' stock options and/or golden parachutes would then likely vest immediately, giving them a fortune.

[FrodosPet]

14. The Constitution can be amended

Hey Mr. Fat Cat CEO, you can have your golden parachute, but it will be taxed at 99.99%.

[Nye Bevan]

15. Yeah, that should be no problem.

Amend the Constitution to allow the government to take your stuff without paying any compensation? The states will be falling over each other to ratify that one.

[Chisox08]

18. Or they can tax them at 99%

and make it so that they can not write those taxes off nor reduce the rate that they pay through tax loop holes. We can also give tax breaks to those who bring jobs back to America, hire Americans and pay a living wage.

We already influence behavior with our tax codes. So we can force any company that do business in America to manufacture in America with our tax codes.

[AnotherMcIntosh]

17. (1) Election of politiicans to represent the 99%. (2) Eliminate NAFTA and all other

let's-send-jobs-to-foreign-countries "free-trade" agreements. (3) Impose a tax on funds being transferred outside of the country. (4) Finding people with a can-do attitude to make such changes or other changes for the purpose of returning manufacturing jobs.

Filing for bankruptcy certainly isn't going to do it.

[whopis01]

20. Import tariffs.

It is quite simple actually.

You point out the problem quite well. Foreign made goods are cheaper than domestically made goods. Therefore, why would a company ever manufacture inside the US when it can do so cheaper outside the US? As long as that remains true, they will not move manufacturing inside the US.

So, the very simple solution is to raise tariffs on those items so that the cost of manufacturing them outside the US is on par with manufacturing them within the US.

[aristocles]

22. Import tariffs were partly to blame for the Great Depression. n/t

[No Vested Interest]

5. Cincinnati's police chief, hired less than 2 yrs ago, is being lured

by Detroit as their next police chief, it is reported in Cincinnati.
He is a Detroit native, with relatives still in Detroit, in addition to having started his career there, so the offer is very tempting to him.
He is the first non-local police chief in cincinnati, and, in general, has done a good job, and is fairly well regarded.
Have to wonder if this would be a good move for him long-range, considering Detroit's financial position.
I'm not in favor of the emergency financial managers appointed by the Rep. Governor Snyder to oversee most of Michigan's majority African-Amer. cities, effectively taking away representative government.
On the other hand, several of Michigan's cities have severe financial problems, exacerbated by the burst housing bubble.

[OnyxCollie]

7. K&R. nt

[jakeXT]

9. It's good to be the king

http://detroitdebtmoratorium.org/

[OldRedneck]

10. We knew this was coming

Why am I not surprised that his recipe for solving the city's woes is:

-- Turn city utilities over to private corporations

-- Break up public employee unions

-- Eliminate health care plans for public employees

[kelliekat44]

11. The solutions proposed are what the GOP would love to see for the entire country

CEO caps, and making corporations pay their fair share of taxes, nd bringing back good paying manufacturing jobs is never part of the solution.

Time for Buffett to buy a city?

[secondvariety]

16. RoboCop

comes to mind.

[KamaAina]

21. Ahh-nuld's available

and he's well qualified, having screwed up an entire state.

[area51]

19. I wonder about

"with costs for retiree benefits eating up a third of its budget"

So possibly a lot of this monetary outlay is due to the fact that we don't have single-payer health care.

[hack89]

23. Pensions are a part of the problem.

Two retirees for every active worker is a recipe for disaster.

[zipplewrath]

24. Bingo

Much of this could be aleviated by a single payer system that could get control of costs.

But yeah, I know we have to "preserve our traditions".