Wednesday, February 20, 2013

Detroit circles the drain:

In a sobering report to Snyder, the review team found Detroit has:
A cash-flow deficit of more than $100 million without "significant spending cuts" by June 30, on top of an accumulated deficit of $327 million.
$14.9 billion, including unfunded pension and employee retirement liabilities. The city also needs $1.9 billion during the next five years to make payments for the liabilities, but city officials have no debt payment plan.
Accumulated deficits in the general fund of $155.4 million to $331.9 million annually since the 2005 fiscal year.
Dillon said the city has been "masking over" annual deficits with long-term borrowing. The report said that without the borrowing, the deficits would total $937 million in fiscal year 2012.
"We believe there's a financial emergency in the city and that there's no plan in place to correct the situation," Dillon said.
Chapter 9 bankruptcy is "always a possibility but I don't think the city should go through (Chapter) 9 to cure its ailments," he added.

Wait, you think the city shouldn't go to bankruptcy??

That is in fact the only plan that has any chance of quick success.  There is no other realistic financial option, short of making the rest of the state foot the bill for the financial stupidity of those who are running Detroit.  

They should pull no punches in their negotiations. They need to tell the city to agree to everything demanded, or they will let the city solve it's own problems, which everyone knows full well they cannot.  The city should be told to cooperate unconditionally, or the final solution will be dis incorporation, and the unions and their unfunded pension plans can sink or swim on whatever money they have now.   Negotiate from there, and do it as fast as possible. The sooner the city's finances can be taken out of the control of the incompetents, the sooner healing can take place.  

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