Detroit's Imminent State Financial Takeover / Bankruptcy

[Cleveland Brown]

Originally Posted by Blitz

Ok, looking back it just says "taxes" and I assumed that meant property taxes. I didn't realize that cities in the U.S. have income taxes. To me it seems like the mayor has the better solution but some kind of unigov would be the only thing that would really work. I'm sure there would be squabbling but the higher levels of government should recognize that it's for the greater good to merge everything together in this unique situation.

Most people agree that the mayor's "plan" is a pure fantasy that would force Detroit into financial management sooner. Also, for your southern neighbors, altruism is a reason to take to political (and other) arms. A good chunk of the American electorate would rather believe in right-wing trickle-down golden showers than to take actions to stabilize and grow the shrinking middle-class.

[LMich]

A few things that may clear up some questions and inaccuracies in the situation:

- The Detroit City Council's plan, among other things, includes raising the income tax from 2.5% to 3% on residents, and 1.25% to 1.5% on non-residents. This would require an act by the legislature (not going to happen) as Detroit already made a deal with Michigan allowed municipal income tax in the 60's that allowed Detroit to impose a tax above the 2% limit for every other city in the state. The act, however, would only apply to the resident side of things, as the city is would still be well below the 2% limit placed on non-resident income taxation.

- The mayor's plan includes an corporate income tax increase from 1% to 1.9%. This would not require a legislative act, because the state limit for corporate taxes that a city may collect is 2%.

To be honest, though, the tax increases aren't the most central part of either the council or the mayor's overall fiscal rescue plan. Bing's corporate income tax would only wield an extra $9 million (of the $45 million needed, immediately). The council's resident and non-resident income tax plan would yield about $50 million.

[DetroitMan]

Bing opposes financial review: 'Detroit needs to be run by Detroiters'

Detroit Mayor Dave Bing had a message today for Governor Rick Snyder and others calling for a state financial review of the city’s finances — the first step in the possible appointment of an emergency manager.


"As many of you know, there are widespread reports that I received a call from the governor informing me that he intends to announce that the state will begin a 30-day financial review of the city, a process that could lead to the appointment of an emergency manager," Bing said. "I did receive that call and I am here today with City Council, labor, our community and businesses to say that we are opposed to the governor beginning this process."


Bing said city officials are making progress and moving closer to addressing the city's fiscal crisis. And he called on the state to help the city right its finances. The mayor said the city has requested help from Lansing to collect income taxes, approximately $155 million in additional revenue annually. In addition he said the state owes Detroit $220 million in revenue sharing, and failure to pay sends "a disturbing signal to our community."

http://www.freep.com/article/2011120...text|FRONTPAGE

[Cleveland Brown]

Bump. Bing doesn't know what the hell he's doing and I'm still convinced that the city will get an emergency financial manager later this year (despite the mayor changing his mind every other week).

[LMich]

Originally Posted by Cleveland Brown

Bump. Bing doesn't know what the hell he's doing and I'm still convinced that the city will get an emergency financial manager later this year (despite the mayor changing his mind every other week).

Later this year?! Barring a consent agreement by the end of this month, an EM will be in place by next month; March at the very latest. The process has already started. In fact, the first phase of the review is over showing "financial stress", as they call it. The city has something like a month to appeal the finding and/or come up with a consent agreement. We're not talking end of the year, here, when this process runs out, we're talking weeks.

That's the thing about the new EM law; once the clock is started, and once stress is found, it can not be turned back. If I remember correctly, the process - barring a city being able to fix its finances on its own - is three months at the very longest. How I see it is the first phase (the stress test) is the phase where the municipality or school district under review has some kind of power. They can try and cook the books before giving them to the reviewer and paint the rosiet and best case scenario. Oncee it reaches phase two, you're in union-busting territory. This is where the administration gives the mayor or superintendent time to bust unions hoping this will solve the crises. If that doesn't work, you're in the last phase, which is basically a kangaroo court where a city or district gets to plead its case to an administration that has already made up its mind to take you over.

IMO, I think the review has shown the city's problems to be so far beyond the unions, that when they failed the intitial street test, the rest of this process has simply been trying to figure out who will be the EM, and not if there will be one.

[Cleveland Brown]

.

Originally Posted by Detroit Free Press

Dillon: State takeover avoidable if Detroit wins concessions from unions by early February

4:25 PM, Jan. 10, 2012


By Dawson Bell and Steve Neavling

Detroit Free Press Staff Writers

Detroit Mayor Dave Bing and the City Council must reach concessions with city unions by early February to avoid a recommendation of state intervention from the state’s emergency review team, state Treasurer Andy Dillon said today.

But union leaders said the chance of reaching an agreement is very unlikely, even after members of the review team expressed shock and anger over the severity of the financial crisis and how little of it was publicly known until recently...

[LMich]

I don't believe Dillon any further than I can throw him. Knowing him, the truth probably is that after much shopping, they've just about found an EM. lol

[subterranean]

Originally Posted by LMich

Parts of Detroit have been allowed to decay to such a degree that even a financially healthy Detroit will need massive amounts of state and federal funds even to get rid of excess infrastructure, let alone rebuild what needs to be rebuilt. I appreciate the help the Feds are giving to see by way of their Neighborhood Stabilization Fund -- Detroit has gotten rid of 3,000 execess homes -- but we're not controlling blight, we're helplessly chasing it.

