Detroit in DebtSunday, April 8, 2012
There is an interesting article on Bloomberg titled, “Detroit Wants State’s Money, But No Real Reform.” After this article was published, the Detroit City Council approved a consent agreement with the state of Michigan, giving up some temporary sovereignty over its own financial affairs. The consent agreement means that a nine-member financial advisory board will run the city’s operations and budget. The city of Detroit was on track to run out of cash by early May, with a projected deficit of $270 million for this fiscal year. The Bloomberg article reveals the following:
Detroit’s accumulated debt stands at more than $10 billion, something that puts its debt-to-asset ratio at 33-to-1. By contrast, GM’s debt-to-equity ratio when it went into bankruptcy was 22-to-1. Detroit’s annual debt payments — $600 million a year — exceed its primary tax revenue by $60 million.
While the city has been repeatedly raped by the Marxist criminals who have been running its finances for the last 40 years, City Council member JoAnn Watson could do nothing better than blame everyone else.
“There are those who will try to pretend the consent agreement will be good for the city even though there is no cash infusion on the table,” said JoAnn Watson during the meeting. “Clearly there’s a viable option … Stand up and demand that the governor pay what he owes. Don’t give up the legacy of this city and those whose shoulders we stand on and act as if we have no options.”
Additionally, the opponents against the consent agreement have, unfortunately, turned this issue into a racial war via claims of racism and white power, as expressed most recently by minister Malik “This is White Supremacy” Shabazz.
To clarify, I am a very much a proponent of my city, and in fact, I have seen immense positive changes in the city over the last few years, with most of those changes occurring in the downtown area and its surrounding communities. Meanwhile, the outlying neighborhoods continue to deteriorate rapidly, in spite of numerous voluntary neighborhood organizations dedicated to rejuvenating their communities. The city of Detroit had three options: (1) the consent agreement allowing the financial review board to take over the city’s finances (2) a takeover of the city by the state with an emergency manager, and (3) bankruptcy. The City Council chose to allow the state to try and clean up its mess because the appointment of an emergency manager would have enabled the state of Michigan to have much more leeway to change union contracts. In my mind, bankruptcy was the best and most viable option, with the emergency manager plan being the next best option. Either of the latter two options could have razed the unions, freeing Detroit from forty years of union thuggery and deeply entrenched political pandering.
The financial review board will have difficulties navigating the waters of union contracts and entitlements. That said, the city’s biggest foe is, unsurprisingly, its legacy costs for the masses of retired government workers living off of the working folks, and its Marxist unions that have enjoyed 4o years of power since the Coleman Young administration established its takeover of the city and handed power over to the unions. Here is a snippet from an article on NPR:
One of the biggest tasks ahead: to try and negotiate new agreements with city unions.
They already agreed to give up historic concessions, only to have the state block final approval. Snyder says those agreements don’t go far enough.
Union leaders now say they’re in no mood to bargain. And they may have little recourse at this point but to strike.
Whenever I hear the local union leaders claim they won’t budge, and would rather strike, I say, “bring it on.” Go, strike, and good riddance. Let the city go bankrupt and let the court sort ‘em all out. This would undoubtably be the best option, for the long term, to clean up the city’s financial boondoggle and do some deep cleaning in the dirty closets while they are at it. The days of wine and roses and inflated wages/benefits are over for the parasites who have been living high while robbing the non-union working class for decades.