The situation just seems so hopeless without an integrated local, state, and national plan for urban areas. Detroit's a stark example of how we've allowed many of our inner-city urban areas to fail, but it's not the only example, unfortunately.

This is somewhat hilarious to me. The city had over $40 million awarded to them in state and federal sources (NSP) for demolition and rehabilitation of housing in 2009 and they've barely spent any of it even though it needs to be expended by the first part of 2013.

At an average of $10,000 per demolition, $30 million would rid them exactly 3000 homes. They HAVE the money to do this, right now. They just aren't getting it done.

[Cleveland Brown]

Originally Posted by LMich

I don't believe Dillon any further than I can throw him. Knowing him, the truth probably is that after much shopping, they've just about found an EM. lol

Well, there is always hope... like a terminally ill brain-dead cancer patient on life-support.

[JonathanGRR]

BREAKING NEWS

Detroit files for bankruptcy, claiming more than 100,000 creditors, billions in debts
Chad Halcom | July 18, 2013

Michigan's largest city initiated the nation's largest-scale municipal bankruptcy at a federal court late Thursday, as Emergency Manager Kevyn Orr and bankruptcy attorneys filed a petition claiming more than 100,000 creditors and billions in debts.

"This decision comes in the wake of 60 years of decline for the city, a period in which reality was often ignored…," Michigan Gov. Rick Snyder states in a letter to Orr dated today authorizing his voluntary Chapter 9 petition at U.S. Bankruptcy Court.

"Many talented individuals have put enormous energy into attempting to avoid this outcome. I knew from the outset that it would be difficult to reverse (that decline, and) hoped those efforts would succeed without resorting to bankruptcy. Unfortunately, they have not. We must face the fact that the city cannot and is not paying its debts as they become due, and is insolvent."

The city is grappling with more than $18 billion in debt. Its obligations include more $5.7 billion in unfunded health care liabilities, $5.4 billion in bond debt, $3.5 billion in unfunded pension liabilities and nearly $500 million according to a proposal Orr to the city's creditors in June.

Orr has contended that legacy costs absorbed nearly 40 cents of every budget revenue dollar for the city in its fiscal 2012 year.

In the petition, the city listed assets and debt of more than $1 billion. Chapter 9 of the U.S. Bankruptcy Code is reserved for municipalities and differs from the rules used by bankrupt companies in Chapter 11.

Orr and Detroit Mayor Dave Bing planned to discuss the bankruptcy filing at a 6:15 p.m. press conference.

"(T)oday's news that the city has filed for bankruptcy protection saddens me, however necessary it may have been. But what stands out about Detroit through the centuries is its grit and resilience," U.S. Sen. Carl Levin, D-Detroit, said in a statement Thursday.

"I know firsthand, because I live in Detroit, that our city is on the rebound in some key ways, and I know deep in my heart that the people of Detroit will face this latest challenge with the same determination that we have always shown."

Also calling the petition regrettable but necessary was President-CEO Sandy Baruah of the Detroit Regional Chamber, who also called the move a "final barrier" to robust growth.

"This decision puts the city on a path to achieve its most essential function – providing Detroiters the services they deserve – and sets the stage for a growing, vibrant Detroit. The private sector is thriving and businesses continue to invest in Detroit."

Snyder also notes in the authorization letter today that only one-third of Detroit's entire ambulance fleet was in service in first-quarter 2013; the average response time for residents to obtain emergency services is 58 minutes compared to a national average of 11 minutes; and 40 percent of the city's streetlights were inoperative during the same period.

"Only one feasible path offers a way out," Snyder said in his letter.

Snyder: Detroit citizens deserve a clear road out of cycle of ever-decreasing services

Detroit joins Jefferson County, Alabama, and the California cities of San Bernardino and Stockton in bankruptcy.

Snyder determined earlier this year that Detroit was in a financial emergency and without a plan to improve things. He made it the largest U.S. city to fall under state oversight when a state loan board hired Orr in March. His letter was attached to Orr's bankruptcy filing.

"The citizens of Detroit need and deserve a clear road out of the cycle of ever-decreasing services," Snyder wrote. "The city's creditors, as well as its many dedicated public servants, deserve to know what promises the city can and will keep. The only way to do those things is to radically restructure the city and allow it to reinvent itself without the burden of impossible obligations."

A turnaround specialist, Orr represented automaker Chrysler LLC during its successful restructuring. He issued a warning early on in his 18-month tenure in Detroit that bankruptcy was a road Detroit and its creditors did not want to tread.
...
The team said Detroit was defaulting on about $2.5 billion in unsecured debt to "conserve cash" for police, fire and other services.

http://www.crainsdetroit.com/article...for-bankruptcy

[Cleveland Brown]

^ Good. Let's get on with it and end the years of uncertainty.

[LMich]

I say "Hallelujah," if only because of inevitability of it all.

Let them fight this out in an dispassionate court proceeding, where it should have been all along, instead of the consent agreement and EM bull perpetuated upon the city, which was too wrapped up in politics to have ever been successful in a town in as deep as Detroit. The vultures are now in a feeding frenzy upon this announcement, but boy are they going to leave hungry. Ain't much left on these bones, I'll tell you that.

But, you know who is going to be screwed the hardest? The retirees. With thousands of of them in the immediate area, there is going to be a measurable blow to the local economy; purchasing power is going to take a significant hit. Another big loser in all of this is every city, county and school district in the state, whose borrowing costs will go up. The banks and insurance companies, as usual, will be just fine.